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512 SUPREME COURT REPORTS ANNOTATED Taule vs. Santos G.R. No. 90336. August 12, 1991.

* RUPERTO TAULE, petitioner, vs. SECRETARY LUIS T. SANTOS AND GOVERNOR LEANDRO VERCELES, respondents. Constitutional Law; Administrative Law; Election Law; The jurisdiction of the Comelec is over popular elections, the elected officials of which are determined through the will of the electorate.The Court agrees with the Solicitor General that the jurisdiction of the COMELEC is over popular elections, the elected officials of which are determined through the will of the electorate. An election is the embodiment of the popular will, the expression of the sovereign power of the people. It involves the choice or selection of candidates to public office by popular vote. Specifically, the term election, in the context of the Constitution, may refer to the conduct of the polls, including the listing of voters, the holding of the electoral campaign, and the casting and counting of the votes which do not characterize the election of officers in the Katipunan ng mga barangay. Election contests would refer to adversary proceedings by which matters involving the title or claim of title to an elective office, made before or after proclamation of the winner, is settled whether or not the contestant is claiming the office in dispute and in the case of elections of barangay officials, it is restricted to proceedings after the proclamation of the winners as no pre-proclamation controversies are allowed. The jurisdiction of the COMELEC does not cover protests over the organizational set-up of the katipunan ng mga barangay composed of popularly elected punong barangays as prescribed by law whose officers are voted upon by their respective members. The COMELEC exercises only appellate jurisdiction over election contests involving elective barangay officials decided by the Metropolitan or Municipal Trial Courts which likewise have limited jurisdiction. The authority of the COMELEC over the katipunan ng mga barangay is limited by law to supervision of the election of the representative of the katipunan concerned to the sanggunian in a particular level conducted by their own respective organization. Same; Same; Same; Election protest of officers of the katipunan ng mga barangay; The Secretary of Local Government has no power to assume jurisdiction over election protest involving officers of the kati-

_______________ * EN BANC. 513 VOL. 200, AUGUST 12, 1991 513 Taule vs. Santos punan ng mga barangay.Construing the constitutional limitation on the power of general supervision of the President over local governments, We hold that respondent Secretary has no authority to pass upon the validity or regularity of the election of the officers of the katipunan. To allow respondent Secretary to do so will give him more power than the law or the Constitution grants. It will in effect give him control over local government officials for it will permit him to interfere in a purely democratic and non-partisan activity aimed at strengthening the barangay as the basic component of local governments so that the ultimate goal of fullest autonomy may be achieved. In fact, his order that the new elections to be conducted be presided by the Regional Director is a clear and direct interference by the Department with the political affairs of the barangays which is not permitted by the limitation of presidential power to general supervision over local governments. Indeed, it is the policy of the state to ensure the autonomy of local governments. This state policy is echoed in the Local Government Code wherein it is declared that the State shall guarantee and promote the autonomy of local government units to ensure their fullest development as self-reliant communities and make them more effective partners in the pursuit of national development and social progress. To deny the Secretary of Local Government the power to review the regularity of the elections of officers of the katipunan would be to enhance the avowed state policy of promoting the autonomy of local governments. Same; Same; Same; Same; The respondent Secretary not having the jurisdiction to hear election protest involving officers of the FABC, the recourse of the parties is to the ordinary courts.Thus, the Court holds that in assuming jurisdiction over the election protest filed by respondent Governor and declaring the election of the officers of the FABC on June 18, 1989 as null and void, the respondent Secretary acted in excess of his jurisdiction. The respondent Secretary not having the

jurisdiction to hear an election protest involving officers of the FABC, the recourse of the parties is to the ordinary courts. The Regional Trial Courts have the exclusive original jurisdiction to hear the protest. Same; Same; Same; Same; The respondent Governor has the personality to file the protest.As regards the second issue raised by petitioner, the Court finds that respondent Governor has the personality to file the protest. Under Section 205 of the Local Government Code, the membership of the sangguniang panlalawigan consists of the governor, the vice-governor, elective members of the said sanggunian, and the presidents of the katipunang panlalawigan and 514 514 SUPREME COURT REPORTS ANNOTATED Taule vs. Santos the kabataang barangay provincial federation. The governor acts as the presiding officer of the sangguniang panlalawigan. As presiding officer of the sangguniang panlalawigan, the respondent governor has an interest in the election of the officers of the FABC since its elected president becomes a member of the assembly. If the president of the FABC assumes his presidency under questionable circumstances and is allowed to sit in the sangguniang panlalawigan, the official actions of the sanggunian may be vulnerable to attacks as to their validity or legality. Hence, respondent governor is a proper party to question the regularity of the elections of the officers of the FABC. Same; Same; Same; Law on Public Officers; The President of the Philippines or his alter ego, the Secretary of Local Government, has no authority to appoint anyone who does not meet the minimum qualification to be president of the federation of barangay councils.In the present controversy involving the sangguniang panlalawigan, the law is likewise explicit. To be appointed by the President of the Philippines to sit in the sangguniang panlalawigan is the president of the katipunang panlalawigan. The appointee must meet the qualifications set by law. The appointing power is bound by law to comply with the requirements as to the basic qualifications of the appointee to the sangguniang panlalawigan. The President of the Philippines or his alter ego, the Secretary of Local Government, has no authority to appoint anyone who does not meet the minimum qualification to be the president of the

federation of barangay councils. Augusto Antonio is not the president of the federation. He is a member of the federation but he was not even present during the elections despite notice. The argument that Antonio was appointed as a remedial measure in the exigency of the service cannot be sustained. Since Antonio does not meet the basic qualification of being president of the federation, his appointment to the sangguniang panlalawigan is not justified notwithstanding that such appointment is merely in a temporary capacity. If the intention of the respondent Secretary was to protect the interests of the federation in the sanggunian, he should have appointed the incumbent FABC President in a hold-over capacity. For even under the guidelines, the term of office of officers of the katipunan at all levels shall be from the date of their election until their successors shall have been duly elected and qualified, without prejudice to the terms of their appointments as members of the sanggunian to which they may be correspondingly appointed. Since the election is still under protest such that no successor of the incumbent has as yet qualified, the respondent Secretary has no choice but to have the incumbent FABC President sit as member of the sanggunian. He could even have appointed petitioner since he was elected the presi515 VOL. 200, AUGUST 12, 1991 515 Taule vs. Santos dent of the federation but not Antonio. The appointment of Antonio, allegedly the protege of respondent Governor, gives credence to petitioners charge of political interference by respondent Governor in the organization. This should not be allowed. The barangays should be insulated from any partisan activity or political intervention if only to give true meaning to local autonomy. PETITION for certiorari to review the resolution of the Secretary of the Department of Local Government. The facts are stated in the opinion of the Court. Balgos & Perez and Bugaring, Tugonon & Associates Law Offices for petitioner. Juan G. Atencia for private respondent. GANCAYCO, J.:

The extent of authority of the Secretary of Local Government over the katipunan ng mga barangay or the barangay councils is brought to the fore in this case. On June 18, 1989, the Federation of Associations of Barangay Councils (FABC) of Catanduanes, composed of eleven (11) members, in their capacities as Presidents of the Association of Barangay Councils in their respective municipalities, convened in Virac, Catanduanes with six members in attendance for the purpose of holding the election of its officers. Present were petitioner Ruperto Taule of San Miguel, Allan Aquino of Viga, Vicente Avila of Virac, Fidel Jacob of Panganiban, Leo Sales of Caramoran and Manuel Torres of Baras. The Board of Election Supervisors/Consultants was composed of Provincial Government Operation Officer (PGOO) Alberto P. Molina, Jr. as Chairman with Provincial Treasurer Luis A. Manlapaz, Jr. and Provincial Election Supervisor Arnold Soquerata as members. When the group decided to hold the election despite the absence of five (5) of its members, the Provincial Treasurer and the Provincial Election Supervisor walked out. The election nevertheless proceeded with PGOO Alberto P. Molina, Jr. as presiding officer. Chosen as members of the Board of Directors were Taule, Aquino, Avila, Jacob and Sales. Thereafter, the following were elected officers of the FABC: 516 516 SUPREME COURT REPORTS ANNOTATED Taule vs. Santos President - Ruperto Taule Vice-President - Allan Aquino Secretary - Vicente Avila Treasurer - Fidel Jacob Auditor

- Leo Sales1 On June 19, 1989, respondent Leandro I. Verceles, Governor of Catanduanes, sent a letter to respondent Luis T. Santos, the Secretary of Local Government,** protesting the election of the officers of the FABC and seeking its nullification in view of several flagrant irregularities in the manner it was conducted.2 In compliance with the order of respondent Secretary, petitioner Ruperto Taule as President of the ABC, filed his comment on the letterprotest of respondent Governor denying the alleged irregularities and denouncing said respondent Governor for meddling or intervening in the election of FABC officers which is a purely non-partisan affair and at the same time requesting for his appointment as a member of the Sangguniang Panlalawigan of the province being the duly elected President of the FABC in Catanduanes.3 On August 4, 1989, respondent Secretary issued a resolution nullifying the election of the officers of the FABC in Catanduanes held on June 18, 1989 and ordering a new one to be conducted as early as possible to be presided by the Regional Director of Region V of the Department of Local Government.4 Petitioner filed a motion for reconsideration of the resolution of August 4, 1989 but it was denied by respondent Secretary in his resolution of September 5, 1989.5 In the petition for certiorari before Us, petitioner seeks the reversal of the resolutions of respondent Secretary dated August 4, 1989 and September 5, 1989 for being null and void. Petitioner raises the following issues: _______________ 1 Page 18, Rollo. ** Now Secretary of Interior and Local Government by virtue of R.A. No. 6975. 2 Page 21, Rollo. 3 Page 23, Rollo. 4 Page 14, Rollo. 5 Page 16, Rollo. 517 VOL. 200, AUGUST 12, 1991

517 Taule vs. Santos 1) Whether or not the respondent Secretary has jurisdiction to entertain an election protest involving the election of the officers of the Federation of Association of Barangay Councils; 2) Whether or not the respondent Governor has the legal personality to file an election protest; 3) Assuming that the respondent Secretary has jurisdiction over the election protest, whether or not he committed grave abuse of discretion amounting to lack of jurisdiction in nullifying the election; The Katipunan ng mga Barangay is the organization of all sangguniang barangays in the following levels: in municipalities to be known as katipunang bayan; in cities, katipunang panlungsod; in provinces, katipunang panlalawigan; in regions, katipunang pampook; and on the national level, katipunan ng mga barangay.6 The Local Government Code provides for the manner in which the katipunan ng mga barangay at all levels shall be organized: Sec. 110. Organization.(1) The katipunan at all levels shall be organized in the following manner: (a) The katipunan in each level shall elect a board of directors and a set of officers. The president of each level shall represent the katipunan concerned in the next higher level of organization. (b) The katipunan ng mga barangay shall be composed of the katipunang pampook, which shall in turn be composed of the presidents of the katipunang panlalawigan and the katipunang panlungsod. The presidents of the katipunang bayan in each province shall constitute the katipunang panlalawigan. The katipunang panlungsod and the katipunang bayan shall be composed of the punong barangays of cities and municipalities, respectively. x x x . The respondent Secretary, acting in accordance with the provision of the Local Government Code empowering him to promulgate in detail the implementing circulars and the rules and regulations to carry out the various administrative actions required for the initial implementation of this Code in such a manner as will ensure the least disruption of on-going pro_______________

6 Sec. 108, Batas Pambansa Blg. 337. 518 518 SUPREME COURT REPORTS ANNOTATED Taule vs. Santos grams and projects,7 issued Department of Local Government Circular No. 89-09 on April 7, 1989,8 to provide the guidelines for the conduct of the elections of officers of the Katipunan ng mga Barangay at the municipal, city, provincial, regional and national levels. It is now the contention of petitioner that neither the constitution nor the law grants jurisdiction upon the respondent Secretary over election contests involving the election of officers of the FABC, the katipunan ng mga barangay at the provincial level. It is petitioners theory that under Article IX, C, Section 2 of the 1987 Constitution, it is the Commission on Elections which has jurisdiction over all contests involving elective barangay officials. On the other hand, it is the opinion of the respondent Secretary that any violation of the guidelines as set forth in said circular would be a ground for filing a protest and would vest upon the Department jurisdiction to resolve any protest that may be filed in relation thereto. Under Article IX, C, Section 2(2) of the 1987 Constitution, the Commission on Elections shall exercise exclusive original jurisdiction over all contests relating to the elections, returns, and qualifications of all elective regional, provincial, and city officials, and appellate jurisdiction over all contests involving elective municipal officials decided by trial courts of general jurisdiction, or involving elective barangay officials decided by trial courts of limited jurisdiction. The 1987 Constitution expanded the jurisdiction of the COMELEC by granting it appellate jurisdiction over all contests involving elective municipal officials decided by trial courts of general jurisdiction or elective barangay officials decided by trial courts of limited jurisdiction.9 _______________ 7 Sec. 222, ibid. 8 Amended by Department of Local Government Circular No. 89-15 issued on July 3, 1989.

9 Sec. 2 (2), Art. XII-C, 1973 Constitution provides as follows___The Commission on Elections shall have the following powers and functions: x x x (2) Be the sole judge of all contests relating to the elections, returns, and qualifications of all members of the Batasang Pambansa and elective provincial and city officials. x x x. 519 VOL. 200, AUGUST 12, 1991 519 Taule vs. Santos The jurisdiction of the COMELEC over contests involving elective barangay officials is limited to appellate jurisdiction from decisions of the trial courts. Under the law,10 the sworn petition contesting the election of a barangay officer shall be filed with the proper Municipal or Metropolitan Trial Court by any candidate who has duly filed a certificate of candidacy and has been voted for the same office within 10 days after the proclamation of the results. A voter may also contest the election of any barangay officer on the ground of ineligibility or of disloyalty to the Republic of the Philippines by filing a sworn petition for quo warranto with the Metropolitan or Municipal Trial Court within 10 days after the proclamation of the results of the election.11 Only appeals from decisions of inferior courts on election matters as aforestated may be decided by the COMELEC. The Court agrees with the Solicitor General that the jurisdiction of the COMELEC is over popular elections, the elected officials of which are determined through the will of the electorate. An election is the embodiment of the popular will, the expression of the sovereign power of the people.12 It involves the choice or selection of candidates to public office by popular vote.13 Specifically, the term election, in the context of the Constitution, may refer to the conduct of the polls, including the listing of voters, the holding of the electoral campaign, and the casting and counting of the votes14 which do not characterize the election of officers in the Katipunan ng mga barangay. Election contests would refer to adversary proceedings by which matters involving the title or claim of title to an elective office, made before or after proclamation of the winner, is settled whether or not the contestant is claiming the office in dispute15 and in the case of elections of barangay officials, it is

_______________ 10 Sec. 9, Republic Act No. 6679; Sec. 252, Batas Pambansa Blg. 881. 11 Sec. 9, Republic Act No. 6679; Sec. 253, Batas Pambansa Blg. 881. 12 Hontiveros vs. Altavos, 24 Phil. 636 (1913). 13 Gonzales vs. Commission on Elections, 21 SCRA 796 (1967). 14 Javier vs. Commission on Elections, 144 SCRA 194 (1986). 15 Ibid. 520 520 SUPREME COURT REPORTS ANNOTATED Taule vs. Santos restricted to proceedings after the proclamation of the winners as no pre-proclamation controversies are allowed.16 The jurisdiction of the COMELEC does not cover protests over the organizational set-up of the katipunan ng mga barangay composed of popularly elected punong barangays as prescribed by law whose officers are voted upon by their respective members. The COMELEC exercises only appellate jurisdiction over election contests involving elective barangay officials decided by the Metropolitan or Municipal Trial Courts which likewise have limited jurisdiction. The authority of the COMELEC over the katipunan ng mga barangay is limited by law to supervision of the election of the representative of the katipunan concerned to the sanggunian in a particular level conducted by their own respective organization.17 However, the Secretary of Local Government is not vested with jurisdiction to entertain any protest involving the election of officers of the FABC. There is no question that he is vested with the power to promulgate rules and regulations as set forth in Section 222 of the Local Government Code. Likewise, under Book IV, Title XII, Chapter 1, Sec. 3(2) of the Administrative Code of 1987,*** the respondent Secretary has the power to establish and prescribe rules, regulations and other issuances and implementing laws on the general supervision of local government units and on the promotion of local autonomy and monitor compliance thereof by said units.

Also, the respondent Secretarys rule making power is provided in Sec. 7, Chapter II, Book IV of the Administrative Code, to wit: (3) Promulgate rules and regulations necessary to carry out department objectives, policies, functions, plans, programs and projects; Thus, DLG Circular No. 89-09 was issued by respondent Secretary in pursuance of his rule-making power conferred by law _______________ 16 Sec. 9, Republic Act No. 6679. 17 Sec. 43, Batas Pambansa Blg. 337. *** Executive Order No. 292. 521 VOL. 200, AUGUST 12, 1991 521 Taule vs. Santos and which now has the force and effect of law.18 Now the question that arises is whether or not a violation of said circular vests jurisdiction upon the respondent Secretary, as claimed by him, to hear a protest filed in relation thereto and consequently declare an election null and void. It is a well-settled principle of administrative law that unless expressly empowered, administrative agencies are bereft of quasi-judicial powers.19 The jurisdiction of administrative authorities is dependent entirely upon the provisions of the statutes reposing power in them; they cannot confer it upon themselves.20 Such jurisdiction is essential to give validity to their determinations.21 There is neither a statutory nor constitutional provision expressly or even by necessary implication conferring upon the Secretary of Local Government the power to assume jurisdiction over an election protect involving officers of the katipunan ng mga barangay. An understanding of the extent of authority of the Secretary over local governments is therefore necessary if We are to resolve the issue at hand. Presidential power over local governments is limited by the Constitution to the exercise of general supervision22 to ensure that local affairs are administered according to law.23 The general supervision is exercised by the President through the Secretary of Local Government.24

In administrative law, supervision means overseeing or the power or authority of an officer to see that the subordinate officers perform their duties. If the latter fails or neglects to fulfill them the former may take such action or step as prescribed by law to make them perform their duties. Control, on _______________ 18 Cebu Institute of Technology vs. Ople, 156 SCRA 632 (1987); People vs. Maceren, 79 SCRA 450 (1977); Philippine Blooming Mills Co., Inc. vs. Social Security Commission, 17 SCRA 1077 (1966). 19 Pilipinas Shell Petroleum Corporation vs. Oil Industry Commission, 145 SCRA 433 (1986). 20 42 Am. Jur. 109. 21 Ibid. 22 Section 4, Article X, 1987 Constitution. 23 Section 14, Batas Pambansa Blg. 337. 24 Ibid. 522 522 SUPREME COURT REPORTS ANNOTATED Taule vs. Santos the other hand, means the power of an officer to alter or modify or nullify or set aside what a subordinate officer had done in the performance of his duties and to substitute the judgment of the former for that of the latter. The fundamental law permits the Chief Executive to wield no more authority than that of checking whether said local government or the officers thereof perform their duties as provided by statutory enactments. Hence, the President cannot interfere with local governments so long as the same or its officers act within the scope of their authority.25 Supervisory power, when contrasted with control, is the power of mere oversight over an inferior body; it does not include any restraining authority over such body.26 Construing the constitutional limitation on the power of general supervision of the President over local governments, We hold that respondent Secretary has no authority to pass upon the validity or regularity of the election of the officers of the katipunan. To allow respondent Secretary to do so will give him more power than the law or

the Constitution grants. It will in effect give him control over local government officials for it will permit him to interfere in a purely democratic and non-partisan activity aimed at strengthening the barangay as the basic component of local governments so that the ultimate goal of fullest autonomy may be achieved. In fact, his order that the new elections to be conducted be presided by the Regional Director is a clear and direct interference by the Department with the political affairs of the barangays which is not permitted by the limitation of presidential power to general supervision over local governments.27 Indeed, it is the policy of the state to ensure the autonomy of local governments.28 This state policy is echoed in the Local Government Code wherein it is declared that the State shall guarantee and promote the autonomy of local government units to ensure their fullest development as self-reliant communities _______________ 25 Pelaez vs. Auditor General, 15 SCRA 569 (1965); Hebron vs. Reyes, 104 Phil. 175 (1958); Mondano vs. Silvosa, et al., 97 Phil. 143 (1955). 26 Hebron vs. Reyes, supra. 27 Ibid. 28 Section 25, Article II, 1987 Constitution. 523 VOL. 200, AUGUST 12, 1991 523 Taule vs. Santos and make them more effective partners in the pursuit of national development and social progress.29 To deny the Secretary of Local Government the power to review the regularity of the elections of officers of the katipunan would be to enhance the avowed state policy of promoting the autonomy of local governments. Moreover, although the Department is given the power to prescribe rules, regulations and other issuances, the Administrative Code limits its authority to merely monitoring compliance by local government units of such issuances.30 To monitor means to watch, observe or check.31 This is compatible with the power of supervision of the Secretary over local governments which as earlier discussed is limited to checking whether the local government unit concerned or the officers thereof

perform their duties as provided by statutory enactments. Even the Local Government Code which grants the Secretary power to issue implementing circulars, rules and regulations is silent as to how these issuances should be enforced. Since the respondent Secretary exercises only supervision and not control over local governments, it is truly doubtful if he could enforce compliance with the DLG Circular.32 Any doubt therefore as to the power of the Secretary to interfere with local affairs should be resolved in favor of the greater autonomy of the local government. Thus, the Court holds that in assuming jurisdiction over the election protest filed by respondent Governor and declaring the election of the officers of the FABC on June 18, 1989 as null and void, the respondent Secretary acted in excess of his jurisdiction. The respondent Secretary not having the jurisdiction to hear an election protest involving officers of the FABC, the recourse of the parties is to the ordinary courts. The Regional Trial Courts have the exclusive original jurisdiction to hear the protest.33 _______________ 29 Section 2, Batas Pambansa Blg. 337. 30 Sec. 3 (2), Chapter 1, Title XII, Book IV, Administrative Code of 1987. 31 Websters Third New International Dictionary, 1971 ed., page 1460. 32 See Serafica vs. Treasurer of Ormoc City, 27 SCRA 1108 (1969). 33 B.P. Blg. 129, Sec. 19. provides as followsJurisdiction in civil 524 524 SUPREME COURT REPORTS ANNOTATED Taule vs. Santos The provision in DLG Circular No. 89-15 amending DLG Circular No. 89-09 which states that whenever the guidelines are not substantially complied with, the election shall be declared null and void by the Department of Local Government and an election shall conduct anew, being invoked by the Solicitor General cannot be applied. DLG Circular No. 89-15 was issued on July 3, 1989 after the June 18, 1989 elections of the FABC officers and it is the rule in statutory construction that laws, including circulars and regulations,34 cannot be applied retrospectively.35 Moreover, such provision is null and void for having

been issued in excess of the respondent Secretarys jurisdiction, inasmuch as an administrative authority cannot confer jurisdiction upon itself. As regards the second issue raised by petitioner, the Court finds that respondent Governor has the personality to file the protest. Under Section 205 of the Local Government Code, the membership of the sangguniang panlalawigan consists of the governor, the vice-governor, elective members of the said sanggunian, and the presidents of the katipunang panlalawigan and the kabataang barangay provincial federation. The governor acts as the presiding officer of the sangguniang panlalawigan.36 As presiding officer of the sangguniang panlalawigan, the respondent governor has an interest in the election of the officers of the FABC since its elected president becomes a member of the assembly. If the president of the FABC assumes his presidency under questionable circumstances and is allowed to sit in the sangguniang panlalawigan, the official actions of the sanggunian may be vulnerable to attacks as to their validity or legality. Hence, respondent governor is a proper party to ques_______________ cases.Regional Trial Courts shall exercise original jurisdiction: x x x (6) In all cases not within the exclusive jurisdiction of any court, tribunal, person or body exercising judicial or quasi-judicial functions. 34 People vs. Que Po Lay, 94 Phil. 640 (1954). 35 Romualdez III vs. Civil Service Commission and Philippine Ports Authority, G.R. Nos. 94878-94881, May 15, 1991; Baltazar vs. Court of Appeals, 104 SCRA 619 (1981). 36 Section 206 (3), Batas Pambansa Blg. 337. 525 VOL. 200, AUGUST 12, 1991 525 Taule vs. Santos tion the regularity of the elections of the officers of the FABC. As to the third issue raised by petitioner, the Court has already ruled that the respondent Secretary has no jurisdiction to hear the protest and nullify the elections.

Nevertheless, the Court holds that the issue of the validity of the elections should now be resolved in order to prevent any unnecessary delay that may result from the commencement of an appropriate action by the parties. The elections were declared null and void primarily for failure to comply with Section 2.4 of DLG Circular No. 89-09 which provides that the incumbent FABC President or the Vice-President shall preside over the reorganizational meeting, there being a quorum. The rule specifically provides that it is the incumbent FABC President or Vice-President who shall preside over the meeting. The word shall should be taken in its ordinary signification, i.e., it must be imperative or mandatory and not merely permissive,37 as the rule is explicit and requires no other interpretation. If it had been intended that any other official should preside, the rules would have provided so, as it did in the elections at the town and city levels38 as well as the regional level.39 It is admitted that neither the incumbent FABC President nor the VicePresident presided over the meeting and elections but Alberto P. Molina, Jr., the Chairman of the Board of Election Supervisors/Consultants. Thus, there was a clear violation of the aforesaid mandatory provision. On this ground, the elections should be nullified. Under Sec. 2.3.2.7 of the same circular it is provided that a Board of Election Supervisors/Consultants shall be constituted to oversee and/or witness the canvassing of votes and proclamation of winners. The rules confine the role of the Board of Election Supervisors/Consultants to merely overseeing and wit_______________ 37 Diokno vs. Rehabilitation Finance Corp., 91 Phil. 608 (1952). 38 Sec. 2.3.2, DLG Circular No. 89-09, where only the incumbent president initially presides over the reorganizational meeting. 39 Sec. 2.5, DLG Circular No. 89-09 which provides that the incumbent Regional FABC President or the vice-president or the member of the Board in succession shall temporarily preside in the reorganizational meeting. 526 526 SUPREME COURT REPORTS ANNOTATED

Taule vs. Santos nessing the conduct of elections. This is consistent with the provision in the Local Government Code limiting the authority of the COMELEC to the supervision of the election.40 In case at bar, PGOO Molina, the Chairman of the Board, presided over the elections. There was direct participation by the Chairman of the Board in the elections contrary to what is dictated by the rules. Worse, there was no Board of Election Supervisors to oversee the elections in view of the walk out staged by its two other members, the Provincial COMELEC Supervisor and the Provincial Treasurer. The objective of keeping the election free and honest was therefore compromised. The Court therefore finds that the election of officers of the FABC held on June 18, 1989 is null and void for failure to comply with the provisions of DLG Circular No. 89-09. Meanwhile, pending resolution of this petition, petitioner filed a supplemental petition alleging that public respondent Local Government Secretary, in his memorandum dated June 7, 1990, designated Augusto Antonio as temporary representative of the Federation to the sangguniang panlalawigan of Catanduanes.41 By virtue of this memorandum, respondent governor swore into said office Augusto Antonio on June 14, 1990.42 The Solicitor General filed his comment on the supplemental petition43 as required by the resolution of the Court dated September 13, 1990. In his comment, the Solicitor General dismissed the supervening event alleged by petitioner as something immaterial to the petition. He argues that Antonios appointment was merely temporary until such time that the provincial FABC president in that province has been elected, appointed and qualified.44 He stresses that Antonios appointment was only a remedial measure designed to cope with the problems brought about by the absence of a representative of the FABC to the sangguni_______________ 40 Sec. 43, Batas Pambansa Blg. 337. 41 Annex A to supplemental petition, p. 60, Rollo. 42 Annex B to supplemental Petition, p. 61, Rollo. 43 P. 67, Rollo. 44 P. 68, Rollo. 527

VOL. 200, AUGUST 12, 1991 527 Taule vs. Santos ang panlalawigan. Sec. 205 (2) of the Local Government Code (B.P. Blg. 337) provides (2) The sangguniang panlalawigan shall be composed of the governor, the vice-governor, elective members of the said sanggunian, and the presidents of the katipunang panlalawigan and the kabataang barangay provincial federation who shall be appointed by the President of the Philippines. (Emphasis supplied.) Batas Pambansa Blg. 51, under Sec. 2 likewise states: x x x The sangguniang panlalawigan of each province shall be composed of the governor as chairman and presiding officer, the vicegovernor as presiding officer pro tempore, the elective sangguniang panlalawigan members, and the appointive members consisting of the president of the provincial association of barangay councils, and the president of the provincial federation of the kabataang barangay. (Emphasis supplied.) In Ignacio vs. Banate, Jr.45 the Court, interpreting similarly worded provisions of Batas Pambansa Blg. 337 and Batas Pambansa Blg. 51 on the composition of the sangguniang panlungsod,46 declared as null and void the appointment of _______________ 45 153 SCRA 546 (1987). 46 Sec. 173 of B.P. Blg. 337 provides as follows, Composition and Compensation.(1) The sangguniang panlungsod, as the legislative body of the city, shall be composed of the vice-mayor, as presiding officer, the elected sangguniang panlungsod members, and the members who may be appointed by the President of the Philippines consisting of the presidents of the katipunang panlungsod ng mga barangay and the kabataang barangay city federation. x x x. Sec. 3 of B.P. Blg. 51, Cities.There shall be in each city such elective local officials as provided in their respective charters, including the city mayor, the city vice-mayor, and the elective members of the sangguniang panglungsod, all of whom shall be elected by the qualified

voters in the city. In addition thereto, there shall be appointive sangguniang panglungsod members consisting of the president of 528 528 SUPREME COURT REPORTS ANNOTATED Taule vs. Santos private respondent Leoncio Banate, Jr. as member of the Sangguniang Panlungsod of the City of Roxas representing the katipunang panlungsod ng mga barangay for he lacked the elegibility and qualification required by law, not being a barangay captain and for not having been elected president of the association of barangay councils. The Court held that an unqualified person cannot be appointed a member of the sanggunian, even in an acting capacity. In Reyes vs. Ferrer,47 the appointment of Nemesio L. Rasgo, Jr. as representative of the youth sector to the sangguniang panlungsod of Davao City was declared invalid since he was never the president of the kabataang barangay city federation as required by Sec. 173, Batas Pambansa Blg. 337. In the present controversy involving the sangguniang panlalawigan, the law is likewise explicit. To be appointed by the President of the Philippines to sit in the sangguniang panlalawigan is the president of the katipunang panlalawigan. The appointee must meet the qualifications set by law.48 The appointing power is bound by law to comply with the requirements as to the basic qualifications of the appointee to the sangguniang panlalawigan. The President of the Philippines or his alter ego, the Secretary of Local Government, has no authority to appoint anyone who does not meet the minimum qualification to be the president of the federation of barangay councils. Augusto Antonio is not the president of the federation. He is a member of the federation but he was not even present during the elections despite notice. The argument that Antonio was appointed as a remedial measure in the exigency of the service cannot be sustained. Since Antonio does not meet the basic qualification of being president of the federation, his appointment to the sangguniang panlalawigan is not justified notwithstanding that such appointment is merely in a temporary ca_______________

the city association of barangay councils, the president of the city federation of the kabataang barangay, and one representative each from the agricultural and industrial labor sectors who shall be appointed by the President x x x. 47 156 SCRA 317 (1987). 48 Ibid. 529 VOL. 200, AUGUST 12, 1991 529 Taule vs. Santos pacity. If the intention of the respondent Secretary was to protect the interest of the federation in the sanggunian, he should have appointed the incumbent FABC President in a hold-over capacity. For even under the guidelines, the term of office of officers of the katipunan at all levels shall be from the date of their election until their successors shall have been duly elected and qualified, without prejudice to the terms of their appointments as members of the sanggunian to which they may be correspondingly appointed.49 Since the election is still under protest such that no successor of the incumbent has as yet qualified, the respondent Secretary has no choice but to have the incumbent FABC President sit as member of the sanggunian. He could even have appointed petitioner since he was elected the president of the federation but not Antonio. The appointment of Antonio, allegedly the protege of respondent Governor, gives credence to petitioners charge of political interference by respondent Governor in the organization. This should not be allowed. The barangays should be insulated from any partisan activity or political intervention if only to give true meaning to local autonomy. WHEREFORE, the petition is GRANTED in that the resolution of respondent Secretary dated August 4, 1989 is hereby SET ASIDE for having been issued in excess of jurisdiction. The election of the officials of the ABC Federation held on June 18, 1989 is hereby annulled. A new election of officers of the federation is hereby ordered to be conducted immediately in accordance with the governing rules and regulations.

The Supplemental petition is hereby GRANTED. The appointment of Augusto Antonio as representative to the Sangguniang Panlalawigan in a temporary capacity is declared null and void. No costs. SO ORDERED. Fernan (C.J.), Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Padilla, Bidin, Sarmiento, Grio-Aquino, Medialdea, Regalado and Davide, Jr., JJ., concur. _______________ 49 Section 2.2., DLG Circular No. 89-09. 530 530 SUPREME COURT REPORTS ANNOTATED Republic vs. Sandiganbayan Petition granted. Note.It is the policy of the State to guarantee and promote the autonomy of the barangays to ensure their fullest development as selfreliant communities. (De Leon vs. Esguerra, 158 SCRA 602.) [Taule vs. Santos, 200 SCRA 512(1991)]

VOL.215,NOVEMBER6,1992 455 Radio Communications of the Philippines, Inc. vs.National Telecommunications Commission G.R. No. 93237.November 6, 1992.* RADIO COMMUNICATIONS OF THE PHILIPPINES, INC. (RCPI), petitioner, vs. NATIONAL TELECOMMUNICATIONS COMMISSION (NTC) and JUAN A. ALEGRE, respondents. Administrative Law; National Telecommunications Commission; NTC has no jurisdiction to impose a fine.E.O. 546, it will be observed, is couched in general terms. The NTC stepped into the shoes of the Board of Communications which exercised powers pursuant to the Public Service Act. The power to impose fines should therefore be read in the light of the Francisco Santiago case because subsequent legislation did not grant additional powers to the Board of Communications. The Board in other words, did not possess the power to impose administrative fines on public services rendering deficient service to customers,ergo its successor cannot arrogate unto itself such power, in the absence of legislation. It is true that the decision in RCPI vs. ________________ * FIRST DIVISION. 456 456 SUPREME COURT REPORTS ANNOTATED Radio Communications of the Philippines, Inc. vs. National Telecommunications Commission Board of Communications seems to have modified the Santiago ruling in that the later case held that the Board of Communications can impose fines if the public service entity violates or fails to comply with the terms and conditions of any certificate or any order, decision or regulation of the Commission. But can private respondents complaint be similarly treated when the complaint seeks redress of a grievance against the company? NTC has no jurisdiction to impose a fine.

Same; Same; Same; Executive Order No. 546 is not an explicit grant of power to impose administrative fines on public service utilities including telegraphic agencies which have failed to render adequate service to customers.No substantial change has been brought about by Executive Order No. 546 invoked by the Solicitor Generals Office to bolster NTCs jurisdiction. The Executive Order is not an explicit grant of power to impose administrative fines on public service utilities, including telegraphic agencies, which have failed to render adequate service to customers. Neither has it expanded the coverage of the supervisory and regulatory power of the agency. Same; Same; Same; Same; Doctrine is settled that jurisdiction and powers of administrative agencies, like respondent commission, are limited to those expressly granted or necessarily implied from those granted in the legislation creating such body.Too basic in administrative law to need citation of jurisprudence is the rule that jurisdiction and powers of administrative agencies, like respondent Commission, are limited to those expressly granted or necessarily implied from those granted in the legislation creating such body; and any order without or beyond such jurisdiction is void and ineffective. PETITION for review of the decision of the National Telecommunications Commission. The facts are stated in the opinion of the Court. Reyes, Almario & Associates for petitioner. PADILLA,J.: Private respondent Juan A. Alegres wife, Dr. Jimena Alegre, sent two (2) RUSH telegrams through petitioner RCPIs facilities in Taft Ave., Manila at 9:00 in the morning of 17 March 1989 to his sister and brother-in-law in Valencia, Bohol and another sister-in-law in Espiritu, Ilocos Norte, with the follow457 VOL.215,NOVEMBER6,1992 457 Radio Communications of the Philippines, Inc. vs. National Telecommunications Commission ing identical texts:

MANONG POLING DIED INTERMENT TUESDAY1 Both telegrams did not reach their destinations on the expected dates. Private respondent filed a letter-complaint against the RCPI with the National Telecommunications Commission (NTC) for poor service, with a request for the imposition of the appropriate punitive sanction against the company. Taking cognizance of the complaint, NTC directed RCPI to answer the complaint and set the initial hearing of the case to 2 May 1989. After two (2) resettings, RCPI moved to dismiss the complaint on the following grounds: 1.Juan Alegre is not the real party in interest; 2.NTC has no jurisdiction over the case; 3.The continued hearing of the case violates its constitutional right to due process of law.2 RCPI likewise moved for deferment of scheduled hearings until after final determination of its motion to dismiss. On 15 June 1989, NTC proceeded with the hearing and received evidence for private respondent Juan Alegre. On 3 October 1989, RCPIs motion to dismiss was denied, thus: The herein complainant is the husband of the sender of the rush telegram that respondent allegedly failed to deliver in a manner respondent bound itself to undertake, so his legal interest in this administrative case cannot be seriously called in question. As regards the issue of jurisdiction, the authority of the Commission to hear and decide this case stems from its power of control and supervision over the operation of public communication utilities as conferred upon it by law. Besides, the filing of a motion to dismiss is not allowed by the rules (Section 1, Rule 12, Rules of Practice and Procedures). Following, however, the liberal construction of the rules, respondent (sic) ________________ 1 Exhibit D-NTC records. 2 Rollo, pp. 19-23. 458 458 SUPREME COURT REPORTS ANNOTATED

Radio Communications of the Philippines, Inc. vs. National Telecommunications Commission motion shall be treated as its answer or be passed upon after the conclusion of the hearing on the merits. x x x3 Hearings resumed in the absence of petitioner RCPI which was, however, duly notified thereof. On 27 November 1989, NTC disposed of the controversy in the following manner: WHEREFORE, in view of all the foregoing, the Commission finds respondent administratively liable for deficient and inadequate service defined under Section 19(a) of C.A. 146 and hereby imposes the penalty of FINE payable within thirty (30) days from receipt hereof in the aggregate amount of ONE THOUSAND PESOS (P1,000.00) for: 1. Rush Telegram sent to Valencia, Bohol on March 17, 1989 and received on March 21, 1989 3 days x P200.00 per day = P600.00 2. Rush Telegram sent to Espiritu, Ilocos Norte on March 17, 1989 and received March 20, 1989 2 days x P200.00 per day = P400.00 Total = P1,000.00 ENTERED. November 27, 1989.4 A motion for reconsideration by RCPI reiterating averments in its earlier motion to dismiss was denied for lack of merit;5 hence, this petition for review invoking C.A. 146 Sec. 19 (a) which limits the jurisdiction of the Public Service Commission (precursor of the NTC) to the fixing of rates. RCPI submits that its position finds support in two (2) decided cases6 identical with the present one. Then Justice (later Chief Justice) Fernando writing for the Court stated: _______________ 3 Ibid., p. 24. 4 Ibid., p. 29. 5 Ibid., pp. 39-40. 6 RCPI vs. Francisco Santiago and Enrique Medina, G.R. No. L-29236, 21 August 1974 and RCPI vs. Constancio Jaugan, G.R. No. L-29247, 21 August 1974, 58 SCRA 493.

459 VOL.215,NOVEMBER6,1992 459 Radio Communications of the Philippines, Inc. vs. National Telecommunications Commission x x x There can be no justification then for the Public Service Commission imposing the fines in these two petitions. The law cannot be any clearer. The only power it possessed over radio companies, as noted was the (sic) fix rates. It could not take to task a radio company for any negligence or misfeasance. It was bereft of such competence. It was not vested with such authority. x x x The Public Service Commission having been abolished by virtue of a Presidential Decree, as set forth at the outset, and a new Board of Communications having been created to take its place, nothing said in this decision has reference to whatever powers are now lodged in the latter body ..... (Footnotes omitted) Two (2) later cases,7 adhering to the above tenet ruled: Even assuming that the respondent Board of Communications has the power of jurisdiction over petitioner in the exercise of its supervision to insure adequate public service, petitioner cannot be subjected to payment of fine under sec. 21 of the Public Service Act, because this provision of the law subjects to a fine every public service that violates or falls (sic) to comply with the terms and conditions of any certificate or any orders, decisions and regulations of the Commission ...... The Office of the Solicitor General now claims that the cited cases are no longer applicable, that the power and authority of the NTC to impose fines is incidental to its power to regulate public service utilities and to supervise telecommunications facilities, which are now clearly defined in Section 15, Executive Order No. 546 dated 23 July 1979, thus: Functions of the Commission. The Commission shall exercise the following functions: x x x b.Establish, prescribe and regulate the areas of operation of particular operators of the public service communications; xxx h.Supervise and inspect the operation of radio stations and _______________ 7 RCPI vs. Board of Communications, G.R. No. L-43653, 29 November 1977 and RCPI vs. Board of Communications, G.R. No. L-45378, 29 November 1977, 80 SCRA 471. 460 460 SUPREME COURT REPORTS ANNOTATED Radio Communications of the Philippines, Inc. vs. National Telecommunications Commission telecommunications facilities. Regulatory administrative agencies necessarily impose sanctions, adds the Office of the Solicitor General. RCPI was fined based on the finding of the NTC that it failed to undertake adequate service in delivering two (2) rush telegrams. NTC takes the view that its power of supervision was broadened by E.O. 546, and that this development superseded the ruling in RCPI vs. Francisco Santiago and companion cases. The issues of due process and real parties in interest do not have to be discussed in this case. This decision will dwell on the primary question of jurisdiction of the NTC to administratively impose fines on a telegraph company which fails to render adequate service to a consumer. E.O. 546, it will be observed, is couched in general terms. The NTC stepped into the shoes of the Board of Communications which exercised powers pursuant to the Public Service Act. The power to impose fines should therefore be read in the light of theFrancisco Santiago case because subsequent legislation did not grant additional powers to the Board of Communications. The Board in other words, did not possess the power to impose administrative fines on public services rendering deficient service to customers, ergo its successor cannot arrogate unto itself such power, in the absence of legislation. It is true that the decision in RCPI vs. Board of Communications seems to have modified the Santiago ruling in that the later case held that the Board of Communications can impose fines if the public service entity violates or fails to comply with the terms and conditions of any certificate or any order, decision or regulation of the Commission. But can private respondents complaint be similarly treated when the complaint seeks redress of a grievance against the company?8 NTC has no jurisdiction to impose a fine.

_______________ 8 There is no doubt that when the complaint seeks damages in case of a breach of contractual obligation on the part of the telecommunications company (failure to send a telegram on time, included), the RTC has jurisdiction (see RCPI and Globe Mackay and Radio Corporation vs. Rufus Rodriguez, G.R. No. 83768, 28 February 1990, 182 461 VOL.215,NOVEMBER6,1992 461 Radio Communications of the Philippines, Inc. vs. National Telecommunications Commission Globe Wireless Ltd. vs. Public Service Commission (G.R. No. L-27520, 21 January 1987, 147 SCRA 269) says so categorically. Verily, Section 13 of Commonwealth Act No. 146, as amended, otherwise known as the Public Service Act, vested in the Public Service Commission jurisdiction, supervision and control over all public services and their franchises, equipment and other properties. xxx The act complained of consisted in petitioner having allegedly failed to deliver the telegraphic message of private respondent to the addressee in Madrid, Spain. Obviously, such imputed negligence has nothing whatsoever to do with the subject matter of the very limited jurisdiction of the Commission over petitioner. Moreover, under Section 21 of C.A. 146, as amended, the Commission was empowered to impose an administrative fine in cases of violation of or failure by a public service to comply with the terms and conditions of any certificate or any orders, decisions or regulations of the Commission. Petitioner operated under a legislative franchise, so there were no terms nor conditions of any certificate issued by the Commission to violate. Neither was there any order, decision or regulation from the Commission applicable to petitioner that the latter had allegedly violated, disobeyed, defied or disregarded. No substantial change has been brought about by Executive Order No. 546 invoked by the Solicitor Generals Office to bolster NTCs jurisdiction. The Executive Order is not an explicit grant of power to impose administrative fines on public service utilities, including telegraphic

agencies, which have failed to render adequate service to customers. Neither has it expanded the coverage of the supervisory and regulatory power of the agency.There appears to be no alternative but to reiterate the settled doctrine in administrative law that: Too basic in administrative law to need citation of jurisprudence is the rule that jurisdiction and powers of administrative agencies, like respondent Commission, are limited to those expressly granted or necessarily implied from those granted in the legislation creating _______________ SCRA 899; RCPI vs. Court of Appeals, et. al., G.R. No. 79578, 13 March 1991, 195 SCRA 147. 462 462 SUPREME COURT REPORTS ANNOTATED Makati Tuscany Condominuim Corp. vs. Court of Appeals such body; and any order without or beyond such jurisdiction is void and ineffective .... (Globe Wireless case, supra). WHEREFORE, the decision appealed from is REVERSED and SET ASIDE for lack of jurisdiction of the NTC to render it. The temporary restraining order issued on 18 June 1990 is made PERMANENT without prejudice, however, to the filing by the party aggrieved by the conduct of RCPI, of the proper action in the proper forum. No costs. SO ORDERED. Cruz (Chairman), Grio-Aquino and Bellosillo, JJ., concur. Medialdea, J., On leave. Decision reversed and set aside. Note.Construction given by an administrative agency possessed of the necessary special knowledge, expertise and experience deserves great weight and respect (Philippine Long Distance Company vs. National Telecommunications Commission, 190 SCRA 717). o0o [Radio Communications of the Philippines, Inc. vs.National Telecommunications Commission, 215 SCRA 455(1992)]

VOL. 68, NOVEMBER 27, 1975 119 The Power of Administrative Agencies To Issue Subpoena ANNOTATION THE POWER OF ADMINISTRATIVE AGENCIES TO ISSUE SUBPOENA By Judge JORGE R. COQUIA 1.Powers of Administrative Bodies in General, p. 119. 2.Power to Obtain Information, p. 120. 3.Power to Require Attendance of Witnesses, p. 120. 4.Administrative Investigatory and Inquisitorial Powers, p. 120. 5.Necessity of Statutory Authority, p. 121. 6.Methods of Enforcement, p. 122. 7.Tests in Determining the Validity of the Enforcement of Administrative Subpoenas, p. 123. 8.Power of the Commission on Election to Punish for Contempt, p. 124. 9.Determination of Relevancy of the Inquiry, p. 125. 10.The Burden of the Respondent, p. 126. 11.Lack of Jurisdiction of the Administrative Agency, p. 127. 12.Fishing Expedition, p. 127. 13.Documents to be Specifically Described, p. 128. 14.Privileged Information, p. 129. _______________ 1. Powers of Administrative Bodies in General Administrative powers are usually vested in administrative agencies. It is their main function to carry into effect the will of the State as expressed by its legislation (Phelps Dodge Corp. vs. National Labor Relations Board, 313 U.S. 177; Reagan vs. Farmers Loan and T. Co., 154 U.S. 362; Davis, Administrative Law (1951, pp. 1-3; Shapiro, The Supreme Court and Administrative Agencies, 104). Administrative agencies have the power of adjudication or quasi-judicial function, the rule-making power or quasi-legislative function, investigatory or inquisitorial powers, 120

120 SUPREME COURT REPORTS ANNOTATED The Power of Administrative Agencies To Issue Subpoena discretionary and ministerial powers, or determinative powers which may be divided into: (a) enabling powers; (b) directing powers; (c) dispensing powers; (d) examining powers, and (e) summary powers or all or a combination of some of the powers (42 Am. Jur. 316). 2. Power to Obtain Information In order to exercise effectively their legislative and judicial functions, administrative bodies must be able to obtain pertinent information and to enforce valid rules and orders. Agencies are authorized to conduct investigations and, in aid thereof, to summon witnesses and require the production of books, papers, contracts, agreements, and other documents. Investigations may be for the purpose of acquiring data to serve as a basis for the formulation of policies, or they may be preliminary steps in the process of enforcing administrative action, or they may merely be hearing (Swonson, Federal Administrative Law, p. 126). 3. Power to Require Attendance of Witnesses Administrative authorities do not have the inherent power to require the attendance of witnesses before them, to put them under oath and to require them to testify once they are before them. They can exercise this power only when validly vested in them. The power to issue subpoena may be exercised in the course of an investigation being conducted by the agency or in proceedings before it. However, it is necessary before it can use the subpoena power that there be an issue of fact for determination within the powers of the body to investigate and determine (42 Am. Jur. 326). 4. Administrative Investigatory and Inquisitorial Powers The investigatory and inquisitorial powers of an administrative agency includes the powers to (1) issue subpoenas; (2) swearing in witnesses; (3) interrogating witnesses; (4) calling for production of books, papers, and records; (5) requiring that books, papers, and records be made available for inspection; (6) inspecting premises; (7) securing written answers to questionnaires; (8) requiring reports, 121

VOL. 68, NOVEMBER 27, 1975 121 The Power of Administrative Agencies To Issue Subpoena periodic or special; (9) requiring of filing statements. Section 71. of the Revised Administrative Code reads: Power of investigating officer to take testimony.Any officer, committee, or person designated by the President of the Philippines to conduct any investigation which may be lawfully prosecuted upon his order may, in the execution of such duty, summon witnesses, administer oaths, and take testimony relevant to the investigation question. The powers incidental to the taking of testimony before an administrative agency is provided for in Section 580 of the Revised Administrative Code which reads: When authority to take testimony or evidence is conferred upon and administrative officer or upon non-judicial person, committee, or other body, such authority shall be understood to comprehend the right to administer oaths and summon witnesses and shall include authority to require the production of document under subpoenas duces tecum or otherwise, subjects in all respect to the same restrictions and qualifications as apply in judicial proceedings of a similar character. Saving the provisions of section one hundred and two of this act, any one who, without lawful excuse, fails to appear upon summons issued under the authority of the preceding paragraph or who, appearing before any individual or body exercising the power therein defined, refuses to make oath, give testimony, or produce documents for inspection, when thereunto lawfully required, shall be subject to discipline as in case of contempt of court and upon application of the individual or body exercising the power in question shall be dealt with by the judge of first instance having jurisdictions of the case in the manner provided by law. 5. Necessity of Statutory Authority An administrative agency possess no inherent power to issue subpoenas. It may do so only if authorized by statute (Benjamin, Administrative Adjudication in the State of New York, p. 147). Usually, the authority to issue subpoena (if such authority is granted is contained in the statute creating the particular agency. There is a great variation as between several agencies in some states concerning their respective powers to issue subpoenas (Cooper. State Administrative Law, Vol. I, p. 295). 122

122 SUPREME COURT REPORTS ANNOTATED The Power of Administrative Agencies To Issue Subpoena Some States have general provisions authorizing their agencies to issue subpoenas. Some states have espoused the approach that subpoenas should be readily available in agency adjudication as in the case of proceedings in the courts. Their statutes make it mandatory for agencies to issue subpoenas at the request of any party, before the hearing is commenced. They further provide that after the hearing has opened, the hearing officer has discretion whether or not to authorize the issuance of subpoenas (See Alaska Statute and California Government Code). Other states provide that the agency or the officer conducting the hearing shall, upon request of any party, require by subpoena the attendance and testimony of witnesses and the production of documents (See Maine Rev. Statutes, Mass. General Laws, Ann., Missouri Rev. Stat., cited in Cooper, op. cit, p. 296). It has been held that legislature may validly grant powers to state agencies to compel production of information for general purposes of investigation, whether or not it is sought in connection with the hearing of a particular contested case, and whether or not the information is sought on the basis that there exists probable cause to believe that the law has been violated (In re Petition of 104 So. 2d 16; Vissering Mercantile Co. vs. Annuzio, 115 N.E. 2d 306; Smith vs. State Board of Accountancy, 271 S.W. 2d 875; Warren vs. Board of Appeals, 17 A. 2d 124). On the other hand, a statute which merely grants agencies power to issue subpoenas to require attendance at administrative hearings has been held not to authorize the issuance of subpoenas in connection with investigations (Commonwealth ex rel. Margiotti vs. Orsini 368 Pa. 259, 81 A. 2d 891). 6. Methods of Enforcement The usual methods of enforcement of administrative subpoenas is by means of application to a trial court of general jurisdiction for an order directing the witness to respond to the subpoena (Interstate Commerce Commission vs. Brimson, 154 U.S. 447). In the aforecited case, the Court remarked that Congress could not constitutionally grant to administrative agencies power to punish for contempt, in case of refusal

to obey subpoena. If the court order is not obeyed, the witness is subject to contempt penalties. 123 VOL. 68, NOVEMBER 27, 1975 123 The Power of Administrative Agencies To Issue Subpoena Aside from constitutional doubts, most state legislatures have evinced the belief that the advantages that may be gained, in the way of prompt and speedy enforcement, by granting contempt power to administrative agencies, are exceeded by the hazards involved. There appears a deepseated reluctance to grant to non-judicial officers, bent on prosecuting their own cases, the power to imprison a witness who refuses to aid them in their task. The fact that Congress consistently have withheld powers of testimonial compulsion from administrative agencies discloses a policy that speaks with impressive significance (Dissenting opinion of Justice Frankfurther in Penfield Company vs. Securities Exchange Commission 330 U.S. 385). State court decisions have held unconstitutional several statutes which vested the power to administrative agencies to impose penalities in case of refusal to comply with an administrative subpoena (People vs. Swena, 296 Pac. 271; Langenberg vs. Decker, 31 N.E. 190, 16 L.R.A. 108; In Re Sims, 37 Pac. 135, 25 L.R.A. 110; Roberts vs. Hackney, 58 S.Q. 810). See, however, Southern Pac. Co. vs. State, 165, Pac. 303; Plunkett vs. Hamilton, 70 S.E. 781; Vogel vs. Corporation Commission, 121 P. 2d 586 which upheld statutes granting contempt powers to agencies. Some decisions have assumed the inherent power of agencies to punish for contempt (Ex Parte Sanford, 139 S. W. 376; In re Hayes, 156 S.E. 791, 73 A.L.R. 1179). An administrative tribunal may not punish for contempt even though it exercises important delegated adjudicating powers (Swenson, Federal Administrative Law, 126). 7. Tests in Determining the Validity of the Enforcement of Administrative Subpoenas The general rule is that when application is made to a court for assistance in enforcing compliance with an administrative subpoena, courts will sustain the subpoena to the extent that it is found to be in

accordance with law (See Federal Administrative Procedure Act, 5 U.S.C, Sec. 1005 (c). The three tests set by the U.S. Supreme Court in determining whether the subpoena is in accordance with law are: (1) whether the inquiry is one the demanding agency is authorized by law to make; (2) whether the materials specified are relevant to an authorized inquiry; (3) whether the disclosure sought is reasonable (Oklahoma Press Publishing 124 124 SUPREME COURT REPORTS ANNOTATED The Power of Administrative Agencies To Issue Subpoena Co., vs. Walling, 327 U.S. 186. See also Cooper, Federal Agency Investigation Requirements for the Production of Documents, 60 Mich. L. Rev. 187 (1961). So long as the investigation is for a lawfully authorized purpose and the information sought relevant and material to the investigation, we cannot see where due process is offended by requiring any person possessed of that information to testify (State ex. rel. Railroad & Warehouse Commission vs. Mees, 49 N.W. 2d 386). If the inquiry is one the agency is authorized to make, if the demand is not too indefinite, and if the information sought is reasonably relevant, then the administrative subpoena should be enforced (Brovelli vs. Superios Court, 364 P. 2d 462). 8. Power of the Commission on Election to Punish for Contempt Section 5 of the Revised Election Code (Rep. Act. No. 180 as amended by Rep. Acts Nos. 599, 867, 2242, 3036, 2522, 3588, and 4648 reads: The Commission on Elections or any of the members thereof shall have the power to summon the parties to a controversy pending before it, issue subpoenas and subpoenas duces tecum and otherwise take testimony in any investigation or hearing pending before it, and delegate such power to any officer. Any controversy submitted to the Commission on Elections shall be tried, heard and decided by it within fifteen days counted from the time the corresponding petition giving rise to said controversy is filed. The Commission or any of the members thereof shall have the power to punish contempts provided for in Rule 64 of the Rules of Court, under the same procedure and with the same penalties provided therein.

Any violation of any final and executory decision, order or ruling of the Commission shall constitute contempt of the Commission. Section 6 of Republic Act No. 6388, otherwise known as the Election Code of 1971 reads: Power of the Commission to investigate and to hear controversy and mue subpoena. The Commission or any of the members thereof, shall in compliance with the requirements of due process have the power to summon the parties to a controvery pending before it issue subpoena and subpoena duces tecum and otherwise take testimony in any investigation or hearing pending before it and delegate such power to any officer of the Commission who shall be a member of the 125 VOL. 68, NOVEMBER 27, 1975 125 The Power of Administrative Agencies To Issue Subpoena Philippine Bar. In case of failure of a witness to attend, the Commission, upon proof of service of a subpoena to said witness, may issue a warrant to arrest the witness and bring him before the Commission or officer before whom his attendance is required. The Commission shall have the power to punish contempts provided for in the Rules of Court, under the same procedure and with the same penalties provided therein. Any controversy submitted to the commission shall after complying with the requirements of due process be heard and decided by it within thirty days after submission of the case. The Commission on Elections cannot be classified as a court of justice within the meaning of the Constitution. It is merely an independent administrative body (Nacionalista Party vs. Vera, L-3474, Dec. 7, 1949 but may however, exercise quasi judicial functions is so far as controversies that by express provision of the law come under its jurisdiction. (1) It has the power to annul an illegal registry list of voters; (2) to annul an election canvass by a municipal board of canvassers; (3) to investigate an act on the illegality of a canvass of election made by a municipal board of canvassers. The requisitioning and preparation of the necessary ballot boxes to be used in the election is ministerial duty which the Commission performs in its judicial administrative capacities. The power to punish for contempt is

inherently judicial in character. The act of the Commission on Election in requisitioning ballots is a ministerial duty to be performed in connection with its administrative capacity. In the exercise of its administrative functions, the Commission have no power to hold a person in contempt (Guevarra vs. Commission on Elections, L-12596, July 31, 1958). The Commission on Elections, in the exercise of its ministerial functions, such as the distribution of ballots and other election paraphernalia among the different municipalities, has no power to punish for contempt, because sueh power is judicial (Masangkay vs. Commission on Elections, L-13827, September 28, 1962, 6 SCRA 27). 9. Determination of Relevancy of the Inquiry The difficulty faced by courts in determining as to whether the material to be inquired into is relevant or not arises from the fact that the material in question is still unknown or the document is still unseen even by the agency and what the 126 126 SUPREME COURT REPORTS ANNOTATED The Power of Administrative Agencies To Issue Subpoena document might reveal. On the other hand, the counsel for the respondent may not wish to reveal the document or information for to do so might reveal the purpose for keeping them undiscovered. It is even more difficult to say that the information is irrelevant when he in fact refuses to reveal its contents. Furthermore, when the issue of relevancy is argued, the actual issues involved in the administrative proceedings may not be crystallized (Cooper, op. cit, p. 300). United States state courts usually rule that if the administrative agency initially shows that the desired information is reasonably relevant, the burden is shifted in the respondent to disprove the relevancy. Courts are generally inclined to overrule the defense of irrelevancy unless the respondent resisting the subpoena can clearly show that the material is clearly irrelevant or that it has no potential relevancy. Generally, the heavy burden of persuasion is placed in the respondent if he is to convince the court that the production of information should be denied for reasons of irrelevancy alone (Id.) A New York Court ruled that the commission will of course be restricted to such evidence relevant to its inquiry (Alexander vs. New York State Commission, 118 N.E. 2d 588). In New

Jersey, however, the court quashed a subpoena duces tecum primarily on the patent irrelevancy and immateriality of the evidence sought. The court added that on a demonstrated irrelevancy the court should not compel obedience to a subpoena duces tecum. It may also be argued that the compliance with the subpoena would cause undue burden involving unreasonable interference with the protected rights of privacy. A Pennsylvania court quashed a subpoena to produce all records of a number of persons which would show their connection with fifty two corporations involved in the dessimination of sporting news on the ground that the said subpoena could not be properly issued on a mass of books and papers in order that there might be a search through them to gather evidence (Annenberg vs. Roberts, 333 Pa. 203, 2 A. 2d 612). 10. The Burden of the Respondent The United States Supreme Court ruling in Oklahoma Press Publishing Company vs. Walling, supra, seemed to imply that if there is difficulty in complying with the subpoena, it may not be enforced. If under all circumstances, the demands of the subpoena are unreasonable and oppressive, the defense of 127 VOL. 68, NOVEMBER 27, 1975 127 The Power of Administrative Agencies To Issue Subpoena undue burden is sufficient basis for quashing the subpoena (WinnLovett Grocery Co. vs. NLRB, 213 F 2d 785). But the mere circumstance that compliance with the subpoena will be expensive and inconvenient or that it will interfere with the normal conduct of respondents business does not ordinarily afford a basis for refusal to enforce the subpoena (Vissering Mercantile Co. vs. Annuzio, 115 N.E. 2d 306). If it appears to the court on the whole record that the purpose of the subpoena is to annoy and embarrass rather than to discover and reveal, the court may deny enforcement (Winn and Lovett Grocery Co. vs. NLRB, 213 P. 2d 785). 11. Lack of Jurisdiction of the Administrative Agency In Oklahoma Press Publishing Co. vs. Walling, 327 U.S. 186, the Court hinted that the issue of lack of jurisdiction could not be raised as a defense on the application for enforcement of a subpoena, that being a

question to be determined, at least in the first instance, by the agency itself. Some state court decisions rule that a witness may be subpoenaed to produce information, regardless of the applicability of the regulatory act to the witness so summoned (State vs. Mees, 49 N.W. 386). A contrary rule may make it impossible for an administrative agency to effectively carry out its investigatory duties (27 A.P.L.R. 2d 1208) 12. Fishing Expedition A court will not issue a subpoena duces tecum unless it is shown that the papers and books to be produced are pertinent, relevant and material to the issues being tried. The application or petition must show these facts. Thus the writ will not be granted as a fishing expedition where the purpose is mere inquiry or to discover whether there is any evidence in them that will be useful to the applicant, or for the general inquisitional examination (Board of Review vs. Williams, 15 So. 48). A subpoena duces tecum could not properly be issued if the purpose is to bring in a mass of books and papers in order that there might be a search through them to gather evidence (Armenberg, vs. Roberts, 333 Pa. 203, 2 A. 2d 612). In Harriman vs. Interstate Commerce Commission, 211 U.S. 407, the Court denied the right of the Commission to examine witnesses as to 128 128 SUPREME COURT REPORTS ANNOTATED The Power of Administrative Agencies To Issue Subpoena various matters on which the Commission sought information that might influence its recommendation to Congress for new legislation. A roving inquisitorial investigation is unknown in the Constitution (U.S.) and would constitute an intolerable tyranny (Jones vs. SEC, 298 U.S. 1). See, however, United States vs. Morton Salt Company, 338 U. S. 632 where the Supreme Court held: Even if one were to regard the request for information in this case as caused by nothing more than official curiosity, nevertheless law-enforcing agencies have a legitimate right to satisfy themselves that corporate behaviour is consistent with the law and the public interest. Said decision was undoubtedly influenced by the fact that the Federal Trade Commission wanted to learn whether respondent was in compliance with the requirements of an order previously entered against it. It may be doubted whether an inquiry as

broad as that there permitted would have been sustained if addressed to one who had not previously been found to have engaged in illegal practices (Cooper, op. cit., p. 309). Many state courts, however, do not prohibit fishing expedition as such. Where the agency is proceeding to drag the nets of inquiry, in the hope that the culprits will be caught, the court will test the legality of the demand in terms of statutory authorization, the potential relevancy and significance of the information sought, and the degree of burden imposed on the witness (Cooper, Id.). 13. Documents to be Specifically Described The controlling doctrine is that the documents demanded must be specifically described. In actual application, however, courts are liberal in granting the application if the documents are appropriately described. Any description is deemed appropriate and sufficiently specific if it enables respondent to identify the documents which the agency desires to see. Thus, a demand that all correspondence relating to specified topics or all documents relevant to a specified inquiry be produced, is generally deemed to be a sufficiently precise description (Brown vs. United States, 276 U.S. 134; Consolidated Mines of California vs. SEC, 97 F. 2d 704; Pope and Talbot vs. Smith, 340 Pac 2d 960). 129 VOL. 68, NOVEMBER 27, 1975 129 The Power of Administrative Agencies To Issue Subpoena 14. Privileged Information In principle, the evidence that is privileged in court proceedings should also be privileged in administrative proceedings (8 Wigmore, Evidence, 2285, 1961 ed.). In the same manner the privilege against self incrimination is also applicable in administrative agencies. But this privilege may not be asserted in behalf of a corporation (Hale vs. Henkel, 201 U.S. 43). The information in a proceeding to declare a forfeiture of certain property because of the evasion of a certain revenue law, though technically a civil proceeding, is in substance and effect a criminal one, and that suits for penalties and forfeitures are within the purview of criminal proceedings for the purpose of that portion of the Fifth Amendment of the Constitution of the United States which declares that no person shall be compelled in a criminal case to be a witness against

himself (Boyd vs. U.S., 116 U.S. 616), cited in Cabal vs. Kapunan, L-19052, December 29, 1962, 6 SCRA 1059). Similarly, a proceeding for the removal of an officer was held to be in substance, criminal, for said portion of the Fifth Amendment applies to all cases in which the action prosecuted is not to establish, recover or redress private and civil rights, but to try and punish persons charged with the commission of public offenses (Thurston vs. Clark, 107 Cal. 285. See also Lee vs. U.S. 37 h. ed. 1150). Proceedings for forfeiture of property are deemed criminal or penal, and, hence, the exemption of defendants in criminal cases from the obligation to be witness against themselves are applicable thereto (Cabal vs. Kapunan, supra). In an administrative hearing against a medical practitioner for alleged malpractice, the Board of Medical Examiners cannot, consistently with the self-incrimination clause, compel the person proceeded against to take the witness stand without his consent (Pascual vs. Board of Medical Examiners, L-25081, May 26, 1969, 28 SCRA 344). The attorney-client relationship privilege may also be availed of in administrative investigatory proceedings (In re Kaplan, 168 N.E. 2d 660). [The Power of Administrative Agencies To Issue Subpoena, 68 SCRA 119(1975)]

620 SUPREME COURT REPORTS ANNOTATED Makati Stock Exchange, Inc. vs. Securities and Exchange Commission No. L-23004. June 30, 1965. MAKATI STOCK EXCHANGE, INC., petitioner, vs. SECURITIES AND EXCHANGE COMMISSION and MANILA STOCK EXCHANGE, respondents. Securities and Exchange Commission; May not prohibit double listing of securities in stock exchanges.The Securities and Exchange Commissions rule that a security already listed in any securities exchange may not be listed anew in any other securities exchange is beyond the power of the Commission to impose because it results in discrimination and violation of constitutional rights. Same; Same; Prohibition against double listing as condition for licensing of stock exchange.The Securities and Exchange Commission may not validly impose as a condition precedent for the licensing of a stock exchange its rule against double listing of securities. PETITION for review of a resolution of the Securities and Exchange Commission. The facts are stated in the opinion of the Court. Hermenegildo B. Reyes for petitioner. Solicitor General for respondent Securities and Exchange Commission. Norberto J. Quisumbing and Emma Quisumbing-Fernando for respondent Manila Stock Exchange. BENGZON, C.J.: This is a review of the resolution of the Securities and 621 VOL. 14, JUNE 30, 1965 621 Makati Stock Exchange, Inc. vs. Securities and Exchange Commission Exchange Commission which would deny the Makati Stock Exchange, Inc., permission to operate a stock exchange unless it agreed not to list for trading on its board, securities already listed in the Manila Stock Exchange.

Objecting to the requirement, Makati Stock Exchange, Inc contends that the Commission has no power to impose it and that, anyway, it is illegal, discriminatory and unjust. Under the law, no stock exchange may do business in the Philippines unless it is previously registered with the Commission by filing a statement containing the information described in Sec. 17 of the Securities Act (Commonwealth Act 83, as amended). It is assumed that the Commission may permit registration if the section is complied with; if not, it may refuse. And there is now no question that the section has been complied with, or would be complied with, except that the Makati Stock Exchange, upon challenging this particular requirement of the Commission (rule against double listing) may be deemed to have shown inability or refusal to abide by its rules, and thereby to have given ground for denying registration. [Sec. 17 (a) (1) and (d)]. Such rule provides: x x x nor shall a security already listed in any securities exchange be listed anew in any other securities exchange x x x. The objection of Makati Stock Exchange, Inc, to this rule is understandable. There is actually only one securities exchangeThe Manila Stock Exchangethat has been operating alone for the past 25 years; and allor presumably allavailable or worthwhile securities for trading in the market are now listed there. In effect, the Commission permits the Makati Stock Exchange, Inc., to deal only with other securities. Which is tantamount to permitting a store to open provided it sells only those goods not sold in other stores. And if theres only one existing store,1 the result is a monopoly. _______________ 1 Selling all goods usually needed in the community. 622 622 SUPREME COURT REPORTS ANNOTATED Makati Stock Exchange, Inc. vs. Securities and Exchange Commission It is not farfetched to assertas petitioner does2that for all practical purposes, the Commissions order or resolution would make it

impossible for the Makati Stock Exchange to operate. So, its permission amounted to a prohibition. Apparently, the Commission acted in the public interest.3 Hence, it is pertinent to inquire whether the Commission may in the public interest prohibit (or make impossible) the establishment of another stock exchange (besides the Manila Stock Exchange), on the ground that the operation of two or more exchanges adversely affects the public interest. At first glance, the answer should be in the negative, because the law itself contemplated, and, therefore, tacitly permitted or tolerated at least, the operation of two or more exchanges. Wherever two or more exchanges exist, the Commission, by order, shall require and enforce uniformity of trading regulations in and/or between said exchanges. *Italics Ours+ (Sec. 28b-13, Securities Act.) In fact, as admitted by respondents, there were five stock exchanges in Manila, before the Pacific War (p. 10, brief), when the Securities Act was approved or amended. (Respondent Commission even admits that dual listing was practiced then.) So if the existence of more than one exchange were contrary to public interest, it is strange that the Congress having from time to time enacted legislation amending the Securities Act,4 has not barred multiplicity of exchanges. Forgetting for the moment the monopolistic aspect of the Commissions resolution, let us examine the authority _______________ 2 Its members (Makatis) will not x x x spend their time exclusively in securities which are new and unknown to the public, with prospect of losing their capital and wasting their time. (quoted on p. 57, Brief of Commission.) 3 The Commissions brief denies this (p. 15); but it is contradicted by the brief of Manila Stock Exchange, p. 3. 4 Commonwealth Acts 283 and 290; Republic Acts 635 and 1143. 623 VOL. 14, JUNE 30, 1965 623 Makati Stock Exchange, Inc. vs. Securities and Exchange Commission of the Commission to promulgate and implement the rule in question.

It is fundamental that an administrative officer has only such powers as are expressly granted to him by the statute, and those necessarily implied in the exercise thereof. In its brief and its resolution now subject to review, the Commission cites no provision expressly supporting its rule. Nevertheless, it suggests that the power is necessary for the execution of the functions vested in it; but it makes no explanation, perhaps relying on the reasons advanced in support of its position that trading of the same securities in two or more stock exchanges, fails to give protection to the investors, besides contravening public interest. (Of this, we shall treat later) On the legality of its rule, the Commissions argument is that: (a) it was approved by the Department Headbefore the War; and (b) it is not in conflict with the provisions of the Securities Act. In our opinion, the approval of the Department,5 by itself, adds no weight in a judicial litigation; and the test is not whether the Act forbids the Commission from imposing a prohibition, but whether it empowers the Commission to prohibit. No specific portion of the statute has been cited to uphold this power. It is not found in sec. 28 (of the Securities Act), which is entitled Powers (of the Commission) with Respect to Exchanges and Securities.6 According to many court precedents, the general power to regulate which the Commission has (Sec. 33) does _______________ 5 The present Department Head is quoted as hinting a desire for review thereof, (p. 3, Brief of Commission.) 6 In its brief, the Commission points to its authority (under Sec. 28b-3) to alter or supplement the Rules of such exchange, x x x in respect of such matters as; x x x the listing or striking from listing of any security. The argument has no merit, since no change of the Rules of Makati Exchange is involved here. And a mere reading of the whole paragraph (b) will show its inapplicability to the pending controversy. 624 624 SUPREME COURT REPORTS ANNOTATED Makati Stock Exchange, Inc. vs. Securities and Exchange Commission not imply authority to prohibit.7

The Manila Stock Exchange, obviously the beneficiary of the disputed rule, contends that the power may be inferred from the express power of the Commission to suspend trading in a security, under said sec. 28 which reads partly: And if in its opinion, the public interest so requires, summarily to suspend trading in any registered security on any securities exchange x x x. (Sec. 28*3+, Securities Act.) However, the Commission has not actednor claimed to have actedin pursuance of such authority, for the simple reason that suspension under it may only be for ten days. Indeed, this section, if applicable, precisely argues against the position of the Commission because the suspension, if it is, and as applied to Makati Stock Exchange, continues for an indefinite period, if not forever; whereas this Section 28 authorizes suspension for ten days only. Besides, the suspension of trading in the security should not be on one exchange only, but on all exchanges; bearing in mind that suspension should be ordered for the protection of investors (first par., see. 28) in all exchanges, naturally, and if the public interest so requires *see. 28(3)+. This brings up the Commissions principal conclusions underlying its determination viz.: (a) that the establishment of another exchange in the environs of Manila would be inimical to the public interest; and (b) that double or multiple listing of securities should be prohibited for the protection of the investors. (a) Public Interest.Having already adverted to this aspect of the matter, and the emerging monopoly of the Manila Stock Exchange, we may, at this juncture, emphasize that by restricting free competition in the marketing of stocks, and depriving the public of the advantages _______________ 7 Regulate does not include prohibit. See many decisions collected in Words and Phrases, Permanent Edition, Vol. 36A, pp. 315-317. (See Republic v. Esguerra, 81 Phil. 33; Primicias v. Fugoso, 80 Phil. 71.) 625 VOL. 14, JUNE 30, 1965 625 Makati Stock Exchange, Inc. vs. Securities and Exchange Commission

thereof, the Commission all but permits what the law punishes as monopolies as crimes against public interest.8 A stock exchange is essentially monopolistic, the Commission states in its resolution (p. 14-a, Appendix, Brief for Petitioner). This reveals the basic foundation of the Commissions process of reasoning. And yet, a few pages afterwards, it recalls the benefits to be derived from the existence of two or more exchanges, and the desirability of a healthy and fair competition in the securities market, even as it expresses the belief that a fair field of competition among stock exchanges should be encouraged; only to resolve, paradoxically enough, that Manila Stock Exchange shall, in effect, continue to be the only stock exchange in Manila or in the Philippines. Double listing of a security, explains the Commission, divides the sellers and the buyers, thus destroying the essence of a stock exchange as a two-way auction market for the securities, where all the buyers and sellers in one geographical area converge in one defined place, and the bidders compete with each other to purchase the security at the lowest possible price and those seeking to sell it compete with each other to get the highest price therefor. In this sense, a stock exchange is essentially monopolistic. Inconclusive premises, for sure. For it is debatable whether the buyer of stock may get the lowest price where all the sellers assemble in only one place. The price there, in one sale, will tend to fix the price for the succeeding sales, and he has no chance to get a lower price except at another stock exchange. Therefore, the arrangement desired by the Commission may, at most, be beneficial to sellers of stocknot to buyersalthough what applies to buyers should obtain equally as to sellers (looking for higher prices). Besides, there is the brokerage fee which must be considered. Not to mention the personality of the broker. (b) Protection of investors.At any rate, supposing the _______________ 8 Art. 186, Revised Penal Code; Commonwealth Act 146. 626 626 SUPREME COURT REPORTS ANNOTATED Makati Stock Exchange, Inc. vs. Securities and Exchange Commission

arrangement contemplated is beneficial to investors (as the Commission says), it is to be doubted whether it is necessary for their protection within the purview of the Securities Act. As the purpose of the Act is to give adequate and effective protection to the investing public against fraudulent representations, or false promises, and the imposition of worthless ventures,9 it is hard to see how the proposed concentration of the market has a necessary bearing to the prevention of deceptive devices or unlawful practices. For it is not mere semantics to declare that acts for the protection of investors are necessarily beneficial to them; but not everything beneficial to them is necessary for their protection. And yet, the Commission realizes that if there were two or more exchanges the same security may sell for more in one exchange and sell for less in the other. Variance in price of the same security would be the rule x x x. Needless to add, the brokerage rates will also differ. This, precisely, strengthens the objection to the Commissions ruling. Such difference in prices and rates gives the buyer of shares alternative options, with the opportunity to invest at lower expense; and the seller, to dispose at higher prices. Consequently, for the investors benefit (protection is not the word), quality of listing10 should be permitted, nay, encouraged, and other exchanges allowed to operate. The circumstance that some people made a lot of money due to the difference in prices of securities traded in the stock exchanges of Manila before the war as the Commission noted, furnishes no sufficient reason to let one exchange corner the market. If there was undue manipulation or unfair advantage in exchange trading the Commission should have other means to correct the specific abuses. Granted that, as the Commission observes, what the country needs is not another market for securities al_______________ 9 People v. Rosenthal, 68 Phil. 42; People v. Fernandez & Trinidad, G.R. No. 45655; Lawyers Journal, Vol. VI, 589, June 18, 1938. 10 It is allowed in the U.S. (p. 33, Commissions brief.) 627 VOL. 14, JUNE 30, 1965 627 Makati Stock Exchange, Inc. vs. Securities and Exchange Commission

ready listed on the Manila Stock Exchange, but one that would focus its attention and energies on the listing of new securities and thus effectively help in raising capital sorely needed by our xxx unlisted industries and enterprises. Nonetheless, we discover no legal authority for it to shore up (and stifle) free enterprise and individual liberty along channels leading to that economic desideratum.11 The Legislature has specified the conditions under which a stock exchange may legally obtain a permit (sec. 17, Securities Act); it is not for the Commission to impose others. If the existence of two competing exchanges jeopardizes public interestwhich is doubtfullet the Congress speak.12 Undoubtedly, the opinion and recommendation of the Commission will be given weight by the Legislature, in judging whether or not to restrict individual enterprise and business opportunities. But until otherwise directed by law, the operation of exchanges should not be so regulated as practically to create a monopoly by preventing the establishment of other stock exchanges and thereby contravening: (a) the organizers (Makatis) Constitutional right to equality before the law; (b) their guaranteed civil liberty to pursue any lawful employment or trade; and (c) the investors right to choose where to buy or to sell, and his privilege to select the brokers in his employment.13 And no extended elucidation is needed to conclude that _______________ 11 Figuratively speaking, why compel this new farmer (Makati Stock) to till virgin forest in order to let the other farmer (Manila Stock) occupy the plain, which after all, does not belong to him? (In the absence, of course, of special reasons calling for the exercise of the police power by the Congress). 12 Lacson v. Roque, L-6225, Jan. 10, 1953. 13 Unreasonably discriminatory regulation may be set aside on such basis.Rivera, Law of Public Administration, citing 42 Am. Jur. 429-430 and some cases. 628

628 SUPREME COURT REPORTS ANNOTATED Makati Stock Exchange, Inc. vs. Securities and Exchange Commission for a licensing officer to deny license solely on the basis of what he believes is best for the economy of the country may amount to regimentation or, in this instance, the exercise of undelegated legislative powers and discretion. Thus, it has been held that where the licensing statute does not expressly or impliedly authorize the officer in charge, he may not refuse to grant a license simply on the ground that a sufficient number of licenses to serve the needs of the public have already been issued. (53 C.J.S. p. 636.) Concerning res judicata.Calling attention to the Commissions order of May 27, 1963, which Makati Stock did not appeal, the Manila Stock Exchange pleads the doctrine of res judicata.14 (The order now reviewed is dated May 7, 1964.) It appears that when Makati Stock Exchange, Inc. presented its articles of incorporation to the Commission, the latter, after making some inquiries, issued on May 27, 1963, an order reading as follows. Let the certificate of incorporation of the MAKATI STOCK EXCHANGE be issued, and if the organizers thereof are willing to abide by the foregoing conditions, they may file the proper application for the registration and licensing of the said Exchange. In that order, the Commission advanced the opinion that it would permit the establishment and operation of the proposed Makati Stock Exchange, provided x x x it shall not list for trading on its board, securities already listed in the Manila Stock Exchange x x x. Admittedly, Makati Stock Exchange, Inc. has not appealed from that order of May 27, 1963. Now, Manila Stock insists on res judicata. Why should Makati have appealed? It got the certificate of incorporation which it wanted. The condition or _______________ 14 The Commissions printed brief does not raise it probably because although apprised of that circumstance, it proceeded to act on the Makatis request, (p. 2 brief) and issued the order of May 7. 629

VOL. 14, JUNE 30, 1965 629 Makati Stock Exchange, Inc. vs. Securities and Exchange Commission proviso mentioned would only apply if and when it subsequently filed the application for registration as stock exchange. It had not yet applied. It was not the time to question the condition;15 Makati was still exploring the convenience of soliciting the permit to operate subject to that condition. And it could have logically thought that, since the condition did not affect its articles of incorporation, it should not appeal the order (of May 27, 1963) which after all, granted the certificate of incorporation (corporate existence) it wanted at that time. And when the Makati Stock Exchange finally found that it could not successfully operate with the condition attached, it took the issue by the horns, and expressing its desire for registration and license, it requested that the condition (against double listing) be dispensed with. The order of the Commission denying such request is dated May 7, 1964, and is now under review. Indeed, there can be no valid objection to the discussion of this issue of double listing now,16 because even if the Makati Stock Exchange, Inc. may be held to have accepted the permission to operate with the condition against double listing (for having failed to appeal the order of May 27, 1963), still it was not precluded from afterwards contesting17 the validity of such condition or rule: (1) An agreement (which shall not be construed as a waiver of any constitutional right or any right to contest the validity of any rule or regulation) to comply and to enforce so far as is within its ptfwers, compliance by its members, with the provisions of this Act, and any amendment thereto, and _______________ 15 It was a mere anticipatory statement of what the Commission would do when the petition for registration is filed. Neither binding nor appealable. (See III Moran Comments on the Rules of Court 295 [1963 Ed.]) 16 Indeed, hinting some doubts about the rule, the Department Head expected a judicial review. (p. 3, Brief for Commission.)

17 This incidentally disposes of the alleged acceptance of the condition by one Mr. Gaberman on which the respondents enlarged. (pp. 19-21, Brief for Commission) 630 630 SUPREME COURT REPORTS ANNOTATED Chamber of Agriculture and Natural Resources of the Phil. vs. Central Bank any rule or regulation made or to be made thereunder. (Sec. 17-a-l, Securities Act [Italics Ours].) Surely, this petition for review has suitably been coursed. And making reasonable allowances for the presumption of regularity and validity of administrative action, we feel constrained to reach the conclusion that the respondent Commission possesses no power to impose the condition of the rule, which, additionally, results in discrimination and violation of constitutional rights. ACCORDINGLY, the license of the petition to operate a stock exchange is approved without such condition. Costs shall be paid by the Manila Stock Exchange. So ordered. Bautista Angelo, Concepcion, Reyes, J.B.L., Paredes, Dizon, Regala, Makalintal, Bengzon, J.P. and Zaldivar, JJ., concur. Barrera, J., is on leave. Petition approved. o0o [Makati Stock Exchange, Inc. vs. Securities and Exchange Commission, 14 SCRA 620(1965)]

VOL. 80, NOVEMBER 29, 1977 471 RCPI vs. Board of Communications No. L-43653. November 29, 1977.* RADIO COMMUNICATIONS OF THE PHILIPPINES, INC. (RCPI), petitioner, vs. BOARD OF COMMUNICATIONS and DIEGO MORALES, respondents. No. L-45378. November 29, 1977.* RADIO COMMUNICATIONS OF THE PHILIPPINES, INC. (RCPI), petitioner, vs. BOARD OF COMMUNICATIONS and PACIFICO INNOCENCIO, respondents. _______________ * FIRST DIVISION. 472 472 SUPREME COURT REPORTS ANNOTATED RCPI vs. Board of Communications Board of Communications; Board of Communications can exercise only such jurisdiction and powers expressly or by necessary implication conferred upon it by statute.The Public Service Commission and its successor in interest, the Board of Communications, being a creature of the legislature and not a court, can exercise only such jurisdiction and powers as are expressly or by necessary implication, conferred upon it by statute. The functions of the Public Service Commission are limited and administrative in nature and it has only jurisdiction and power as are expressly or by necessary implication conferred upon it by statute. As successor in interest of the Public Service Commission, the Board of Communications exercises the same powers, jurisdiction and functions as that provided for in the Public Service Act for the Public Service Commission. Same; Board of Communications with power of supervision and control only over matters related to the issuance of the certificate of public convenience.As provided under Section 129 of the Public Service Act governing the organization of the Specialized Regulatory Board, the Board of Communications has the power to issue certificates of public

convenience. But this power to issue certificates of public convenience does not carry with it the power of supervision and control over matters not related to the issuance of the certificate of public convenience or in the performance therewith in a manner suitable to promote public interest. Same; Board of Communications with power to impose fine only where public service violates or fails to comply with terms and conditions of the certificate of public convenience or the orders, decisions or regulations of the Board.Even assuming that the respondent Board of Communications has the power of jurisdiction over, petitioner in the exercise of its supervision to insure adequate public service, petitioner cannot be subjected to payment of fine under Section 21 of the Public Service Act, because this provision of the law subjects to a fine every public service that violates or fails to comply with the terms and conditions of any certificate or any orders, decisions or regulations of the Commission. In the two cases, the petitioner is not being charged nor investigated for violation of the terms and conditions of its certificate of public convenience or of any order, decision or regulations of the respondent Board of Communications. The complaint of respondents was that they were allegedly inconvenienced or injured by the failure of the petitioner to transmit to them telegrams informing them of the deaths of close relatives which according to them constitute breach of contractual 473 VOL. 80, NOVEMBER 29, 1977 473 RCPI vs. Board of Communications obligation through negligence under the Civil Code. The charges, however, do not necessarily involve petitioners failure to comply with its certificate of public convenience or any order, decision or regulation of the respondent Board of Communications. Courts; Courts with jurisdiction over complaints for injury caused by breach of contractual obligation arising from negligence.If in the two cases the complainants allegedly suffered injury due to petitioners breach of contractual obligation arising from negligence, the proper forum for them to ventilate their grievances for possible recovery of

damages against petitioner should be in the courts and not in the respondent Board of Communications. PETITIONS for review of the decision of the Board of Communications. The facts are stated in the opinion of the Court. Treas & Aligaen for petitioner. R. Mag. Bernaldo for respondent Morales. Silvestre T. de la Cruz for respondent Innocencio. Primitivo C. Santos for respondent Board. MARTIN, J.: These two petitions (G.R. No. L-43653 and G.R. No. L-45378) for review by certiorari of the decisions of the Board of Communications in BC Case No. 75-01-OC, entitled Diego T. Morales vs. Radio Communications of the Philippines, Inc. (RCPI) and BC Case No. 75-08-OC, entitled Pacifico Innocencio vs. Radio Communications of the Philippines, Inc. (RCPI), have been consolidated as per resolution of this Court dated March 21, 1977, as they involve the same issue as to whether the Board of Communications has jurisdiction over claims for damages allegedly suffered by private respondents for failure to receive telegrams sent thru the petitioner Radio Communications of the Philippines, Inc., RCPI for short. In BC Case No. 75-01-OC (G.R. No. L-43653) complainant respondent Diego Morales claims that while he was in Manila his daughter sent him a telegram on October 15, 1974 from Santiago, Isabela, informing him of the death of his wife, Mrs. Diego T. Morales. The telegram sent thru the petitioner RCPI however never reached him. He had to be informed personally about the death of 474 474 SUPREME COURT REPORTS ANNOTATED RCPI vs. Board of Communications his wife and so to catch up with the burial of his wife, he had to take the trip by airplane to Isabela. In its answer petitioner RCPI claims that the telegram sent by respondent was transmitted from Santiago, Isabela to its Message Center at Cubao, Quezon City but when it was relayed from Cubao, the radio signal became intermittent making the copy received at

Sta. Cruz, Manila unreadable and unintelligible. Because of the failure of the RCPI to transmit said telegram to him, respondent allegedly suffered inconvenience and additional expenses and prays for damages. In BC Case No. 75-08-OC (G.R. No. L-45378) complainant respondent Pacifico Innocencio claims that on July 13, 1975 Lourdes Innocencio sent a telegram from Paniqui, Tarlac, thru the facilities of the petitioner RCPI to him at Barrio Lomot, Cavinti, Laguna for the purpose of informing him about the death of their father. The telegram was never received by Pacifico Innocencio. Inspite of the non-receipt and/or non-delivery of the message sent to said address, the sender (Lourdes Innocencio) has not been notified about its non-delivery. As a consequence Pacifico Innocencio was not able to attend the internment of their father at Moncada, Tarlac. Because of the failure of RCPI to deliver to him said telegram he allegedly was shocked when he learned about the death of their father when he visited his hometown Moncada, Tarlac on August 14, 1975, and thus suffered mental anguish and personal inconveniences. Likewise, he prays for damages. After hearing, the respondent Board in both cases held that the service rendered by petitioner was inadequate and unsatisfactory and imposed upon the petitioner in each case a disciplinary fine of P200 pursuant to Section 21 of Commonwealth Act 146, as amended, by Presidential Decree No. 1 and Letter of Implementation No. 1. The main thrust of the argument of petitioner is that respondent Board has no jurisdiction to entertain and take cognizance of complaints for injury caused by breach of contractual obligation arising from negligence covered by Article 1170 of the Civil Code1 _______________ 1 ART. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages. 475 VOL. 80, NOVEMBER 29, 1977 475 RCPI vs. Board of Communications

and injury caused by quasi delict or tort liability under Article 2176 of the Civil Code2 which according to it should be ventilated in the proper courts of justice and not in the Board of Communications. We agree with petitioner RCPI. In one case We have ruled that the Public Service Commission and its successor in interest, the Board of Communications, being a creature of the legislature and not a court, can exercise only such jurisdiction and powers as are expressly or by necessary implication, conferred upon it by statute.3 The functions of the Public Service Commission are limited and administrative in nature and it has only jurisdiction and power as are expressly or by necessary implication conferred upon it by statute.4 As successor in interest of the Public Service Commission, the Board of Communications exercises the same powers, jurisdiction and functions as that provided for in the Public Service Act for the Public Service Commission. One of these powers as provided under Section 129 of the Public Service Act governing the organization of the Specialized Regulatory Board, is to issue certificate of public convenience. But this power to issue certificate of public convenience does not carry with it the power of supervision and control over matters not related to the issuance of certificate of public convenience or in the performance therewith in a manner suitable to promote public interest. But even assuming that the respondent Board of Communications has the power or jurisdiction over petitioner in the exercise of its supervision to insure adequate public service, petitioner cannot be subjected to payment of fine under Section 21 of the Public Service Act, because this provision of the law subjects to a fine every public service that violates or fails to comply with the terms and conditions of any certificate or any orders, decisions or regulations of the Commission. In the two cases before us petitioner is not being charged nor investigated for violation of the terms and conditions of its _______________ 2 ART. 2176. Whoever by act or omission causes damage to another there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the provision of this Chapter. 3Filipino Bus Co. vs. Phil. Railway Co., 57 Phil. 860.

4 Batangas Laguna Tayabas Bus Co. vs. Public Service Commission, L25994 and L-26004-26046, August 31, 1966, 17 SCRA 1111. 476 476 SUPREME COURT REPORTS ANNOTATED RCPI vs. Board of Communications certificate of public convenience or of any order, decision or regulations of the respondent Board of Communications. The complaint of respondents in the two cases was that they were allegedly inconvenienced or injured by the failure of the petitioner to transmit to them telegrams informing them of the deaths of close relatives which according to them constitute breach of contractual obligation through negligence under the Civil Code. The charges, however, do not necessarily involve petitioners failure to comply with its certificate of public convenience or any order, decision or regulation of the respondent Board of Communications. It is clear from the record that petitioner has not been charged of any violation or failure to comply with the terms and conditions of its certificate of public convenience or of any order, decision or regulation of the respondent Board. The charge does not relate to the management of the facilities and system of transmission of messages by petitioner in accordance with its certificate of public convenience. If in the two cases before Us complainants Diego Morales and Pacifico Innocencio allegedly suffered injury due to petitioners breach of contractual obligation arising from negligence, the proper forum for them to ventilate their grievances for possible recovery of damages against petitioner should be in the courts and not in the respondent Board of Communications. Much less can it impose the disciplinary fine of P200 upon the petitioner. In Francisco Santiago vs. RCPI (G.R. No. L-29236) and Constancio Langan vs. RCPI (G.R. No. L29247), this Court speaking thru Justice Enrique Fernando, ruled: There can be no justification then for the Public Service Commission (now the Board of Communications as successor in interest) imposing the fines in these two petitions. The law cannot be any clearer. The only power it possessed over radio companies as noted was to fix rates. It could not take to task a radio company for any negligence or misfeasance. It was not vested with such authority. What it did then in these two petitions lacked the impress of validity.

In the face of the provision itself, it is rather apparent that the Public Service Commission lacked the required power to proceed against petitioner. There is nothing in Section 21 thereof which empowers it to impose a fine that calls for a different conclusion. WHEREFORE, both decisions of respondent Board of Communications in BC Case No. 75-01-OC and BC Case No. 75-08-OC are hereby reversed, set aside, declared null and void for lack of 477 VOL. 80, NOVEMBER 29, 1977 477 Embee Transportation Corporation vs. Camacho jurisdiction to take cognizance of both cases. Without costs. SO ORDERED. Teehankee (Chairman), Makasiar, Muoz Palma, Fernandez and Guerrero, JJ., concur. Decisions reversed, set aside, declared null and void for lack of jurisdiction to take cognizance of both cases. Notes.The Public Service Commission is without any jurisdiction to act on complaints against radio companies for negligence or malfeasance and to penalize them with fines. (Radio Communications of the Philippines, Inc. vs. Santiago, 58 SCRA 493). The orders of the Board of Communications cannot be stayed by a petition for certiorari unless the Supreme Court orders otherwise. (Gonzales vs. Public Service Commission, 61 SCRA 504). The mere fact that the National Power Corporation has a power plant in the same area where the petitioner has a franchise is not sufficient basis for granting the latter tax exemption privileges given to the NPC; it is well-settled that exemption from taxation is never presumed. (Davao Light & Power Co., Inc. vs. Commissioner of Customs,44 SCRA 122). Although a motion for reconsideration is pending before the Board of Transportation, the Court will go into the merits of the controversy and grant certiorari where there is strong public interest to have the issue raised settled. (Arrow Transportation Corp. vs. Board of Transportation, 63 SCRA 193). The Civil Aeronautics Board has the power to impose fines for violations of its rules and regulations. (Civil Aeronautics Board vs. Philippine Airlines, Inc., 63 SCRA 524).

o0o [RCPI vs. Board of Communications, 80 SCRA 471(1977)]

VOL. 162, JUNE 8, 1988 11 Provisional Authority: A Controversial Legal Relief ANNOTATION PROVISIONAL AUTHORITY: A CONTROVERSIAL LEGAL RELIEF By ROGELIO E. SUBONG * _______________ I.Introduction, p. 12 II.Franchising and Regulatory Bodies Empowered to Issue Provisional Authority, p. 13 III.Types of Authorizations Issued by Franchising and Regulatory Bodies, p. 14 a)Certificate of Public Convenience (CPC), p. 14 b)Certificate of Public Convenience and Necessity (CPCN), p. 14 c)Provisional Authority (PA), p. 15 d)Special Permit (SP), p. 15 IV.Brief Survey of Decisions on Provisional Authority, p. 15 a)Barredo Case of 1933, p. 15 b)Javellana Case of 1937, p. 16 c)Sambrano Cases of 1938 (the only oral permit issued), p. 17 d)Ablaza Case of 1951, p. 18 e)Silva Case of 1952, p. 19 f)Transcon Case of 1954, p. 19 _______________ * The writer, an A.B. 62 (UP)LLB 66 (UP) graduate also wrote the Annotation on the Heirs of E. San Pablo, et al. vs. Pantranco South Express, Inc., et al., 153 SCRA 199, wherein he was counsel for the Heirs of E. San Pablo. 12 12 SUPREME COURT REPORTS ANNOTATED Provisional Authority: A Controversial Legal Relief

g)Arrow Case of 1975, p. 21 h)Matienzo Case of 1988, p. 22 V.Summary of Doctrines and Requisites for Issuance of a Provisional Authority, p. 23 VI.Revocation of Provisional Authority and Due Process, p. 25 VII.Statutory Basis of Provisional Authority, p. 26 VIII.Presidential Decree No. 101, p. 28 IX.Significance of the Matienzo Ruling, p. 29 X.Conclusion, p. 33 _______________ I. Introduction In the field of public utility regulation, a cardinal postulate is that time is of the essence. It is a settled given that public convenience cannot be made to wait. Accordingly, public need for a particular service had to be filled as soon as possible. The more urgent the need, the more immediate should be the response. Thus, public utility jurisprudence particularly on transportation, has sanctioned actions of regulatory bodies providing for immediate temporary relief to pressing and urgent need for public utility service. This type of immediate relief is well known in the transportation industry as provisional authority or provisional permit. A provisional authority as a temporary relief has an enlightened goal. However, in recent years it has acquired a distinct notoriety as a legal relief due to abuse and misuse. In the late seventies, its alleged indiscriminate issuance was blamed for the sudden increase of jeepneys plying within Metro-Manila, which aggravated the traffic problems therein. Hence, it was even perceived to have contributed to the dismissal of the Chairman of the transport regulatory body at the time. The 13 VOL. 162, JUNE 8, 1988 13 Provisional Authority: A Controversial Legal Relief case of Rufino Matienzo, et al., vs. Leopoldo M. Abellera, et al., G.R. No. L-45839, promulgated June 1, 1988, which questioned the grant of the provisional authorities by the defunct Board of Transportation in favor of

taxicab operators in Metro-Manila, provides a timely opportunity to review and re-examine the history, legal basis and requisites for the valid issuance of this legal relief. It appears that the Matienzo decision has made crucial changes on the prevailing jurisprudence on provisional authority. Hence, we will also try to point out and discuss these significant changes. II. Franchising and Regulatory Bodies Empowered to Issue Provisional Authority It is settled that it is the franchising and regulatory body which issues the CPCs and PAs. There were earlier regulatory bodies which were created when public utility regulation was introduced by the Americans at the turn of the century. But formal franchising begun with the creation of the commission-type of regulatory bodies especially with the creation of the Public Service Commission (PSC). As will be noted, the PSC which was created under Com. Act No. 146, as amended or the Public Service Act, as amended, was the governing franchising and regulatory body since its passage on November 7, 1936 up to 1972. The PSC was abolished under the Integrated Reorganization Plan (IRP) which was elevated into law by Presidential Decree No. 1 of September 24, 1972right after the declaration of Martial Law. The PSC was vested with vast powers and wide jurisdiction, so much so that it had issued PAs and CPCs to various types of public utilities, e.g., land transport, water ferry service, electric plant, ice plant, telephone service, waterworks, etc. With the abolition of the PSC, three (3) Specialized Regulatory Boards were created in its stead. One of these bodies was the Board of Transportation (BOT), which took over the powers and functions of the defunct PSC in the areas of land and water transportation. When the Matienzo case arose during the second half of the 1970s, the franchising and regulatory body which issued the questioned provisional authorities was the BOT. But the BOT along with the Bureau of Land Transportation was abolished 14 14 SUPREME COURT REPORTS ANNOTATED Provisional Authority: A Controversial Legal Relief and replaced by the Land Transportation Commission (LTC) under Executive Order No. 1011 of March 20, 1985. The LTC was naturally

empowered to grant PAs and CPCs but only for land transport services since jurisdiction over water transportation was transferred to the Maritime Industry Authority (MARINA). Finally, when the new administration took over in February, 1986, Executive Order Nos. 125 and 125-A were issued abolishing the LTC and clearly vesting upon the MARINA the power to issue CPCs and impliedly provisional authorities to water transport services. To replace the abolished LTC, Executive Order No. 202 dated June 19, 1987 was issued creating the Land Transportation Franchising and Regulatory Board (LTFRB). This is presently the governing franchising and regulatory body specifically empowered to issue CPCs and also impliedly PAs to land transport services. III. Types of Authorizations Issued by Franchising and Regulatory Bodies The impression that may be gathered, is that a franchising and regulatory body issues only one type of authorization, the Certificate of Public Convenience. In fact, it issues several types of authorizations. The more important ones are as follows: a) Certificate of Public Convenience (CPC) A formal Order (ordecision) issued after a public hearing by a regulatory body which grants public utility service the right to render service to a particular area. (Mosher, Public Utility Regulation, p. 93, cited in Rosal, Public Service Commission, p. 26, 1940 ed.) This is sometimes used interchangeably with franchise, although the latter technically refers to a legislative grant to operate a public utility service. b) Certificate of Public Convenience and Necessity (CPCN) Anauthorization issued by the Commission (regulatory body) for the operation of public services for which a franchise is required by law, such as electric, telephone and other services (Almario, Transportation and the Public Service Law, 1977 ed., p. 293). Franchise is that legislative grant mentioned earlier, to operate public utility service on the basis of which a CPCN is issued by a regulatory body. A CPCN in this jurisdiction is not issued for land transport services. 15 VOL. 162, JUNE 8, 1988 15 Provisional Authority: A Controversial Legal Relief c) Provisional Authority (PA)

An immediate temporary grant of operating rights in favor of an applicant during the pendency of his application for CPC, on ground of urgent public need. In other words, after an application for CPC is filed, the applicant may request for the issuance of a provisional authority on ground of urgent public need for the proposed service, so that he can immediately operate, since the issuance of a CPC may still take some time or only after the case is terminated. d) Special Permit (SP) This has been understood as an authorization granted to one who is already a CPC grantee to fill up sudden temporary transport needs in certain areas arising from the withdrawal of service therein due to transport strike, seasonal influx of travellers therein, etc. A special permit also sometimes refers to the 1 or 2-day authority given to an operator to use his units for excursions, special trips or to ferry wellwishers to the airport and the like. In the recent ruling of Matienzo, a Special Permit was made synonymous or used interchangeably with Provisional Authority. IV. Brief Survey of Decisions on Provisional Authority Provisional Authority as a form of legal relief dates back to the early years of public utility regulation in our country. In fact, in the 1920s, special or provisional authorities used to be issued by those regulatory bodies in existence then, ex-parte or without hearing. This could be justified by the fact that during these years, there was a dire need to harness for public use all available transport facilities. a) Barredo Case of 1933 On March 7, 1933, the Supreme Court ruled for the first time on the validity of the provisional authority in the case of Barredo, et al. vs. PSC, 58 Phil. 899 (1933). During the early 1930s, a certain Ramon Silos filed an application for a taxicab service within the City of Manila. Mr. Barredo and other taxicab operators already authorized in Manila, opposed this application of Silos. When it was initially called for hearing, only arguments were had from the parties. Thereafter, a provisional authority was issued in favor of applicant Silos. Barredo, et al. questioned the Order before the Supreme Court which nullified the same for lack of evidence and legal basis to 16 16

SUPREME COURT REPORTS ANNOTATED Provisional Authority: A Controversial Legal Relief support such issuance. The Court made a classic holding on the limits of the powers of a regulatory body: The powers of the Public Service Commission are found in the legislation creating that body. Their powers are limited to those expressly granted or necessarily implied from those granted. In our basic law, Certificate of Public Convenience can only be granted after hearing and this Court in review is compelled to set aside Orders: When it clearly appears that there was no evidence before the Commission to support reasonably such Order. The action of the Public Service Commission in granting these special or provisional permits is not only not authorized by their organic law but is forbidden by the requirement to take evidence before issuing orders. The orders complained of must therefore be set aside and declared of no effect. At about the same time, in Manila Yellow Taxicab, Inc., et al. vs. PSC, 58 Phil. 899 (1933); unreported the High Court reiterated this Barredo ruling of lack of legal basis on the part of the PSC to issue special or provisional permits. It will be noted that the law prevailing then was Act No. 3108, which like subsequent public utility laws had no specific provision on provisional authority. b) Javellana Case of 1937 A few years thereafter, the Supreme Court ruled anew on this matter of provisional authority in the now leading case of Javellana vs. La Paz Ice Plant and Cold Storage, 64 Phil. 893 (1937). This time the issuance of provisional authority was upheld. In this case, La Paz Ice Plant, a grantee of an ice plant CPC for Iloilo City applied for an increase of its daily productive capacity. This was opposed by Mr. Elpidio Javellana, a competing ice plant operator in said city. During this period, ice plants were still regulated and under the jurisdiction of the PSC. In this case, hearings were conducted and evidences were presented by the parties. They were also required to submit their respective Memoranda. However, before these Memoranda were filed, the defunct PSC issued a provisional authority in favor of La Paz Ice Plant. This provisional authority was questioned by Mr. Javellana before the Supreme Court by way of Certiorari. This time, the High Court upheld the 17

VOL. 162, JUNE 8, 1988 17 Provisional Authority: A Controversial Legal Relief Order, thus In the case of Barredo vs. Public Service Commission (58 Phil. 79) it was stated that the action of the Public Service Commission in granting the special or provisional permits referred to therein, was not only not authorized by their organic law, but forbidden by the requirement to take evidence before issuing such permit. In said case, no hearing on the merits was had and no evidence was presented, while in this case, there was hearing on the merits and both parties presented evidence for and against the application to increase productive capacity and production filed by respondent. The case could not be decided immediately because the parties asked for time to file memoranda. Inasmuch as the convenience and necessity of the ice-consuming public demanded the prompt decision thereof, the Public Service Commission was compelled to issue the Order in question. c) Sambrano Cases of 1938 (the only oral permit issued) In the case of Sambrano vs. Northern Luzon Transp. Co., Inc., 66 Phil. 27 (1938), the PSC granted a provisional permit to Northern Luzon Transp. Co., Inc., in substitution of an abandoned service of an operator without a hearing. The Supreme Court declared that said provisional permit had complied with the requirement of hearing, because a certificate being taken over was granted after hearing and besides the oppositor had failed to seek timely relief against said permit. This portion of the decision was a mere obiter dictum and not its ratio decid-endi. In fact, the court even made the qualification that it was not basing its resolution on this alleged compliance, but on the failure of oppositor to avail of a timely relief. Then in the same year, the same parties figured in another litigation, which made it unique, as it involved this time the issuance of a verbal provisional permit in Northern Luzon Transp., Co., Inc. vs. Sambrano, 66 Phil. 60 (1938). It appears that Judge Roman A. Cruz, a Commissioner then, acting upon an application for a PUB Bus Service in Ilocos verbally authorized the applicant to start the service immediately while the case has not been heard. This Order was issued in 1932, a year prior to the Barredo ruling of 1933. A decision was only finally rendered in 1937, due

to the reorganization of the regulatory body at that time. The High Court in a passing 18 18 SUPREME COURT REPORTS ANNOTATED Provisional Authority: A Controversial Legal Relief comment paid homage to the Barredo doctrine, but since the permit was already superseded by a decision, it merely declared: Although the granting of a (verbal) special authority is anomalous and the public utility commission is without authority to do so, the same having been granted in the present case and utilized for a period of six (6) years, to the benefit of the public, the final ratification thereof remedied the anomaly. d) Ablaza Case of 1951 In 1951, the Supreme Court while reiterating the Javellana doctrine even went a step further by upholding a provisional authority issued during a much earlier stage of the proceedings in Ablaza Co., Inc. vs. Ocampo, 88 Phil. 412 (1951). In this case, Pampanga Bus Co. applied for a CPC to operate a PUB bus service, on the line; Manila to Hagonoy via Malabon and vice-versa. This was opposed by Ablaza Trans. Co., Inc., an affected bus operator therein. After applicant presented its evidence and before Ablaza Trans. Co., Inc. could present its evidence in support of its opposition, the former moved for issuance of a provisional authority which was granted. The High Tribunal declared that the issuance of the permit was justified in line with the Javellana ruling. It is contended in the first place that the Commission may not issue a provisional permit pending final determination of an application for a permanent certificate and the contention seems to find support in the case of Barredo vs. Public Service Commission, 58 Phil. 79, where this Court ruled that the issuance of such permit is not authorized by law. But we find that this ruling has already been modified and this court held in a subsequent case (Javellana vs. La Paz Ice Plant, et al., 64 Phil. 893) that when the case cannot be decided at once and the Commission issues a provisional permit to meet an urgent need, the Commission does not thereby exceed its jurisdiction. In the present case, there is no denying the need for a prompt measure to do away with the travel at Malolos which constitutes a nuisance to the travelling public. And considering that, with the case only half-finished, the decision is still remote,

especially because of various motions for postponements whereby, so it is alleged without contradiction, the oppositor has been systematically causing the delay of the hearing, we believe that in line with the ruling laid down in the Javellana case, supra, the issuance of the 19 VOL. 162, JUNE 8, 1988 19 Provisional Authority: A Controversial Legal Relief provisional permit in the present case is justified and does not constitute excess of jurisdiction. e) Silva Case of 1952 Then, in Silva vs. Ocampo, et al., 90 Phil. 777 (1952), the Court even justified the issuance of a provisional authority, based upon a resubmitted evidence and not those adduced during the hearing for such purpose. In this case, an application for a CPC to operate a 10-ton daily productive capacity ice plant in Lipa City was filed before the defunct PSC. Eliseo Silva, an existing ice plant operator opposed this application. However, the first proceedings earlier had were nullified by the Supreme Court, for some reasons. During the re-hearing and over the objection of oppositor, applicant merely re-submitted the evidence in the motion for issuance of provisional authority. The Court ruled, thus In so granting such provisional permit, the Commission partly said: x x x. This provisional authority should be granted because the publics need for the service is urgent and the hearing and final determination of this case will necessarily take time. There is nothing in the law which prohibits the Commission from receiving any evidence for the purpose of acting on a petition for provisional permit. The law is silent as to the procedure to be followed with regard to provisional permit. The rule even empowers the Commission to act on certain matters of public interest, subject to established limitations and exceptions and saving provisions to the contrary (Sec. 17, Com. Act No. 146, as amended). There being no express prohibition in the law, nor any provision to the contrary, we hold that the re-submitted evidence may serve as basis for the issuance of a provisional permit to the applicant. f) Transcon Case of 1954

Then came the significant ruling in Transport Contractors, Inc. vs. PSC and Delgado Brothers, Inc., 95 Phil. 744 (1954). On July 17, 1953, Delgado Brothers, Inc. (Delbros, for short) filed an application for a CPC to operate a TH Truck Service within Angeles City, Pampanga to any point in the Island of Luzon. The application was set for hearing immediately on July 29, 1953 and prior to this date, the then PSC issued a provisional permit in favor of Delbros without any hearing 20 20 SUPREME COURT REPORTS ANNOTATED Provisional Authority: A Controversial Legal Relief whatsoever. Transport Contractors, Inc. (Transcon, for short) a TH operator in the area, asked for the cancellation of this permit, citing as grounds therefor, that: it was issued without legal authority and with abuse of discretion and without notice and hearing. The defunct PSC argued that Delbros has an exclusive hauling contract with the U.S. Air Force at Clark Field, Angeles, Pampanga. That the service in question was of urgent character for the transport of materials, equipment and all kinds of supplies belonging to the U.S. Air Force, from Clark Air Base in Pampanga to the U.S. Military Base and vice-versa; that the delay in the rendering of service would jeopardize and obviously affect the military operations of the Air Force; and finally, the need to extend minimum cooperation to the U.S. Air Force and the U.S. government was certified by the Office of the President and that the Order was issued also on the basis of the investigation made by the commission. The Court ruled in favor of Delbros The Court has time and again ruled that the Public Service Commission has power to grant a provisional revocable permit for the operation of a public utility, when the purpose of such permit is to meet an urgent public need. (Javellana vs. La Paz Ice Plant & Cold Storage Co., 64 Phil. 893; Ablaza Trans. Co. vs. Ocampo, 109). In the present case, it appears that the permit was issued for such purpose, so that it cannot be said that the Commission acted without authority. It also appears that the permit was issued after an investigation. What is noteworthy about the Transcon case, is the fact that while the High Court cited the Javellana and Ablaza cases which required a hearing

before a provisional permit may be issued, it chose to ignore such teaching. It sought refuge upon a finding of urgent public need and that the permit was issued after an investigation. Indeed the Transcon case, in a sense brought the PSC full circle back to the 1920s, when the provisional permits were issued in a free-willing manner, exparte or without hearing. However, strangely enough, this ruling did not open the floodgates to an indiscriminate issu21 VOL. 162, JUNE 8, 1988 21 Provisional Authority: A Controversial Legal Relief ance of provisional permits that later obtained in the early 1970s up to the early 1980s. Inspite of the promulgation of Transcon in 1954, up to the declaration of Martial Law in 1972, the guidelines set forth in Barredo, Javellana and Ablaza cases, were still generally observed in proceedings before the defunct PSC in the consideration of requests for issuance of PAs. g) Arrow Case of 1975 Then came Arrow Transp. vs. BOT & Sultan Rent-a-Car, 63 SCRA 193 (1975) which sanctioned a full and complete return of the BOT, the transport regulatory then, to the easier period of ex-parte grants of provisional permits. For with the declaration of Martial Law in 1972, the creation of the BOT replacing the PSC in the field of transport regulation and the issuance of Pres. Decree No. 101 (PD 101), numerous applications for issuance of franchises/CPCs were filed with the new regulatory body. During this period, the BOT started issuing provisional permits upon mere filing of the applications and without hearing. Thus, one such applications was that of Sultan Rent-A-Car which was filed on September 12, 1974. The application was for CPC to operate a PUB autotruck service from Cebu City to Mactan International Airport and viceversa. Since the application also prayed for the issuance of a provisional authority, the same was granted eight (8) days after the filing of the application without so much as any hearing conducted on the propriety of such permit. Arrow Transportation, an authorized bus operator on said route moved for a reconsideration and cancellation of the Order granting the provisional authority. The reasons cited, were absence of hearing and lack of jurisdiction, there being no publication, as required.

However, Arrow Transportation did not wait anymore for the resolution of its motion. It went directly to the Supreme Court on certiorari. The High Tribunal sustained the action of the BOT. As was pointed out in the answer of respondent Board of Transportation, such a claim is hardly persuasive with the procedure set forth in Presidential Decree No. 101, being followed and the provisional authority to operate being based on urgent public need. 22 22 SUPREME COURT REPORTS ANNOTATED Provisional Authority: A Controversial Legal Relief Such a contention merits the approval of the Court. The petition cannot prosper . . . The petition, to repeat, cannot prosper. 1. It is to be admitted that the claim for relief on the asserted constitutional deficiency based on procedural due process, not from the standpoint of the absence of a hearing but from lack of jurisdiction without the required publication having been made, was argued vigorously and developed exhaustively in the memoranda of petitioner. The arguments set forth while impressed with plausibility, do not suffice to justify the grant of certiorari. 2. A barrier to petitioners pretension not only formidable but also insurmountable, is the well-settled doctrine that for a provisional permit, an ex-parte hearing suffices. The decisive consideration is the existence of public need. There was shown in the case, respondent Board, on the basis of demonstrable data, being satisfied of the pressing necessity for the grant of the provisional permit sought. There is no warrant for the nullification of what was ordered by it. h) Matienzo Case of 1988 After a long gap of some thirteen (13) years, the Supreme Court was again confronted with this issue of the validity of provisional authority, in the recent case of Rufino Matienzo, et al. vs. Leopoldo Abellera, et al., G.R. No. L-45839, promulgated June 1, 1988. In this case, the High Court made significant pronouncements on the prevailing jurisprudence on provisional authority. In Matienzo, which pertains to the operations of taxicabs in Metro-Manila, the High Tribunal came out with significant holdings. It will be recalled that during the second half of the 1970s,

there had been a proliferation of taxicab units which were either colorum, kabit or excess units. Colorum refers to taxicab units operating but not yet covered by any franchise. Kabit refers to those units actually owned by someone but operated under the franchise of another. Excess Units refer to those motor vehicles operated as taxicab units far beyond the number authorized in an operators franchise. However, these three (3) types of illegally operated taxicab units appear to be simply denominated as excess taxicab units in Matienzo. Matienzo tested the validity of provisional permits in applications for the legalization of these excess taxicab units, pur23 VOL. 162, JUNE 8, 1988 23 Provisional Authority: A Controversial Legal Relief suant to PD No. 1. The following issues were raised: whether or not the BOT has, a) the power to grant the permits under LOI No. 379; b) the power to act on these applications for legalization under Sec. 1, PD 101; and, c) satisfied procedural due process requirements. The Supreme Court categorically refused to discuss the issues raised, declaring that the same became moot and academic, since these permits had already expired, having expressly limited their validity up to June 30, 1977. Inspite of this refusal to rule on the validity of these provisional authorities, the Supreme court still made significant pronouncements in this case. It declared that: Indeed a reading of Section 1, Presidential Decree No. 1, shows a grant of powers to the regulatory board to issue provisional permits as a step towards the legalization of colorum taxicab operations without the alleged time limitation. And then, as to the claim that due process was denied by the issuance of the provisional authorities without notice and hearing, the Supreme Court justified such action by declaring that: The petitioners having been able to timely oppose the petitions in question, any lack of notice is deemed cured. V. Summary of Doctrines and Requisites for Issuance of a Provisional Authority. The foregoing survey of those cases showed the various periods of doctrinal developments on the issuance of provisional permits. These periods also show the changes and modifications of the requisites for a

legally warranted issuance of this immediate relief. Let us summarize these significant developments: 1. Early 1930s up to the Barredo ruling of 1933 During the early 1920s public utility regulation in the country was literally grouping for direction. Then too, there was a clear and felt need to encourage and increase entry into the business of transportation, to facilitate progress for the country. In fact, in the Barredo decision of 1933, the Court observed that the Commission has been issuing such Orders for ten (10) years without question. 24 24 SUPREME COURT REPORTS ANNOTATED Provisional Authority: A Controversial Legal Relief And with the advent of the Barredo case, the Supreme Court began to set forth the rule that a provisional permit issued without evidence taken beforehand is forbidden and must therefore be set aside and declared of no effect. 2.Javellana (1937), Ablaza (1951) and Silva (1952) rulings The cases of Javellana, Ablaza and Silva followed the teachings of Barredo, but modified and/or amplified said ruling as regards the requisites for a valid issuance of provisional authority. In Javellana, the High Court upheld the provisional authority because there were already hearings on the merits, with both parties presenting their respective evidence, what remained to be filed were only the memoranda of the parties and public convenience and necessity demand the prompt decision thereof. While in Ablaza, hearing on the merits also sufficed to sustain a provisional authority, even if the case is only half-finished and the case cannot be terminated at once, as there is systematic delay by oppositors and there is urgent public need for the service. And, in Silva, the High Court ruled that since the law is silent as to the procedure to be followed in the proper issuance of a provisional authority, its grant on the basis of a resubmitted evidence from a previous hearing and there is an urgent public need for the service will also suffice. The Sambrano cases have no relevant doctrine by way of requisites to the valid issuance of a provisional authority. 3.Transcon ruling of 1954

As stated earlier, Transcon brought the PSC full circle to the 1920s, when provisional permits were issued even without prior hearing. The Supreme Court then accorded its impress of approval on this ex-parte grant of provisional permit. Let us remember that jurisprudence could be reflective of the national mood at a given time. The decision came out a few years after the Liberation period. It would be ingratitude not to accommodate our Brother Americans who needed the immediate Service of TH trucks to move men and materials for their military operations. However, inspite of Transcon, the PSC especially as regards bus and jeepney applications generally preferred to stick to the requisite prior hearing or reception25 VOL. 162, JUNE 8, 1988 25 Provisional Authority: A Controversial Legal Relief of-evidence-first before issuing a provisional authority as set forth in Barredo, Javellana and similar cases. 4.Arrow ruling of 1975 It was actually during the period of the Arrow case, when there was full and actual return to the free-wheeling days of the 1920s. This case also introduced the concept of demonstrable data (which the High Court did not define) to support allegations of urgent public need. The Supreme Court further declared: x x x it is the well-settled doctrine that for a provisional permit, an ex-parte hearing suffices. The decisive consideration is the existence of public need. 5.Matienzo ruling of 1988 Indeed, thirteen (13) years later, the Supreme Court appears to have abandoned this categorical holding in Arrow,that in the issuance of a provisional authority an ex-partehearing suffices. Matienzo, on the other hand, declared that: suffice it to say that Presidential Decree No. 101 does not require such notice and hearing for the grant of temporary authority. 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. In other words, in Matienzo,a provisional authority may be issued without notice and hearing, not even ex-parte, as enjoined in Arrow. Furthermore, if oppositors are however accorded the chance to timely oppose the petition in question, any lack of notice is

deemed cured. Let it be placed on record, however, that while Arrow imposes the condition of ex-parte hearing for a valid issuance of a provisional permit, like Matienzo, the permits in both cases were issued a few days after filing of the basic applications without prior hearing therefor. VI. Revocation of Provisional Authority and Due Process From our brief survey of Transcon, Arrow and Matienzo it appears that a provisional authority may be issued ex-parte or without any prior hearing at all. We must realize that a provisional authority having the nature of an operating right, 26 26 SUPREME COURT REPORTS ANNOTATED Provisional Authority: A Controversial Legal Relief may entail investments in equipment (units) and other facilities. Hence, can a provisional authority be cancelled in the same manner that it was issued without violating due process? In the case of Samala vs. Saulog Transit, 63 SCRA 215 (1975), the High Tribunal answered in the negative A revocation of a provisional authority of the nature given by the Respondent Commission cannot just be ordered upon mere whim or caprice on its part and must be based on credible evidence since to sanction said act of Respondent Commission would be tantamount to deprivation of due process on the part of the petitioner who must have invested money in making the additional units available for public service. Basing the revocation upon credible evidence implies hearing. Thus, it now appears that a provisional authority may be issued even without notice and hearing as per Matienzo, but its revocation cannot be done in the same manner without violating the right to due process of the grantee who had invested money by virtue of the grant of this operating right (PA), however, temporary. VII. Statutory Basis of Provisional Authority What is ironic about the concept of a provisional authority, is that for all its having been the cornerstone of a long line of jurisprudence for more than fifty (50) years, there appears no provision of law specifically authorizing it. Authorities usually fall back to a general reference to the

provisions of Com. Act No. 146, or the Public Service Act, as amended and PD 101, as legal sanctions for the issuance of the provisional authority. However, a close scrutiny of the provisions of Com. Act No. 146, as amended failed to yield such specific codal provision that may be cited as legal authority for the issuance of a provisional authority, especially in the manner it has been issued. But it is different with respect to the authority to approve rates for public utilities. There is a specific provision which is Section 16 (c) of Com. Act No. 146, as amended: That the Commission (now, the LTFRB) may, in its discretion approve rates proposed by public services provisionally and without necessity of hearing. 27 VOL. 162, JUNE 8, 1988 27 Provisional Authority: A Controversial Legal Relief There was mention of Section 16 (h) of Com. Act No. 146, as amended, in Javellana, as legal authority for the then PSC in issuing the provisional authority in that case. Section 16 (h) empowers the PSC to require any public service, to establish, construct, maintain and operate any reasonable expansion of its facilities. A cursory reading of this provision convinces even a layman that such reliance is misplaced. In Arrow and Matienzo cases, it seems that PD 101 is being cited as statutory basis for the issuance of provisional authority. However, an examination of this Decree shows that it only mentions of special permit and not provisional authority or provisional permit. As discussed earlier, special permit has a technical meaning in public utility regulation. To repeat, a provisional authority contemplates of an immediate authorization during the pendency of a basic application. Whereas, a special permit is in the nature of a basic authority by itself. However, if the special permit mentioned in PD 101, is synonymous or exactly refers to the provisional authority as we understand it, therefore this Decree is one such legal basis thereof. Yet, as per Matienzo, it seems that Section 1 of PD 101 is cited as legal authority for the issuance of a provisional authority only in specified cases, e.g., as a step towards the legalization of colorum taxicab operations.

Hence, there seems to be a continuing absence of a specific statutory provision categorically authorizing the transport regulatory body to issue the provisional authority in the manner that it has been issued particularly as a temporary immediate relief in a pending fresh application for CPC. This does not however render such issuances of the regulatory bodies legally baseless. The provisional authority has been too well entrenched in our jurisprudence to be wanting altogether in legal sanction. Even in the absence of a specific legal provision, such power may be inferred from the basic authority to issue CPCs under Section 16 (a) of Com. Act No. 146, as amended. The compelling principle is that the power to issue a CPC, which is a higher and more permanent authorization necessarily implies the power to issue such temporary relief as a provisional authority. Then too, there is our jurisprudence starting from Barredo, Javellana, Ablaza, Silva, Transcon, Arrow and most recently, 28 28 SUPREME COURT REPORTS ANNOTATED Provisional Authority: A Controversial Legal Relief Matienzo. All these cases have recognized the power of the regulatory body to issue this kind of relief, set forth conditions for its valid issuance and upheld such actions when the guidelines were observed. Thus, this long line of jurisprudence is also our legal authority. After all, under Article 8 of the New Civil Code, this jurisprudence forms part of the legal system of the Philippines. VIII. Presidential Decree No. 101 Perhaps a brief discussion of PD 101 is in order, since it was relied upon as legal sanction for the issuance of provisional authority in Arrow and Matienzo cases. It will be recalled that PD 101 was issued on January 17, 1973, about four (4) months after the declaration of Martial Law. The mood of the moment then was to instill order and discipline in the chaotic world of land transportation. Hence, the newly created Board of Transportation (BOT) was invested with certain powers to improve the deplorable condition of vehicular traffic, obtain maximum utilization of existing public service motor vehicles, eradicate the harmful and unlawful trade of clandestine operators by replacing or allowing them to

become legitimate and responsible operators x x x. Thus, under Section 1 of PD 101, the BOT was empowered 1. To provide, prescribe, redefine or modify the lines, routes or zones of service of operators x x x. 2. To grant special permits of limited terms for the operation of public utility motor vehicles, as may in the judgment of the Board, be necessary to supplement and render adequate the services in any area, as a consequence of the modification of rights, routes or zones, x x x. 3. To grant special permits of limited terms, for the operation of public utility motor vehicles, as may, in the judgment of the Board, be necessary to replace or convert clandestine operators into legitimate and responsible operators, x x x. 4. x x x x x. Then, as to the exercise of these powers, Section 2 of the same Decree, provides that: x x x x the Board shall proceed promptly along the method of legislative inquiry. 29 VOL. 162, JUNE 8, 1988 29 Provisional Authority: A Controversial Legal Relief IX. Significance of the Matienzo Ruling The Matienzo decision came out at a time when the controversy over this conversion cases of about a decade ago had already died down. It was then viewed as a ploy to get additional taxicab units in MetroManila, which was then declared saturated or closed to new taxicab applications. There is now a pronounced dearth of new taxicab units owing to their prohibitive cost. Because of this, new applications for taxicab service are presently accepted, unlike during the time when the Matienzo case arose, these applications were not allowed. Hence, these applications for conversion or legalization were resorted to. The resolution of Matienzo now, about a decade after the controversy, generally went unnoticed and did not cause any stir in the transport industry. But this is not to say that it will not alter the course of public utility jurisprudence. In fact the Matienzo decision came out with significant holdings which will be cited or used as authority by regulatory bodies or even appellate courts lawyers, in subsequent cases. Let us point out a few

a)PD 101 as legal basis for the issuance of provisional authority In Arrow, mention was made of the procedure in PD 101 being followed in the issuance of provisional authority in that case. However, in Matienzo, the court was more categorical in citing said Decree as a source of legal sanction for the issuance of a provisional authority. Indeed a reading of Section 1, PD 101 shows a grant of powers to the respondent Board to issue provisional permits as a step towards the legalization of colorum taxicab operations without the alleged time limitation. However, Section 1 of PD 101 speaks of vesting power upon the BOT to issue special permits of limited term. In practice before the BOT then, a Special Permit had been distinguished from a provisional authority or provisional permit. A provisional authority as stated earlier is a temporary relief issued in the same case involving a pending basic application on ground of urgent public need for the proposed service therefor. A Special Permit also pertains to a right to operate a public utility, but it used to be treated as the main application itself. Besides, this 30 30 SUPREME COURT REPORTS ANNOTATED Provisional Authority: A Controversial Legal Relief is usually granted to those who are already CPC or franchise holders, for the purpose of allowing them to modify the use of their franchise for certain contingencies. As in paragraphs 2 and 3 of Section 1, PD 101, special permits may be granted to transport companies to fill the needs in certain areas, as a result of modification of lines therein, or such special permits may be issued to replace clandestine operations or fill up the vacuum created by their cessation of operation, while seeking conversion into legitimate operators. However, since in the Matienzo decision, special permit and provisional authority are deemed the same, the holding that PD 101 is a statutory basis for the power to grant provisional authority standsunless later clarified by the High Court. b)PD 101 does not require notice of hearing for the valid issuance of a provisional authority From Barredo, Javellana, Ablaza to Silva, the Supreme Court had constantly enjoined the regulatory body to take evidence before issuing

Orders or conduct hearings before validly issuing a provisional authority. But with Transcon and Arrow, wherein the facts disclosed that their respective provisional authorities were issued without prior hearing or a few days after the filing of the basic application for CPCs, both issuances were upheld by the High Court because of urgent public need and after investigation (Transcon) and also because of urgent public need and on the basis of demonstrable data (Arrow). However, in Arrow, the Court still conceded that for (a valid issuance of) a provisional authority, an exparte hearing suffices. In Matienzo, apart from a categorical recognition that Section 1 of PD 101 granted the then BOT the power to issue provisional permits in the legalization of colorum taxicab operations, the High Court further set forth that: x x x suffice it to say that PD 101 does not require such notice or hearing for the grant of temporary authority. This is a clear departure from Barredo, Javellana and similar cases and a return to the days of Transcon and the 1920s. 31 VOL. 162, JUNE 8, 1988 31 Provisional Authority: A Controversial Legal Relief c)The defect of lack of notice and hearing cured by timely pposition In Matienzo, the lack of notice and hearing was justified by the assurance that: The provisional nature of the authority and the fact that the primary application shall be given a full hearing are the safeguards against abuse. But a persistent question is whether the right to due process of affected operators has been already violated the moment the provisional authority is issued without such notice and hearing. In the case of Halili vs. PSC and Heras (93 Phil. 357), the answer is in the affirmative. In this case, Antonio Heras known as the operator of JD Transit, was granted ex-parte, a provisional authority to amend his line from Manila to UP Balara, Quezon City. Fortunato Halili, an affected operator under the trade name Halili Transit, questioned the sudden issuance of this provisional authority, claiming that the PSC had no right to make amendments without according hearing to the interested parties. cuando la enmienda no es de forma y afecta seriamente los derechos de las partes, no debe la Comision enmendarla sin cir a las partes

interesadas. En el caso presente, se ha cambiado la ruta de los buses y segun el recurrente, eso le perjudicia. A similar holding was made earlier against CAM Transit, Inc. when the defunct Public Service Commission issued what appears to be a permanent Order amending the formers Manila-UP Balara lines, to the prejudice also of Halili Transit. The court declared: To allow the respondent Commission to authorize the amendment, without giving the petitioners opportunity to be heard and express his objections thereto is clearly a deprivation of a precious right and privilege without due process of law. (Halili vs. PSC & CAM, 92 Phil. 1036). And in the case of Veneracion vs. Congson Ice Plant and Cold Storage, Inc., 53 SCRA 119, a much later ruling than the two (2) Halili cases, a provisional authority issued ex-parte to operate an ice plant was further condemned as violative of due process. 32 SUPREME COURT REPORTS ANNOTATED 32 Provisional Authority: A Controversial Legal Relief The Court finds that the respondent commission deprived petitioner of his right to due process and exceeded its authority in having granted exparte to respondent the provisional permit to operate the competing ice and cold storage plants without a clear showing of an urgent public need and in disregard of petitioners right to be heard in opposition. Thus, the holding of the two (2) Halili and later the Veneracion cases, is thatthe issuance of provisional authority exparte or without notice and hearing accorded to affected parties, violates the rights to due process of affected operators. On the other hand, Matienzo postulates that PD 101 does not require such notice or hearing for the grant of temporary authority. It appears that Matienzo being the later ruling has abandoned the two (2) Halili cases and the much later, Veneracion case. d)Presence of safeguards against abuse Matienzo further gave the assurance that: 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. And that petitioners having been able to timely oppose the petitions in question, any lack of notice is deemed cured. In this regard, it may be pointed out that all these conditions were also present in Halili, Arrow and Veneracion cases.

In other words, the oppositors in these cases timely opposed the application and even sought the nullification of the questioned provisional authorities. But that did not alter the holding earlier adverted to. As a measure of the large impact of this holding, this assurance of safeguards against its abuse has been immediately reiterated in the recently decided case of Bautista, et al. vs. Board of Energy, et al. G.R. No. 75016, Prom. January 13, 1989. It should be noted however, that this case pertains to the provisional grant of adjusted rates of an electric public utility (Meralco), which grant is subject to a hearing within thirty (30)-days thereafter, as explicitly authorized under Sec. 16 (c) of Com. Act No. 146, as amended. 33 VOL. 162, JUNE 8, 1988 33 Provisional Authority: A Controversial Legal Relief X. Conclusion Matienzo is the latest pronouncement on provisional authority. Owing to the abuse in its grants about a decade ago or since the early 1970s to early 1980s and being a potential source of controversy, the present regulatory body so far has not availed of this relief in public utility case. But the power to exercise it is inherent in the regulatory body and therefore is always there. And, it does not mean that due to disuetude, it can no longer exercise the same or that it cannot be resorted to should the need arise. A provisional authority as a legal relief has a beautiful rationale when properly used. It should be noted that in public utility business, as in public utility regulation, the time factor is also of crucial importance. A fleet of buses, jeepneys or taxicabs should not be made to wait for the final determination of a contested case if urgent public need demands its immediate operation, more so when these units were purchased on installments. In fact, in Javellana the court has recognized that: The Commission considers that public service cases are partly commercial in nature and not purely judicial and therefore, the time factor should be taken into account. Hence, provisional authority is of crucial importance in public utility regulation. Matienzo has greatly altered the prevailing jurisprudence on the matter. It has declared PD 101 as a source of provisional authority and further postulated that such Decree does not require notice and

hearing for the grant of this temporary authority. If Matienzo has abandoned the two (2) Halili cases and Veneracion case by the holding that dispensed with prior hearing in the issuance of provisional authority, can this Constitutional requisite of procedural due process be abandoned? Even Section 2 of PD 101 prescribed the method of legislative inquiry in the exercise of these powers which contemplates of hearings with the guarantees of the Bill of Rights (Quinn vs. U.S. 349 U.S., 155, 75 S. Ct. 668, 99 L. Ed. 964, 51 ALR 2d 1151; 1954, cited in Gonzales, Political Law Reviewer p. 106, 1965 ed). As a further measure of its deference to due process, Section 3 of PD 101 in its Limitations enjoined that in the carrying out of the purpose of the Decree, the BOT shall reduce as much as possible any 34 34 SUPREME COURT REPORTS ANNOTATED Provisional Authority: A Controversial Legal Relief adverse effect on any person or persons affected by this Decree. Let it be noted, that this holding is of far-reaching consequences, unless duly clarified. By way of resume of these holdings, what then now are the basic requisites for the valid issuance of a provisional authority? In light of Matienzo, PD 101 does not require such notice and hearing for the grant of temporary authority. In Barredo, Javellana and Silva cases, prior hearing or reception of evidence is required for a valid issuance of a provisional authority. Transcon which sanctioned the immediate issuance upon filing may not be controlling because it only pertains to a TH application (which is not usually opposed since it caters on contract to a special clientele) unlike auto-truck or bus applications which clearly affect similar operators. And besides, this was certified by the President then as urgent and there was an investigation on its urgency. Even Arrow conceded that for a provisional permit, an ex-parte hearing suffices. Now comes Matienzo declaring that PD 101 does not require such notice and hearing for the grant of temporary authority. Has Matienzo then done away with the basic requisites set forth in Barredo, Javellana, Silva and Arrow? Finally, will this Matienzo holding apply to provisional authorities issued in ordinary applications for CPCs, in nonlegalization applications or in those cases not covered by Section 1, PD

101? Indeed clarification on these very significant pronouncements of the High Court at the first opportunity is in order. Otherwise, under a less legally circumspect transport regulatory body, those freewheeling days and era of abuse in the issuance of provisional authorities may return anew. o0o [Provisional Authority: A Controversial Legal Relief, 162 SCRA 11(1988)]

72 SUPREME COURT REPORTS ANNOTATED Solid Homes, Inc. vs. Payawal G.R. No. 84811. August 29, 1989.* SOLID HOMES, INC., petitioner, vs. TERESITA PAYAWAL and COURT OF APPEALS, respondents. Statutory Construction; General Law and Special Law; In case of conflict between a general law and a special law, the latter must prevail as an exception to the former, regardless of the dates of their enactment. This construction must yield to the familiar canon that in case of conflict between a general law and a special law, the latter must prevail regardless of the dates of their enactment. Thus, it has been held that The fact that one law is special and the other general creates a presumption that the special act is to be considered as remaining an exception of the general act, one as a general law of the land and the other as the law of the particular case. x x x The circumstance that the special law is passed before or after the general act does not change the principle. Where the special law is later, it will be regarded as an exception to, or a qualification of, the prior general act; and where the general act is later, the special statute will be construed as remaining an exception to its terms, unless repealed expressly or by necessary implication. Same; Administrative Law; Administrative Agencies; Statutes conferring powers on administrative agencies must be liberally con________________ * FIRST DIVISION. 73 VOL. 177, AUGUST 29, 1989 73 Solid Homes, Inc. vs. Payawal strued to enable them to discharge their duties in accordance with the legislative purpose.Statutes conferring powers on their administrative agencies must be liberally construed to enable them to discharge their assigned duties in accordance with the legislative purpose. Fol-lowing

this policy in Antipolo Realty Corporation v. National Housing Authority, the Court sustained the competence of the respondent administrative body, in the exercise of the exclusive jurisdiction vested in it by PD No. 957 and PD No. 1344, to determine the rights of the parties under a contract to sell a subdivision lot. Civil Procedure; Decisions; A decision rendered without jurisdiction is a total nullity and may be struck down even on appeal except when the party raising the issue is barred by estoppel.It is settled that any decision rendered without jurisdiction is a total nullity and may be struck down at any time, even on appeal before this Court. The only exception is where the party raising the issue is barred by estoppel, which does not appear in the case before us. On the contrary, the issue was raised as early as in the motion to dismiss filed in the trial court by the petitioner, which continued to plead it in its answer and, later, on appeal to the respondent court. We have no choice, therefore, notwithstanding the delay this decision will entail, to nullify the proceedings in the trial court for lack of jurisdiction. Same; Jurisdiction; Administrative Law; National Housing Authority; Presidential Decree No. 957; Housing and Land Use Regulatory Board; The Housing and Land Use Regulatory Board has exclusive jurisdiction over cases involving real estate business and practices under Sec. 1, of PD 957.The applicable law is PD No. 957, as amended by PD No. 1344, entitled Empowering the National Housing Authority to Issue Writs of Execution in the Enforcement of Its Decisions Under Presidential Decree No. 957. Section 1 of the latter decree provides as follows: SECTION 1. In the exercise of its function to regulate the real estate trade and business and in addition to its powers provided for in Presidential Decree No. 957, the National Housing Authority shall have exclusive jurisdiction to hear and decide cases of the following nature: A. Unsound real estate business practices;B. Claims involving refund and any other claims filed by subdivision lot or condominium unit buyer against the project owner, developer, dealer, broker or salesman; and C. Cases involving specific performance of contractual and statutory obligations filed by buyers of subdivision lot or condominium unit against the owner, developer, dealer, broker or salesman. (Italics supplied.) The language of this section, especially the italicized portions, leaves no room for doubt 74

74 SUPREME COURT REPORTS ANNOTATED Solid Homes, Inc. vs. Payawal that exclusive jurisdiction over the case between the petitioner and the private respondent is vested not in the Regional Trial Court but in the National Housing Authority. Same; Same; Same; Same; Same; The Housing and Land Use Regulatory Board can award damages as part of its exclusive power to hear and decide claims involving refund and other claims filed by subdivision lot and condominium unit buyers.On the competence of the Board to award damages, we find that this is part of the exclusive power conferred upon it by PD No. 1344 to hear and decide claims involving refund and any other claims filed by subdivision lot or condominium unit buyers against the project owner, developer, dealer, broker or salesman. x x x Besides, a strict construction of the subject provisions of PD No. 1344 which would deny the HSRC the authority to adjudicate claims for damages and for damages and for attorneys fees would result in multiplicity of suits in that the subdivision/condominium buyer who wins a case in the HSRC and who is thereby deemed entitled to claim damages and attorneys fees, would be forced to litigate in the regular courts for the purpose, a situation which is obviously not in the contemplation of the law. (Italics supplied.) PETITION to review the decision of the Court of Appeals. The facts are stated in the opinion of the Court. CRUZ, J.: We are asked to reverse a decision of the Court of Appeals sustaining the jurisdiction of the Regional Trial Court of Quezon City over a complaint filed by a buyer, the herein private respondent, against the petitioner, for delivery of title to a subdivision lot. The position of the petitioner, the defendant in that action, is that the decision of the trial court is null and void ab initio because the case should have been heard and decided by what is now called the Housing and Land Use Regulatory Board. The complaint was filed on August 31, 1982, by Teresita Payawal against Solid Homes, Inc. before the Regional Trial Court of Quezon City and docketed as Civil Case No. Q-36119.

The plaintiff alleged that the defendant contracted to sell to her a subdivision lot in Marikina on June 9, 1975, for the agreed price of P28,080.00, and that by September 10, 1981, she had already paid the defendant the total amount of P38,949.87 in 75 VOL. 177, AUGUST 29, 1989 75 Solid Homes, Inc. vs. Payawal ecuted a deed of sale over the land but failed to deliver the corresponding certificate of title despite her repeated demands because, as it appeared later, the defendant had mortgaged the property in bad faith to a financing company. The plaintiff asked for delivery of the title to the lot or, alternatively, the return of all the amounts paid by her plus interest. She also claimed moral and exemplary damages, attorneys fees and the costs of the suit. Solid Homes moved to dismiss the complaint on the ground that the court had no jurisdiction, this being vested in the National Housing Authority under PD No. 957. The motion was denied. The defendant repleaded the objection in its answer, citing Section 3 of the said decree providing that the National Housing Authority shall have exclusive jurisdiction to regulate the real estate trade and business in accordance with the provisions of this Decree. After trial, judgment was rendered in favor of the plaintiff and the defendant was ordered to deliver to her the title to the land or, failing this, to refund to her the sum of P38,949.87 plus interest from 1975 and until the full amount was paid. She was also awarded P5,000.00 moral damages, P5,000.00 exemplary damages, P10,000.00 attorneys fees, and the costs of the suit.1 Solid Homes appealed but the decision was affirmed by the respondent court,2 which also berated the appellant for its obvious efforts to evade a legitimate obligation, including its dilatory tactics during the trial. The petitioner was also reproved for its gall in collecting the further amount of P1,238.47 from the plaintiff purportedly for realty taxes and registration expenses despite its inability to deliver the title to the land. In holding that the trial court had jurisdiction, the respondent court referred to Section 41 of PD No. 957 itself providing that:

SEC.41.Other remedies.The rights and remedies provided in this Decree shall be in addition to any and all other rights and remedies that may be available under existing laws. ____________ 1 Rollo, pp. 6 & 14. 2 Tensuan,J., ponente, with Nocon and Kalalo, JJ.,concurring. VOL. 177, AUGUST 29, 1989 76 76 SUPREME COURT REPORTS ANNOTATED Solid Homes, Inc. vs. Payawal and declared that its clear and unambiguous tenor undermine(d) the (petitioners) pretension that the court a quo was bereft of jurisdiction. The decision also dismissed the contrary opinion of the Secretary of Justice as impinging on the authority of the courts of justice. While we are disturbed by the findings of fact of the trial court and the respondent court on the dubious conduct of the petitioner, we nevertheless must sustain it on the jurisdictional issue. The applicable law is PD No. 957, as amended by PD No. 1344, entitled Empowering the National Housing Authority to Issue Writs of Execution in the Enforcement of Its Decisions Under Presidential Decree No. 957. Section 1 of the latter decree provides as follows: SECTION1.In the exercise of its function to regulate the real estate trade and business and in addition to its powers provided for in Presidential Decree No. 957, the National Housing Authority shall haveexclusive jurisdiction to hear and decide cases of the following nature: A.Unsound real estate business practices; B.Claims involving refund and any other claims filed by subdivision lot or condominium unit buyer against the project owner, developer, dealer, broker or salesman; and C.Cases involving specific performance of contractual and statutory obligations filed by buyers of subdivision lot or condominium unit against the owner, developer, dealer, broker or salesman. (Italics supplied.) The language of this section, especially the italicized portions, leaves no room for doubt that exclusive jurisdiction over the case between the

petitioner and the private respondent is vested not in the Regional Trial Court but in the National Housing Authority.3 The private respondent contends that the applicable law is BP ____________________ 3 Under E.O. No. 648 dated Feb. 7, 1981, the regulatory functions conferred on the National Housing Authority under P.D. Nos. 957, 1216, 1344 and other related laws were transferred to the Human Settlements Regulatory Commission, which was renamed Housing and Land Use Regulatory Board by E.O. No. 90 dated Dec. 17, 1986. 77 VOL. 177, AUGUST 29, 1989 77 Solid Homes, Inc. vs. Payawal No. 129, which confers on regional trial courts jurisdiction to hear and decide cases mentioned in its Section 19, reading in part as follows: SEC.19.Jurisdiction in civil cases.Regional Trial Courts shall exercise exclusive original jurisdiction: (1) In all civil actions in which the subject of the litigation is incapable of pecuniary estimation; (2) In all civil actions which involve the title to, or possession of, real property, or any interest therein, except actions for forcible entry into and unlawful detainer of lands or buildings, original jurisdiction over which is conferred upon Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts; xxx (8)In all other cases in which the demand, exclusive of interest and cost or the value of the property in controversy, amounts to more than twenty thousand pesos (P20,000.00). It stresses, additionally, that BP No. 129 should control as the later enactment, having been promulgated in 1981, after PD No. 957 was issued in 1975 and PD No. 1344 in 1978. This construction must yield to the familiar canon that in case of conflict between a general law and a special law, the latter must prevail regardless of the dates of their enactment. Thus, it has been held that The fact that one law is special and the other general creates a presumption that the special act is to be considered as remaining an

exception of the general act, one as a general law of the land and the other as the law of the particular case.4 xxx The circumstance that the special law is passed before or after the general act does not change the principle. Where the special law is later, it will be regarded as an exception to, or a qualification of, the prior general act; and where the general act is later, the special statute will be construed as remaining an exception to its terms, unless repealed expressly or by necessary implication.5 _______________ 4 Manila Railroad Co. v. Rafferty, 40 Phil. 224 (1919); Butuan Sawmill, Inc. v. City of Butuan, 16 SCRA 758; Bagatsing v. Ramirez, 74 SCRA 306. 5 59 C.J., 1056-1058. 78 78 SUPREME COURT REPORTS ANNOTATED Solid Homes, Inc. vs. Payawal It is obvious that the general law in this case is BP No. 129 and PD No. 1344 the special law. The argument that the trial court could also assume jurisdiction because of Section 41 of PD No. 957, earlier quoted, is also unacceptable. We do not read that provision as vesting concurrent jurisdiction on the Regional Trial Court and the Board over the complaint mentioned in PD No. 1344 if only because grants of power are not to be lightly inferred or merely implied. The only purpose of this section, as we see it, is to reserve to the aggrieved party such other remedies as may be provided by existing law, like a prosecution for the act complained of under the Revised Penal Code.6 On the competence of the Board to award damages, we find that this is part of the exclusive power conferred upon it by PD No. 1344 to hear and decide claims involving refund and any other claims filed by subdivision lot or condominium unit buyers against the project owner, developer, dealer, broker or salesman. It was therefore erroneous for the respondent to brush aside the well-taken opinion of the Secretary of Justice that

Such claim for damages which the subdivision/condominium buyer may have against the owner, developer, dealer or salesman, being a necessary consequence of an adjudication of liability for nonperformance of contractual or statutory obligation, may be deemed necessarily included in the phrase claims involving refund and any other claims used in the aforequoted subparagraph C of Section 1 of PD No. 1344. The phrase any other claims is, we believe, sufficiently broad to include any and all claims which are incidental to or a necessary consequence of the claims/cases specifically included in the grant of jurisdiction to the National Housing Authority under the subject provisions. The same may be said with respect to claims for attorneys fees which are recoverable either by agreement of the parties or pursuant to Art. 2208 of the Civil Code (1) when exemplary damages are awarded and (2) where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs plainly valid, just and demandable claim. xxx _______________ 6 Article 316. 79 VOL. 177, AUGUST 29, 1989 79 Solid Homes, Inc. vs. Payawal Besides,a strict construction of the subject provisions of PD No. 1344 which would deny the HSRC the authority to adjudicate claims for damages and for damages and for attorneys fees would result in multiplicity of suits in that the subdivision/condominium buyer who wins a case in the HSRC and who is thereby deemed entitled to claim damages and attorneys fees would be forced to litigate in the regular courts for the purpose, a situation which is obviously not in the contemplation of the law. (Italics supplied.)7 As a result of the growing complexity of the modern society, it has become necessary to create more and more administrative bodies to help in the regulation of its ramified activities. Specialized in the particular fields assigned to them, they can deal with the problems thereof with more expertise and dispatch than can be expected from the

legislature or the courts of justice. This is the reason for the increasing vesture of quasi-legislative and quasi-judicial powers in what is now not unreasonably called the fourth department of the government. Statutes conferring powers on their administrative agencies must be liberally construed to enable them to discharge their assigned duties in accordance with the legislative purpose.8 Following this policy in Antipolo Realty Corporation v. National Housing Authority,9 the Court sustained the competence of the respondent administrative body, in the exercise of the exclusive jurisdiction vested in it by PD No. 957 and PD No. 1344, to determine the rights of the parties under a contract to sell a subdivision lot. It remains to state that, contrary to the contention of the petitioner, the case of Tropical Homes v. National Housing Authority10 is not in point. We upheld in that case the constitutionality of the procedure for appeal provided for in PD No. 1344, but we did not rule there that the National Housing Authority and not the Regional Trial Court had exclusive jurisdiction over the cases enumerated in Section 1 of the said decree. That is what we are doing now. _________________ 7 Min. of Justice Op. No. 271, s. 1982. 8 Cooper River Convalescent Ctr., Inc. v. Dougherty, 356 A. 2d 55, 1975. 9 153 SCRA 399. 10 152 SCRA 54. 80 80 SUPREME COURT REPORTS ANNOTATED Solid Homes, Inc. vs. Payawal It is settled that any decision rendered without jurisdiction is a total nullity and may be struck down at any time, even on appeal before this Court.11 The only exception is where the party raising the issue is barred by estoppel,12 which does not appear in the case before us. On the contrary, the issue was raised as early as in the motion to dismiss filed in the trial court by the petitioner, which continued to plead it in its answer and, later, on appeal to the respondent court. We have no choice, therefore, notwithstanding the delay this decision will entail, to nullify the proceedings in the trial court for lack of jurisdiction.

WHEREFORE, the challenged decision of the respondent court is REVERSED and the decision of the Regional Trial Court of Quezon City in Civil Case No. Q-36119 is SET ASIDE, without prejudice to the filing of the appropriate complaint before the Housing and Land Use Regulatory Board. No costs. SO ORDERED. Narvasa, Gancayco, Grio-Aquino and Medialdea, JJ., concur. Decision reversed. Notes.Jurisdiction is determined by the law in force at the time of the commencement of the action. (Lee vs. Municipal Trial Court of Legaspi City, Br. I, 145 SCRA 408.) Existence of a court judgment cannot be presumed. It must be proved. (Republic vs. Court of Appeals, 146 SCRA 15.) o0o _________________ 11 Trinidad v. Yatco, 1 SCRA 866; Corominas, Jr. v. Labor Standards Commission, 2 SCRA 721; Sebastian v. Gerardo, 2 SCRA 763; Buena v. Sapnay, 6 SCRA 706. 12 Tijam v. Sibonghanoy, 23 SCRA 29; Philippine National Bank v. IAC, 143 SCRA 299; Tan Boon Bee & Company, Inc. v. Judge Jarencio, G.R. No. 41337, June 30, 1988. 81 [Solid Homes, Inc. vs. Payawal, 177 SCRA 72(1989)]

292 SUPREME COURT REPORTS ANNOTATED Laguna Lake Development Authority vs. Court of Appeals G.R. No. 110120. March 16, 1994.* LAGUNA LAKE DEVELOPMENT AUTHORITY, petitioner, vs. COURT OF APPEALS, HON. MANUEL JN. SERAPIO, Presiding Judge, RTC, Branch 127, Caloocan City, HON. MACARIO A. ASISTIO, JR., City Mayor of Caloocan and/or THE CITY GOVERNMENT OF CALOOCAN, respondents. Administrative Law; Sec. 16 E.O. 192; A Pollution Adjudication Board (PAB) under the office of DENR Secretary now assumes the powers and functions of the National Pollution Control Commission with respect to adjudication of pollution cases.The matter of determining whether there is such pollution of the environment that requires control, if not prohibition, of the operation of a business establishment is essentially addressed to the Environmental Management Bureau (EMB) of the DENR which, by virtue of Section 16 of Executive Order No. 192, series of 1987, has assumed the powers and functions of the defunct National Pollution Control Commission created under Republic Act No. 3931. Under said Executive Order, a Pollution Adjudication Board (PAB) under the Office of the DENR Secretary now assumes the powers and functions of the National Pollution Control Commission with respect to adjudication of pollution cases. Same; Same; Adjudication of pollution cases generally pertains to the PAB except where the special law provides for another forum; LLDA as a special charter has responsibility to protect the inhabitants of the Laguna Lake region from the deleterious effects of pollutants emanating from the discharge of wastes from the surrounding areas.As a general rule, the adjudication of pollution cases generally pertains to the Pollution Adjudication Board (PAB), except in cases where the special law provides for another forum. It must be recognized in this regard that the LLDA, as a specialized administrative agency, is specifically mandated under Republic Act No. 4850 and its amendatory laws to carry out and make effective the declared national policy of promoting and accelerating the development and balanced growth of the Laguna Lake area and the surrounding provinces of Rizal and Laguna and the cities of San Pablo, Manila, Pasay, Quezon and Caloocan with due regard and adequate

provisions for environmental management and control, preservation of the quality of human life and ecological systems, and the prevention of undue ecological disturbances, deterioration and _______________ * THIRD DIVISION. 293 VOL. 231, MARCH 16, 1994 293 Laguna Lake Development Authority vs. Court of Appeals pollution. Under such a broad grant of power and authority, the LLDA, by virtue of its special charter, obviously has the responsibility to protect the inhabitants of the Laguna Lake region from the deleterious effects of pollutants emanating from the discharge of wastes from the surrounding areas. In carrying out the aforementioned declared policy, the LLDA is mandated, among others, to pass upon and approve or disapprove all plans, programs, and projects proposed by local government offices/agencies within the region, public corporations, and private persons or enterprises where such plans, programs and/or projects are related to those of the LLDA for the development of the region. Same; Same; LLDA has the power and authority to issue a cease and desist order under RA. 4850 and its amendatory laws.Having thus resolved the threshold question, the inquiry then narrows down to the following issue: Does the LLDA have the power and authority to issue a cease and desist order under Republic Act No. 4850 and its amendatory laws, on the basis of the facts presented in this case, enjoining the dumping of garbage in Tala Estate, Barangay Camarin, Caloocan City. The irresistible answer is in the affirmative. Same; Same; Same.The cease and desist order issued by the LLDA requiring the City Government of Caloocan to stop dumping its garbage in the Camarin open dumpsite found by the LLDA to have been done in violation of Republic Act No. 4850, as amended, and other relevant environment laws, cannot be stamped as an unauthorized exercise by the LLDA of injunctive powers. By its express terms, Republic Act No. 4850, as amended by P.D. No. 813 and Executive Order No. 927, series of 1983, authorizes the LLDA to make, alter or modify orders requiring the discontinuance of pollution. (Italics for emphasis) Section 4, par. (d)

explicitly authorizes the LLDA to make whatever order may be necessary in the exercise of its jurisdiction. Same; Same; Same; The power to make, alter or modify orders requiring the discontinuance of pollution is also expressly bestowed upon LLDA by E.O. No. 927, series of 1983.To be sure, the LLDA was not expressly conferred the power to issue an ex-parte cease and desist order in a language, as suggested by the City Government of Caloocan, similar to the express grant to the defunct National Pollution Control Commission under Section 7 of P.D. No. 984 which, admittedly was not reproduced in P.D. No. 813 and E.O. No. 927, series of 1983. However, it would be a mistake to draw therefrom the conclusion that there is a denial of the power to issue the order in question when the power to make, alter or modify orders requiring the discontinuance of pollution is expressly and clearly bestowed upon the LLDA by Executive Order No. 927, series of 1983. 294 294 SUPREME COURT REPORTS ANNOTATED Laguna Lake Development Authority vs. Court of Appeals Same; While it is a fundamental rule that an administrative agency has only such powers as are expressly granted to it by law, it is likewise a settled rule that an administrative agency has also such powers as are necessarily implied in the exercise of its express powers.Assuming arguendo that the authority to issue a cease and desist order were not expressly conferred by law, there is jurisprudence enough to the effect that the rule granting such authority need not necessarily be express. While it is a fundamental rule that an administrative agency has only such powers as are expressly granted to it by law, it is likewise a settled rule that an administrative agency has also such powers as are necessarily implied in the exercise of its express powers In the exercise, therefore, of its express powers under its charter, as a regulatory and quasi-judicial body with respect to pollution cases in the Laguna Lake region, the authority of the LLDA to issue a cease and desist order is, perforce, implied Otherwise, it may well be reduced to a toothless paper agency. Same; Same; PAB has the power to issue an ex-parte cease and desist order when there is prima facie evidence of an establishment exceeding

the allowable standards set by the anti-pollution laws of the country.In this connection, it must be noted that in Pollution Adjudication Board v. Court of Appeals, et al., the Court ruled that the Pollution Adjudication Board (PAB) has the power to issue an ex-parte cease and desist order when there is prima facie evidence of an establishment exceeding the allowable standards set by the anti-pollution laws of the country. Same; Same; The relevant Pollution control statute and implementing regulations were enacted and promulgated in the exercise of that pervasive sovereign power to protect the safety, health and general welfare and comfort of the public, as well as the protection of plant and animal life commonly designated as the police power.Ex parte cease and desist orders are permitted by law and regulations in situations like that here presented precisely because stopping the continuous discharge of pollutive and untreated effluents into the rivers and other inland waters of the Philippines cannot be made to wait until protracted litigation over the ultimate correctness or propriety of such orders has run its full course, including multiple and sequential appeals such as those which Solar has taken, which of course may take several years. The relevant pollution control statute and implementing regulations were enacted and promulgated in the exercise of that pervasive, sovereign power to protect the safety, health, and general welfare and comfort of the public, as well as the protection of plant and animal life, commonly designated as the police power. It is a constitu295 VOL. 231, MARCH 16, 1994 295 Laguna Lake Development Authority vs. Court of Appeals tional commonplace that the ordinary requirements of procedural due process yield to the necessities of protecting vital public interests like those here involved, through the exercise of police power. x x x Same; International Law; The Philippines is a party to the Universal Declaration of Human Rights and The Alma Conference Declaration of 1978 which recognize health as a fundamental human right.As a constitutionally guaranteed right of every person, it carries the correlative duty of non-impairment. This is but in consonance with the declared policy of the state to protect and promote the right to health of the people and instill health consciousness among them. It is to be

borne in mind that the Philippines is party to the Universal Declaration of Human Rights and the Alma Conference Declaration of 1978 which recognize health as a fundamental human right. Same; The issuance of cease and desist order by the LLDA is the proper exercise of its power and authority under its charter and its amendatory laws.The issuance, therefore, of the cease and desist order by the LLDA, as a practical matter of procedure under the. circumstances of the case, is a proper exercise of its power and authority under its charter and its amendatory laws. Had the cease and desist order issued by the LLDA been complied with by the City Government of Caloocan as it did in the first instance, no further legal steps would have been necessary. PETITION for review on certiorari of a decision of the Court of Appeals. The facts are stated in the opinion of the Court. Alberto N. Hidalgo and Ma. Teresa T. Oledan for petitioner. The City Legal Officer & Chief Law Department for Mayor Macario A. Asistio, Jr. and the City Government of Caloocan. ROMERO, J.: The clash between the responsibility of the City Government of Caloocan to dispose of the 350 tons of garbage it collects daily and the growing concern and sensitivity to a pollution-free environment of the residents of Barangay Camarin, Tala Estate, Caloocan City where these tons of garbage are dumped everyday is the hub of this controversy elevated by the protagonists to the 296 296 SUPREME COURT REPORTS ANNOTATED Laguna Lake Development Authority vs. Court of Appeals Laguna Lake Development Authority (LLDA) for adjudication. The instant case stemmed from an earlier petition filed with this Court by Laguna Lake Development Authority (LLDA for short) docketed as G.R. No. 107542 against the City Government of Caloocan, et al. In the Resolution of November 10, 1992, this Court referred G.R. No. 107542 to the Court of Appeals for appropriate disposition. Docketed therein as CAG.R. SP No. 29449, the Court of Appeals, in a decision1 promulgated on January 29, 1993 ruled that the LLDA has no power and authority to

issue a cease and desist order enjoining the dumping of garbage in Barangay Camarin, Tala Estate, Caloocan City. The LLDA now seeks, in this petition, a review of the decision of the Court of Appeals. The facts, as disclosed in the records, are undisputed. On March 8, 1991, the Task Force Camarin Dumpsite of Our Lady of Lourdes Parish, Barangay Camarin, Caloocan City, filed a lettercomplaint2 with the Laguna Lake Development Authority seeking to stop the operation of the 8.6-hectare open garbage dumpsite in Tala Estate, Barangay Camarin, Caloocan City due to its harmful effects on the health of the residents and the possibility of pollution of the water content of the surrounding area. On November 15, 1991, the LLDA conducted an on-site investigation, monitoring and test sampling of the leachate3 that seeps from said dumpsite to the nearby creek which is a tributary of the Marilao River. The LLDA Legal and Technical personnel found that the City Government of Caloocan was maintaining an open dumpsite at the Camarin area without first securing an Environmental Compliance Certificate (ECC) from the Environmental Management Bureau (EMB) of the Department of Environment and Natural Resources, as required under Presidential Decree _______________ 1 Jorge S. Imperial, J., ponente, Vicente V. Mendoza and Quirino D. Abad Santos, Jr., JJ., concurring. 2 Annex C, Petition, G.R. No. 107542, Rollo, pp. 47-51. 3 Websters Third International Dictionary (1986) defines leachate as the liquid that has percolated through soil or other medium. 297 VOL. 231, MARCH 16, 1994 297 Laguna Lake Development Authority vs. Court of Appeals No. 1586,4 and clearance from LLDA as required under Republic Act No. 4850,5 as amended by Presidential Decree No. 813 and Executive Order No. 927, series of 1983.6 After a public hearing conducted on December 4, 1991, the LLDA, acting on the complaint of Task Force Camarin Dumpsite, found that the water collected from the leachate and the receiving streams could considerably

affect the quality, in turn, of the receiving waters since it indicates the presence of bacteria, other than coliform, which may have contaminated the sample during collection or handling.7 On December 5, 1991, the LLDA issued a Cease and Desist Order8 ordering the City Government of Caloocan, Metropolitan Manila Authority, their contractors, and other entities, to completely halt, stop and desist from dumping any form or kind of garbage and other waste matter at the Camarin dumpsite. The dumping operation was forthwith stopped by the City Government of Caloocan. However, sometime in August 1992 the dumping operation was resumed after a meeting held in July 1992 among the City Government of Caloocan, the representatives of Task Force Camarin Dumpsite and LLDA at the Office of Environmental Management Bureau Director Rodrigo U. Fuentes failed to settle the problem. After an investigation by its team of legal and technical personnel on August 14, 1992, the LLDA issued another order reiterating the December 5, 1991 order and issued an Alias Cease and Desist Order enjoining the City Government of Caloocan from continuing its dumping operations at the Camarin area. On September 25, 1992, the LLDA, with the assistance of the Philippine National Police, enforced its Alias Cease and Desist Order by prohibiting the entry of all garbage dump trucks into _______________ 4 Establishing An Environment Impact Statement System, Including Other Environmental Management Related Measures and For Other Purposes (June 11, 1978). 5 An Act Creating The Laguna Lake Development Authority, Prescribing Its Powers, Functions And Duties, Providing Funds Therefor, And For Other Purposes (July 18, 1966). 6 Annex D, Petition, G.R. No. 107542, Rollo, pp. 52-54. 7 Ibid. 8 Annex G, Petition, G.R. No. 107542, Rollo, pp. 58-63. 298 298 SUPREME COURT REPORTS ANNOTATED Laguna Lake Development Authority vs. Court of Appeals the Tala Estate, Camarin area being utilized as a dumpsite.

Pending resolution of its motion for reconsideration earlier filed on September 17, 1992 with the LLDA, the City Government of Caloocan filed with the Regional Trial Court of Caloocan City an action for the declaration of nullity of the cease and desist order with prayer for the issuance of a writ of injunction, docketed as Civil Case No. C-15598. In its complaint, the City Government of Caloocan sought to be declared as the sole authority empowered to promote the health and safety and enhance the right of the people in Caloocan City to a balanced ecology within its territorial jurisdiction.9 On September 25, 1992, the Executive Judge of the Regional Trial Court of Caloocan City issued a temporary restraining order enjoining the LLDA from enforcing its cease and desist order. Subsequently, the case was raffled to the Regional Trial Court, Branch 126 of Caloocan which, at the time, was presided over by Judge Manuel Jn. Serapio of the Regional Trial Court, Branch 127, the pairing judge of the recently-retired presiding judge. The LLDA, for its part, filed on October 2, 1992 a motion to dismiss on the ground, among others, that under Republic Act No. 3931, as amended by Presidential Decree No. 984, otherwise known as the Pollution Control Law, the cease and desist order issued by it which is the subject matter of the complaint is reviewable both upon the law and the facts of the case by the Court of Appeals and not by the Regional Trial Court.10 On October 12, 1992 Judge Manuel Jn. Serapio issued an order consolidating Civil Case No. C-15598 with Civil Case No. C-15580, an earlier case filed by the Task Force Camarin Dumpsite entitled Fr. John Moran, et al. vs. Hon. Macario Asistio. The LLDA, however, maintained during the trial that the foregoing cases, being independent of each other, should have been treated separately. On October 16, 1992, Judge Manuel Jn. Serapio, after hearing the motion to dismiss, issued in the consolidated cases an order11 _______________ 9 Annex M, Petition, G.R. No. 107542, Rollo, pp. 77-81. 10 Annex O, Petition, G.R. No. 107542, Rollo, pp. 83-90. 11 Annex A, Petition, G.R. No. 107542, Rollo, pp. 29-37. 299

VOL. 231, MARCH 16, 1994 299 Laguna Lake Development Authority vs. Court of Appeals denying LLDAs motion to dismiss and granting the issuance of a writ of preliminary injunction enjoining the LLDA, its agent and all persons acting for and on its behalf, from enforcing or implementing its cease and desist order which prevents plaintiff City of Caloocan from dumping garbage at the Camarin dumpsite during the pendency of this case and/or until further orders of the court. On November 5, 1992, the LLDA filed a petition for certiorari, prohibition and injunction with prayer for restraining order with the Supreme Court, docketed as G.R. No. 107542, seeking to nullify the aforesaid order dated October 16, 1992 issued by the Regional Trial Court, Branch 127 of Caloocan City denying its motion to dismiss. The Court, acting on the petition, issued a Resolution12 on November 10, 1992 referring the case to the Court of Appeals for proper disposition and at the same time, without giving due course to the petition, required the respondents to comment on the petition and file the same with the Court of Appeals within ten (10) days from notice. In the meantime, the Court issued a temporary restraining order, effective immediately and continuing until further orders from it, ordering the respondents: (1) Judge Manuel Jn. Serapio, Presiding Judge, Regional Trial Court, Branch 127, Caloocan City to cease and desist from exercising jurisdiction over the case for declaration of nullity of the cease and desist order issued by the Laguna Lake Development Authority (LLDA); and (2) City Mayor of Caloocan and/or the City Government of Caloocan to cease and desist from dumping its garbage at the Tala Estate, Barangay Camarin, Caloocan City. Respondents City Government of Caloocan and Mayor Macario A. Asistio, Jr. filed on November 12, 1992 a motion for reconsideration and/or to quash/recall the temporary restraining order and an urgent motion for reconsideration alleging that . . . in view of the calamitous situation that would arise if the respondent city government fails to collect 350 tons of garbage daily for lack of a dumpsite (i)t is therefore, imperative that the issue be resolved with dispatch or with sufficient leeway to allow the _______________

12 G.R. No. 107542, Rollo, pp. 93-95. 300 300 SUPREME COURT REPORTS ANNOTATED Laguna Lake Development Authority vs. Court of Appeals respondents to find alternative solutions to this garbage problem. On November 17, 1992, the Court issued a Resolution13 directing the Court of Appeals to immediately set the case for hearing for the purpose of determining whether or not the temporary restraining order issued by the Court should be lifted and what conditions, if any, may be required if it is to be so lifted or whether the restraining order should be maintained or converted into a preliminary injunction. The Court of Appeals set the case for hearing on November 27, 1992, at 10:00 in the morning at the Hearing Room, 3rd Floor, New Building, Court of Appeals.14 After the oral argument, a conference was set on December 8, 1992 at 10:00 oclock in the morning where the Mayor of Caloocan City, the General Manager of LLDA, the Secretary of DENR or his duly authorized representative and the Secretary of DILG or his duly authorized representative were required to appear. It was agreed at the conference that the LLDA had until December 15, 1992 to finish its study and review of respondents technical plan with respect to the dumping of its garbage and in the event of a rejection of respondents technical plan or a failure of settlement, the parties will submit within 10 days from notice their respective memoranda on the merits of the case, after which the petition shall be deemed submitted for resolution.15 Notwithstanding such efforts, the parties failed to settle the dispute. On April 30, 1993, the Court of Appeals promulgated its decision holding that: (1) the Regional Trial Court has no jurisdiction on appeal to try, hear and decide the action for annulment of LLDAs cease and desist order, including the issuance of a temporary restraining order and preliminary injunction in relation thereto, since appeal therefrom is within the exclusive and appellate jurisdiction of the Court of Appeals under Section 9, par. (3), of Batas Pambansa Blg. 129; and (2) the Laguna Lake Development Authority has no power and authority to issue a _______________

13 G.R. No. 107542, Rollo, pp. 98-99. 14 Ibid, p. 97. 15 G.R. No. 107542, Rollo, pp. 129-130. 301 VOL. 231, MARCH 16, 1994 301 Laguna Lake Development Authority vs. Court of Appeals cease and desist order under its enabling law, Republic Act No. 4850, as amended by P.D. No. 813 and Executive Order No. 927, series of 1983. The Court of Appeals thus dismissed Civil Case No. 15598 and the preliminary injunction issued in the said case was set aside; the cease and desist order of the LLDA was likewise set aside and the temporary restraining order enjoining the City Mayor of Caloocan and/or the City Government of Caloocan to cease and desist from dumping its garbage at the Tala Estate, Barangay Camarin, Caloocan City was lifted, subject, however, to the condition that any future dumping of garbage in said area, shall be in conformity with the procedure and protective works contained in the proposal attached to the records of this case and found on pages 152-160 of the Rollo, which was thereby adopted by reference and made an integral part of the decision, until the corresponding restraining and/or injunctive relief is granted by the proper Court upon LLDAs institution of the necessary legal proceedings. Hence, the Laguna Lake Development Authority filed the instant petition for review on certiorari, now docketed as G.R. No. 110120, with prayer that the temporary restraining order lifted by the Court of Appeals be reissued until after final determination by this Court of the issue on the proper interpretation of the powers and authority of the LLDA under its enabling law. On July 19, 1993, the Court issued a temporary restraining order16 enjoining the City Mayor of Caloocan and/or the City Government of Caloocan to cease and desist from dumping its garbage at the Tala Estate, Barangay Camarin, Caloocan City, effective as of this date and continuing until otherwise ordered by the Court. It is significant to note that while both parties in this case agree on the need to protect the environment and to maintain the ecological balance of the surrounding areas of the Camarin open dumpsite, the question as

to which agency can lawfully exercise jurisdiction over the matter remains highly open to question. The City Government of Caloocan claims that it is within its _______________ 16 G.R. No. 110120, Rollo, p. 70. 302 302 SUPREME COURT REPORTS ANNOTATED Laguna Lake Development Authority vs. Court of Appeals power, as a local government unit, pursuant to the general welfare provision of the Local Government Code,17 to determine the effects of the operation of the dumpsite on the ecological balance and to see that such balance is maintained. On the basis of said contention, it questioned, from the inception of the dispute before the Regional Trial Court of Caloocan City, the power and authority of the LLDA to issue a cease and desist order enjoining the dumping of garbage in the Barangay Camarin over which the City Government of Caloocan has territorial jurisdiction. The Court of Appeals sustained the position of the City of Caloocan on the theory that Section 7 of Presidential Decree No. 984, otherwise known as the Pollution Control Law, authorizing the defunct National Pollution Control Commission to issue an ex-parte cease and desist order was not incorporated in Presidential Decree No. 813 nor in Executive Order No. 927, series of 1983. The Court of Appeals ruled that under Section 4, par. (d), of Republic Act No. 4850, as amended, the LLDA is instead required to institute the necessary legal proceeding against any person who shall commence to implement or continue implementation of any project, plan or program within the Laguna de Bay region without previous clearance from the Authority. The LLDA now assails, in this petition for review, the abovementioned ruling of the Court of Appeals, contending that, as an administrative agency which was granted regulatory and adjudicatory powers and functions by Republic Act No. 4850 and its amendatory laws, Presidential Decree No. 813 and Executive Order No. 927, series of 1983, it is invested with the power and authority to issue a cease and desist order

pursuant to Section 4 par. (c), (d), (e), (f), and (g) of Executive Order No. 927 series of 1983 which provides, thus: SECTION 4. Additional Powers and Functions.The Authority shall have the following powers and functions: xxx xxx xxx (c) Issue orders or decisions to compel compliance with the provisions of this Executive Order and its implementing rules and regulations only after proper notice and hearing. _______________ 17 Section 16, Republic Act No. 7160, otherwise known as The Local Government Code of 1991. 303 VOL. 231, MARCH 16, 1994 303 Laguna Lake Development Authority vs. Court of Appeals (d) Make, alter or modify orders requiring the discontinuance of pollution specifying the conditions and the time within which such discontinuance must be accomplished. (e) Issue, renew, or deny permits, under such conditions as it may determine to be reasonable, for the prevention and abatement of pollution, for the discharge of sewage, industrial waste, or for the installation or operation of sewage works and industrial disposal system or parts thereof: x x x (f) After due notice and hearing, the Authority may also revoke, suspend or modify any permit issued under this Order whenever the same is necessary to prevent or abate pollution. (g) Deputize in writing or request assistance of appropriate government agencies or instrumentalities for the purpose of enforcing this Executive Order and its implementing rules and regulations and the orders and decisions of the Authority. The LLDA claims that the appellate court deliberately suppressed and totally disregarded the above provisions of Executive Order No. 927, series of 1983, which granted administrative quasi-judicial functions to LLDA on pollution abatement cases. In light of the relevant environmental protection laws cited which are applicable in this case, and the corresponding overlapping jurisdiction of

government agencies implementing these laws, the resolution of the issue of whether or not the LLDA has the authority and power to issue an order which, in its nature and effect was injunctive, necessarily requires a determination of the threshold question: Does the Laguna Lake Development Authority, under its Charter and its amendatory laws, have the authority to entertain the complaint against the dumping of garbage in the open dumpsite in Barangay Camarin authorized by the City Government of Caloocan which is allegedly endangering the health, safety, and welfare of the residents therein and the sanitation and quality of the water in the area brought about by exposure to pollution caused by such open garbage dumpsite? The matter of determining whether there is such pollution of the environment that requires control, if not prohibition, of the operation of a business establishment is essentially addressed to the Environmental Management Bureau (EMB) of the DENR which, by virtue of Section 16 of Executive Order No. 192, series 304 304 SUPREME COURT REPORTS ANNOTATED Laguna Lake Development Authority vs. Court of Appeals of 1987,18 has assumed the powers and functions of the defunct National Pollution Control Commission created under Republic Act No. 3931. Under said Executive Order, a Pollution Adjudication Board (PAB) under the Office of the DENR Secretary now assumes the powers and functions of the National Pollution Control Commission with respect to adjudication of pollution cases.19 As a general rule, the adjudication of pollution cases generally pertains to the Pollution Adjudication Board (PAB), except in cases where the special law provides for another forum. It must be recognized in this regard that the LLDA, as a specialized administrative agency, is specifically mandated under Republic Act No. 4850 and its amendatory laws to carry out and make effective the declared national policy20 of promoting and accelerating the development and balanced growth of the Laguna Lake area and the surrounding provinces of Rizal and Laguna and the cities of San Pablo, Manila, Pasay, Quezon and Caloocan21 with due regard and adequate provisions for environmental management and control, preservation of the quality of human life and ecological systems,

and the prevention of undue ecological disturbances, deterioration and pollution. Under such a broad grant of power and authority, the LLDA, by virtue of its special charter, obviously has the responsibility to protect the inhabitants of the Laguna Lake region from the deleterious effects of pollutants emanating from the discharge of wastes from the surrounding areas. In carrying out the aforementioned declared policy, the LLDA is mandated, among others, to pass upon and approve or disapprove all plans, programs, and projects proposed by local government offices/agencies within the region, public corporations, and private persons or enterprises where such plans, _______________ 18 Providing For The Reorganization Of The Department of Environment, Energy and Natural Resources, Renaming It As The Department of Environment and Natural Resources, And For Other Purposes (June 10, 1987). 19 Section 19, Executive Order No. 192, series of 1987. 20 Section 1, Republic Act No. 4850, as amended by P.D. No. 813 and Executive Order No. 927, series of 1983. 21 Section 41, par. (4), Republic Act No. 4850, as amended by P.D. No. 813 and Executive Order No. 927, series of 1983. 305 VOL. 231, MARCH 16, 1994 305 Laguna Lake Development Authority vs. Court of Appeals programs and/or projects are related to those of the LLDA for the development of the region.22 In the instant case, when complainant Task Force Camarin Dumpsite of Our Lady of Lourdes Parish, Barangay Camarin, Caloocan City, filed its letter-complaint before the LLDA, the latters jurisdiction under its charter was validly invoked by complainant on the basis of its allegation that the open dumpsite project of the City Government of Caloocan in Barangay Camarin was undertaken without a clearance from the LLDA, as required under Section 4, par. (d), of Republic Act No. 4850, as amended by P.D. No. 813 and Executive Order No. 927. While there is also an allegation that the said project was without an Environmental Compliance Certificate from the Environmental Management Bureau

(EMB) of the DENR, the primary jurisdiction of the LLDA over this case was recognized by the Environmental Management Bureau of the DENR when the latter acted as intermediary at the meeting among the representatives of the City Government of Caloocan, Task Force Camarin Dumpsite and LLDA sometime in July 1992 to discuss the possibility of reopening the open dumpsite. Having thus resolved the threshold question, the inquiry then narrows down to the following issue: Does the LLDA have the power and authority to issue a cease and desist order under Republic Act No. 4850 and its amendatory laws, on the basis of the facts presented in this case, enjoining the dumping of garbage in Tala Estate, Barangay Camarin, Caloocan City. The irresistible answer is in the affirmative. The cease and desist order issued by the LLDA requiring the City Government of Caloocan to stop dumping its garbage in the Camarin open dumpsite found by the LLDA to have been done in violation of Republic Act No. 4850, as amended, and other relevant environment laws,23 cannot be stamped as an unautho_______________ 22 Section 4, par. (d), Republic Act No. 4850, as amended by P.D. No. 813 and Executive Order No. 927, series of 1983. (Italics supplied). 23 Sections 45 and 48, Presidential Decree No. 1152, otherwise known as Philippine Environment Code which requires that solid waste disposal shall be by sanitary landfill, incineration, composting and other methods as may be approved by competent government authority and, that the sites shall conform with existing zoning, land 306 306 SUPREME COURT REPORTS ANNOTATED Laguna Lake Development Authority vs. Court of Appeals rized exercise by the LLDA of injunctive powers. By its express terms, Republic Act No. 4850, as amended by P.D. No. 813 and Executive Order No. 927, series of 1983, authorizes the LLDA to make, alter or modify orders requiring the discontinuance of pollution.24 (Italics for emphasis) Section 4, par. (d) explicitly authorizes the LLDA to make whatever order may be necessary in the exercise of its jurisdiction.

To be sure, the LLDA was not expressly conferred the power to issue an ex-parte cease and desist order in a language, as suggested by the City Government of Caloocan, similar to the express grant to the defunct National Pollution Control Commission under Section 7 of P.D. No. 984 which, admittedly was not reproduced in P.D. No. 813 and E.O. No. 927, series of 1983. However, it would be a mistake to draw therefrom the conclusion that there is a denial of the power to issue the order in question when the power to make, alter or modify orders requiring the discontinuance of pollution is expressly and clearly bestowed upon the LLDA by Executive Order No. 927, series of 1983. Assuming arguendo that the authority to issue a cease and desist order were not expressly conferred by law, there is jurisprudence enough to the effect that the rule granting such authority need not necessarily be express.25 While it is a fundamental rule that an administrative agency has only such powers as are expressly granted to it by law, it is likewise a settled rule that an administrative agency has also such powers as are necessarily implied in the exercise of its express powers.26 In the exercise, therefore, of its express powers under its charter, as a regulatory and quasi-judicial body with respect to pollution cases in the Laguna Lake region, the authority of the LLDA to issue a cease and desist order is, perforce, implied. Otherwise, it may well be reduced to a toothless paper agency. _______________ use standards, and pollution control regulations, respectively; Section 4, Presidential Decree No. 1586. 24 Section 4, par. (d), Executive Order No. 927, series of 1983. 25 Motor Transit Co. v. Railroad Com. 189 CAl 573, 209 P. 586. 26 Republic v. Court of Appeals, G.R. No. 90482, August 5, 1991, 200 SCRA 266; Guerzon v. Court of Appeals, et al., G.R. No. 77707, August 8, 1988, 164 SCRA 182. 307 VOL. 231, MARCH 16, 1994 307 Laguna Lake Development Authority vs. Court of Appeals In this connection, it must be noted that in Pollution Adjudication Board v. Court of Appeals, et al.,27 the Court ruled that the Pollution

Adjudication Board (PAB) has the power to issue an ex-parte cease and desist order when there is prima facie evidence of an establishment exceeding the allowable standards set by the anti-pollution laws of the country. The ponente, Associate Justice Florentino P. Feliciano, declared: Ex parte cease and desist orders are permitted by law and regulations in situations like that here presented precisely because stopping the continuous discharge of pollutive and untreated effluents into the rivers and other inland waters of the Philippines cannot be made to wait until protracted litigation over the ultimate correctness or propriety of such orders has run its full course, including multiple and sequential appeals such as those which Solar has taken, which of course may take several years. The relevant pollution control statute and implementing regulations were enacted and promulgated in the exercise of that pervasive, sovereign power to protect the safety, health, and general welfare and comfort of the public, as well as the protection of plant and animal life, commonly designated as the police power. It is a constitutional commonplace that the ordinary requirements of procedural due process yield to the necessities of protecting vital public interests like those here involved, through the exercise of police power. x x x The immediate response to the demands of the necessities of protecting vital public interests gives vitality to the statement on ecology embodied in the Declaration of Principles and State Policies of the 1987 Constitution. Article II, Section 16 which provides: The State shall protect and advance the right of the people to a balanced and healthful ecology in accord with the rhythm and harmony of nature. As a constitutionally guaranteed right of every person, it carries the correlative duty of non-impairment. This is but in consonance with the declared policy of the state to protect and promote the right to health of the people and instill health _______________ 27 G.R. No. 93891, March 11, 1991, 195 SCRA 112. 308 308 SUPREME COURT REPORTS ANNOTATED

Laguna Lake Development Authority vs. Court of Appeals consciousness among them.28 It is to be borne in mind that the Philippines is party to the Universal Declaration of Human Rights and the Alma Conference Declaration of 1978 which recognize health as a fundamental human right.29 The issuance, therefore, of the cease and desist order by the LLDA, as a practical matter of procedure under the circumstances of the case, is a proper exercise of its power and authority under its charter and its amendatory laws. Had the cease and desist order issued by the LLDA been complied with by the City Government of Caloocan as it did in the first instance, no further legal steps would have been necessary. The charter of LLDA, Republic Act No. 4850, as amended, instead of conferring upon the LLDA the means of directly enforcing such orders, has provided under its Section 4 (d) the power to institute necessary legal proceeding against any person who shall commence to implement or continue implementation of any project, plan or program within the Laguna de Bay region without previous clearance from the LLDA. Clearly, said provision was designed to invest the LLDA with sufficiently broad powers in the regulation of all projects initiated in the Laguna Lake region, whether by the government or the private sector, insofar as the implementation of these projects is concerned. It was meant to deal with cases which might possibly arise where decisions or orders issued pursuant to the exercise of such broad powers may not be obeyed, resulting in the thwarting of its laudable objective. To meet such contingencies, then the writs of mandamus and injunction which are beyond the power of the LLDA to issue, may be sought from the proper courts. Insofar as the implementation of relevant anti-pollution laws in the Laguna Lake region and its surrounding provinces, cities and towns are concerned, the Court will not dwell further on the related issues raised which are more appropriately addressed to an administrative agency with the special knowledge and expertise of the LLDA. _______________ 28 Art. II, Section 15, 1987 Constitution. 29 Record of the Constitutional Commission, Proceedings and Debates, Vol. III, p. 119. 309

VOL. 231, MARCH 16, 1994 309 Vda. de Alvarez vs. Court of Appeals WHEREFORE, the petition is GRANTED. The temporary restraining order issued by the Court on July 19, 1993 enjoining the City Mayor of Caloocan and/or the City Government of Caloocan from dumping their garbage at the Tala Estate, Barangay Camarin, Caloocan City is hereby made permanent. SO ORDERED. Feliciano (Chairman), Bidin, Melo and Vitug, JJ., concur. Petition granted. Note.The ex-parte cease and desist orders issued by the Pollution Adjudication Board are permitted under the Police Power of the State (Pollution Adjudication Board vs. Court of Appeals, 195 SCRA 112). [Laguna Lake Development Authority vs. Court of Appeals, 231 SCRA 292(1994)]

[No. L-8785. February 25, 1957] CORNELIO S. RUPERTO, as Assistant Fiscal to the City of Manila, petitioner and appellee, vs. HON. LUIS P. TORRES, as Chairman, HON. MARIANO H. DE JOYA, HON. POMPEYO DIAZ and HON. PILAR HIDALGO LIM, as members of the Integrity Board, respectively and CONRADO TEODORO SR., respondents and appellants. Appeal from a judgment of the Court of First Instance of Manila holding that the supplementary report and recommendation of the Integrity Board recommending the removal of the petitioner herein, is null and void, and so is Administrative Order No.. 171 of the President, removing petitioner herein from office. Ordering that petitioner be reinstated to his former position as assistant city fiscal of Manila and that all salaries due him from the date of his dismissal until his reinstatement be paid to him. Judgment reversed, case dismissed with costs against petitionerappellee. Labrador, J. ponente. [Ruperto vs. Torres, 100 Phil. 1098(1957)]

836 SUPREME COURT REPORTS ANNOTATED Carmelo vs. Ramos No. L-17778. November 30, 1962. IN RE CONTEMPT PROCEEDINGS AGAINST ARMANDO RAMOS, JESUS L. CARMELO, in his capacity as Chairman of the Probe Committee, Office of the Mayor of Manila, petitioner-appellant, vs. ARMANDO RAMOS, respondentappellee. Administrative Law; Contempt Committed Against Administrative Bodies; Contempt under Rule 64 of the Rules of Court.Rule 64 (Contempt) of the Rules of Court applies only to inferior and superior courts and does not comprehend contempt committed against administrative officials or bodies, unless said contempt is clearly considered and expressly defined as contempt of court, as is done in paragraph 2 of Section 580 of the Revised Administrative Code. (People vs. Mendoza; People vs. Dizon, 49 Off. Gaz., No. 2, 541) Same; Same; When Section 580 of the Revised Administrative Code may be invoked.One who invokes Section 580 of the Revised Administrative Code must first show that he has authority to take testimony or evidence before he can apply to the courts for the punishment of hostile witnesses. (Francia vs. Pecson, et al., 87 Phil. 100.) Same; Same; Same; Delegation by Mayor of Manila of power to investigate.The delegation by the Mayor of Manila of the power to investigate city officials and employees appointed by him does not imply a delegation of the power to take testimony or evidence of witnesses whose appearance may be required by the compulsory process of subpoena. Same; Same; Same; To what offices Section 580 of the Revised Administrative Code pertains.It is doubtful whether the provisions of Section 580 of the Revised Administrative Code are applicable to the City of Manila, as these pertain to national bureaus or offices of the government. APPEAL from a decision of the Court of First Instance of Manila. Alvendia, J. The facts are stated in the opinion of the Court.

City Fiscal Hermogenes Concepcion, Jr. for petitioner-appellant. Armando Ramos for and in his own behalf as respondent-appellee. REGALA, J.: On February 3, 1960, the Mayor of Manila issued an executive order creating a committee to investigate the anomalies involving the license inspectors and other personnel of the License Inspection Division of the Office 837 VOL. 6, NOVEMBER 30, 1962 837 Carmelo vs. Ramos of the City Treasurer and of the License and Permits Division of this Office (of the Mayor). He named Mr. Jesus L. Carmelo as chairman of said committee. It appears that the committee issued subpoenas to Armando Ramos, a private citizen working as a bookkeeper in the Casa de Alba, requiring him to appear before it on June 3, 8, 9, 15 and 16 and August 4 and 11, 1960, in connection with an administrative case against Crisanta Estanislao but that Ramos, on whom the subpoenas were duly served, refused to appear. Claiming that Ramos refusal tended to impede, obstruct, or degrade the administrative proceedings, petitioner filed in the Court of First Instance of Manila a petition to declare Armando Ramos in contempt. After hearing, during which petitioner was required to show a prima facie case, the trial court dismissed the petition. The lower court held that there is no law empowering committees created by municipal mayors to issue subpoenas and demand that witnesses testify under oath. It also held that to compel Ramos to testify would be to violate his right against self-incrimination. It appears that in a statement given to investigators of the Office of the Mayor, Ramos admitted having misappropriated on several occasions, sums of money given to him by the owner of Casa de Alba for the payment of the latters taxes for 1956-1959 and that this fact had not been discovered earlier because Ramos used to entertain employees in the City Treasurers office at Casa de Alba where Ramos was a bookkeeper as stated above. The trial court held that to compel Ramos

to confirm this statement in the administrative case against certain employees in the Office of the City Treasurer would be to compel him to give testimony that could be used against him in a criminal case for estafa of which the owner of Casa de Alba was the offended party. From that decision, petitioner appealed to this Court. The main issue in this case is the power, if any, of a committee, like the committee of which petitioner is the chairman, to subpoena witnesses to appear before it and to ask for their punishment in case of refusal. 838 838 SUPREME COURT REPORTS ANNOTATED Carmelo vs. Ramos The rule is that Rule 64 (Contempt)1 of the Rules of Court applies only to inferior and superior courts and does not comprehend contempt committed against administrative officials or bodies like the one in this case, unless said contempt is clearly considered and expressly defined as contempt of court, as is done in paragraph 2 of Section 580 of the Revised Administrative Code. (People v. Mendoza; People v. Dizon, 49 O.G. No. 2, 541.) Petitioner invokes Section 580 of the Revised Administrative Code which provides as follows: Powers incidental to taking of testimony.When authority to take testimony or evidence is conferred upon an administrative officer or upon any nonjudicial person, committee, or other body, such authority shall be understood to comprehend the right to administer oaths and summons witnesses and shall include authority to require the production of documents under a subpoena duces tecum or otherwise, subject in all respects to the same restrictions and qualifications as apply in judicial proceedings of a similar character. Saving the provisions of section one hundred and two of this Act, any one who, without lawful excuse, fails to appear ______________ 1 Section 4 of this rule provides in part: Charge; where to be filed.x x x And where a contempt punishable by law has been committed against an administrative officer or any non-judicial person, committee, or other body, the charge may be filed with the Court of First Instance of the

province or city in which the contempt has been committed. This provision of Rule 64 embodies the historical notion that the contempt power is necessarily judicial. This notion dates as far back as 1893, when the Supreme Court of the United States, in ICC v. Brimson, 154 U.S. 447, remarked that such body as the Interstate Commerce Commission could not, under our system of government, and consistently with due process of law, be invested with authority to compel obedience to its orders by a judgment of fine or imprisonment. But the Court went on to hold that a judicial proceeding to enforce a subpoena issued by the Commission satisfies the case or controversy requirement of the Constitution, and that judicial enforcement does not violate the principle of separation of powers. Accordingly, since 1893, the Congress of the United States has consistently refused to empower any agency to commit for contempt, customarily providing instead that agencies may apply to appropriate district court for an order enforceable by contempt proceedings. (Davis, The Administrative Power of Investigation. 56 Yale L.J. No. 7, 1111 at 1139-40.) 839 VOL. 6, NOVEMBER 30, 1962 839 Carmelo vs. Ramos upon summons issued under the authority of the preceding paragraph or who, appearing before any individual or body exercising the power therein defined, refuses to make oath, give testimony, or produce documents for inspection, when thereunto lawfully required, shall be subject to discipline as in case of contempt of court and upon application of the individual or body exercising the power in question shall be dealt with by the judge of first instance having jurisdiction of the case in the manner provided by law. One who invokes this provision of the law must first show that he has authority to take testimony or evidence before he can apply to the courts for the punishment of hostile witnesses. (Francia v. Pecson, et al., 87 Phil. 100.) Now, what authority to take testimony does petitioners committee have from which the power to cite witnesses may be implied, pursuant to section 580?

To be sure, there is nothing said in the executive order of the Mayor creating the committee about such a grant of power. All that the order gives to this body is the power to investigate anomalies involving certain city employees. Petitioner contends that the Mayor of Manila has the implied power to investigate city officials and employees appointed by him to the end that the power expressly vested in him to suspend and remove such officials or employees (Sec. 22, Republic Act No. 409) may be justly and fairly exercised. We agree with this proposition and We held so in the case of Pagkanlungan v. De la Fuente, 48 O.G. No. 10, p. 4332. But We do not agree with the petitioner that a delegation of such power to investigate implies also a delegation of the power to take testimony or evidence of witnesses whose appearance may be required by the compulsory process of subpoena. Thus, in denying this power to an investigating body in the Office of the Mayor of Manila, We said in Francia v. Pecson, et al., supra: We do not think the mayor (of Manila) can delegate or confer the powers to administer oaths, to take testimony, and to issue subpoenas. Furthermore, it is doubtful whether the provisions of section 580 of the Administrative Code are applicable to 840 840 SUPREME COURT REPORTS ANNOTATED Carmelo vs. Ramos the City of Manila as these pertain to national bureaus or offices of the government. Citing 50 Am. Jur. 449, petitioner contends that the power of the investigation committee to issue compulsory process to secure the attendance of witnesses undoubtedly exists since only complimentary to the power of the mayor to investigate, suspend and remove city officers and employees, supra, is the recognized rule that where the statute grants a right, it also confers by implication every particular power necessary for the exercise thereof. There is no merit in the argument. In the first place, the authority cited speaks of statutory grant of power to a body. Here, We have seen that whatever power may be claimed by petitioners committee may only be traced to the power of the Mayor to investigate as implied from his power to suspend or remove certain city

employees. There is no statutory grant of power to investigate to petitioners committee. In the second place, even granting that the Mayor has the implied power to require the appearance of witnesses before him, the rule, as noted earlier, is that the Mayor can not delegate this power to a body like the committee of the petitioner. (Francia v. Pecson, et al., supra.) Lastly, 50 Am. Jur. Sec. 428, p. 450 itself admits an exception to the rule invoked by the petitioner. Thus, it is stated that where the liberty and property of persons are sought to be brought within the operation of a power claimed to be impliedly granted by an act because necessary to its due execution, the case must be clearly seen to be within those intended to be reached. Here, no less than the liberty of Armando Ramos is involved in the claim of the committee to the right to cite witnesses. We hold, therefore, that petitioners committee has no power to cite witnesses to appear before it and to ask for their punishment in case of refusal. This conclusion makes it unnecessary for Us to pass upon the other error assigned by petitioner as having been allegedly committed by the trial court. WHEREFORE, the decision of the Court of First In841 VOL. 6, NOVEMBER 30, 1962 841 Rizal Cement Workers Union (FFW) vs. Court of Industrial Relations stance of Manila is hereby affirmed, without pronouncement as to costs. Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon and Makalintal, JJ., concur. Bengzon, C.J., took no part. Decision affirmed. __ [Carmelo vs. Ramos, 6 SCRA 836(1962)]

VOL. 68, NOVEMBER 27, 1975 99 Evangelista vs. Jarencio No. L-29274. November 27, 1975.* SEC. QUIRICO P. EVANGELISTA, in his capacity as Secretary of the Presidential Agency on Reforms and Government Operations, and the PRESIDENTIAL AGENCY ON REFORMS AND GOVERNMENT OPERATIONS (PARGO), petitioner, vs. HON. HILARION U. JARENCIO, as Presiding Judge, Court of First Instance of Manila, Branch XXIII, and FERNANDO MANALASTAS. Assistant City Public Service Officer of Manila, and ALL OTHER CITY OFFICIALS AND EMPLOYEES SIMILARLY SITUATED, respondents. Administrative law; Administrative agency may be authorized to make investigations in proceedings for sole purpose of obtaining information on which future action of a legislative or judicial nature may be taken. An administrative agency may be authorized to make investigations, not only In proceedings of a legislative or judicial nature, but also in proceedings whose sole purpose is to obtain _______________ * EN BANC. 100 100 SUPREME COURT REPORTS ANNOTATED Evangelista vs. Jarencio information upon which future action of a legislative or judicial nature may be taken and may require attendance of witnesses in proceedings of a purely investigatory nature. It may conduct general inquiries into evils calling for correction, and to report findings to appropriate bodies and make recommendations for actions. Same; Subpoena power of Presidential Agency on Reforms and Government Operations (PARGO) created under Executive Order No. 4 is not confined to mere quasi-judicial function of that Agency but may be used to meet the very purpose for its creation, to forestall and erode nefarious activities and anomalies in the civil service.Such subpoena

power operates in extenso to all the functions of the Agency as laid out in the aforequoted sub-paragraphs (b), (e), and (h). It is not bordered by nor is it merely exercisable, as respondents would have it, in quasijudicial or adjudicatory function under sub-paragraph (b). The functions enumerated in all these sub-paragraphs (b), (e), and (h) interlink or intertwine with one another with the principal aim of meeting the very purpose of the creation of the Agency, which is to forestall and erode nefarious activities and anomalies in the civil service. To hold that the subpoena power of the Agency is confined to mere quasi-judicial or adjudicatory function would therefore imperil or inactivate the Agency in its investigatory functions under sub-paragraphs (e) and (h). x x x We see no reason to depart from the established rule that forbids differentiation when the law itself makes none. Same; Administrative agencies may issue administrative subpoenas in the course of investigations whether or not adjudication is involved and whether or not probable cause is shown.Rightly, administrative agencies may enforce subpoenas issued in the course of investigations, whether or not adjudication is involved, and whether or not probable cause is shown and even before the issuance of a complaint. It is not necessary, as in the case of a warrant, that a specific charge or complaint of violation of law be pending or that the order be made pursuant to one. It is enough that the investigation be for a lawfully authorized purpose. The purpose of the subpoena is to discover evidence, not to prove a pending charge, but upon which to make one if the discovered evidence so justifies. Its obligation cannot rest on a trial of the value of testimony sought; it is enough that the proposed investigation be for a lawfully authorized purpose, and that the proposed witness be claimed to have information that might shed some helpful light. Same; Administrative agency has power of inquisition; it can investigate merely suspicion that law is being violated or because it wants assurance that it is not.The administrative agency has the power of inquisition which is not dependent upon a case or 101 VOL. 68, NOVEMBER 27, 1975 101 Evangelista vs. Jarencio

controversy in order to get evidence, but can investigate merely on suspicion that the law is being violated or even just because it wants assurance that it is not. Same; Requisites for validity of administrative subpoena.In sum, it may be stated that a subpoena meets the requirements for enforcement if the inquiry is (1) within the authority of the agency; (2) the demand is not too indefinite; and (3) the information is reasonably relevant. Same; Constitutional law; While the privilege against self-incrimination extends to administrative investigations, any unnecessary extension thereof in an investigation whose purpose is only to discover facts as a basis of future action would be unwise. Respondent, however, may contest any attempt in the investigation that tends to disregard his privilege against self-incrimination.We are mindful that the privilege against self-incrimination extends in administrative investigations, generally, in scope similar to adversary proceedings, x x x Nevertheless, in the present case, We find that the respondent Fernando Manalastas is not facing any administrative charge. He is merely cited as a witness in connection with the fact-finding investigation of anomalies and irregularities in the City of Manila with the object of submitting the assembled facts to the President of the Philippines or to file the corresponding charges. Since the only purpose of investigation is to discover facts as a basis of future action, any unnecessary extension of the privilege would thus be unwise. Anyway, by all means, respondent may contest any attempt in the investigation that tends to disregard his privilege against self-incrimination. Same; Same; Constitutionality of Executive Orders may not be collaterally impeached.For reasons of public policy, the constitutionality of executive orders, which are commonly said to have the force and effect of statutes, cannot be collaterally impeached. Much more so when the issue was not duly pleaded in the court below x x x The Court will not anticipate a question of constitutional law in advance of the necessity of deciding it. ORIGINAL ACTION in the Supreme Court. Certiorari and prohibition with preliminary injunction. The facts are stated in the opinion of the Court. Solicitor General Antonio P. Barredo, 1st Assistant Solicitor General Esmeraldo Umali and Solicitor Bernardo P. Pardo for petitioners.

Gregorio A. Ejercito and Felix C. Chavez for respondents. 102 102 SUPREME COURT REPORTS ANNOTATED Evangelista vs. Jarencio MARTIN, J.; This is an original action for certiorari and prohibition with preliminary injunction, under Rule 65 of the Rules of Court, seeking to annul and set aside the order of respondent Judge, the Honorable Hilarion J. Jarencio, Presiding Judge of the Court of First Instance of Manila, dated July 1, 1968, in Civil Case No. 73305, entitled Fernando Manalastas vs. Sec. Ramon D. Bagatsing, etc., which reads as follows: IT IS ORDERED that, upon the filing of a bond in the amount of P5,000.00, let the writ of preliminary injunction prayed for by the petitioner [private respondent] be issued restraining the respondents [petitioners], their agents, representatives, attorneys and/or other persons acting in their behalf from further issuing subpoenas in connection with the fact-finding investigations to the petitioner [private respondent] and from instituting contempt proceedings against the petitioner [private respondent] under Section 580 of the Revised Administrative Code. (Stress supplied). Pursuant to his special powers and duties under Section 64 of the Revised Administrative Code,1 the President of the Philippines created the Presidential Agency on Reforms and Government Operations (PARGO) under Executive Order No. 4 of January 7, 1966.2 Purposedly, he charged the Agency with the following functions and responsibilities:3 b. To investigate all activities involving or affecting immoral practices, graft and corruptions, smuggling (physical or technical), lawlessness, subversion, and all other activities which are prejudicial to the government and the public interests, and to submit proper recommendations to the President of the Philippines. e. To investigate cases of graft and corruption and violations of Republic Acts Nos. 1379 and 3019, and gather necessary evidence to establish prima facie, acts of graft and acquisition of unlawfully _______________

1 Sec. 64 (c). To order, when in his opinion the good of the public service so requires, an investigation of any action or the conduct of any person in the Government service, and in connection therewith to designate the official, committee, or person by whom such investigation shall be conducted. 2 Executive Order No. 208, dated February 9, 1967, converted the Agency into a division under the Executive Office and is now known as Complaints and Investigating Office. 3 Executive Order No. 88, dated September 25, 1967, amending in part Executive Order No. 4. 103 VOL. 68, NOVEMBER 27, 1975 103 Evangelista vs. Jarencio amassed wealth* * *. h. To receive and evaluate, and to conduct fact-finding investigations of sworn complaints against the acts, conduct or behavior of any public official or employee and to file and prosecute the proper charges with the appropriate agency. For a realistic performance of these functions, the President vested in the Agency all the powers of an investigating committee under Sections 71 and 580 of the Revised Administrative Code, including the power to summon witnesses by subpoena or subpoena duces tecum, administer oaths, take testimony or evidence relevant to the investigation.4 Whereupon, on June 7, 1968, petitioner Quirico Evangelista, as Undersecretary of the Agency, issued to respondent Fernando Manalastas, then Acting City Public Service Officer of Manila, a subpoena ad testiftcandum commanding him to be and appear as witness at the Office of the PRESIDENTIAL AGENCY ON REFORMS AND GOVERNMENT OPERATIONS * * * then and there to declare and testify in a certain investigation pending therein. Instead of obeying the subpoena, respondent Fernando Manalastas filed on June 25, 1968 with the Court of First Instance of Manila an Amended Petition for prohibition, certiorari and/or injunction with preliminary injunction and/or restraining order docketed as Civil Case No. 73305 and assailed its legality. On July 1, 1968, respondent Judge issued the aforementioned Order:

IT IS ORDERED that, upon the filing of a bond in the amount of P5,000.00, let the writ of preliminary injunction prayed for by the petitioner [private respondent] be issued restraining the respondents [petitioners], their agents, representatives, attorneys and/or other persons acting in their behalf from further issuing subpoenas in connection with the fact-finding investigations to the petitioner [private respondent] and from instituting contempt proceedings against the petitioner [private respondent] under Section 530 of the Revised Administrative Code. (Stress supplied). _______________ 4 Executive Order No. 4, para. (5). The Agency is hereby vested with all the powers of an investigating committee under Sections 71 and 580 of the Revised Administrative Code, including the power to summon witnesses by subpoena duces tecum, administer oaths, take testimony or evidence relevant to the investigation. 104 104 SUPREME COURT REPORTS ANNOTATED Evangelista vs. Jarencio Because of this, petitioners5 elevated the matter direct to Us without a motion for reconsideration first filed on the fundamental submission that the Order is a patent nullity.6 As unfurled, the dominant issue in this case is whether the Agency, acting thru its officials, enjoys the authority to issue subpoenas in its conduct of fact-finding investigations. It has been essayed that the life blood of the administrative process is the flow of fact, the gathering, the organization and the analysis of evidence.7 Investigations are useful for all administrative functions, not only for rule making, adjudication, and licensing, but also for prosecuting, for supervising and directing, for determining general policy, for recommending, legislation, and for purposes no more specific than illuminating obscure areas to find out what if anything should be done.8 An administrative agency may be authorized to make investigations, not only in proceedings of a legislative or judicial nature, but also in proceedings whose sole purpose is to obtain information upon which future action of a legislative or judicial nature may be taken9

and may require the attendance of witnesses in proceedings of a purely investigatory nature. It may conduct general inquiries into evils calling for correction, and to report findings to appropriate bodies and make recommendations for actions.10 We recognize that in the case before Us, petitioner Agency draws its subpoena power from Executive Order No. 4, para. 5 which, in an effectuating mood, empowered it to summon witnesses, administer oaths, and take testimony relevant to the investigation11 with the authority to require the production of documents under a subpoena duces tecum or otherwise, subject in all respects to the same restrictions and qualifications as apply in judicial proceedings of a similar character.12 Such _______________ 5 Resolution of the Court on November 28, 1969 excluded Ramon D. Bagatsing as petitioner in the case. 6 See Matute v. Court of Appeals, 31 Jan. 1969, 26 SCRA 799, 800; Central Bank v. Cloribel, L-26971, 11 April 1972, 44 SCRA 314. 7 Administrative Law, Jaffe and Nathanson, 1961 ed., 491. 8 Pope & Talbot, Inc, v. Smith, 340 P. 2d 964, citing 1 Davis Administrative Law Treatise, 160. 9 See Notes on 27 ALR 2d 1208, 1209, and cases cited. 10 Marchitto v. Waterfront Commission of New York Harbor, 160 A 2d 832. 11 Section 71, Revised Administrative Code. 12 Section 580, Revised Administrative Code. 105 VOL. 68, NOVEMBER 27, 1975 105 Evangelista vs. Jarencio subpoena power operates in extenso to all the functions of the Agency as laid out in the aforequoted sub-paragraphs (b), (e), and (h). It is not bordered by nor is it merely exercisable, as respondents would have it, in quasi-judicial or adjudicatory function under sub-paragraph (b). The functions enumerated in all these sub-paragraphs (b), (e), and (h) interlink or intertwine with one another with the principal aim of meeting the very purpose of the creation of the Agency, which is to

forestall and erode nefarious activities and anomalies in the civil service. To hold that the subpoena power of the Agency is confined to mere quasi-judicial or adjudicatory functions would therefore imperil or inactiviate the Agency in its investigatory functions under subparagraphs (e) and (h). More than that, the enabling authority itself (Executive Order No. 4, para. 5) fixes no distinction when and in what function should the subpoena power be exercised. Similarly, We see no reason to depart from the established rule that forbids differentiation when the law itself makes none. Nor could We impress upon this subpoena power the alleged strictures of a subpoena issued under the Rules of Court13 to abridge its application. The seeming proviso in Section 580 of the Revised Administrative Code that the right to summon witnesses and the authority to require the production of documents under a subpoena duces tecum or otherwise shall be subject in all respects to the same restrictions and qualifications as apply in judicial proceedings of a similar character cannot be validly seized upon to require, in respondents formulation, that, as in a subpoena under the Rules, a specific case must be pending before a court for hearing or trial and that the hearing or trial must be in connection with the exercise of the courts judicial or adjudicatory functions14 before a non-judicial subpoena can be issued by an administrative agency like petitioner Agency. It must be emphasized, however, that an administrative subpoena differs in essence from a judicial subpoena. Clearly, what the Rules speaks of is a judicial subpoena, one procurable from and issuable by a competent court, and not an administrative subpoena. To an extent, therefore, the restrictions and qualifications referred to in Section 580 of the Revised Administrative Code could mean the restraints against _______________ 13 See Sections 1 and 3, Rule 23, Rules of Court. 14 Answer, Respondents, at 43, 45 Case Records. 106 106 SUPREME COURT REPORTS ANNOTATED Evangelista vs. Jarencio

infringement of constitutional rights or when the subpoena is unreasonable or oppressive and when the relevancy of the books, documents or things does not appear.15 Rightly, administrative agencies may enforce subpoenas issued in the course of investigations, whether or not adjudication is involved, and whether or not probable cause is shown16 and even before the issuance of a complaint.17 It is not necessary, as in the case of a warrant, that a specific charge or complaint of violation of law be pending or that the order be made pursuant to one. It is enough that the investigation be for a lawfully authorized purpose.18 The purpose of the subpoena is to discover evidence, not to prove a pending charge, but upon which to make one if the discovered evidence so justifies.19 Its obligation cannot rest on a trial of the value of testimony sought; it is enough that the proposed investigation be for a lawfully authorized purpose, and that the proposed witness be claimed to have information that might shed some helpful light.20 Because judicial power is reluctant if not unable to summon evidence until it is shown to be relevant to issues on litigations it does not follow that an administrative agency charged with seeing that the laws are enforced may not have and exercise powers of original inquiry. The administrative agency has the power of inquisition which is not dependent upon a case or controversy in order to get evidence, but can investigate merely on suspicion that the law is being violated or even just because it wants assurance that it is not. When investigative and accusatory duties are delegated by statute to an administrative body, it, too may take steps to inform itself as to whether there is probable violation of the law.21 In sum, it may be stated that a subpoena meets the requirements for enforcement if the inquiry is (1) within the authority of the agency; (2) the demand is not too indefinite; and (3) the _______________ 15 See Section 4, Rule 23, Rules of Court. 16 1 Davis, Administrative Law Treatise, 171. 17 NLRB v. Anchor Rome Mills, Inc., 197 P. 2d 447 (5th Cir. 1952). 18 Oklahoma Press Pub. Co. v. Walling, 327 US 185 (1946). 19 SEC v. Vacuum Can Co., 157 P. 2d 530, cert den 330 US 820 (1947). 20 See Marchitto, ante.

21 United States v. Morton Salt Co., 338 US 632 (1950), abandoning the Harriman, 211 US 407; (1908) and American Tobacco, 264 US 298; (1924) doctrine against fishing expedition. 107 VOL. 68, NOVEMBER 27, 1975 107 Evangelista vs. Jarencio information is reasonably relevant.22 There is no doubt that the fact-finding investigations being conducted by the Agency upon sworn statements implicating certain public officials of the City Government of Manila in anomalous transactions23 fall within the Agencys sphere of authority and that the information sought to be elicited from respondent Fernando Manalastas, of which he is claimed to be in possession,24 is reasonably relevant to the investigations. We are mindful that the privilege against self-incrimination extends in administrative investigations, generally, in scope similar to adversary proceedings.25 In Cabal v. Kapunan, Jr.,26 the Court ruled that since the administrative charge of unexplained wealth against the respondent therein may result in the forfeiture of the property under the Anti-Graft and Corrupt Practices Act, a proceeding criminal or penal in nature, the complainant cannot call the respondent to the witness stand without encroaching upon his constitutional privilege against self-incrimination. Later, in Pascual, Jr. v. Board of Medical Examiners,27 the same approach was followed in the administrative proceedings against a medical practitioner that could possibly result in the loss of his privilege to practice the medical profession. Nevertheless, in the present case, We find that respondent Fernando Manalastas is not facing any administrative charge.28 He is merely cited as a witness in connection with the fact-finding investigation of anomalies and irregularities in the City Government of Manila with the object of submitting the assembled facts to the President of the Philippines or to file the corresponding charges.29 Since the only purpose of investigation is to discover facts as a basis of future action, any unnecessary extension of the privilege would thus be unwise.30 Anyway, by all means, respondent Fernando Manalastas may contest any attempt in the investigation that _______________

22 Adams v. FTC, 296 F. 2d 861, cert den 369 US 864 (1962). 23 Petition, at 6, Case Records; See Annexes B, B-1, Petition; at 17-24, Case Records. 24 Petition, at 7, Case Records. 25 Rights of Witnesses in Administrative Investigations, 54 Harv. L. Rev. 1214. 26 L-19052, 29 Dec. 1962, 6 SCRA 1064, per Concepcion, J. 27 L-25018, 26 May 1969, 28 SCRA 345, per Fernando, J. 28 Memorandum, Petitioners, at 154, Case Records. 29 Idem; Petition, at 8, Case Records. 30 Rights of Witnesses in Administrative Investigations, ante. 108 108 SUPREME COURT REPORTS ANNOTATED Evangelista vs. Jarencio tends to disregard his privilege against self-incrimination. A question of constitutional dimension is raised by respondents on the inherent power of the President of the Philippines to issue subpoena.31 More tersely stated, respondents would now challenge, in a collateral way, the validity of the basic authority, Executive Order No. 4, as amended in part by Executive Order No. 88. Unfortunately, for reasons of public policy, the constitutionality of executive orders, which are commonly said to have the force and effect of statutes32 cannot be collaterally impeached.33 Much more when the issue was not duly pleaded in the court below as to be acceptable for adjudication now.34 The settled rule is that the Court will not anticipate a question of constitutional law in advance of the necessity of deciding it.35 Nothing then appears conclusive than that the disputed subpoena issued by petitioner Quirico Evangelista to respondent Fernando Manalastas is well within the legal competence of the Agency to issue. WHEREFORE, the aforequoted order of respondent Judge, dated July 1, 1968, is hereby set aside and declared of no force and effect. Without pronouncement as to costs. SO ORDERED. Castro, Antonio, Esguerra, Muoz Palma and Aquino, JJ., concur. Makalintal, CJ., in the result. Fernando, J, concurs and adds a brief separate opinion.

Teehankee, J, Dissents in a separate opinion. Barredo, Makasiar, and Concepcion, Jr., JJ, took no part. FERNANDO, J., Concurring: The opinion of the Court, ably penned by Justice Martin, is both learned and comprehensive. It reflects the current state of doctrinal pronouncements in American Administrative Law, _______________ 31 Memorandum, Respondents, at 160, 161, Case Records. 32 US v. Borja, 191 F, Supp 563, 566; Farkas vs. Texas Instrument, Inc., 375 F. 2d 629, 632, dert den 389 US 977. 33 San Miguel Brewery, Inc. vs. Magno, L-21879, 29 Sept. 1967, 21 SCRA 297. 34 Idem; also 2 Modern Constitutional Law, Antieau, 1969 ed., 648. 35 Petite vs. United States, 361 US 529 (1960). 109 VOL. 68, NOVEMBER 27, 1975 109 Evangelista vs. Jarencio which up to now possesses worth in this jurisdiction. It is in accordance with the views expressed in two authoritative American treatises, that of Davis1 and that of Jaffe.2 The compact but highly useful text of Parker yields the same conclusion.3 A similar approach may be discerned in the casebooks of Katz,4 and McFarland and Vanderbelt.5 A concurrence is thus called for. That for me does not conclude matters though. The constitutional rights of a person who may be involved in such administrative investigation, call for respect. A recognition of the expanded reach of the administrative process in order to assure that the objectives of a regulatory statute be attained cannot obscure the protection that the Constitution affords a person who may find himself in the position of a respondent. It is worthwhile to my mind that there be a reference, even if far from detailed, to such an aspect. Hence this sep. rate opinion. 1. The right to be protected against unreasonable search and seizure should not fall by the wayside.6 The broad sweep of the administrative power of investigation cannot, consistently with the Constitution, go so

far as to render it meaningless. It is with such a reading in mind that I view the pronouncement in United States v. Morton Salt Co.,7 on which reliance is placed in the opinion of Justice Martin. The doctrine formulated in such American case by Justice Jackson reads thus: Of course a _______________ 1 Cf. 1 Davis, Administrative Law Treatise, 159-232 (1958). 2 Cf. Jaffe, Judicial Control of Administrative Action, 115-119 (1965). 3 Cf. Parker, Administrative Law, 135-143 (1952). 4 Cf. Katz, Cases and Materials in Administrative Law, 175-221 (1947). 5 Cf. McFarland and Vanderbilt, Administrative Law: Cases and Materials, 83-86 (1952). 6 According to Article IV, Section 3 of the present Constitution: The right of the people to be secure in their persons, houses, papers and effects against unreasonable searches and seizures of whatever nature and for any purpose shall not be violated, and no search warrant or warrant of arrest shall issue except upon probable cause to be determined by the judge, or such other responsible officer as may be authorized by law, after examination under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be searched, and the persons or things to be seized. 7 338 US 682 (1950). 110 110 SUPREME COURT REPORTS ANNOTATED Evangelista vs. Jarencio governmental investigation into corporate matters may be of such a sweeping nature and so unrelated to the matter properly under inquiry as to exceed the investigatory power. Federal Trade Comm. v. American Tobacco Co., * * *. But it is sufficient if the inquiry is within the authority of the agency, the demand is not too indefinite and the information sought is reasonably relevant. The gist of the protection is in the requirement, expressed in terms, that the disclosure sought shall not be unreasonable. 8 It has been given approval in an impressive number of subsequent adjudications.9 It suffices, however, to call attention to the

words of Justice Jackson in the two paragraphs preceding the excerpts cited to remove any doubt as to its lending itself to the construction that an inroad into the right of search and seizure is now permissible: The Commissions order is criticized upon grounds that the order transgresses the Fourth Amendments proscription of unreasonable searches and seizures and the Fifth Amendments due process of law clause. It is unnecessary here to examine the question of whether a corporation is entitled to the protection of the Fourth Amendment. * * * Although the right to be let alonethe most comprehensive of rights and the right most valued by civilized men, * * * is not confined literally to searches and seizures as such, but extends as well to the orderly taking under compulsion of process, * * * neither incorporated nor unincorporated associations can plead an unqualified right to conduct their affairs in secret. * * * While they may and _______________ 8 Ibid, 652-653. 9 Cf. F. T. C. v. Browning, 435 F2d 96 (1970); Local No. 104, Sheet Metal Workers International Association v. Equal Employment Opportunity Commission, 439 F2d 237 (1971); United States v. Newman, 441 F2d 165 (1971); Securities and Exchange Commission v. First Security Bank of Utah, 447 F2d 166 (1971); Modine Manufacturing Company v. National Labor Relations, 453 F2d 292 (1971); United States v. Litton Industries, Inc., 462 F2d 14 (1972); Burlington Northern Inc. v. Interstate Commerce Commission, 462 F2d 280 (1972); Wilmoth v. Hansel, 25 A 86 (1892); Flanagan v. New York, L.E. & W.R. Co., 32 S. 84 (1895); Mobil Oil Corporation v. Durkin, 278 A2d 477 (1971); Fred Depkin & Son, Inc. v. Director, New Jersey Division of Taxation, 276 A2d 161 (1971); Appeal of Ohio Radio, Inc., 266 NE 2d 575 (1970); Mckay v. Stewart & Cecire v. Stewart, 272 NE 2d 887 (1971); McKay v. Cecire, 324 S2d 302 (1971); Koch v. Kosydar, 290 NE 2d 847 (1972); State Real Estate Commission v. Roberts, 271 A2d 246 (1970). 111 VOL. 68, NOVEMBER 27, 1975 111 Evangelista vs. Jarencio

should have protection from unlawful demands made in the name of public investigation, * * * corporations can claim no equality with individuals in the enjoyment of a right to privacy. * * * They are endowed with public attributes. They have a collective impact upon society, from which they derive the privilege of acting as artificial entities. The Federal Government allows them the privilege of engaging in interstate commerce. Favors from government often carry with them an enhanced measure of regulation. * * * Even if one were to regard the request for information in this case as caused by nothing more than official curiosity, nevertheless law-enforcing agencies have a legitimate right to satisfy themselves that corporate behavior is consistent with the law and the public interest.10 Thus is rendered clear that the landmark Boyd decision which warned against the use of the subpoena power to trench upon this guarantee still speaks authoritatively. This Court has spoken to the same effect, Boyd having been cited in a number of cases.11 I would, therefore, read the opinion of my brethren as not departing from but precisely adhering to its command. Whatever relaxation of its compelling force may be allowable in case of corporations should not apply where an individual is concerned. That should reassure respondent Manalastas that if he could demonstrate a failure to abide by the constitutional mandate on search and seizure, he is not without a remedy. 2. Nor can I fully reconcile myself to the implications lurking in this observation in the opinion of the Court: Since the only purpose of investigation is to discover facts as a basis of future action, any unnecessary extension of the privilege would thus be unwise.12 The right not to incriminate oneself13 is _______________ 10 338 US 632, 651-652 (1950). 11 Cf. U.S. v. Navarro, 3 Phil. 143 (1904); Ocampo v. Jenkins, 14 Phil. 681 (1909); Worcester v. Ocampo, 22 Phil. 42 (1912); U.S. v. Ipil, 27 Phil. 530 (1914); Uy Kheytin v. Villareal, 42 Phil. 886 (1920); People v. Carlos 47 Phil. 626 (1925); Alvarez v. Court of First Instance, 64 Phil. 33 (1937); Rodriguez v. Villamiel, 65 Phil. 230 (1937); Yee Sue Kay v. Almeda, 70 Phil. 141 (1940); Moncado v. Peoples Court, 80 Phil. 1 (1948). 12 At 9.

13 According to Article IV, Section 20 of the present Constitution: No person shall be compelled to be a witness against himself. Any person under investigation for the commission of an offense shall have the right to remain silent and to counsel, and to be informed of 112 112 SUPREME COURT REPORTS ANNOTATED Evangelista vs. Jarencio equally deserving of the utmost deference and respect. What is more, the present Constitution by the adoption of the Miranda doctrine has vitalized it even further.14 There is, happily, the last sentence of such paragraph: Anyway, by all means, respondent Fernando Manalastas may contest any attempt in the investigation that tends to disregard his privilege against self-incrimination.15 When read in connection with the earlier reference to the fact that the respondent is called as a witness not as the party proceeded against, it cannot be said, in the light of the ruling in Planas v. Gil,16 that it offends against this constitutional guarantee. As of now then, with the question of any modification of the Planas doctrine not being properly before us, I can yield my concurrence. Candor compels the statement, however, that for me a reexamination of such a pronouncement is desirable. A distinction between a witness and a respondent may be too tenuous if the realities of the situation be fully considered. I am bothered by the thought that the force of the Cabal17 and the Pascual, Jr. decisions18 may be eroded if the prospective respondent is first called as a witness and is thus compelled to testify, For the present, it may suffice if I express my misgivings. At any rate, concurrence is not ruled out in view of the aforementioned caveat in the able opinion of Justice Martin. SEPARATE OPINION TEEHANKEE, J., dissenting: I am constrained to dissent from the main opinion of Mr. Justice Martin which grants the petition and sets aside respondent courts order and writ of preliminary injunction of July 1, 1968 and would therefore require respondent Fernando _______________

such right. No force, violence, threat, intimidation, or any other means which vitiates the free will shall be used against him. Any confession obtained in violation of this section shall be inadmissible in evidence. 14 Cf. Magtoto v. Manguera, L-37021, March 3, 1975, 63 SCRA 4. 15 At 9. 16 67 Phil. 62 (1939). 17 Cabal v. Kapunan, Jr., L-19052, December 29, 1962, 6 SCRA 1064. 18 Pascual, Jr. v. Board of Medical Examiners, L-25018, May 26, 1969, 28 SCRA 345. 113 VOL. 68, NOVEMBER 27, 1975 113 Evangelista vs. Jarencio Manalastas as assistant city public service officer of Manila (and all other city officials similarly situated) to comply with the PARGO subpoena to testify to matters relevant to the investigation of anomalies and sworn statements involving or implicating certain City officials or other public officers.1 While the subpoena commands respondent Manalastas to appear as witness before the PARGO,2 on the basis whereof the main opinion finds that said respondent is not facing any administrative charge and that he is merely cited as witness in connection with the fact-finding investigation of anomalies and irregularities in the City Government of Manila with the object of submitting the assembled facts to the President of the Philippines or to file the corresponding charges,3 it is a fact shown by the very petition at bar itself and its Annexes B and B-1 that respondent Manalastas is in fact and for all intents and purposes subpoenaed as a respondent or one directly implicated with alleged bribery and graft in the said sworn statements that concededly as per the petition itself initiated the PARGOs alleged fact-finding investigation.4 Thus Annex B of the petition which is a sworn statement of one Edilberto Arguelles, investigated by the PARGO on the overpricing of eight steam cleaners sold through him as commission agent to the City of Manila, sets forth the detailed allegations of said declarant that respondent Manalastas and a number of other city officials named and unnamed got the lions share of the overpricing. Annex B-1 of the petition is the sworn

statement of one Carlos Montaez with reference to some overpriced equipment sold by him to the City of Manila wherein he likewise narrated in detail the modus operandi and specifically named respondent Manalastas and five other officials to whom he allegedly gave: due monetary consideration. All claims of PARGO to the contrary notwithstanding, the very petition and said annexed sworn statements (which were not shown to respondent judge in spite of his expressly asking for them during the course of the hearing5) show that _______________ 1 Petition, p. 11, prayer (b). 2 Now known as Complaints and Investigating Office (CIO) under Ex. Order No. 208, dated Feb. 9, 1987. 3 Main opinion at p. 9 thereof, citing petitioners Memorandum at p. 154, Rollo, emphasis supplied. 4 Petition, p. 3, par. 5. 5 Answer, Rollo, p. 40. 114 114 SUPREME COURT REPORTS ANNOTATED Evangelista vs. Jarencio respondent Manalastas (and others similarly situated) are indeed not merely witnesses but in reality respondents (subject to administrative and criminal charges.) Respondent has therefore correctly invoked Cabal vs. Kapunan,6 wherein the Court through then Chief Justice Roberto Concepcion held that therein petitioner rightfully refused to take the witness stand as against the order of the Presidential Committee investigating the complaint against him for alleged unexplained wealth (since such proceedings were in substance and effect a criminal one and his position was virtually that of an accused on trial and he therefore had the right to remain silent and invoke the privilege against self-incrimination in support of a blanket refusal to answer any and all questions) and ordered the dismissal of the criminal contempt charge against him. Pascual, Jr. vs. Bd. of Examiners7 is equally in point, wherein the Court sustained the lower courts writ of injunction against the respondent

boards order compelling therein petitioner to take the witness stand in a malpractice case (wherein he was respondent) in view of the penal nature of the proceedings and the right of the accused to refuse not only to answer incriminatory questions, but also to take the witness stand.8 The Court therein stressed that the constitutional guarantee, along with other rights granted an accused, stands for a belief that while crime should not go unpunished and that the truth must be revealed, such desirable objectives should not be accomplished according to means or methods offensive to the high sense of respect accorded the human personality. More and more in line with the democratic creed, the deference accorded an individual even those suspected of the most heinous crimes is given due weight. To quote from Chief Justice Warren, the constitutional foundation underlying the privilege is the respect a government x x x must accord to the dignity and integrity of its citizens. and that while earlier decisions stressed the principle of humanity on which this right is predicated, precluding as it does all resort to force or compulsion, whether physical or mental, current judicial opinion places equal emphasis on its identification with the right to privacy. Thus according to Justice Douglas: The Fifth Amendment in its Self_______________ 6 6 SCRA 1064. 7 28 SCRA 344, per Fernando, J.; emphasis supplied. 8 Idem, at p. 348; citing Chavez vs. CA, 24 SCRA 663. 115 VOL. 68, NOVEMBER 27, 1975 115 Evangelista vs. Jarencio Incrimination clause enables the citizen to create a zone of privacy which government may not force to surrender to his detriment. That petitioners investigation and subpoena against respondent Manalastas were in substance and effect criminal in nature against him as a respondent (and not merely as witness) as indicated above, is borne out by the fact of record in Sugay vs. Pamaran9 (of which the Court can well take judicial notice) that on July 22, 1971 respondent Manalastas as well as Carlos Montaez the trader (affiant in Annex B-1, petition, supra,10) and a number of other city officials were charged by the city

fiscal in the Circuit Criminal Court of Manila for violations of Republic Act 3019 (Anti-Graft Law) in connection with the alleged gross overpricing of the same equipment (steam cleaners and air compressor) purchased for the City. The main opinions justification for upholding the subpoena, viz, that since the only purpose of investigation is to discover facts as a basis of future action, any unnecessary extension of the privilege (against selfincrimination) would thus be unnecessary11 thus appears to be flawed in fact and in law: respondent was in fact being investigated as respondent-suspect and without submitting to the investigation was actually criminally charged in court; as a pure matter of legal principle, the 1973 Constitution has recognized the necessity of strengthening (and extending) the privilege against self-incrimination by expressly providing as a constitutional mandate in the Bill of Rights that Any person under investigation for the commission of an offense shall have the right to remain silent and to counsel, and to be informed of such right (Article IV, section 20) and outlawing the use of any confession obtained in violation of said section by declaring its inadmissibility in evidence. Respondent Manalastas was therefore justified in invoking the privilege against self-incrimination and in securing the respondent courts injunction against enforcement of petitioners subpoena. Respondent was unquestionably a party respondent who under the doctrine of Cabal and Pascual, supra, had the right to remain silent and invoke the privilege against self-incrimination and refuse to take the witness stand. This _______________ 9 L-33877-79, 41 SCRA 260 (Sept. 30, 1971). 10 At page 2 hereof. 11 At page 9. 116 116 SUPREME COURT REPORTS ANNOTATED Evangelista vs. Jarencio legal and constitutional right may not be defeated by the transparent expedient of citing respondent as a supposed witness in what was avowed to be a general fact-finding investigation but obviously was a

fishing expedition to ensnare respondent as a prime suspect, as borne out by the sworn statements withheld from respondent court and now annexed to the very petition at bar and petitioners contention that In effect, the injunction issued by the lower court is one to restrain criminal prosecutions. This contention has of course been proven baseless by the events already cited above that such criminal prosecutions were in fact filed in court against respondent and others without the need of petitioners fact-finding investigation and subpoenas. The thrust of all this is that the State with its overwhelming and vast powers and resources can and must ferret out and investigate wrongdoing, graft and corruption and at the same time respect the constitutional guarantees of the individuals right to privacy, silence and due process and against self-incrimination and unreasonable search and seizure. This means that leads and charges must be investigated and followed up through the assistance of the corresponding police and law enforcement agencies as provided in the petitioners executive charter12 and the evidence secured by proper applications for search warrants, and as conceded in the petition itself, after the corresponding report to the President to file the corresponding charges against the persons who may appear responsible or merely refer them to other appropriate offices such as the Fiscals office, like what was done in other cases.13 There appears to be validity in respondents contention that the subpoena power granted petitioner in its executive charter does not apply to general fact-finding investigations conducted by it.14 I find no need, however, of going further into this issue, _______________ 12 Ex. Order No. 88. dated Sept. 25, 1967, amending Ex. Order No. 8 which created petitioner as the executive instrumentality in the Office of the President thus provides that petitioner shall receive and evaluate, and (to) conduct fact-finding investigations of sworn complaints against the acts, conduct or behavior of any public official or employee and (to) file and prosecute the proper charges with the appropriate agency. Petition, Annexes A and A-1. (Emphasis supplied). 13 Petition, at page 8. 14 Vide Harriman vs. Interstate Commerce Commission, 211 U.S. 407 and Federal Trade Commission vs. American Tobacco Co., 264 117

VOL. 68, NOVEMBER 27, 1975 117 Evangelista vs. Jarencio since this dissent is based directly on the fundamental tenet that respondent Manalastas was unquestionably being investigated by petitioner as respondent and a prime suspect (and not as a mere witness) and accordingly, under settled doctrine, he had every right to remain silent and to invoke his right against self-incrimination and to refuse to take the witness stand. I therefore vote for upholding respondent courts injunction against enforcement of petitioners subpoena. Order set aside. Notes.Under Executive Order No. 370, series of 1941, administrative proceedings may be commenced against a government officer or employee by the head or chief of the Bureau or office concerned motu proprio, in which case, whatever written charge is filed by him need not be sworn to, for the simple reason that said head or chief of the bureau or office is deemed to be acting in his official capacity and under his oath of office. It is only when the charge or complaint is filed by another person that the aforesaid executive order requires it to be under oath, for the obvious purpose of protecting government employees against malicious complaints filed only for the purpose of harassing them; and even in such case, when the complaint is not or cannot be sworn to by the complainant, the head or chief of the bureau or office may, in his discretion, take action thereon if the public interest or the special circumstances of the case warrant. (Maloga vs. Gella, 15 SCRA 370; Pastoriza vs. Division Superintendent of Schools, L-14233, Sept. 23, 1959; Bautista vs. Negado, L-14319, May 26, 1960). The authority of the head or chief of a bureau or office to investigate subordinate officers and employees can be delegated and such delegation is not contrary to due process of law (Esperanza vs. Castillo, L21810, April 30, 1966; Hemando vs. _______________ U.S. 298, where Justice Holmes in the first ease ruled out a federal commissions application to require witnesses to testify before it except in connection with specific complaints for violation of the Interstate

Commerce Act or with its investigation of specific subjects that might have been the object of complaint. In the second case, Justice Holmes likewise ruled against a federal commissions fishing expeditions into private papers on the mere possibility that they may disclose evidence of crime in view of the Constitutional provision against unreasonable searches and seizures. 118 118 SUPREME COURT REPORTS ANNOTATED Evangelista vs. Jarencio Francisco, 17 SCRA 83). Pursuant to this rule, it was held that the action of the Superintendent of the Lighthouse Service in authorizing the Provincial Auditor of Ilocos Norte to investigate an employee who belongs to the former agency was proper. (Hemando vs. Francisco, 17 SCRA 83). The Judge of a sala of the court of first instance to which an employee is assigned is, in legal contemplation, the Head thereof and legally authorized to file an administrative charge against said employee (Garcia vs. Teehankee, 27 SCRA 1143). If the party duly summoned or duly notified to appear at an administrative investigation refuses to appear, he may be declared in default and the investigation may proceed without his presence. (Awyong Hian vs. Court of Tax Appeals, 59 SCRA 110). o0o VOL. 37, JANUARY 30, 1971 303 Catura vs. Court of Industrial Relations No. L-27392. January 30, 1971. PABLO CATURA and Luz SALVADOR, petitioners, vs. THE COURT OF INDUSTRIAL RELATIONS and CELESTINO TABANIAG, et al., respondents. Court of Industrial Relations; Power of investigation. The controlling provisions of law concerning the power of investigation of the Court of Industrial Relations to assure compliance with internal labor organization procedures with the corresponding authority to investigate to substantiate alleged violations may be found in paragraphs (b), (h), and (1) of Section 17 of the Industrial Peace Act. To paraphrase Justice

Laurel, the power to investigate, to be conscientious and rational at the very least, requires an inquiry into existing facts and conditions. The documents required to be produced constitutes evidence of the most solid character as to whether or not there was a failure to comply with the mandates of the law. It is 304 304 SUPREME COURT REPORTS ANNOTATED Catura vs. Court of Industrial Relations not for this Court to whittle down the authority conferred on administrative agencies to assure the effective administration of a statute, in this case intended to protect the rights of union members against its officers. The matter was properly within its cognizance and the means necessary to give it force and effectiveness should be deemed implied unless the power sought to be exercised is so arbitrary as to trench upon private rights of petitioners entitled to priority. Same; Case calling for the exercise of the power of investigation.The complaint before respondent court against petitioners as President and Treasurer of the union, specifically recited an unauthorized disbursement of union funds as well as the failure to make a full and detailed report of financial transactions of the union and to make the book of accounts and other records of its financial activities open to inspection by the members. Clearly, the matter was deemed serious enough by the prosecutor of respondent Court to call for the exercise of the statutory power of investigation to substantiate the alleged violation so as to assure that the rights and conditions of membership in a labor organization as specifically set forth in Section 17 be respected. All that the challenged order did was to require petitioners, as President and Treasurer of the labor organization, to deliver and deposit with respondent Court all of its book of accounts, bank accounts, pass books, union funds, receipts, vouchers and other documents related to its finances at the hearing of the petition before it on January 3, 1967. On its face, it cannot be said that such a requirement is beyond the statutory power conferred. If if were otherwise, the specific provisions of law allegedly violated may not be effectively complied with. The authority to investigate might be rendered futile if respondent Court could be held as having acted contrary to law.

Labor organization; Books of accounts open to inspection. The validity of the order in question cannot be impugned by the allegation that there was a denial of procedural due process. If the books and records sought to be delivered and deposited in court for examination were the private property of petitioners, perhaps the allegation of the absence of due process would not be entirely lacking in plausibility. Such is not the case however. The pertinent section of the Industrial Peace Act makes clear that such books of accounts and other records of the financial activities are open to inspection by any member of a labor organization. For the court to require their submission at the hearing of the petition is beyond question, and no useful purpose would be served by first hearing petitioners before an order to that effect can be issued. 305 VOL. 37, JANUARY 30, 1971 305 Catura vs. Court of Industrial Relations Remedial law; Procedural due process; Hearing on a motion for reconsideration meets requirement of due process.As far back as 1935, it has already been a settled doctrine that a plea of denial of procedural due process does not lie where a defect consisting of an absence of notice of hearing was thereafter cured by the alleged aggrieved party having had the opportunity to be heard on a motion for reconsideration. What the law prohibits is not the absence of previous notice, but the absolute absence thereof and lack of opportunity to be heard. There is then no occasion to impute deprivation of property without due process where the adverse party was heard on a motion for reconsideration constituting as it does sufficient opportunity for him to inform the Tribunal concerned of his side of the controversy. x x x what due process contemplates is freedom from arbitrariness and what it requires is fairness or justice, the substance rather than the form being paramount, the conclusion being that the hearing on a motion for reconsideration meets the strict requirement of due process. PETITION for review of a resolution of the Court of Industrial Relations. The facts are stated in the opinion of the Court. Joselito J. de la Rosa for petitioners. Ernesto Estrella for respondents. FERNANDO, J.:

It is a novel question that presents itself before this Court in this petition for the review of a resolution of respondent Court of Industrial Relations. Specifically, it is whether respondent Court, in the exercise of its power of investigation to assure compliance with the internal labor organization procedures under Section 17 of the Industrial Peace Act,1 can require a labor organizations books of ac_______________ 1 The first paragraph of Section 17, Republic Act No. 875, the Industrial Peace Act, reads as follows: It is hereby declared to be the public policy of the Philippines to encourage the following internal labor organization procedures. A minimum of ten per cent of the makers of & labor organization may report an alleged violation of these procedures in their labor organization to the Court. If the Court finds, upon investigation, evidence to substantiate the alleged violation and that efforts to correct the alleged violation through the procedure provided by the labor organizations constitution or by-laws have been 306 306 SUPREME COURT REPORTS ANNOTATED Catura vs. Court of Industrial Relations counts, bank accounts, pass books, union funds, receipts, vouchers and other documents related to *its+ finances be delivered and deposited with it at the hearing to conduct such investigation in accordance with a complaint duly filed without the officials of such labor organization, therein named as respondents and petitioners before us, being heard prior to the issuance of such order. The respondent Court, first acting through Associate Judge Joaquin M. Salvador and thereafter en banc, upheld its power to do so. The challenge to such competence sought to be fortified by the allegation of the absence of procedural due process was rejected. After a careful study of the matter, we cannot say that thereby respondent Court was in error. We have no reason to reverse. As set forth in the brief for the petitioners, Pablo Catura and Luz Salvador, the President and Treasurer, respectively, of the Philippine Virginia Tobacco Administration Employees Association, a legitimate labor organization duly registered, there was, on December 27, 1966, a

complaint against them under Section 17 filed by the prosecution division of respondent Court, the principal complainants being now respondent Celestino Tabaniag as well as other employees constituting more than ten percent of the entire membership of such labor organization. In the complaint, it was charged that during the tenure of office of petitioners before us as such President and Treasurer, they were responsible for unauthorized disbursement of union funds with complainants on various occasions during the latter part of 1966 demanding from them a full and detailed report of all financial transactions of the union and to make the book of accounts and other records of the financial activities of the union open to inspection by the members, only to be met with a refusal on their _______________ exhausted, the Court shall dispose of the complaint as in unfair labor practice cases. The exclusive competence of respondent Court of Industrial Relations under this provision of law was sustained in the following cases: Tolentino v. Angeles, 99 Phil. 309 (1956): Kapisanan ng mga Manggagawa v. Bugay, 101 Phil. 18 (1957); Philippine Land-Sea Labor Union (PLASLU) v. Ortiz, 103 Phil. 409 (1958); Philippine Association of Free Labor Unions (PAFLU) v. Padilla, 106 Phil. 591 (1959). 307 VOL. 37, JANUARY 30, 1971 307 Catura vs. Court of Industrial Relations part to comply. It was further asserted that the executive board of such labor organization passed a resolution calling for a general membership meeting so that petitioners could be confronted about the status of union funds, but then, Pablo Catura, as President, cancelled such meeting. There was thereafter a general membership resolution reiterating previous demands for a full and detailed report of all financial transactions of the union, but again there was no response, thus compelling the members to refer the matter to the Department of Labor which duly issued subpoenas for the presentation of such book of accounts to petitioners without any success. After setting forth that complainants had exhausted all remedies provided in the unions constitution and by-laws, which were all unavailing, the complaint

sought, after due hearing and judgment, to declare present petitioners, as respondents, guilty of unfair labor practice under the above provision of the Industrial Peace Act, for them to cease and desist from further committing such unfair labor practice complained of, and to render a full and detailed report of all financial transactions of the union as well as to make the book of accounts and other records of these financial activities open to inspection by the members.2 Thereafter, on December 28, 1966, respondent Celestino Tabaniag and the other members, as petitioners in the above complaint before respondent Court, sought an injunction to prevent now petitioners Pablo Catura who, it turned out, was again elected as President in an election on November 15, 1966, from taking his oath of office in view of his alleged persistence in the abuse of his authority in the disbursement of union funds as well as his refusal to make a full and detailed report of all financial transactions of the union.3 Then came the order of December 29, 1966, by Associate Judge Joaquin M. Salvador which, instead of granting the injunction sought, limited itself to requiring and directing personally the respondents Pablo Catura and Luz Salvador, president and treasurer, respectively, of the Phil_______________ 2 Complaint, Annex A, Brief for the Petitioners, pp. 11-15. 3 Petition, Annex B, Ibid., pp. 16-21. 308 308 SUPREME COURT REPORTS ANNOTATED Catura vs. Court of Industrial Relations ippine Virginia Tobacco Administration Employees Association, to deliver and deposit to this Court all the said Associations book of accounts, bank accounts, pass books, union funds, receipts, vouchers and other documents related to the finances of the said labor union at the hearing of this petition on January 3, 1967 at 9:00 oclock in the morning. Said respondents are hereby required to comply strictly with this Order.4 There was a motion for reconsideration on January 2, 1967 by now petitioners Pablo Catura and Luz Salvador on the ground that they were not heard before such order was issued, which moreover in their opinion was beyond the power of respondent Court. With Associate

Judge Ansberto P. Paredes dissenting, the order was sustained in a resolution by the Court en banc on February 28, 1967. Hence the present petition filed on April 3, 1967. The petition was given due course by this Court in a resolution of April 13, 1967 with a preliminary injunction issued upon petitioners posting a bond of P2,000.00. Respondents did not take the trouble of filing an answer within the period expired on June 17, 1967 and petitioners were required to submit their brief within thirty days under this Courts resolution of July 14, 1967. Such a brief was duly filed on September 19 of that year. There was no brief for respondents. The case was thus deemed submitted for decision on October 4, 1968. In the light of the interpretation to be accorded the applicable legal provisions and after a careful consideration of the contention that such a power to issue the challenged order cannot be deemed as possessed by respondent Court which moreover did not accord petitioners procedural due process, we have reached the conclusion, as set forth at the opening of this opinion, that petitioners cannot prevail. The order as issued first by Associate Judge Joaquin M. Salvador and thereafter by respondent Court en banc must be sustained. 1. The controlling provisions of law to the specific situation before this Court concerning the power of invests_______________ 4 Order Annex C, Ibid., p. 23. 309 VOL. 37, JANUARY 30, 1971 309 Catura vs. Court of Industrial Relations gation of respondent Court to assure compliance with internal labor organization procedures with the corresponding authority to investigate to substantiate alleged violations may be found in paragraphs (b), (h), and (l) of the aforecited Section 17 of the Industrial Peace Act. Thus: The members shall be entitled to full and detailed reports from their officers and representatives of all financial transactions as provided in the constitution and by-laws of the organization.5* * * The funds of the organization shall not be applied for any purpose or object other than those expressly stated in its constitution or by-laws or those

expressly authorized by a resolution of the majority of the member.6* * * The books of accounts and other records of the financial activities of a legitimate labor organization shall be open to inspection by any officer or member thereof.7 To repeat, the complaint before respondent Court against petitioners as President and Treasurer of the union, specifically recited an unauthorized disbursement of union funds as well as the failure to make a full and detailed report of financial transactions of the union and to make the book of accounts and other records of its financial activities open to inspection by the members. Clearly, the matter was deemed serious enough by the prosecutor of respondent Court to call for the exercise of the statutory power of investigation to substantiate the alleged violation so as to assure that the rights and conditions of membership in a labor organization as specifically set forth in Section 17 be respected. All that the challenged order did was to require petitioners, as President and Treasurer of the labor organization, to deliver and deposit with respondent Court all of its book of accounts, bank accounts, pass books, union funds, receipts, vouchers and other documents related to its finances at the hearing of the petition before it on January 3, 1967. On its face, it cannot be said that such a requirement is beyond the statutory power conferred. If it were other_______________ 5 Paragraph (b). 6 Paragraph (h). 7 Paragraph (l). 310 310 SUPREME COURT REPORTS ANNOTATED Catura vs. Court of Industrial Relations wise, the specific provisions of law allegedly violated may not be effectively complied with. The authority to investigate might be rendered futile if respondent Court could be held as having acted contrary to law. To paraphrase Justice Laurel, the power to investigate, to be conscientious and rational at the very least, requires an inquiry into existing facts and conditions. The documents required to be produced

constitutes evidence of the most solid character as to whether or not there was a failure to comply with the mandates of the law. It is not for this Court to whittle down the authority conferred on administrative agencies to assure the effective administration of a statute, in this case intended to protect the rights of union members against its officers. The matter was properly within its cognizance and the means necessary to give it force and effectiveness should be deemed implied unless the power sought to be exercised is so arbitrary as to trench upon private rights of petitioners entitled to priority. No such showing has been made; no such showing can be made. To repeat, there should be no question about the correctness of the order herein challenged. 2. Nor is the validity of the order in question to be impugned by the allegation that there was a denial of procedural due process. If the books and records sought to be delivered and deposited in court for examination were the private property of petitioners, perhaps the allegation of the absence of due process would not be entirely lacking in plausibility. Such is not the case however. The pertinent section of the Industrial Peace Act makes clear that such books of accounts and other records of the financial activities are open to inspection by any member of a labor organization. For the court to require their submission at the hearing of the petition is, as above noted, beyond question, and no useful purpose would be served by first hearing petitioners before an order to that effect can be issued. Moreover, since as was shown in the very brief of petitioners, there was a motion for reconsideration, the absence of any hearing, even if on the assumption purely for arguments sake that there was such a requirement, has been cured. So it was held by this Court in a recent decision. Thus: As far back as 1935, it has already been 311 VOL. 37, JANUARY 30, 1971 311 Fernando vs. Franco a settled doctrine that a plea of denial of procedural due process does not lie where a defect consisting of an absence of notice of hearing was thereafter cured by the alleged aggrieved party having had the opportunity to be heard on a motion for reconsideration. What the law prohibits is not the absence of previous notice, but the absolute absence

thereof and lack of opportunity to be heard. There is then no occasion to impute deprivation of property without due process where the adverse party was heard on a motion for reconsideration constituting as it does sufficient opportunity for him to inform the Tribunal concerned of his side of the controversy. As was stated in a recent decision, what due process contemplates is freedom from arbitrariness and what it requires is fairness or justice, the substance rather than the form being paramount, the conclusion being that the hearing on a motion for reconsideration meets the strict requirement of due process.8 WHEREFORE, the petition for certiorari is denied. The writ of preliminary injunction issued under the resolution of April 13, 1967 is dissolved and declared to be without any further force or effect. Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Teehankee, Barredo, Villamor and Makasiar, JJ., concur. 182 SUPREME COURT REPORTS ANNOTATED Guerzon vs. Court of Appeals No. L-77707. August 8, 1988.* PEDRO W. GUERZON, petitioner, vs. COURT OF APPEALS, BUREAU OF ENERGY UTILIZATION, F. C. CAASI, JR., and PILIPINAS SHELL PETROLEUM CORPORATION, respondents. Administrative Law; Administrative Agencies; Powers of; An administrative agency has only such powers as are expressly granted to it by law and those that are necessarily implied in the exercise thereof. As it is, jurisdiction to order a lessee to vacate the leased premises is vested in the civil courts in an appropriate case for unlawful detainer or accion publiciana [Secs. 19(2) and 33(2), B.P. Blg. 129, as amended.] There is nothing in P.D. No. 1206, as amended, that would suggest that the same or similar jurisdiction has been granted to the Bureau of Energy Utilization. It is a fundamental rule that an administrative agency has only such powers as are expressly granted to it by law and those that are necessarily implied in the exercise thereof [Makati Stock Exchange, Inc. v. Securities and Exchange Commission, G.R. No. L-23004, June 30, 1965, 14 SCRA 620; Sy v. Central Bank, G.R. No. L-41480, April 30, 1976, 70 SCRA 570.] That issuing the order to vacate was the most effective way of stopping any illegal trading in petroleum products is no excuse for a deviation from this rule. Otherwise, adherence to the rule of law would be rendered meaningless.

Same; Same; Same; Bureau of Energy Utilization; The BEU has no power to decide contractual disputes between gasoline dealers and oil companies in the absence of an express provision of law granting to it such power.Moreover, contrary to the Solicitor Generals theory, the text of the assailed order leaves no room for doubt that it was issued in connection with an adjudication of the contractual dispute between respondent Shell and petitioner. But then the Bureau of Energy Utilization, like its predecessor, the defunct Oil Industry Commission, has no power to decide contractual disputes between gasoline dealers and oil companies, in the absence of an express provision of law granting to it such power [see Pilipinas Shell Petroleum Corp. v. Oil Industry Commission, G.R. No. L-41315, November 13, 1986, 155 SCRA 433.] As explicitly stated in the law, in connection with the exercise of quasijudicial powers, the Bureaus jurisdiction is limited to cases involving violation or non-compliance with any _______________ * THIRD DIVISION. 183 VOL. 164, AUGUST 8, 1988 183 Guerzon vs. Court of Appeals term or condition of any certificate, license or permit issued by it or of any of its orders, decisions, rules or regulations. Same; Same; Same; Due Process; PD 1206 requires that notice of hearing and opportunity to be heard be given to the offender before any administrative penalty provided under Sec. 7(e) may be imposed.Even if the issuance of the order to vacate was within the authority of respondent Caasi, Jr., still its nullity is apparent because of the failure to comply with the requirement of notice and hearing. That P.D. No. 1206, as amended, requires notice and hearing before any administrative penalty provided in Sec. 7(e) may be imposed is patent. Sec. 7(e) provides for a gradation of penalties of which the imposition of a fine in an amount not exceeding P1,000.00 is the least severe, and requires that even before a fine is imposed notice and an opportunity to be heard be given to the offender. PETITION to review the decision of the Court of Appeals.

The facts are stated in the opinion of the Court. Llego, Llego & Collera for petitioner. Florentino G. Dumlao, Jr. for respondent Pilipinas Shell Petroleum Corporation. CORTS, J.: Raised by petitioner to this Court is the issue of whether or not the Bureau of Energy Utilization, the agency charged with regulating the operations and trade practices of the petroleum industry, has the power to order a service station operator-lessee to vacate the service station and to turn over its possession to the oil company-lessor upon the expiration of the dealership and lease agreements. The facts, as found by the Court of Appeals, are as follows: Basic antecedent facts show that on January 9, 1981 petitioner Pedro Guerzon executed with Basic Landoil Energy Corporation, which was later acquired by respondent Pilipinas Shell Petroleum Corporation, a contract denominated as Service Station Lease for the use and operation of respondent SHELLS properties, facilities and equipment, which included four (4) pieces of fuel dispensing pumps and one (1) piece air compressor, for a period of five (5) years from January 15, 1981 and ending on January 14, 1986. On January 7, 1981 petitioner likewise executed with the same Corporation a 184 184 SUPREME COURT REPORTS ANNOTATED Guerzon vs. Court of Appeals Dealers Sales Contract for the sale by petitioner of respondent SHELLS petroleum and other products in the leased service station which contract expired April 12, 1986. On April 13, 1981, respondent Bureau of Energy Utilization (BEU) approved the Dealers Sales Contract pursuant to which petitioner was appointed dealer of SHELLS gasoline and other petroleum products which he was to sell at the gasoline station located at Cagayan de Oro City. On the same day, respondent BEU issued a certificate of authority in petitioners favor, which had a 5year period of validity, in line with the terms of the contract. Paragraph 9 of the Service Station Lease Contract provides:

The cancellation or termination of the Dealers Sales Contract executed between the COMPANY and the LESSEE on January 7, 1981 shall automatically cancel this Lease. As early as January 2, 1986 respondent SHELL through its District ManagerReseller Mindanao wrote to petitioner informing him that the Company was not renewing the Dealers Sales Contract which was to expire on April 12, 1986 together with the service station lease and reminding him to take appropriate steps to wind up his business activities at the station and, on the appropriate date to hand over the station with all its facilities and equipment to the representative of respondent. A copy of this letter was furnished respondent BEU, through the latters Mindanao Division Office. On April 12, 1986, respondent SHELL wrote petitioner reiterating the decision not to extend the Dealers Sales Contract, demanding the surrender of the station premises and all company owned equipment to the respondents representative. On April 15, 1986 respondent BEU, through respondent Caasi, Jr., officerin-charge of its Mindanao Division Office, issued the assailed order directing the petitioner as follows: (1) immediately vacate the service station abovementioned and turn it over to Pilipinas Shell Petroleum Corporation; and (2) show cause in writing, under oath within ten (10) days from receipt hereof why no administrative and/or criminal proceedings shall be instituted against you for the aforesaid violation. The order directed that a copy of the same be furnished the PC-INP Commander of Cagayan de Oro City, requesting prompt and effective enforcement of the directive and submitting to the BEU of the result of the action taken thereon. 185 VOL. 164, AUGUST 8, 1988 185 Guerzon vs. Court of Appeals On April 22, 1986, pursuant to the order of April 15, 1986, respondent SHELL, accompanied by law enforcement officers, was able to secure possession of the gasoline station in question together with the requisite equipments and accessories, and turned them over to the control of the personnel of respondent SHELL who accompanied them.

On May 9, 1986, petitioner filed with the Regional Trial Court of Misamis Oriental a complaint for certiorari, injunction and damages with preliminary mandatory injunction (Civil Case No. 10619) to annul the disputed order dated April 15, 1986 of respondent F.C. Caasi, Jr., but on September 18, 1986 this complaint was dismissed for lack of jurisdiction to annul the order of a quasi-judicial body of equivalent category as the Regional Trial Court. [Rollo, pp. 37-39.] Thus, petitioner filed in the Court of Appeals a petition for certiorari with a prayer for preliminary mandatory injunction against Filipinas Shell Petroleum Corporation, F.C. Caasi, Jr. and the Bureau of Energy Utilization seeking the annulment of respondent Caasi, Jr.s order dated April 15, 1986 and the restoration to petitioner of possession of the service station and the equipment removed therefrom. In a decision promulgated on February 10, 1987, the Court of Appeals denied due course and dismissed the petition after holding the disputed order valid and the proceedings undertaken to implement the same sanctioned by Presidential Decree No. 1206, as amended. Hence, petitioners recourse to this Court. In his petition for review, petitioner ascribed the following errors to the Court of Appeals: I THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT RESPONDENT BUREAU OF ENERGY UTILIZATION HAS JURISDICTION TO EJECT THE PETITIONER FROM THE GASOLINE SERVICE STATION LEASED. II THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THERE IS NO NECESSITY OF ANY NOTICE AND HEARING PRIOR TO THE ISSUANCE OF THE DISPUTED ORDER ISSUED BY RESPONDENT BUREAU OF ENERGY UTILIZA186 186 SUPREME COURT REPORTS ANNOTATED Guerzon vs. Court of Appeals TION ORDERING THE PETITIONER TO VACATE THE LEASED PREMISES. [Rollo, p. 13]

The controversy revolves around the assailed order issued by respondent F.C. Caasi, Jr., Officer-in-Charge of the Mindanao Division Office of the Bureau of Energy Utilization, which reads: 15 April 1986 Mr. Pedro W. Guerzon Corner Velez-Recto Streets Cagayan de Oro City Sir: We were officially informed by Pilipinas Shell Petroleum Corporation that you refused to vacate its company-owned service station at the above address despite the fact that you were advised by Shell in its letter of January 02, 1986 that it will not renew the Dealers Sales Contract between yourself and the company upon its expiration on April 12, 1986. Your continued occupancy of the service station is not only considered a violation of BEU laws, rules and regulations but is also detrimental to the interests of the parties concerned and the public. In view thereof, you are hereby directed to: (1) immediately vacate the service station abovementioned and turn it over to Pilipinas Shell Petroleum Corporation; and (2) show cause in writing, under oath within ten (10) days from receipt hereof why no administrative and/or criminal proceedings shall be instituted against you for the aforesaid violation. Let a copy of this directive be furnished the PC-INP Commander of Cagayan de Oro City, who is hereby requested to cause the prompt and effective enforcement hereof and to submit to this Bureau the result/s of the action/s taken thereon. Very truly yours, (Sgd.) F.C. CAASI, JR. Officer-in-Charge cc: PC/INP Commander Cagayan de Oro City Pilipinas Shell Petroleum Corporation Sasa, Davao City/Cagayan de Oro City BEU-Manila [Rollo, p. 122; Italics supplied.] 187

VOL. 164, AUGUST 8, 1988 187 Guerzon vs. Court of Appeals As stated at the outset, whether or not it is within the jurisdiction of the Bureau of Energy Utilization to issue the above order is the primary issue to be resolved. The Solicitor General contends that since petitioners license to sell petroleum products expired on April 12, 1986, when his dealership and lease contracts expired, as of the following day, April 13, 1986 he was engaged in illegal trading in petroleum products in violation of Batas Pambansa Blg. 33 [Rollo, pp. 100-101.] The pertinent provisions of B.P. No. 33 state: Sec. 2. Prohibited Acts.The following acts are prohibited and penalized: (a) Illegal trading in petroleum and/or petroleum products; x x x Sec. 3. Definition of terms.For the purposes of this Act, the following terms shall be understood to mean: Illegal trading in petroleum and/or petroleum productsthe sale or distribution of petroleum products for profit without license or authority from the Government; non-issuance of receipts by licensed traders; misrepresentation as to quality and/or quantity; and sale by oil companies, distributors and/or dealers violative of government rules and regulations. x x x Thus, concludes the Solicitor General, the Bureau of Energy Utilization had the power to issue, and was justified in issuing, the order to vacate pursuant to Presidential Decree No. 1206, as amended, the pertinent portion of which provides: Sec. 7. Bureau of Energy Utilization.There is created in the Department a Bureau of Energy Utilization, hereafter referred to in this Section as the Bureau, which shall have the following powers and functions, among others: x x x e. After due notice and hearing, impose and collect a fine not exceeding One Thousand Pesos, for every violation or non-compliance with any term or condition of any certificate, license, or permit issued by the Bureau or of any of its orders, decisions, rules and regulations.

The fine so imposed shall be paid to the Bureau, and failure to pay the fine within the time specified in the order or decision of the Bureau or failure to cease and discontinue the violation or noncompliance shall be deemed good and sufficient reason for the sus188 188 SUPREME COURT REPORTS ANNOTATED Guerzon vs. Court of Appeals pension, closure or stoppage of operations of the establishment of the person guilty of the violation or non-compliance. In case the violation or default is committed by a corporation or association, the manager or person who has charge of the management of the corporation or association and the officers or directors thereof who have ordered or authorized the violation or default shall be solidarity liable for the payment of the fine. The Bureau shall have the power and authority to issue corresponding writs of execution directing the City Sheriff or provincial Sheriff or other peace officers whom it may appoint to enforce the fine or the order of closure, suspension or stoppage of operations. Payment may also be enforced by appropriate action brought in a court of competent jurisdiction. The remedy provided herein shall not be a bar to or affect any other remedy under existing laws, but shall be cumulative and additional to such remedies; x x x However, the Solicitor Generals line of reasoning is fatally flawed by the failure of the facts to support it. From a cursory reading of the assailed order, it is readily apparent that the order is premised on petitioners refusal to vacate the service station in spite of the expiration and nonrenewal of his dealership and lease agreements with respondent Shell. Nowhere in the order is it stated that petitioner had engaged in illegal trading in petroleum products or had committed any other violation of B.P. Blg. 33. The order merely makes a vague reference to a violation of BEU laws, rules and regulations, without stating the specific provision violated. That petitioner had engaged in illegal trading in petroleum products cannot even be implied from the wording of the assailed order. But then, even if petitioner was indeed engaged in illegal trading in petroleum products, there was no basis under B.P. Blg. 33 to order him

to vacate the service station and to turn it over to respondent Shell. Illegal trading in petroleum products is a criminal act wherein the injured party is the State. Respondent Shell is not even alleged by the Solicitor General as a private party prejudiced and, therefore, it can claim no relief if a criminal case is instituted.** _______________ ** B.P. Blg. 33 penalizes a person guilty of illegal trading in petroleum products with a fine of not less than P2,000.00 but not more than P10,000.00, or imprisonment of at least 2 months but not 189 VOL. 164, AUGUST 8, 1988 189 Guerzon vs. Court of Appeals Even on the assumption that petitioners continued occupancy and operation of the service station constituted a violation of a law or regulation, still the Court has no recourse but to rule against the legality of the order, the Bureau of Energy Utilization not being empowered to issue it. Section 7 of P.D. No. 1206, as amended, is very clear as to the courses of action that the Bureau of Energy Utilization may take in case of a violation or non-compliance with any term or condition of any certificate, license or permit issued by the Bureau or any of its orders, decisions, rules or regulations. The Bureau may: (1) impose a fine not exceeding P1,000.00; and (2) in case of failure to pay the fine imposed or to cease and discontinue the violation or non-compliance, order the suspension, closure or stoppage of operations of the establishment of the guilty party. Its authority is limited to these two (2) options. It can do no more, as there is nothing in P.D. No. 1206, as amended, which empowers the Bureau to issue an order to vacate in case of a violation. As it is, jurisdition to order a lessee to vacate the leased premises is vested in the civil courts in an appropriate case for unlawful detainer or accion publiciana [Secs. 19(2) and 33(2), B.P. Blg. 129, as amended.] There is nothing in P.D. No. 1206, as amended, that would suggest that the same or similar jurisdiction has been granted to the Bureau of Energy Utilization. It is a fundamental rule that an administrative agency has only such powers as are expressly granted to it by law and those that are necessarily implied in the exercise thereof [Makati Stock Exchange, Inc.

v. Securities and Exchange Commission, G.R. No. L-23004, June 30, 1965, 14 SCRA 620; Sy v. Central Bank, G.R. No. L-41480, April 30, 1976, 70 SCRA 570.] That issuing the order to vacate was the most effective way of stopping any illegal trading in petroleum products is no excuse more than 1 year, or both, in the discretion of the court. Furthermore, the petroleum products subject of the offense shall be forfeited in favor of the Government, provided that if the products have already been delivered and paid the payment shall be the subject of the forfeiture, and if the seller who has not yet delivered has been fully paid, he shall return the payment received to the buyer. If the offender is a trader his license shall also be cancelled. [Sec. 7] 190 190 SUPREME COURT REPORTS ANNOTATED Guerzon vs. Court of Appeals for a deviation from this rule. Otherwise, adherence to the ruleof law would be rendered meaningless. Moreover, contrary to the Solicitor Generals theory, the text of the assailed order leaves no room for doubt that it was issued in connection with an adjudication of the contractual dispute between respondent Shell and petitioner. But then the Bureau of Energy Utilization, like its predecessor, the defunct Oil Industry Commission, has no power to decide contractual disputes between gasoline dealers and oil companies, in the absence of an express provision of law granting to it such power [see Pilipinas Shell Petroleum Corp. v. Oil Industry Commission, G.R. No. L-41315, November 13, 1986, 145 SCRA 433.] As explicitly stated in the law, in connection with the exercise of quasi-judicial powers, the Bureaus jurisdiction is limited to cases involving violation or noncompliance with any term or condition of any certificate, license or permit issued by it or of any of its orders, decisions, rules or regulations. Viewed from any angle, respondent F.C. Caasi, Jr., in issuing the assailed order, acted beyond his authority and overstepped the powers granted by P.D. No. 1206, as amended. The assailed order was, therefore, null and void. Even if the issuance of the order to vacate was within the authority of respondent Caasi, Jr., still its nullity is apparent because of the failure to comply with the requirement of notice and hearing. That P.D. No. 1206,

as amended, requires notice and hearing before any administrative penalty provided in Sec. 7(e) may be imposed is patent. Sec. 7(e) provides for a gradation of penalties of which the imposition of a fine in an amount not exceeding P1,000.00 is the least severe, and requires that even before a fine is imposed notice and an opportunity to be heard be given to the offender. While the order dated April 15, 1986 is null and void, the Court, however, finds itself unable to issue the writ of mandatory injunction prayed for ordering respondent Shell to restore possession of the service station and the equipment and facilities therein to petitioner. Petitioner himself had admitted in his petition that his dealership and lease agreements with respondent Shell had already expired. Recognized the validity of the termination of the agreements, he requested for their renewal. However, this request was denied. [Rollo, p. 91 Unde191 VOL. 164, AUGUST 8, 1988 191 Guerzon vs. Court of Appeals niably, after April 12, 1986, any right petitioner had to possess the service station and the equipment and facilities therein had been extinguished. No basis for an affirmative relief therefore exists. WHEREFORE, in view of the foregoing, the Decision of the Court of Appeals dated February 10, 1987 is REVERSED and the Order dated April 15, 1986 issued by respondent Caasi, Jr. of the Bureau of Energy Utilization is ANNULLED and SET ASIDE. However, the right of petitioner to the possession of the service station and the equipment and facilities having been extinguished, the prayer for the issuance of a writ of mandatory injunction is DENIED. SO ORDERED. Gutierrez, Jr., Feliciano and Bidin, JJ., concur. Fernan, (C.J.), no partwas counsel for Pilipinas Shell Petroleum Corporation (Cebu Office). Decision reversed. Note.View that an administrative regulation not properly delegated is null and void. However, it may be considered as expressing the executive view is entitled to great weight. (National Federation of Sugar Workers (NFSW) vs. Ovejera, 114 SCRA 354.)

o0o [Guerzon vs. Court of Appeals, 164 SCRA 182(1988)]

120 SUPREME COURT REPORTS ANNOTATED Tayug Rural Bank vs. Central Bank of the Philippines No. L-46158. November 28, 1986.* TAYUG RURAL BANK, plaintiff-appellee, vs. CENTRAL BANK OF THE PHILIPPINES, defendant-appellant. Central Bank; Banks; Loans; RA. 720, The Rural Bank Act, does not authorize the CB to impose any additional penalty rate on rural banks' past due loans.Nowhere in any of the above-quoted pertinent provisions of R.A. 720 nor in any other provision of R.A. 720 for ________________ ** Justice Alampay took no part. Justice Feliciano was designated to sit in the Second Division. * SECOND DIVISION. 121 VOL. 146, NOVEMBER 28, 1986 121 Tayug Rural Bank vs. Central Bank of the Philippines that matter, is the Monetary Board authorized to mete out on rural banks an additional penalty rate on their past due accounts with Appellant. As correctly stated by the trial court, while the Monetary Board possesses broad supervisory powers, nonetheless, the retroactive imposition of administrative penalties cannot be taken as a measure supervisory in character. Same; Same; Same; Administrative Law; An administrative rule or CB regulation must conform with the law.There are, however, limitations to the rule-making power of administrative agencies. A rule shaped out by jurisprudence is that when Congress authorizes promulgation of administrative rules and regulations to implement given legislation, all that is required is that the regulation be not in contradiction with it, but conform to the standards that the law prescribes (Director of Forestry v. Muoz, 23 SCRA 1183). The rule delineating the extent of the binding force to be given to administrative rules and regulations was explained by the Court in Teoxon v. Member of the Board of Administrators (33

SCRA 588), thus: "The recognition of the power of administrative officials to promulgate rules in the implementation of the statute, as necessarily limited to what is provided for in the legislative enactment, may be found as early as 1908 in the case of United States v. Barrias (11 Phil. 327) in 1914 U.S. v. Tupasi Molina (29 Phil 119), in 1936 People v. Santos (63 Phil. 300), in 1951 Chinese Flour Importers Ass. v. Price Stabilization Board (89 Phil. 439), and in 1962 Victorias Milling Co., Inc. v. Social Security Commission (4 SCRA 627). The Court held in the same case that "A rule is binding on the courts so long as the procedure fixed for its promulgation is followed and its scope is within the statute granted by the legislature, even if the courts are not in agreement with the policy stated therein or its innate wisdom x x x." On the other hand, "administrative interpretation of the law is at best merely advisory, for it is the courts that finally determine what the law means." Indeed, it cannot be otherwise as the Constitution limits the authority of the President, in whom all executive power resides, to take care that the laws be faithfully executed. No lesser administrative, executive office, or agency then can, contrary to the express language of the Constitution, assert for itself a more extensive prerogative. Necessarily, it is bound to observe the constitutional mandate. There must be strict compliance with the legislative enactment. The rule has prevailed over the years, the latest restatement of which was made by the Court in the case of Bautista v. Junio (L-50908, January 31, 1984, 127 SCRA 342). 122 122 SUPREME COURT REPORTS ANNOTATED Tayug Rural Bank vs. Central Bank of the Philippines Same; Same; Same; Imposition of added penalty rate on a rural bank's past due loan from the Central Bank which does not form part of any stipulation contained in the borrowing bank's promissory cannot be meted out by CB regulation enacted after execution of P.N.Such clause was not a part of the promissory notes executed by Appellee to secure its loans. Appellant inserted the clause in the revised DLC Form No. 11 to make it a part of the contractual obligation of rural banks securing loans from the Central Bank, after December 23, 1964. Thus, while there is now a basis for the imposition of the 10% penalty rate on overdue accounts of rural banks, there was none during the period that Appellee

contracted its loans from Appellant, the last of which loan was on July 30, 1963. Surely, the rule cannot be given retroactive effect. Same; Same; Same; Same.Finally, on March 31, 1970, the Monetary Board in its Resolution No. 475 effective April 1, 1970, revoked its Resolution No. 1813, dated December 18, 1964 imposing the questioned 10% per annum penalty rate on past due loans of rural banks and amended sub-paragraph (a), Section 10 of the existing guidelines governing rural banks' applications for a loan or rediscount, dated May 7, 1969 (Folder of Exhibits, p. 19). As stated by the trial court, this move on the part of the Monetary Board clearly shows an admission that it has no power to impose the 10% penalty interest through its rules and regulations but only through the terms and conditions of the promissory notes executed by the borrowing rural banks. Appellant evidently hoped that the defect could be adequately accomplished by the revision of DLC Form No. 11. Attorney's; Contracts; Loans; Stipulation in a bank's P.N. to the Central Bank to pay attorney's fees is valid.The contention that Appellant is entitled to the 10% cost of collection in case of suit and should therefore, have been awarded the same by the court below, is well taken. It is provided in all the promissory notes signed by Appellee that in case of suit for the collection of the amount of the note or any unpaid balance thereof, the Appellee Rural Bank shall pay the Central Bank of the Philippines a sum equivalent to ten (10%) per cent of the amount unpaid not in any case less than five hundred (P500.00) pesos as attorney's fees and costs of suit and collection. Thus, Appellee cannot be allowed to come to Court seeking redress for an alleged wrong done against it and then be allowed to renege on its corresponding obligations. APPEAL from the decision of the Court of First Instance of Manila, Br. III. 123 VOL. 146, NOVEMBER 28, 1986 123 Tayug Rural Bank vs. Central Bank of the Philippines The facts are stated in the opinion of the Court. Bengzon, Bengzon, Villaroman & De Vera Law Office for plaintiff-appellee. Evangelista, Bautista & Valdehuesa Law Office for defendantappellant.

PARAS, J.: Submitted on May 20, 1977 for decision by this Court is this appeal from the decision dated January 6, 1971 rendered by the Court of First Instance of Manila, Branch III in Civil Case No. 76920, the decretal portion of which states as follows: "WHEREFORE, judgment is rendered for the plaintiff on the complaint and the defendant is ordered to further credit the plaintiff the amounts collected as 10% penalty in the sum of P19,335.88 or up to July 15, 1969 and to refrain from collecting the said 10% penalty on the remaining past due loans of plaintiff with the defendant. With respect to defendant's counterclaim, judgment is hereby rendered against the plaintiff and the defendant is ordered to pay the Central Bank of the Philippines the outstanding balance of its past overdue accounts in the sum of P444,809,45 plus accrued interest at the rate of 1/2 of 1% per annum with respect to the promissory notes (Annexes 1 to 1-E of defendant's Answer) and 2-% per annum with respect to the promissory notes (Annexes 1-f to 1-i of the Answer). From this amount shall be deducted the sum of P19,335.88 collected as 10% penalty." The facts of the case based on the parties' stipulation of facts (Record on Appeal, p. 67), are as follows: Plaintiff-Appellee, Tayug Rural Bank, Inc., is a banking corporation in Tayug, Pangasinan. During the period from December 28, 1962 to July 30, 1963, it obtained thirteen (13) loans from Defendant-Appellant, Central Bank of the Philippines, by way of rediscounting, at the rate of 1/2 of 1% per annum from 1962 to March 28, 1963 and thereafter at the rate of 2-% per annum. The loans, amounting to P813,000.00 as of July 30, 1963, were all covered by corresponding promissory notes prescribing the terms and conditions of the aforesaid loans (Record on Appeal, pp. 15-53). As of July 15, 1969, the 124 124 SUPREME COURT REPORTS ANNOTATED Tayug Rural Bank vs. Central Bank of the Philippines outstanding balance was P444,809.45 (Record on Appeal, p. 56). On December 23, 1964, Appellant, thru the Director of the Department of Loans and Credit, issued Memorandum Circular No. DLC-8, informing

all rural banks that an additional penalty interest rate of ten per cent (10%) per annum would be assessed on all past due loans beginning January 4, 1965. Said Memorandum Circular was actually enf orced on all rural banks effective July 4, 1965. On June 27, 1969, Appellee Rural Bank sued Appellant in the Court of First Instance of Manila, Branch III, to recover the 10% penalty imposed by Appellant amounting to P16,874.97, as of September 27, 1968 and to restrain Appellant from continuing the imposition of the penalty. Appellant filed a counterclaim for the outstanding balance and overdue accounts of Appellee in the total amount of P444,809.45 plus accrued interest and penalty at 10% per annum on the outstanding balance until full payment. (Record on Appeal, p. 13). Appellant justified the imposition of the penalty by way of affirmative and special defenses, stating that it was legally imposed under the provisions of Section 147 and 148 of the Rules and Regulations Governing Rural Banks promulgated by the Monetary Board on September 5, 1958, under authority of Section 3 of Republic Act No. 720, as amended (Record on Appeal, p. 8, Affirmative and Special Defenses Nos. 2 and 3). In its answer to the counterclaim, Appellee prayed for the dismissal of the counterclaim, denying Appellant's allegations, stating that if Appellee has any unpaid obligations with Appellant, it was due to the latter's fault on account of its flexible and double standard policy in the granting of rediscounting privileges to Appellee and its subsequent arbitrary and illegal imposition of the 10% penalty (Record on Appeal, p. 57). In its Memorandum filed on November 11, 1970, Appellee also asserts that Appellant had no basis to impose the penalty interest inasmuch as the promissory notes covering the loans executed by Appellee in favor of Appellants do not provide f or penalty interest rate of 10% per annum on just due loans beginning January 4, 1965 (Record on Appeal, p. 96). The lower court, in its Order dated March 3, 1970, stated 125 VOL. 146, NOVEMBER 28, 1986 125 Tayug Rural Bank vs. Central Bank of the Philippines that "only a legal question has been raised in the pleadings" and upholding the stand of plaintiff Rural Bank, decided the case in its favor. (Rollo, p. 34).

Appellant appealed the decision of the trial court to the Court of Appeals, for determination of questions of facts and of law. However, in its decision promulgated April 13, 1977, the Court of Appeals, finding no controverted facts and taking note of the statement of the lower court in its pre-trial Order dated March 3, 1970 that only a legal question has been raised in the pleadings, (Record on Appeal, p. 61), ruled that the resolution of the appeal will solely depend on the legal issue of whether or not the Monetary Board had authority to authorize Appellant Central Bank to impose a penalty rate of 10% per annum on past due loans of rural banks which had failed to pay their accounts on time and ordered the certification of this case to this Court for proper determination (Rollo, pp. 34-35). On April 20, 1977, the entire record of the case was forwarded to this Court (Rollo, p. 36). In the resolution of May 20, 1977, the First Division of this Court, ordered the case docketed and as already stated declared the same submitted for decision (Rollo, p. 38). In its Brief, Appellant assigns the following errors: I. THE LOWER COURT ERRED IN HOLDING THAT IT IS BEYOND THE REACH OF THE MONETARY BOARD TO METE OUT PENALTIES ON PAST DUE LOANS OF RURAL BANKS ESPECIALLY SINCE NO PENAL CLAUSE HAS BEEN INCLUDED IN THE PROMISSORY NOTES. II. THE LOWER COURT ERRED IN HOLDING THAT THE IMPOSITION OF THE PENALTY IS AN IMPAIRMENT OF THE OBLIGATION OF CONTRACT WITHOUT DUE PROCESS. III. THE LOWER COURT ERRED IN NOT FINDING JUDGMENT AGAINST PLAINTIFF FOR 10% COST OF COLLECTION OF THE PROMISSORY NOTE AS PROVIDED THEREIN. It is undisputed that no penal clause has been included in the promissory notes. For this reason, the trial court is of the view that Memorandum Circular DLC-8 issued on December 126 126 SUPREME COURT REPORTS ANNOTATED Tayug Rural Bank vs. Central Bank of the Philippines 23, 1964 prescribing retroactive effect on all past due loans, impairs the obligation of contract and deprives the plaintiff of its property without due process of law. (Record on Appeal, p. 40).

On the other hand appellant without opposing appellee's right against impairment of contracts, contends that when the promissory notes were signed by appellee, it was chargeable with knowledge of Sections 147 and 148 of the rules and regulations authorizing the Central Bank to impose additional reasonable penalties, which became part of the agreement. (ibid). Accordingly, the issue is reduced to the sole question as to whether or not the Central Bank can validly impose the 10% penalty on Appellee's past overdue loans beginning July 4, 1965, by virtue of Memorandum Circular No. DLC-8 dated December 23, 1964. The answer is in the negative. Memorandum Circular No. DLC-8 issued by the Director of Appellant's Department of Loans and Credit on December 23, 1964, reads as follows: "Pursuant to Monetary Board Resolution No. 1813 dated December 18, 1964, and in consonance with Section 147 and 148 of the Rules and Regulations Governing Rural Banks concerning the responsibility of a rural bank to remit immediately to the Central Bank payments received on papers rediscounted with the latter including the loan value of rediscounted papers as they mature, and to liquidate fully its maturing loan obligations with the Central Bank, personal checks, for purposes of repayment, shall be considered only after such personal checks shall have been honored at clearing. In addition, rural banks which shall default in their loan obligations, thus incurring past due accounts with the Central Bank, shall be assessed an additional penalty interest rate of ten per cent (10%) per annum on such past due accounts with the Central Bank over and above the customary interest rate(s) at which such loans were originally secured from the Central Bank." (Record on Appeal, p. 135). The above-quoted Memorandum Circular was issued on the basis of Sections 147 and 148 of the Rules and Regulations 127 VOL. 146, NOVEMBER 28, 1986 127 Tayug Rural Bank vs. Central Bank of the Philippines Governing Rural Banks of the Philippines approved on September 5, 1958, which provide:

"Section 147. Duty of Rural Bank to turn over payment received for papers discounted or used for collateral.A Rural Bank receiving any payment on account of papers discounted or used for collateral must turn the same over to the creditor bank before the close of the banking day next following the receipt of payment, as long as the aggregate discounting on loan amount is not fully paid, unless the Rural Bank substitutes the same with another eligible paper with at least the same or earlier maturity and the same or greater value. A Rural Bank failing to comply with the provisions of the preceding paragraph shall ipso facto lose its right to the rediscounting or loan period, without prejudice to the Central Bank imposing additional reasonable penalties, including curtailment or withdrawal of financial assistance. "Sec. 148. Default and other violations of obligation by Rural Bank, effectA Rural Bank becomes in default upon the expiration of the maturity period of its note, or that of the papers discounted or used as collateral, without the necessity of demand. A Rural Bank incurring default, or in any other manner, violating any of the stipulations in its note, shall suffer the consequences provided in the second paragraph of the preceding section." (Record on Appeal, p. 136.) The "Rules and Regulations Governing Rural Banks" was published in the Official Gazette, 55 O.G., on June 13, 1959, pp. 5186-5289. It is by virtue of these same Rules that Rural Banks rediscount their loan papers with the Central Bank at 21/2% interest per annum and in turn lend the money to the public at 12% interest per annum (Defendant's Reply to Plaintiff 's Memorandum, Record on Appeal, p. 130). Appellant maintains that it is pursuant to Section 3 of R.A. No. 720, as amended, that the Monetary Board has adopted the set of Rules and Regulations Governing Rural Banks. It reads: "SEC. 3. In furtherance of this policy, the Monetary Board of the Central Bank of the Philippines shall formulate the necessary rules and regulations governing the establishment and operatives of 128 128 SUPREME COURT REPORTS ANNOTATED Tayug Rural Bank vs. Central Bank of the Philippines

Rural Banks for the purpose of providing adequate credit facilities to small farmers and merchants, or to cooperatives of such farmers or merchants and to supervise the operation of such banks." The specific provision under the law claimed as basis for Sections 147 and 148 of the Rules and Regulations Governing Rural Banks, that is, on Appellant's authority to extend loans to Rural Banks by way of rediscounting is Section 13 of R.A. 720, as amended, which provides: "SEC. 13. In an emergency or when a financial crisis is imminent, the Central Bank may give a loan to any Rural Bank against assets of the Rural Bank which may be considered acceptable by a concurrent vote of at least five members of the Monetary Board. In normal times, the Central Bank may rediscount against papers evidencing a loan granted by a Rural Bank to any of its customers which can be liquified within a period of two hundred and seventy days: PROVIDED, HOWEVER, That for the purpose of implementing a nationwide program of agricultural and industrial development, Rural Banks are hereby authorized under such terms and conditions as the Central Bank shall prescribe to borrow on a medium or long term basis, funds that the Central Bank or any other government financing institutions shall borrow from the International Bank for Reconstruction and Development or other international or foreign lending institutions for the specific purpose of financing the above stated agricultural and industrial program. Repayment of loans obtained by the Central Bank of the Philippines or any other government financing institution from said foreign lending institutions under this section shall be guaranteed by the Republic of the Philippines." As to the supervising authority of the Monetary Board of the Central Bank over Rural Banks, the same is spelled-out under Section 10 of R. A. 720, as follows: "SEC. 10. The power to supervise the operation of any Rural Bank by the Monetary Board of the Central Bank as herein indicated, shall consist in placing limits to the maximum credit allowed any individual borrower; in prescribing the interest rate; in determining the loan period and loan procedure; in indicating the manner in which technical assistance shall be extended to Rural Banks; in imposing a uniform accounting system and manner of keeping the ac129

VOL. 146, NOVEMBER 28, 1986 129 Tayug Rural Bank vs. Central Bank of the Philippines counts and records of the Rural Banks; in undertaking regular credit examination of the Rural Banks; in instituting periodic surveys of loan and lending procedures, audits, test check of cash and other transactions of the Rural Banks; in conducting training courses for personnel of Rural Banks; and, in general, in supervising the business operation of the Rural Banks.'' Nowhere in any of the above-quoted pertinent provisions of R.A. 720 nor in any other provision of R.A. 720 for that matter, is the monetary Board authorized to mete out on rural banks an additional penalty rate on their past due accounts with Appellant. As correctly stated by the trial court, while the Monetary Board possesses broad supervisory powers, nonetheless, the retroactive imposition of administrative penalties cannot be taken as a measure supervisory in character. (Record on Appeal, p. 141). Administrative rules and regulations have the force and effect of law (Valerio v. Hon. Secretary of Agriculture and Natural Resources, 7 SCRA 719; Commissioner of Civil Service v. Cruz, 15 SCRA 638; R.B. Industrial Development Company, Ltd. v. Enage, 24 SCRA 365; Director of Forestry v. Muoz, 23 SCRA 1183; Gonzalo Sy v. Central Bank of the Philippines, 70 SCRA 570). There are, however, limitations to the rule-making power of administrative agencies. A rule shaped out by jurisprudence is that when Congress authorizes promulgation of administrative rules and regulations to implement given legislation, all that is required is that the regulation be not in contradiction with it, but conform to the standards that the law prescribes (Director of Forestry v. Muoz, 23 SCRA 1183). The rule delineating the extent of the binding force to be given to administrative rules and regulations was explained by the Court in Teoxon v. Member of the Board of Administrators (33 SCRA 588), thus: "The recognition of the power of administrative officials to promulgate rules in the implementation of the statute, as necessarily limited to what is provided for in the legislative enactment, may be found as early as 1908 in the case of United States v. Barrias (11 Phil. 327) in 1914 U.S. v. Tupasi Molina (29 Phil. 119), in 1936 People v. Santos (63 Phil. 300), in 1951 Chinese Flour Importers Ass. v. Price

130 130 SUPREME COURT REPORTS ANNOTATED Tayug Rural Bank vs. Central Bank of the Philippines Stabilization Board (89 Phil. 439), and in 1962 Victorias Milling Co., Inc. v. Social Security Commission (4 SCRA 627). The Court held in the same case that "A rule is binding on the courts so long as the procedure fixed for its promulgation is followed and its scope is within the statute granted by the legislature, even if the courts are not in agreement with the policy stated therein or its innate wisdom x x x." On the other hand, "administrative interpretation of the law is at best merely advisory, for it is the courts that finally determine what the law means." Indeed, it cannot be otherwise as the Constitution limits the authority of the President, in whom all executive power resides, to take care that the laws be faithfully executed. No lesser administrative, executive office, or agency then can, contrary to the express language of the Constitution, assert for itself a more extensive prerogative. Necessarily, it is bound to observe the constitutional mandate. There must be strict compliance with the legislative enactment. The rule has prevailed over the years, the latest restatement of which was made by the Court in the case of Bautista v. Junio (L-50908, January 31, 1984, 127 SCRA 342). In case of discrepancy between the basic law and a rule or regulation issued to implement said law, the basic law prevails because said rule or regulation cannot go beyond the terms and provisions of the basic law (People v. Lim, 108 Phil. 1091). Rules that subvert the statute cannot be sanctioned {University of St. Tomas v. Board of Tax Appeals, 93 Phil. 376; Del Mar v. Phil. Veterans Administration, 51 SCRA 340). Except for constitutional officials who can trace their competence to act to the fundamental law itself, a public official must locate in the statute relied upon a grant of power before he can exercise it. Department zeal may not be permitted to outrun the authority conferred by statute (Radio Communications of the Philippines, Inc. v. Santiago, L-29236, August 21, 1974, 58 SCRA 493). When promulgated in pursuance of the procedure or authority conferred upon the administrative agency by law, the rules and regulations partake of the nature of a statute, and compliance therewith may be enforced by

a penal sanction provided in the law (Victorias Milling Co., Inc. v. Social Security 131 VOL. 146, NOVEMBER 28, 1986 131 Tayug Rural Bank vs. Central Bank of the Philippines Commission, 114 Phil. 555; People v. Maceren, L-32166, October 18, 1977, 79 SCRA 462; Daza v. Republic, L-43276, September 28, 1984, 132 SCRA 267). Conversely, the rule is likewise clear. Hence an administrative agency cannot impose a penalty not so provided in the law authorizing the promulgation of the rules and regulations, much less one that is applied retroactively. The records show that DLC Form No. 11 (Folder of Exhibits, p. 16) was revised December 23, 1964 to include the penal clause, as follows: "In the event that this note becomes past due, the undersigned shall pay a penalty at the rate of per cent ( ) per annum on such past due account over and above the interest rate at which such loan was originally secured from the Central Bank." Such clause was not a part of the promissory notes executed by Appellee to secure its loans. Appellant inserted the clause in the revised DLC Form No. 11 to make it a part of the contractual obligation of rural banks securing loans from the Central Bank, after December 23, 1964. Thus, while there is now a basis for the imposition of the 10% penalty rate on overdue accounts of rural banks, there was none during the period that Appellee contracted its loans from Appellant, the last of which loan was on July 30, 1963. Surely, the rule cannot be given retroactive effect. Finally, on March 31, 1970, the Monetary Board in its Resolution No. 475 effective April 1, 1970, revoked its Resolution No. 1813, dated December 18, 1964 imposing the questioned 10% per annum penalty rate on past due loans of rural banks and amended sub-paragraph (a), Section 10 of the existing guidelines governing rural banks' applications for a loan or rediscount, dated May 7, 1969 (Folder of Exhibits, p. 19). As stated by the trial court, this move on the part of the Monetary Board clearly shows an admission that it has no power to impose the 10% penalty interest through its rules and regulations but only through the terms and conditions of the promissory notes executed by the borrowing rural

banks. Appellant evidently hoped that the defect could be adequately accomplished by the revision of DLC Form No. 11. 132 132 SUPREME COURT REPORTS ANNOTATED People vs. Abedes The contention that Appellant is entitled to the 10% cost of collection in case of suit and should therefore, have been awarded the same by the court below, is well taken. It is provided in all the promissory notes signed by Appellee that in case of suit for the collection of the amount of the note or any unpaid balance thereof, the Appellee Rural Bank shall pay the Central Bank of the Philippines a sum equivalent to ten (10%) per cent of the amount unpaid not in any case less than five hundred (P500.00) pesos as attorney's fees and costs of suit and collection. Thus, Appellee cannot be allowed to come to Court seeking redress for an alleged wrong done against it and then be allowed to renege on its corresponding obligations. PREMISES CONSIDERED, the decision of the trial court is hereby AFFIRMED with modification that Appellee Rural Bank is ordered to pay a sum equivalent to 10% of the outstanding balance of its past overdue accounts, but not in any case less than P500.00 as attorney's fees and costs of suit and collection. SO ORDERED. Feria (Chairman), Fernan, Alampay and Gutierrez, Jr., JJ., concur. Decision affirmed with modification. o0o [Tayug Rural Bank vs. Central Bank of the Philippines, 146 SCRA 120(1986)]

VOL. 231, MARCH 28, 1994 463 Provident Tree Farms, Inc. vs. Batario, Jr. G.R. No. 92285. March 28, 1994.* PROVIDENT TREE FARMS, INC., petitioner, vs. HON. DEMETRIO M. BATARIO, JR., Presiding Judge of Branch 48, Regional Trial Court of Manila, COMMISSIONER OF CUSTOMS and A.J. INTERNATIONAL CORPORATION, respondents. Administrative Law; Bureau of Customs; Enforcement of the import ban under Sec. 36 of the Revised Forestry Code is within the exclusive realm of the Bureau of Customs and regular courts have no authority to interfere with it.The enforcement of the import ban under Sec. 36, par. (1), of the Revised Forestry Code is within the exclusive realm of the Bureau of Customs, and direct recourse of petitioner to the Regional Trial Court to compel the Commissioner of Customs to enforce the ban is devoid of any legal basis. To allow the regular court to direct the Commissioner to impound the imported matches, as petitioner would, is clearly an interference with the exclusive jurisdiction of the _______________ * FIRST DIVISION. 464 464 SUPREME COURT REPORTS ANNOTATED Provident Tree Farms, Inc. vs. Batario, Jr. Bureau of Customs over seizure and forfeiture cases. An order of a judge to impound, seize or forfeit must inevitably be based on his determination and declaration of the invalidity of the importation, hence, a usurpation of the prerogative and an encroachment on the jurisdiction of the Bureau of Customs. In other words, the reliefs directed against the Bureau of Customs as well as the prayer for injunction against importation of matches by private respondent AJIC may not be granted without the court arrogating upon itself the exclusive jurisdiction of the Bureau of Customs.

Same; Same; Tariff and Customs Code; The enforcement of statutory rights is not foreclosed by the absence of a statutory procedure.The claim of petitioner that no procedure is outlined for the enforcement of the import ban under the Tariff and Customs Code, if true, does not at all diminish the jurisdiction of the Bureau of Customs over the subject matter. The enforcement of statutory rights is not foreclosed by the absence of a statutory procedure. The Commissioner of Customs has the power to promulgate all rules and regulations necessary to enforce the provisions of this (Tariff and Customs) Code x x x subject to the approval of the Secretary of Finance. Moreover, it has been held that x x x (w)here the statute does not require any particular method of procedure to be followed by an administrative agency, the agency may adopt any reasonable method to carry out its functions. Same; Same; Doctrine of Primary Jurisdiction; Petitioners correspondence with the Bureau of Customs contesting the legality of the importations may take the nature of an administrative proceeding the pendency of which would preclude the court from interfering with it.But over and above the foregoing, PTFIs correspondence with the Bureau of Customs contesting the legality of match importations may already take the nature of an administrative proceeding the pendency of which would preclude the court from interfering with it under the doctrine of primary jurisdiction. Same; Same; Certiorari and Mandamus; Court cannot compel an agency to do a particular act or to enjoin such act which is within its prerogatives, except when in the exercise of its authority it gravely abuses or exceeds its jurisdiction.Moreover, however cleverly the complaint may be worded, the ultimate relief sought by PTFI is to compel the Bureau of Customs to seize and forfeit the match importations of AJIC. Since the determination to seize or not to seize is discretionary upon the Bureau of Customs, the same cannot be subject of mandamus. But this does not preclude recourse to the courts by way of the extraordinary relief of certiorari under Rule 65 of the Rules of 465 VOL. 231, MARCH 28, 1994 465 Provident Tree Farms, Inc. vs. Batario, Jr.

Court if the Bureau of Customs should gravely abuse the exercise of its jurisdiction. Otherwise stated, the court cannot compel an agency to do a particular act or to enjoin such act which is within its prerogative, except when in the exercise of its authority it gravely abuses or exceeds its jurisdiction. In the case at bench, we have no occasion to rule on the issue of grave abuse of discretion or excess of jurisdiction as it is not before us. PETITION for review on certiorari of an order of the Regional Trial Court of Manila, Br. 48. Batario, Jr., J. The facts are stated in the opinion of the Court. Siguion Reyna, Montecillo & Ongsiako for petitioner. Sumulong, Sumulong, Paras & Abano Law Offices for private respondent. BELLOSILLO, J.: PETITIONER PROVIDENT TREE FARMS, INC. (PTFI), is a Philippine corporation engaged in industrial tree planting. It grows gubas trees in its plantations in Agusan and Mindoro which it supplies to a local match manufacturer solely for production of matches. In consonance with the state policy to encourage qualified persons to engage in industrial tree plantation, Sec. 36, par. (1), of the Revised Forestry Code1 confers on entities like PTFI a set of incentives among which is a qualified ban against importation of wood and wood-derivated products. On 5 April 1989, private respondent A.J. International Corporation (AJIC) imported four (4) containers of matches from Indonesia, which the Bureau of Customs released on 12 April 1989, and two (2) more containers of matches from Singapore on 19 April 1989. The records do not disclose when the second ship_______________ 1 Sec. 36, par (1), of the Revised Forestry Code of the Philippines, P.D. No. 705, as amended by P.D. No. 1559 of 11 June 1978 provides: x x x x No wood, wood products or wood-derivated products including pulp, paper and paperboard shall be imported if the same are available in required quantities and reasonable prices, as may be certified by the Department Head, from artificial or man-made forests, or local processing plants manufacturing the same x x x x.

466 466 SUPREME COURT REPORTS ANNOTATED Provident Tree Farms, Inc. vs. Batario, Jr. ment was released. On 25 April 1989, upon request of PTFI, Secretary Fulgencio S. Factoran, Jr., of the Department of Natural Resources and Environment issued a certification that there are enough available softwood supply in the Philippines for the match industry at reasonable price.2 On 5 May 1989, PTFI filed with the Regional Court of Manila a complaint for injunction and damages with prayer for a temporary restraining order against respondents Commissioner of Customs and AJIC to enjoin the latter from importing matches and wood-derivated products, and the Collector of Customs from allowing and releasing the importations. It was docketed as Civil Case No. 89-48836 and raffled to respondent Judge Demetrio M. Batario, Jr. PTFI prays for an order directing the Commissioner of Customs to impound the subject importations and that AJIC be directed to pay petitioner P250,000.00 in actual damages, P1,000,000.00 in exemplary damages, and P50,000.00 as attorneys fees. On 14 June 1989, AJIC moved to dismiss the complaint alleging that: (a) The Commissioner of Customs under Sec. 1207 of the Tariff and Customs Code and not the regular court, has exclusive jurisdiction to determine the legality of an importation or ascertain whether the conditions prescribed by law for an importation have been complied with x x x x (and over cases of) seizure, detention or release of property affected x x x x;3 (b) The release of subject importations had rendered injunction moot and academic;4 (c) The prayer for damages has no basis as the questioned acts of the Commissioner are in accordance with law and no damages may be awarded based on future acts;5 and, (d) The complaint for injunction cannot stand it being mainly a provisional relief and not a principal remedy.6 PTFI opposed the motion to dismiss. On 28 July 1989, AJICs motion to dismiss was denied. However, on 8 February 1990, on _______________ 2 Annex B-1, Petition, Rollo, p. 37. 3 Motion to Dismiss, pp. 2-3, Annex C, Petition, Rollo, pp. 39-40.

4 Id., p. 6, Rollo, p. 43. 5 Id., pp. 6-7, Rollo, pp. 43-44. 6 Id., p. 7, Rollo, p. 44. 467 VOL. 231, MARCH 28, 1994 467 Provident Tree Farms, Inc. vs. Batario, Jr. motion for reconsideration by AJIC and despite the opposition of PTFI, the Court reconsidered its 28 July 1989 order and dismissed the case on the ground that it had no jurisdiction to determine what are legal or illegal importations.7 In this present recourse, PTFI seeks to set aside the 8 February 1990 order of respondent court and prays for the continuation of the hearing in Civil Case No. 89-48836. PTFI claims that what was brought before the trial court was a civil case for injunction, i.e., restraining the entry of safety matches into the country x x x for the purpose of securing compliance with Sec. 36 (1) of the Forestry Code and for damages, to seek redress of its right which has been clearly violated by the importation of safety matches x x x x (which) is a denial to the petitioner of the protection and incentive granted it by Section 36 (1) of the Forestry Code x x x x8 PTFI asserts the inapplicability of the procedures outlined in R.A. No. 1125 relative to incidents before the Court of Tax Appeals because the instant action is not a protest case where the aggrieved party is not an importer. It then argues that since it could not avail of the remedies afforded by the Tariff and Customs Code, resort to the courts is warranted, citing Commissioner of Customs v. Alikpala.9 On the formal requirements, we hold that the claim of public respondent that the petition was filed late has no basis. The records revealed that PTFI received the assailed order of 8 February 1990 on 20 February 1990,10 hence, it had until 7 March 1990 to file petition for review on certiorari. On that date, PTFI filed a motion for extension of fifteen (15) days within which to file the petition.11 On 19 March 1990, this Court granted PTFI a thirty (30)-day non-extendible period to file its petition,12 thus resetting the new deadline for the petition to 6 April 1990. On that date the petition was filed. _______________

7 Order of 8 February 1990, Annex A, Petition, Rollo, p. 28-29. 8 Petition, pp. 6-9, Rollo, pp. 19-22. 9 No. L-32542, 26 November 1970, 36 SCRA 208. 10 Motion for Extension of Time to File Petition for Review on Certiorari, p. 1; Rollo, p. 2. 11 Id. 12 Rollo, p. 4-A. 468 468 SUPREME COURT REPORTS ANNOTATED Provident Tree Farms, Inc. vs. Batario, Jr. Petitioner anchors his complaint on a statutory privilege or incentive granted under Sec. 36, par. (1), of the Revised Forestry Code. The only subject of this incentive is a ban against importation of wood, wood products or wood-derivated products which is to be enforced by the Bureau of Customs since it has, under the Tariff and Customs Code, the exclusive original jurisdiction over seizure and forfeiture cases13 and, in fact, it is the duty of the Collector of Customs to exercise jurisdiction over prohibited importations.14 The enforcement of the import ban under Sec. 36, par. (1), of the Revised Forestry Code is within the exclusive realm of the Bureau of Customs, and direct recourse of petitioner to the Regional Trial Court to compel the Commissioner of Customs to enforce the ban is devoid of any legal basis. To allow the regular court to direct the Commissioner to impound the imported matches, as petitioner would, is clearly an interference with the exclusive jurisdiction of the Bureau of Customs over seizure and forfeiture cases. An order of a judge to impound, seize or forfeit must inevitably be based on his determination and declaration of the invalidity of the importation, hence, a usurpation of the prerogative and an encroachment on the jurisdiction of the Bureau of Customs. In other words, the reliefs directed against the Bureau of Customs15 as well as the prayer for injunction _______________ 13 Sec. 602 (g), of the Tariff and Customs Code provides: The general duties, powers and jurisdiction of the bureau shall include x x x x Exercise

exclusive original jurisdiction over seizure and forfeiture cases under the tariff and customs laws. 14 Sec. 1207, of the Tariff and Customs Code provides: Where articles are of prohibited importation or subject to importation only upon conditions prescribed by law, it shall be the duty of the Collector to exercise such jurisdiction in respect thereto as will prevent importation or otherwise secure compliance with all legal requirements. 15 x x x x A temporary restraining injunction/writ of preliminary injunction be issued against x x x x (d)efendant Commissioner of Customs, commanding and ordering said defendant from allowing the importation of matches and other derivated products, or if such importations have been made and are in his custody, from releasing the same, as such importations is prohibited by law, i.e., Forestry Code, Section 36 x x x x After hearing, that said injunction be made permanent x x x x That defendant Commissioner of Customs be ordered to 469 VOL. 231, MARCH 28, 1994 469 Provident Tree Farms, Inc. vs. Batario, Jr. against importation of matches by private respondent AJIC16 may not be granted without the court arrogating upon itself the exclusive jurisdiction of the Bureau of Customs. The claim of petitioner that no procedure is outlined for the enforcement of the import ban under the Tariff and Customs Code, if true, does not at all diminish the jurisdiction of the Bureau of Customs over the subject matter. The enforcement of statutory rights is not foreclosed by the absence of a statutory procedure. The Commissioner of Customs has the power to promulgate all rules and regulations necessary to enforce the provisions of this (Tariff and Customs) Code x x x subject to the approval of the Secretary of Finance.17 Moreover, it has been held that x x x (w)here the statute does not require any particular method of procedure to be followed by an administrative agency, the agency may adopt any reasonable method to carry out its functions.18 But over and above the foregoing, PTFIs correspondence with the Bureau of Customs19 contesting the legality of match impor_______________

impound the shipments complained of x x x x (Complaint, pp. 5-6, Rollo, pp. 34-35.) 16 x x x x A temporary restraining injunction/writ of preliminary injunction be issued against x x x x (d)efendant A.J. International Corporation, commanding and/or ordering said defendant to cease and desist from importing matches and/or wood derivated products in violation of the Forestry Code x x x x After hearing, that said injunction be made permanent x x x x (Complaint, pp. 5-6, Rollo, pp. 34-35.) 17 Sec. 608, Tariff and Customs Code. 18 2 Am Jur 2d 340, pp. 155-156, citing Douglas County v. State Bd. of Equalization & Assessment, 158 Neb 325, 63 NW 2d 449; State ex rel. York v. Walla Walla County, 28 Wash 2d 891, 184 P 2d 577, 172 ALR 1001. 19 Annex A, Memorandum for Private Respondent, Rollo, p. 138-139. In part the letter of Siguion Reyna, Montecillo & Ongsiako in behalf of PTFI to the Bureau of Customs, Collection District II-B, dated 10 January 1990 reads: We refer to your letter December 7, 1989, which is in reply to our letter of November 4, 1989 requesting for the implementation of Section 36 (1) of the Forestry Code., i.e., prohibition on importation of safety matches. With due respect to the opinion rendered by your office that. . . there is no law or regulation prohibiting the importation of matches, we wish to reiterate that Section 36 (1) 470 470 SUPREME COURT REPORTS ANNOTATED Provident Tree Farms, Inc. vs. Batario, Jr. tations may already take the nature of an administrative proceeding the pendency of which would preclude the court from interfering with it under the doctrine of primary jurisdiction. In Presidential Commission on Good Government v. Pea,20 we held that x x x x under the sense-making and expeditious doctrine of primary jurisdiction x x x the courts cannot or will not determine a controversy involving a question which is within the jurisdiction of an administrative tribunal, 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, and a uniformity of ruling is essential to comply with the purposes of the regulatory statute administered (Pambujan Sur United Mine Workers v. Samar Mining Co., Inc., 94 Phil. 932, 941 [1954].) In this era of clogged court dockets, the need for specialized administrative boards or commissions with the special knowledge, experience and capability to hear and determine promptly disputes on technical matters or essentially factual matters, subject to judicial review in case of grave abuse of discretion, has become well nigh indispensable xxxx Moreover, however cleverly the complaint may be worded, the ultimate relief sought by PTFI is to compel the Bureau of Customs to seize and forfeit the match importations of AJIC. Since the determination to seize or not to seize is discretionary upon the Bureau of Customs, the same cannot be subject of mandamus. But this does not preclude recourse to the courts by way of the extraordinary relief of certiorari under Rule 65 of the Rules of Court if the Bureau of Customs should gravely abuse the exercise of its jurisdiction. Otherwise stated, the court cannot compel an agency to do a particular act or to enjoin such act which is _______________ of the Forestry Code clearly prohibits the importation of wood, wood products or wood derivated products. x x x x With respect to your opinion that what is being protected is the matchwood timber industry, not the match industry, we wish to emphasize that the survival of the match wood timber industry depends upon the survival of the local match industry the existence of which is gravely threatened by the importation of matches x x x x. 20 No. L-77663, 12 April 1988, 158 SCRA 556, 567-568. 471 VOL. 231, MARCH 28, 1994 471 Provident Tree Farms, Inc. vs. Batario, Jr. within its prerogative, except when in the exercise of its authority it gravely abuses or exceeds its jurisdiction. In the case at bench, we have no occasion to rule on the issue of grave abuse of discretion or excess of jurisdiction as it is not before us.

The petitioners claim for damages against AJIC being inextricably linked with the legality of the importations, must necessarily rise or fall with the main action to bar the questioned importations. Petitioners allegation that (e)very importation of matches by said defendant is a denial to plaintiff of the protection and incentives granted it by Sec. 36 (1) of the Forestry Code,21 merely indicates its reliance on the illegality of the importations for its prayer for damages. In other words, if the importations were authorized, there would be no denial of the plaintiffs protection and incentives under the Forestry Code. Necessarily, the claim for damages must await the decision declaring the importations unlawful. In Rosales v. Court of Appeals, we categorized a similar case for damages as premature since (t)he finality of the administrative case which gives life to petitioners cause of action has not yet been reached.22 The pendency of petitioners request to the Bureau of Customs for the implementation of the ban against the importation of matches under the Forestry Code is impliedly admitted; in fact, it is apparent from the correspondence of counsel for petitioner that the Bureau is inclined to sustain the validity of the importations.23 Hence, as in Rosales, the order of the trial court granting the dismissal of the civil case must be upheld. WHEREFORE, finding no reversible error in the appealed Order of the Regional Trial Court of Manila in Civil Case No. 89-48836 dated 8 February 1990, the same is AFFIRMED and, consequently, the instant petition for review is DENIED. Davide, Jr., Quiason and Kapunan, JJ., concur. Cruz (Chairman), J., No part. Related to plaintiffs counsel. _______________ 21 Par. 10, Complaint, Annex B, Petition, Rollo, p. 32. 22 No. L-47821, 15 September 1988, 165 SCRA 344, 350. 23 See note 19. 472 472 SUPREME COURT REPORTS ANNOTATED China Banking Corporation vs. Court of Appeals Petition denied; Appealed order affirmed.

Note.Jurisdiction over action for enforcement of mining contracts is exclusive with the Director of Mines (United Paracale Mining Company, Inc. vs. Dela Rosa, 221 SCRA 108 [1993]). o0o [Provident Tree Farms, Inc. vs. Batario, Jr., 231 SCRA 463(1994)]

VOL. 43, FEBRUARY 29, 1972 479 Philex Mining Corpora tion vs. Zaldivia No. L-29669. February 29, 1972. PHILEX MINING CORPORATION, petitioner, vs. LUZ M. ZALDIVIA and THE SECRETARY OF AGRICULTURE AND NATURAL RESOURCES, respondents. Mining law; Director of Mines without real judicial power.There is nothing in sections 61 and 73 of the Mining Law that indicates a legislative intent to confer real judicial power upon the Director of Mines. The very terms of section 73 thereof, as amended by R.A. 4388, in requiring that the adverse claim must state in full detail the nature, boundaries and extent of the adverse claim show that the conflicts to be decided by reason of such adverse claim refer primarily to questions of fact. The controversies to be submitted and resolved by the Director of Mines under the said sections therefore refer only to the overlapping of claims, and administrative matters incidental thereto. Same; Where adverse claim not within authority of Director of Mines. As the petitioners adverse claim is not one grounded on overlapping of claims nor is it a mining conflict arising out of mining locations (there being only one involved) but one originating from the alleged fiduciary or contractual relationship between the petitioner mining corporation and the locator and his transferees, the adverse claim is not within the executive or administrative authority of the mining director to resolve, but in that of the courts. (See Bspinosa vs. Makalintal, 79 Phil. 134) PETITION to review and set aside the decision of the Secretary of Agriculture and Natural Resources. The facts are stated in the opinion of the Court. Agrava & Agrava for petitioner. Ernesto E. Lanzona for respondent Luz M. Zaldivia. Solicitor General Felix V. Makasiar, Assistant Solicitor General Antonio G. Ibarra and Solicitor Hector C. Fule for respondent Secretary of Agriculture and Natural Resources. REYES, J.B.L., J.:

Petition to review and set aside the decision of the Secretary of Agriculture and Natural Resources, upholding, on appeal, the Director of Mines as being without junsdic480 480 SUPREME COURT REPORTS ANNOTATED Philex Mining Corpora tion vs. Zaldivia tion to adjudicate an adverse claim filed by herein petitioner Philex Mining Corporation against the lode lease application recorded in the name of herein private respondent Luz M. Zaldivia to a mining claim, known as George Claim, located in Tuba, Benguet, Mt. Province. The records of the Bureau of Mines disclosed that, by a registered deed of assignment, dated 24 September 1955, George T. Scholey, as locator of the aforesaid mining claim, sold, transferred and assigned all his rights, title and interest therein to Milagros Yrastorza; on 7 December 1959, Yrastorza filed Lode Lease Application No. V-4671 covering the said mining claim, but on 15 October 1963, she sold, transferred and conveyed all her rights and interest in the claim to herein respondent Luz Zaldivia. The transfer was approved by the Director of Mines on 29 December 1966; hence, Lode Lease Application No. V-4671 was recorded in Zaldivias name and given due course. Upon publication of the lease application, herein petitioner Philex Mining Corporation interposed an adverse claim to the lease application, alleging that it is the beneficial and equitable owner of the min ing claim; that it was located on 9 December 1955 by the petitioner corporations then general manager for the benefit of the corporation; that when Scholey tran sferred the claim to Yrastorza, Scholey was still th e general manager, while Yrastorza was also employed by the company; and that Yrastorza and respondent Zaldivia, who had also been an employee of the corporation, merely acted as agents of Scholey, so that, despite the transfers, petitioner remained the equitable owner. Respondent Zaldivia moved to dismiss the adverse claim on three (3) grounds, namely: late filing of the adverse claim, lack of jurisdiction of the Director of Mines to resolve the question of ownership raised by herein petitioner, and the alleged defect of the adverse claim for noncompliance with certain requirements of the Mining Act, as amended. In

the course of an oral argument on the motion to dismiss, only the question of jurisdiction was submitted for resolution. In an order issued on 2 April 1968, the Director of Mines 481 VOL. 43, FEBRUARY 29, 1972 481 Philex Mining Corpora tion vs. Zaldivia dismissed the adverse claim on the ground that the Bureau had no jurisdiction to resolve the question of ownership, because the question was judicial in character and should be ventilated before the courts. Petitioner appealed to the Secretary of Agriculture and Natural Resources but, in a decision rendered on 24 September 1968, the Secretary affirmed the order of the Director of Mines. Petitioner Philex Mining Corporation filed the present petition on the sole issue of jurisdiction of the Director of Mines over the controverted issues. Petitioner relies upon amendments introduced by Republic Act No. 4388 to the Mining Act (Commonwealth Act No. 137), arguing that, before said amendments, conflicts and disputes arising out of mining location were determined by the Director of Mines, whose decision might be appealed to the Department Secretary, and the latters decision in turn was reviewable by a competent court, as provided in the original Section 61 of Commonwealth Act 137, as follows: Sec. 61. Conflicts and disputes arising out of mining locations may be submitted to the Director of the Bureau of Mines for decision; Provided, that such decision may be appealed to the Secretary of Agriculture and Commerce within ninety day s from the date of its entry. In case any one of the interested parties should disagree from the decision of the Director of the Bureau of Mines or of the Secretary of Agriculture and Commerce, the matter may be taken to the court of competent jurisdiction within ninety day s after notice of such decision, after which time without the institution of such action the said decision shall be final and binding upon the parties concerned. and that an adverse claim to a lease application may be filed with the Director and upon such filing, all proceedings, except the publication of notice of the application and the making and filing of the proper affidavit, shall be stayed until the controversy is settled by a competent

court, as provided for in the original Section 73 of Commonwealth Act 137, as follows: Sec. 73. At any time during the period of publication, any adverse claim may be filed under oath with the Director of 482 482 SUPREME COURT REPORTS ANNOTATED Philex Mining Corpora tion vs. Zaldivia the Bureau of Mines, and shall state in full detail the nature, boundaries, and extent of the adverse claim, and shall be accompanied by all plans, documents, and agreements upon which such adverse claim is based. Upon the filing of any adverse claim all proceedings except the publication of notice of application for lease and the making and filing of the affidavits in connection therewith, as herein prescribed, shall be stayed until the controversy shall have been settled or decided by a court of competent jurisdiction, or the adverse claim waived. . . . . but that Congress realized that the two sections were defective in the sense that great delays were incurred and so, Congress amended the two sections through Republic Act 4388, as follows: Sec. 61. Conflicts and disputes arising out of mining locations shall be submitted to the Director of Mines for decision; Provided, That the decision or order of the Director of Mines may be appealed to the Secretary of Agriculture and Natural Resources within thirty days from receipt, of such decision or order. In case any one of the parties should disagree from the decision or order of the Secretary of Agriculture and Natural Resources, the matter may be taken to the Court of Appeals or the Supreme Court, as the case may be, within thirty day s from the receipt of such decision or order, otherwise the said decision or order shall be final and binding upon the parties concerned. Findings of facts in the decision or order of the Director of Mines when affirmed by the Secretary of Agriculture and Natural Resources shall be final and conclusive, and the aggrieved party or parties desiring to appeal from such decision or order shall file in the Supreme Court petition for review wherein only questions of law may be raised. Sec. 73. At any time during the period of publication, any adverse claim may be filed under oath with the Director of Mines, and shall state in full detail the nature, boundaries, and extent of the adverse claim, and shall

be accompanied by all plans, documents, and agreements upon which such adverse claim is based; Provided, however, That no adverse claim from any person, association, partnership or corporation, whose protest filed under Section sixty-one of this Act has already been finally decided by the Director of Mines and/or the Secretary of Agriculture and Natural Resources, shall be entertained. Upon the filing of the adverse claim all proceedings except, the publica483 VOL. 43, FEBRUARY 29, 1972 483 Philex Mining Corpora tion vs. Zaldivia tion of notice of application for patent or lease and the making and filing of the affidavit in connection therewith, as herein prescribed shall be stayed until the controversy shall have been settled or decided in accordance with Section sixty-one of this Act or the adverse claim waived. with the expressed intention embodied in the explanatory note to the bill that became Republic Act 4388, as follows: Sections 61 and 73, which refer to overlapping of claims are amended to expedite the resolution of mining conflicts which constitute one of the impediments to the mining industry. Profitable mining properties are left idle due to delays in litigations over conflicting claims. The decision of the Director of Mines when affirmed by the Secretary of Agriculture and Natural Resources shall be final and conclusive and appealable only to the Court of Appeals or to the Supreme Court, as the case may be. As contemplated in the proposed amendment to Section 73, adverse claims shall be decided by the Director of Mines in accordance with Section 61 of the Mining Act, instead of leaving the matter to the Court of First Instance. Due to the thousands of cases, it takes years before the court can decide a case. (Congressional Record, Proceedings and Debates of the Fifth Congress. Second Regular Session, Vol. II, Part II, No. 66, Page 1346) It is thus made clear, according to the petitioner, that courts have been divested of original jurisdiction to adjudicate adverse claims which, by the amendments, was transferred to the Director of Mines, whose decision may be appealed to the Secretary; and the latters decision, in turn, may be reviewed by the Court of Appeals or the Supreme Court, as

the case may be, so that, in the present case, the Secretary erred in affirming the dismissal by the Director of petitioners adverse claim. We can not agree with petitioners contention. The sole issue raised by it is a pure question of law, to wit, whether Scholey, during the period of his management of appellants affairs, could lawfully locate mining claims for his sole and exclusive benefit, and transfer to others the rights thus acquired. There is here no question of fact nor matters requiring technological knowledge and experience. The issue 484 484 SUPREME COURT REPORTS ANNOTATED Philex Mining Corpora tion vs. Zaldivia is one to be resolved in conformity with legal rules and standards governing the powers of an agent, and the laws restrictions upon the latters right to act for his own exclusive benefit while the agency is in force. Decision of such questions involves the interpretation and application of the laws and norms of justice established by society and constitutes essentially an exercise of the judicial power which under the Constitution is exclusively allocated to the Supreme Court, and such courts as the Legislature may establish, and one that mining officials are ill-equipped to deal with. We see nothing in sections 61 and 73 of the Mining Law that indicates a legislative intent to confer real judicial power upon the Director of Mines. The very terms of section 73 of the Mining Law, as amended by Republic Act No. 4388, in requiring that the adverse claim mu st state in full detail the nature, boundaries and extent of the adverse claim snow that the conflicts to be decided by reason of such adverse claim refer primarily to questions of fact. This is made even clearer by the explanatory note to House Bill No. 2522, later to become Republic Act 4388, that sections 61 and 73 that refer to the overlapping of claims are amended to expedite resolutions of mining conflicts. . . The controversies to be submitted and resolved by the Director of Mines under the sections refer therefore only to the overlapping of claims, and administrative matters incapital thereto. As already shown, petitioners adverse claim is not one grounded on overlapping of claims nor is it a mining conflict arising out of mining locations (there being only one involved) but one originating from the

alleged fiduciary or contractual relationship between petitioner and locator Scholey and his transferees Yrastorza and respondent Zaldivia. As such, the adverse claim is not within the executive or administrative authority of the mining director to solve, but in that of the courts, as it has been correctly held, on the basis of the doctrine stated in Espinosa vs. Makalintal, 79 Phil. 134. This ruling, notwithstanding the amend485 VOL. 43, FEBRUARY 29, 1972 485 Philex Mining Corpora tion vs. Zaldivia ments introduced by Republic Act 4388, is still applicable to the case at bar. The doctrine was stated thus: . . . The powers granted to the Secretary of Agriculture and Commerce by the pertinent provisions of law invoked by petitioners are all of executive and administrative nature, such as granting of licenses, permits, lease, and contracts, or approving, rejecting, reinstating, or cancelling applications, or deciding conflicting applications. The controversies between the parties, as raised in the pleadings in case No. 200 of the Court of First Instance of Iloilo appear to have arisen upon disagreements in civil or contractual relations between the litigants to which the legal provisions invoked by petitioner are not and cannot be applicable. It should be far-fetched to recognize in the Secretary of Agriculture and Commerce the power of determining whether or not, as alleged by Paranpan, he has been deprived by defendants of the possession of the fishpond in question and of the legal effects of such deprivation, or upon the nature of the two contracts of mortgage in the form of sale with right to repurchase between Sason and Paranpan, as alleged by the defendants, or whether Paranpan has charged Sason with usurious interests. These are questions judicial in nature and only courts of justice can decide them. But petitioner claims th at the Espinosa-Makalintal case cannot be invoked in the present case because there the parcel of land involved was already the object of a lease agreement between the government and the lessee, while here, the George Claim has not yet been leased to respondent Zaldivia and, therefore, the mining claim has not passed from the administrative control of the Director of Mines. The objection is without merit, since the question presented in the petitioners adverse

claim is judicial in nature, not a mining conflict, and it is immaterial whether the mining claim in question has or has not passed out of administrative control of the Director of Mines. WHEREFORE, the petition for review is hereby dismissed and the executive decision under review is affirmed, with costs against petitioner Philex Mining Corporation. Concepcion, C.J., Makalintal, Zaldivar, Castro, Teehankee, Barredo, Villamor and Makasiar, JJ., concur. Petition for review dismissed and executive decision under review affirmed. 486 486 SUPREME COURT REPORTS ANNOTATED People vs. Domondon Notes.Purely administrative and discretionary functions may not be interfered with by the courts (Coloso v. Board of Accountancy, 92 Phil. 938). In Dumagnin vs. Reynolds (L-3572, Sept. 30, 1952 , 92 Phil. 66), the Court ruled that a mere employee may n ot stake a mining claim for himself and, if he does so, he may be compelled to transfer the same to the employer. [Philex Mining Corpora tion vs. Zaldivia, 43 SCRA 479(1972)]

VOL. 153, AUGUST 31, 1987 399 Antipolo Realty Corp. vs. National Housing Authority No. L-50444. August 31, 1987.* ANTIPOLO REALTY CORPORATION, petitioner, vs. THE NATIONAL HOUSING AUTHORITY, HON. G.V. TOBIAS, in his capacity as General Manager of the National Housing Authority, THE HON. JACOBO C. CLAVE, in his capacity as Presidential Executive Assistant and VIRGILIO A. YUSON, respondents. Government Corporations; Limited delegation of judicial or quasi-judicial authority to administrative agencies well recognized in our jurisdiction. It is by now commonplace learning that many administrative agencies exercise and perform adjudicatory powers and functions, though to a limited extent only. Limited delegation of judicial or quasi-judicial authority to administrative agencies (e.g., the Securities and Exchange Commission and the National Labor Relations Commission) is well recognized in our jurisdiction, basically because the need for special competence and experience has been recognized as essential in the resolution of questions of complex or ____________ * EN BANC. 400 400 SUPREME COURT REPORTS ANNOTATED Antipolo Realty Corp. vs. National Housing Authority specialized character and because of a companion recognition that the dockets of our regular courts have remained crowded and clogged. Same; Same; Extent of exercise of judicial or quasi-judicial powers of administrative entity depends on provisions of the statute creating such agency.In general, the quantum of judicial or quasijudicial powers which an administrative agency may exercise is defined in the enabling act of such agency. In other words, the extent to which an administrative entity may exercise such powers depends largely, if not wholly, on the provisions of the statute creating or empowering such agency. In the

exercise of such powers, the agency concerned must commonly interpret and apply contracts and determine the rights of private parties under such contracts. 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. Thus, the extent to which the NHA has been vested with quasi-judicial authority must be determined by referring to the terms of Presidential Decree No. 957, known as "The Subdivision and Condominium Buyers' Decree." Section 3 of this statute provides as follows: "National Housing Authority.The National Housing Authority shall have exclusive jurisdiction to regulate the real estate trade and business in accordance with the provisions of this decree." Same; Same; Same; Petitioner not entitled to exercise its options under clause 7 of the contract.Having failed to comply with its contractual obligation to complete certain specified improvements in the subdivision within the specified period of two years from the date of the execution of the Contract to Sell, petitioner was not entitled to exercise its options under Clause 7 of the Contract. Hence, petitioner could neither rescind the Contract to Sell nor treat the installment payments made by the private respondent as forfeited in its favor. Indeed, under the general Civil Law, in view of petitioner's breach of its contract with private respondent, it is the latter who is vested with the option either to rescind the contract and receive reimbursement of all installment payments (with legal interest) made for the purchase of the subdivision lot in question, or to suspend payment of further purchase installments until such time as the petitioner had fulfilled its obligations to the buyer. The NHA was therefore correct in holding that private respondent's prior installment payments could not be forfeited in favor of petitioner. 401 VOL. 153, AUGUST 31, 1987 401 Antipolo Realty Corp. vs. National Housing Authority Same; Same; Same; Same; Due Process; What the fundamental law abhors is not the absence of previous notice but rather the absolute lack of opportunity to be heard.We turn to petitioner's assertion that it had been denied the right to due process. This assertion lacks substance. The record shows that a copy of the order denying the Motion to Dismiss and

scheduling the hearing of the complaint for the morning of 6 March 1978, was duly served on counsel for petitioner, as evidenced by the annotation appearing at the bottom of said copy indicating that such service had been effected. But even if it be assumed, arguendo, that such notice had not been served on the petitioner, nevertheless the latter was not deprived of due process, for what the fundamental law abhors is not the absence of previous notice but rather the absolute lack of opportunity to be heard. In the instant case, petitioner was given ample opportunity to present its side and to be heard on a motion for reconsideration as well, and not just on a motion to dismiss; the claim of denial of due process must hence sound even more hollow. PETITION for certiorari to review the decision of the National Housing Authority: The facts are stated in the opinion of the Court. FELICIANO, J.: By virtue of a Contract to Sell dated 18 August 1970, Jose Hernando acquired prospective and beneficial ownership over Lot. No. 15, Block IV of the Ponderosa Heights Subdivision in Antipolo, Rizal, from the petitioner Antipolo Realty Corporation. On 28 August 1974, Mr. Hernando transferred his rights over Lot No. 15 to private respondent Virgilio Yuson. The transfer was embodied in a Deed of Assignment and Substitution of Obligor (Delegacin), executed with the consent of Antipolo Realty, in which Mr. Yuson assumed the performance of the vendee's obligations under the original contract, including payment of his predecessor's installments in arrears. However, for failure of Antipolo Realty to develop the subdivision project in accordance with its undertaking under Clause 17 of the Contract to Sell, Mr. Yuson paid only the arrearages pertaining to the period up to, and including, the month of August 1972 and stopped all monthly installment 402 402 SUPREME COURT REPORTS ANNOTATED Antipolo Realty Corp. vs. National Housing Authority payments falling due thereafter Clause 17 reads:

"Clause 17.SUBDIVISION BEAUTIFICATION. To insure the beauty of the subdivision in line with the modern trend of urban development, the SELLER hereby obligates itself to provide the subdivision with: a) Concrete curbs and gutters b) Underground drainage system c) Asphalt paved roads d) Independent water system e) Electrical installation with concrete posts. f) Landscaping and concrete sidewalks g) Developed park or amphitheatre h) 24-hour security guard service. These improvements shall be complete within a period of two (2) years from date of this contract. Failure by the SELLER shall permit the BUYER to suspend his monthly installments without any penalties or interest charges until such time that such improvements shall have been completed. "1 On 14 October 1976, the president of Antipolo Realty sent a notice to private respondent Yuson advising that the required improvements in the subdivision had already been completed, and requesting resumption of payment of the monthly installments on Lot No. 15. For his part, Mr. Yuson replied that he would conform with the request as soon as he was able to verify the truth of the representation in the notice. In a second letter dated 27 November 1976, Antipolo Realty reiterated its request that Mr. Yuson resume payment of his monthly installments, citing the decision rendered by the National Housing Authority (NHA) on 25 October 1976 in Case No. 252 (entitled "Jose B. Viado Jr., complainant vs. Conrado S. Reyes, respondent") declaring Antipolo Realty to have "substantially complied with its commitment to the lot buyers pursuant to the Contract to Sell, executed by and between the lot buyers and the respondent." In addition, a formal demand was made for full and immediate payment of the amount of _____________ 1 Rollo, pp. 26-29, Annex "D " of Petition. 403 VOL. 153, AUGUST 31, 1987 403

Antipolo Realty Corp. vs. National Housing Authority P16,994.73, representing installments which, Antipolo Realty alleged, had accrued during the period while the improvements were being completedi.e., between September 1972 and October 1976. Mr. Yuson refused to pay the September 1972October 1976 monthly installments but agreed to pay the post October 1976 installments. Antipolo Realty responded by rescinding the Contract to Sell, and claiming the forfeiture of all installment payments previously made by Mr. Yuson. Aggrieved by the rescission of the Contract to Sell, Mr. Yuson brought his dispute with Antipolo Realty before public respondent NHA through a letter-complaint dated 10 May 1977 which complaint was docketed in NHA as Case No. 2123. Antipolo Realty filed a Motion to Dismiss which was heard on 2 September 1977. Antipolo Realty, without presenting any evidence, moved for the consolidation of Case No. 2123 with several other cases filed against it by other subdivision lot buyers, then pending before the NHA. In an Order issued on 7 February 1978, the NHA denied the motion to dismiss and scheduled Case No. 2123 for hearing. After hearing, the NHA rendered a decision on 9 March 1978 ordering the reinstatement of the Contract to Sell under the following conditions: "1) Antipolo Realty Corporation shall sent [sic] to Virgilio Yuzon a statement of account for the monthly amortizations from November 1976 to the present; 2) No penalty interest shall be charged for the period from November 1976 to the date of the statement of account; and 3) Virgilio Yuzon shall be given sixty (60) days to pay the arrears shown in the statement of account."2 Antipolo Realty filed a Motion for Reconsideration asserting: (a) that it had been denied due process of law since it had not been served with notice of the scheduled hearing; and (b) that the jurisdiction to hear and decide Mr. Yuson's complaint was lodged in the regular courts, not in the NHA, since that _____________ 2 Rollo, p. 20, Annex "A" of Petition. 404

404 SUPREME COURT REPORTS ANNOTATED Antipolo Realty Corp. vs. National Housing Authority complaint involved the interpretation and application of the Contract to Sell. The motion for reconsideration was denied on 28 June 1978 by respondent NHA General Manager G.V. Tobias, who sustained the jurisdiction of the NHA to hear and decide the Yuson complaint. He also found that Antipolo Realty had in its counsel had failed to attend the hearing.3 The case was submitted for decision, and eventually decided, solely on the e vidence presented by the complainant. On 2 October 1978, Antipolo Realty came to this Court with a Petition for Certiorari and Prohibition with Writ of Preliminary Injunction, which was docketed as G.R. No. L49051. Once more, the jurisdiction of the NHA was assailed. Petitioner further asserted that, under Clause 7 of the Contract to Sell, it could validly terminate its agreement with Mr. Yuson and, as a consequence thereof, retain all the prior installment payments made by the latter.4 _____________ 3 Ibid, pp. 21-22, Annex "B" of Petition. 4 Clause 7 provides: "In case the BUYER fails to satisfy any monthly installments, or any other payments herein agreed upon, he is granted a month of grace within which to make the retarded payment, it is understood, however, that should the month of grace herein granted to the BUYER expire, without the payments corresponding to both months having been satisfied, an interest of 12% per annum will be charged on the amounts he should have paid; it is understood further, that should a period of 60 days elapse, to begin from the expiration of the month of grace herein mentioned, and the BUYER has not paid all the amounts he should have paid, with the corresponding interest, up to that date, the SELLER has the right to declare this contract cancelled, ex parte, and of no effect, and as consequence thereof, the SELLER may dispose of the parcel or parcels of land covered by this contract, without notice to the BUYER, in favor of other persons, as if this contract had never been entered into. In case of such cancellation of this contract, all the amounts paid in accordance with this agreement, together with all and charges paid for the use and occupation of the above-mentioned

premises, and as payment for the damages suffered by failure of the BUYER to fulfill his part of this agreement, and the BUYER hereby 405 VOL. 153, AUGUST 31, 1987 405 Antipolo Realty Corp. vs. National Housing Authority This Court denied certiorari in a minute resolution issued on 11 December 1978, "without prejudice to petitioner's pursuing the administrative remedy."5 A motion for reconsideration was denied on 29 January 1979. Thereafter, petitioner interposed an appeal from the NHA decision with the Office of the President which, on 9 March 1979, dismissed the same through public respondent Presidential Executive Assistant Jacobo C. Clave.6 In the present petition, Antipolo Realty again asserts that, in hearing the complaint of private respondent Yuson and in ordering the reinstatement of the Contract to Sell between the parties, the NHA had not only acted on a matter beyond its competence, but had also, in effect, assumed the performance of judicial or quasi-judicial functions which the NHA was not authorized to perform. We find the petitioner's arguments lacking in merit. It is by now commonplace learning that many administrative agencies exercise and perform adjudicatory powers and functions, though to a limited extent only. Limited delegation of judicial or quasi-judicial authority to administrative agencies (e.g., the Securities and Exchange Commission and the National Labor Relations Commission) is well recognized in our jurisdiction,7 basically because the need for special competence and experience has been recognized as essential in the resolution of questions of complex or specialized character and because of a companion recognition that the dockets of our regular courts have remained crowded and clogged. In Spouses Jose Abejo and Aurora Abejo, et al. vs. Hon. Rafael dela Cruz, etc., et al.,8 the Court, through Mr, Chief _____________

renounces all his right to demand or reclaim the return of the same and obliges himself to peacefully and immediately vacate the premises and deliver the same to the SELLER without delay." 5 Rollo of G.R. No. 49051, p. 63. 6 Rollo, pp. 23-25, Annex "C" of Petition. 7 See, e.g., National Federation of Labor v. Eisma, 127 SCRA 419 (1984) and Philex Mining Corporation v. Reyes, 118 SCRA 602 (1982). 8 G.R. No. L-63558, promulgated 19 May 1987; underscoring supplied. 406 406 SUPREME COURT REPORTS ANNOTATED Antipolo Realty Corp. vs. National Housing Authority Justice Teehankee, said: "In the fifties, the Court taking cognizance of the move to vest jurisdiction in administrative commissions and boards the power to resolve specialized disputes in the field of labor (as in corporations, public transportation and public utilities) ruled that Congress in requiring the Industrial Court's intervention in the resolution of labormanagement controversies likely to cause strikes or lockouts meant such jurisdiction to be exclusive, although it did not so expressly state in the law. The Court held that under the 'sense-making and expeditious doctrine of primary jurisdiction . . . the courts cannot or will not determine a controversy involving a question which is within the jurisdiction of an administrative tribunal, 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, and a uniformity of ruling is essential to comply with the purposes of the regulatory statute administered' (Pambujan Sur United Mine Workers v. Samar Mining Co., Inc., 94 Phil. 932, 941 [1954]). In this era of clogged court dockets, the need for specialized administrative boards or commissions with the special knowledge, experience and capability to hear and determine promptly disputes on technical matters or essentially factual matters, subject to judicial review in case of grave abuse of discretion, has become well nigh indispensable. Thus, in 1984, the Court noted that 'between the power lodged in an administrative body and a court, the unmistakeable trend has been to

refer it to the former. "Increasingly, this Court has been committed to the view that unless the law speaks clearly and unequivocably, the choice should fall on [an administrative agency]" ' (NFL v. Eisma, 127 SCRA 419, 428, citing precedents). The Court in the earlier case of Ebon vs. De Guzman (113 SCRA 52, 56 [1982]), noted that the lawmaking authority, in restoring to the labor arbiters and the NLRC their jurisdiction to award all kinds of damages in labor cases, as against the previous P.D. amendment splitting their jurisdiction with the regular courts, 'evidently, . . . had second thoughts about depriving the Labor Arbiters and the NLRC of the jurisdiction to award damages in labor cases because that setup would mean duplicity of suits, splitting the cause of action and possible conflicting findings and conclusions by two tribunals on one and the same claim.' " In an even more recent case, Tropical Homes, Inc. vs. National 407 VOL. 153, AUGUST 31, 1987 407 Antipolo Realty Corp. vs. National Housing Authority Housing Authority, et al.,9 Mr. Justice Gutierrez, speaking for the Court, observed that: "There is no question that a statute may vest exclusive original jurisdiction in an administrative agency over certain disputes and controversies falling within the agency's special expertise. The very definition of an administrative agency includes its being vested with quasi-judicial powers. The ever increasing variety of powers and functions given to administrative agencies recognizes the need for the active intervention of administrative agencies in matters calling for technical knowledge and speed in countless controversies which cannot possibly be handled by regular courts." In general, the quantum of judicial or quasi-judicial powers which an administrative agency may exercise is defined in the enabling act of such agency. In other words, the extent to which an administrative entity may exercise such powers depends largely, if not wholly, on the provisions of the statute creating or empowering such agency.10 In the exercise of such powers, the agency concerned must commonly interpret and apply contracts and determine the rights of private parties under such contracts. 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. Thus, the extent to which the NHA has been vested with quasi-judicial authority must be determined by referring to the terms of Presidential Decree No. 957, known as 'The Subdivision and Condominium Decree."11 Section 3 of this statute provides as follows: "National Housing Authority.The National Housing Authori_____________ 9 G.R. No. L-48672, promulgated 31 July 1987; underscoring supplied. 10 See, in this connection, DMRC Enterprises v. Este del Sol Mountain Reserve, Inc., 132 SCRA 293 (1984); Union Glass and Container Corporation v, Securities and Exchange Commission, 126 SCRA 31 (1983); and Philex Mining Corporation v. Reyes, supra. 11 Promulgated on 12 July 1976. 408 408 SUPREME COURT RETORTS ANNOTATED Antipolo Realty Corp. vs. National Housing Authority ty shall have exclusive jurisdiction to regulate the real estate trade and business in accordance with the provisions of this decree." (Italics supplied) The need for and therefore the scope of the regulatory authority thus lodged in the NHA are indicated in the second and third preambular paragraphs of the statute which provide: "WHEREAS, numerous reports reveal that many real estate subdivision owners, developers, operators, and/or sellers have reneged on their representations and obligations to provide and maintain properly subdivision roads, drainage, sewerage, water systems, lighting systems and other similar basic requirements, thus endangering the health and safety of home and lot buyers; WHEREAS, reports of alarming magnitude also show cases of swindling and fraudulent manipulations perpetrated by unscrupulous subdivision and condominium sellers and operators, such as failure to deliver titles to the buyers or titles free from liens and encumbrances, and to pay real

estate taxes, and fraudulent sales of the same subdivision lots to different innocent purchasers for value." (Italics supplied) Presidential Decree No. 134412 clarified and spelled out the quasijudicial dimensions of the grant of regulatory authority to the NH A in the following quite specific terms: "SECTION 1. In the exercise of its functions to regulate the real estate trade and business and in addition to its powers provided for in Presidential Decree No. 957, the National Housing Authority shall have exclusive jurisdiction to hear and decide cases of the following nature: A. Unsound real estate business practices: B. Claims involving refund and any other claims filed by subdivision lot or condominium unit buyer against the project owner, developer, dealer, broker or salesman; and C.Cases involving specific performance of contractual and statutory obligations filed by buyers of subdivision lots or condominium units against the owner, developer, dealer, broker or salesman." (Italics supplied.) _____________ 12 Promulgated on 2 April 1978. 409 VOL. 153, AUGUST 31, 1987 409 Antipolo Realty Corp. vs. National Housing Authority The substantive provisions being applied and enforced by the NHA in the instant case are found in Section 23 of Presidential Decree No. 957 which reads: "Sec. 23. Non-Forfeiture of Payments.No installment payment made by a buyer in a subdivision or condominium project for the lot or unit he contracted to buy shall be forfeited in favor of the owner or developer when the buyer, after due notice to the owner or developer, desists from further payment due to the failure of the owner or developer to develop the subdivision or condominium project according to the approved plans and within the time limit for complying with the same. Such buyer may, at his option, be reimbursed the total amount paid including amortization and interests but excluding delinquency interests, with interest thereon at the legal rate." (Italics supplied.)

Having failed to comply with its contractual obligation to complete certain specified improvements in the subdivision within the specified period of two years from the date of the execution of the Contract to Sell, petitioner was not entitled to exercise its options under Clause 7 of the Contract. Hence, petitioner could neither rescind the Contract to Sell nor treat the installment payments made by the private respondent as forfeited in its favor. Indeed, under the general Civil Law,13 in view of petitioner's breach of its contract with private respondent, it is the latter who is vested with the option either to rescind the contract and receive reimbursement of all installment payments (with legal interest) made for the purchase of the subdivision lot in question, or to suspend payment of further purchase installments until such time as the petitioner had fulfilled its obligations to the buyer. The NHA was therefore correct in holding that private respondent's prior installment payments could not be forfeited in favor of petitioner. Neither did the NHA commit any abuse, let alone a grave abuse of discretion or act in excess of its jurisdiction when it ordered the reinstatement of the Contract to Sell between the parties. Such reinstatement is no more than a logical consequence of the NHA's correct ruling, just noted, that the petitioner was not entitled to rescind the Contract to Sell. There is, ____________ 13 Articles 1191 and 1169, Civil Code. 410 410 SUPREME COURT REPORTS ANNOTATED Antipolo Realty Corp. vs. National Housing Authority in any case, no question that under Presidential Decree No. 957, the NHA was legally empowered to determine and protect the rights of contracting parties under the law administered by it and under the respective agreements, as well as to ensure that their obligations thereunder are faithfully performed. We turn to petitioner's assertion that it had been denied the right to due process. This assertion lacks substance. The record shows that a copy of the order denying the Motion to Dismiss and scheduling the hearing of the complaint for the morning of 6 March 1978, was duly served on

counsel for petitioner, as evidenced by the annotation appearing at the bottom of said copy indicating that such service had been effected.14 But even if it be assumed, arguendo, that such notice had not been served on the petitioner, nevertheless the latter was not deprived of due process, for what the fundamental law abhors is not the absence of previous notice but rather the absolute lack of opportunity to be heard.15 In the instant case, petitioner was given ample opportunity to present its side and to be heard on a motion for reconsideration as well, and not just on a motion to dismiss; the claim of denial of due process must hence sound even more hollow.16 We turn finally to the question of the amount of P16,994.73 which petitioner insists had accrued during the period from September 1972 to October 1976, when private respondent had suspended payment of his monthly installments on his chosen subdivision lot. The NHA in its 9 March 1978 resolution ruled that the regular monthly installments under the Contract to Sell did not accrue during the September 1972October 1976 period: "[R]espondent allowed the complainant to suspend payment of his monthly installments until the improvements in the subdivision shall have been completed. Respondent informed complainant on November 1976 that the improvements have been completed. Monthly installments during the period of suspension of payment did not _____________ 14 Rollo of G.R. No. 49051, p. 58; Annex " A" of Comment. 15 Manuel v. Villena, 37 SCRA 745 (1971) and Asprec v. Itchon, 16 SCRA 921 (1966). 16 See, BLTB Co. v. Cadiao, 22 SCRA 987 (1968). 411 VOL. 153. AUGUST 31, 1987 411 Antipolo Realty Corp. vs. National Housing Authority become due and demandable. Neither did they accrue. Such must be the case, otherwise, there is no sense in suspending payments. If the suspension is lifted the debtor shall resume payments but never did he incur any arrears.

Such being the case, the demand of respondent for complainant to pay the arrears due during the period of suspension of payment is null and void. Consequently, the notice of cancellation based on the refusal to pay the arrears that were not due and demandable is also null and void."17 The NHA resolution is probably too terse and in need of clarification and amplification. The NHA correctly held that no installment payments should be considered as having accrued during the period of suspension of payments. Clearly, the critical issue is what happens to the installment payments which would have accrued and fallen due during the period of suspension had no default on the part of the petitioner intervened. To our mind, the NHA resolution is most appropriately read as directing that the original period of payment in the Contract to Sell must be deemed extended by a period of time equal to the period of suspension (i.e., by four (4) years and two (2) months) during which extended time (tacked on to the original contract period) private respondent buyer must continue to pay the monthly installment payments until the entire original contract price shall have been paid We think that such is the intent of the NHA resolution which directed that "[i]f the suspension is lifted, the debtor shall resume payments" and that such is the most equitable and just reading that may be given to the NHA resolution. To permit Antipolo Realty to collect the disputed amount in a lump sum after it had defaulted on its obligations to its lot buyers, would tend to defeat the purpose of the authorization (under Sec. 23 of Presidential Decree No. 957, supra) to lot buyers to suspend installment payments. As the NHA resolution pointed out, "[s]uch must be the case, otherwise, there is no sense in suspending payments." Upon the other hand, to condone the entire amount that would have become due would be an excessively harsh penalty upon the petitioner and would result in the unjust enrichment of the private respondent at the expense ______________ 17 Rollo, p. 20; underscoring supplied. 412 412 SUPREME COURT REPORTS ANNOTATED Ching vs. Malaya

of the petitioner. It should be recalled that the latter had already fulfilled, albeit tardily, its obligations to its lot buyers under their Contracts to Sell. At the same time, the lot buyer should not be regarded as delinquent and as such charged penalty interest. The suspension of installment payments was attributable to the petitioner, not the private respondent. The tacking on of the period of suspension to the end of the original period precisely prevents default on the part of the lot buyer. In the words of the NHA resolution, "never would [the buyer] incur any arrears.'' WHEREFORE, the Petition for Certiorari is DISMISSED. The NHA decision appealed from is hereby AFFIRMED and clarified as providing for the lengthening of the original contract period for payment of installments under the Contract to Sell by four (4) years and two (2) months, during which extended time private respondent shall continue to pay the regular monthly installment payments until the entire original contract price shall have been paid. No pronouncement as to costs. SO ORDERED. Teehankee (C.J.), Yap, Fernan, Narvasa, MelencioHerrera, Gutierrez, Jr., Cruz, Paras, Gancayco, Padilla, Bidin, Sarmiento and Corts, JJ., concur. Petition dismissed Decision affirmed. [Antipolo Realty Corp. vs. National Housing Authority, 153 SCRA 399(1987)]

VOL. 507, NOVEMBER 16, 2006 181 Locus Standi: A Mischievous Concept in Law? ANNOTATION LOCUS STANDI: A MISCHIEVOUS CONCEPT IN LAW? By ROGELIO E. SUBONG * __________________ I.INTRODUCTION, p. 183 II.LOCUS STANDI DEFINED, p. 184 a)From U.S. Jurisdiction, p. 184 b)In Philippine Jurisdiction, p. 185 III.BASIC NATURE OF LOCUS STANDI, p. 186 a)Views on locus standi, p. 186 b)Comparison of these views, p. 187 IV.A BRIEF HISTORY, p. 188 a)Specific application of locus standi, p. 188 b)Locus standi and Real Party in Interest, p. 189 V.RATIONALE OF LOCUS STANDI, p. 190 VI.CASES ON LOCUS STANDI, p. 191 a)People vs. Vera of 1937-38 to Philconsa vs. Mathay of 1960, p. 191 b)Tolentino vs. Comelec of 1971 to Placu vs. Cuneta of 1980, p. 193 c)De La Llana vs. Alba of 1982 to Kapatiran, etc. vs. Tan of 1988, p. 196 d)Association, etc. vs. Sec. of Agriculture of 1989 to Guingona, Jr. vs. Carague of 1991, p. 199 _______________ * A.B. (UP) 62 & LL.B. (UP) 66. 182 182 SUPREME COURT REPORTS ANNOTATED Locus Standi: A Mischievous Concept in Law?

e)Basco vs. Phil. Amusement and Gaming Corp. to Kilosbayan Inc. vs. Guingona, Jr. of 1994, p. 201 f)KMU Center vs. Garcia of 1994 to Bayan vs. Zamora of 2000, p. 203 g)Chavez vs. PEA of 2002 to Francisco vs. MMDA of 2006, p. 207 VII.KILOSBAYAN INC. VS. GUINGONA, JR., 232 SCRA 110 (1994) AND KILOSBAYAN, INC. VS. MORATO, 246 SCRA 540 (1995), p. 212 a)The first case of Kilosbayan Inc. vs. Guingona, Jr., supra, p. 212 b)The second case of Kilosbayan, Inc. vs. Morato, 246 SCRA 540 (1995), p. 214 c)A legal oddity?, p. 215 d)These cases witnessed justices debating, arguing or even proselytizing their respective views, p. 216 e)The spirited debates among justices still failed to yield a consensus, p. 217 VIII.TRANSCENDENTAL IMPORTANCE: A MAGIC INCANTATION?, p. 219 a)No definition of the term in our jurisprudence, p. 219 b)Determinants of Transcendental Importance, p. 220 c)Attempt at definition, p. 221 IX.OBSERVATIONS, p. 222 a)Virtually everyone can be a petitioner, p. 222 b)Requisites for standing or locus standi are hard to meet, p. 223 c)Requisites tested against petitioners in previous cases, p. 224 d)The Resort to Transcendental Importance and Judicial Discretion, p. 227 e)Standing or Locus Standi: A procedural or substantive barrier?, p. 228 f)The need to reexamine this concept of standing or locus standi, p. 229 183 VOL. 507, NOVEMBER 16, 2006 183 Locus Standi: A Mischievous Concept in Law? XI.CONCLUSION, p. 231 a)The quality of our lawmakers and the laws they pass, p. 231 b)The Eugenia T. San Pablo vignette, p. 232 c)The locus standi mystique lives on, p. 234 d)Death of Certainty and the need for continuing debate, p. 234 _________________

The Courts opinion will accomplish the seemingly impossible feat of leaving this area of the law more confused than it found it. (Chief Justice William H. Rehnquist, U.S. Supreme Court, Dissenting Opinion, Roe vs. Wade, 1973) I. INTRODUCTION In private law, the litigant or suitor must be the real party in interest to be able to pursue civil claims. And in public law, he must have the standing or locus standi to be able to pursue a suit usually assailing the constitutionality or legality of legislative enactments as well as executive issuances, actions or contracts. Like real party in interest, the absence of standing or locus standi should doom at the initial stage any legal action. Unlike real party in interest, if standing or locus standi does not obtain, the court may exercise its discretion to give due course to a suit, citing such reasons as the transcendental importance of the issues, presence of serious constitutional issues for resolution, etc. And then even if a suitor has it, the court may still refuse to entertain the suit, citing reasons like failure to observe the hierarchy of courts, lack of urgency, etc. Standing or locus standi has been so elusive and malleable that it has become a mischievous concept in law. It defies categorization and definite application and then it could be disregarded, to allow action, or harnessed, to bar it, depending upon the whims and caprice of the court. Hence, there is a need to re-examine this concept: Is it an inflexible procedural 184 184 SUPREME COURT REPORTS ANNOTATED Locus Standi: A Mischievous Concept in Law? barrier which stringently screens suitors or litigants? Or is it a porous wall that allows unrestricted suits for real or fancied reasons? Hence, there is a need also to search for a clearer and more consistent categorization and application of this concept in our jurisprudence for the guidance of all. The case of Ernesto B. Francisco vs. Hon. Bayani Fernando and the Metro Manila Development Authority, promulgated on Nov. 16, 2006 is a timely occasion to revisit, reexamine and take a hard look at this concept and those related to it. We will also try to find out whether it has advanced the cause of constitutionalism and law, or has promoted judicial ambivalence and abdication of duty.

II. LOCUS STANDI DEFINED a) From U.S. Jurisdiction Locus standi isa place to stand; a standing. (Ballantine Law Dictionary, Third Edition, p. 752). Or it is the right to litigate or to be heard. It has been called one of the most amorphous concepts in the entire domain of public law (from Harvard Law Prof. Paul Freund, suggesting the difficulty in crafting its definition). In common law, the litigant has locus standi if a private right is interfered with; in statute law, the right is conferred by the statute (http://sixthformlaw.infor/03_dictionary/dict_l.htm). In common law, and under many statutes, standing or locus standi is the ability of a party to demonstrate to the court sufficient connection to and harm from the law or action challenged. In the United States, for example, a person cannot bring a suit challenging the constitutionality of a law unless the plaintiff can demonstrate that the plaintiff is (or will be) harmed by the law. Otherwise, the court will rule that the plaintiff lacks standing to bring the suit, and will dismiss the case without considering the merits of the claim of unconstitutionality. (http://wikipedia.org/wiki/Locusstandi). 185 VOL. 507, NOVEMBER 16, 2006 185 Locus Standi: A Mischievous Concept in Law? The U.S. Supreme Court held: In essence the question of standing is whether the litigant is entitled to have the court decide the merits of the dispute or of a particular issue. (Warth v. Allen, 422 U.S. 490, 498; 1975; (http://wikipedia.org/wiki/Locusstandi;). b) In Philippine Jurisdiction In our jurisdiction, the nature and features of locus standi have been extensively discussed but they virtually repeat themselves. Chief Justice Enrique Fernando, noted in Tan vs. Macapagal, 43 SCRA 677 (1972), that the first case that discussed locus standi (proper party, then), was People vs. Vera, 65 Phil. 56 (1937-38). The High Court through Justice Jose P. Laurel postulated: The unchallenged rule is that the person who impugns the validity of a statute must have a personal and substantial interest in the case such that he has sustained, or will sustain, direct injury as a result of its enforcement. Subsequent decisions and

authorities on standing or locus standi have consistently cited, elaborated upon, adopted or rephrased this delineation of Justice Laurel. Thus, in Jumamil vs. Cafe, 470 SCRA 475 (2005), about seventy (70) years thereafter, the words of Justice Laurel still echoed in the High Courts definition of the term: Legal standing or locus standi is a partys personal and substantial interest in a case such that he has sustained or will sustain direct injury as a result of the governmental act being challenged. It calls for more than just a generalized grievance. The term interest means a material interest, an interest in issue affected by the decree, as distinguished from mere interest in the question involved, or a mere incidental interest. Unless a persons constitutional rights are adversely affected by the statute or ordinance, he has no legal standing. 186 186 SUPREME COURT REPORTS ANNOTATED Locus Standi: A Mischievous Concept in Law? III. BASIC NATURE OF LOCUS STANDI a) Views on Locus Standi From the above definitions, we can deduce the following views on locus standi: 1) That it is the right to litigate or to be heard, whether the litigant is entitled to have the issue decided, or the ability to demonstrate to the court the harm to the petitioner, as per definitions from American jurisdiction; 2) That it is personal and substantial interest in the constitutional question being raised, per justice Laurel in People vs. Vera, supra, and Jumamil vs. Cafe, supra, in our jurisdiction. From the above, locus standi is viewed either as a right or interest to pursue a constitutional question. Let us analyze each view, if it would sufficiently catch the real nature of locus standi. First, as a right, this is also shared by every citizen who has an inherent stake and duty to see to it that the Constitution is followed and the laws and executive issuances as well as government actions are consistent with it. Second, as interest or personal and material interest per Jumamil vs. Cafe, supra, or personal and substantial interest it may be also claimed by

anyone as to render it too general as basis. As such right and interest, they both suffer from the bane of nebulousness. The other view of standing or locus standi as the ability to demonstrate to the court the harm to petitioner, defined in American jurisdiction is similar to the view in our jurisdiction that it is the ability to specifically prove (how, this could be done in a pleading, was not explained) that he has sufficient interest in preventing the illegal expenditures of money or it is being able to craft an issue of transcendental significance to the people, as when the issues are of paramount importance to the public. (Francisco, Jr. vs. Nagmamalasakit na Mga Manananggol ng Manggagawang Pilipino, Inc., etc., 415 SCRA 44 (2003). This view may not also be reliable as will be shown hereunder. 187 VOL. 507, NOVEMBER 16, 2006 187 Locus Standi: A Mischievous Concept in Law? On the other hand, the view hardly emphasized is that locus standi pertains to the possession of inherent or lawconferred attributes on the petitioner or litigant that entitles him to initiate and pursue constitutional and legal challenges. After all, locus standi basically means a place to stand which focuses on the situs or the suitor not on the issue sought to be resolved. b) Comparison of these views Let us compare these views: a) With locus standi, as interest or right to initiate and pursue proceedings, the focus or the point of reference is the case or constitutional or legal question/issue sought to be ruled upon; b) On the other hand, with locus standi, as the possession of inherent or law-conferred qualifications/attributes of petitioner or litigant, the focus or point of reference is the suitor, and not the case or constitutional question/issue challenged. Perhaps, it may result in a more accurate grasp of locus standi if the point of reference were on the suitor whether he possesses the requisite qualifications/attributes to raise a constitutional or legal question and not so much on the interest he has (which naturally flows from his attributes and which interest clothes him with personality per Sanidad vs. Comelec, 73 SCRA 333 (1976) in the subject of the suit (the constitutional or legal issues). This distinction may

probably result to a more effective winnowing only of those qualified suitors or petitioners to embark upon a constitutional or legal challenge. c) And locus standi as the ability of a party to demonstrate to the court sufficient connection to and harm from the law or action challenged or being able to craft an issue of transcendental importance to the people, may not be a reliable guide. This may mislead because standing or locus standi is made to depend upon artful presentation of the issues or 188 188 SUPREME COURT REPORTS ANNOTATED Locus Standi: A Mischievous Concept in Law? facility of language in the pleadings to demonstrate entitlement to file and pursue the case. A pertinent part of the discussion in Flast vs. Cohen, 393 US 83, from the US Supreme Court was reproducedn in the Dissenting Opinion of now Chief Justice Puno, in Kilosbayan, Inc. vs. Guingona, Jr., 232 SCRA 110 (1994): The fundamental aspect of standing is that it focuses on the party seeking to get his complaint before a federal court and not on the issues he wishes to be adjudicated. x x x x x x In other words, when standing is placed in issue in a case, the question is whether the person whose standing is challenged is a proper party to request an adjudication of a particular issue and not whether the issue itself is justiciable. (Emphasis supplied) Based on the above, locus standi may be defined as the standing or position of a suitor possessing such personality, qualifications or attributes, either inherent or conferred by law that entitles him to question the constitutionality or validity of legislative enactments, executive and administrative issuances, e.g., law, ordinances, executive orders, rules circulars, and the like, as well as government actions and contracts of which he has direct, personal and substantial interest and has or will sustain direct injury from the enforcement thereof. IV. A BRIEF HISTORY a) Specific application of locus standi Locus standi as possession of attributes to pursue a suit has always been in the Rules of Civil Procedure although not so denominated then. It

pertained also to the proper or appropriate party who can bring a suit. Such party has been technically referred to as real party in interest in our Rules of Procedure, famously defined as the party who would be benefited or injured by the judgment, or the party entitled to the avails of the suit (Salonga vs. Warner Barnes & Co., Ltd., 88 Phil. 125 *1951+). Then with the approval of the 1935 Con189 VOL. 507, NOVEMBER 16, 2006 189 Locus Standi: A Mischievous Concept in Law? stitution, there were cases challenging and testing laws against this fundamental law. As stated in People vs. Vera, supra, the forerunner term for locus standi was proper party, and then in subsequent cases, personality, standing or interest was also used. It was only in Sanidad vs. Comelec, supra, when the High Court used the term locus standi for the first time, specifically referring to petitioners raising constitutional or legal challenges. b) Locus standi and Real Party in Interest Real party in interest and locus standi are both viewed as possession of direct, personal and substantial interest in the subject and outcome of the case. However, they differ in that real party in interest is applied to a litigant in private law whereas locus standi has been generally applied to a litigant in public law where there is usually a challenge to the constitutionality of a law or the constitutionality and legality of administrative and executive issuances as well as government actions and contracts. It has been recognized as a concept in constitutional law (The Anti-Graft League of the Phil., Inc. vs. San Juan, 260 SCRA 250 [1996] and Kilosbayan, Inc. vs. Morato, 246 SCRA 540 [1995]). Quoting from a U.S. court decision: x x x standing because of its constitutional underpinnings, is very different from questions relating to whether a particular plaintiff is the real party in interest or has capacity to sue. Although all three requirements are directed towards insuring that only certain parties can maintain an action, standing restrictions require a partial consideration of the merits, as well as broader policy concerns relating to the proper role of the judiciary in certain areas *citation omitted] (Kilosbayan Inc. vs. Morato, supra, and reiterated in Francisco, Jr. vs. Nagmamalasakit na mga Manananggol ng mga Manggagawang

Pilipino, et al., and related cases, 415 SCRA 44 [2003]). This simply means that locus standi pertains to constitution and legal challenges. 190 190 SUPREME COURT REPORTS ANNOTATED Locus Standi: A Mischievous Concept in Law? V. RATIONALE OF LOCUS STANDI As pointed out earlier, locus standi is either applied as a procedural barrier or a porous wall depending upon its use by the court. Hence, locus standi when used as a barrier aims to screen indiscriminate filing of petitions at the slightest excuse to question the constitutionality or validity of laws, government issuances and actions. If petitioners are liberally held to possess locus standi, the courts would be inundated with petitions from crackpots who may just want their names immortalized in the pages of the Philippine Reports or the Supreme Court Reports Annotated (SCRA) whose interest in the case is nothing short of nothing. The High Court must be regularly swamped with nuisance petitions raising all kinds of constitutional and legal challenges, and dismissed outrightalthough they are often unreported. Justice Melo in his Dissenting Opinion in Kilosbayan, Inc. vs. Guingona, Jr., 232 SCRA 110 (1994) was forthright: If every taxpayer, claiming to have interest in the contract, no matter how remote, could come to this Court and seek nullification of said contract, the day may come when the activities of government corporate entities will ground to a standstill on account of nuisance suits filed against them by persons whose suppose interest in the contract is as remote and as obscure as the interest of any man in the street. On the other hand, as a porous wall, locus standi aims at a policy of expanded jurisdiction by allowing the largest segment of our people the opportunity to question the constitutionality of laws and/or legality of government issuances and actions, and by encouraging them to constantly hover as a brooding omnipresence over their officials to keep them within the straight and narrow path of constitutionalism and legality. 191 VOL. 507, NOVEMBER 16, 2006

191 Locus Standi: A Mischievous Concept in Law? VI. CASES ON LOCUS STANDI a) People vs. Vera of 1937-38 to Philconsa vs. Mathay of 1960 As mentioned earlier, the first case that discussed this doctrine of standing or locus standi was People vs. Vera, 65 Phil. 56 (1937-38) which came out with the novel holding that the People or the Government was considered as a proper party to have its own laws set aside. The accused, Mariano Cu Unjieng, who was convicted in this case applied for probation which was opposed by the prosecution. The defense questioned the personality of the private complainant bank when it challenged the constitutionality of that Probation Law. The High Court through Justice Jose P. Laurel, asserted: And on the hypothesis that the Hongkong & Shanghai Banking Corporation, represented by the private prosecution, is not the proper party to raise the constitutional question herea point we do not have to decidewe are of the opinion that the People of the Philippines, represented by the Solicitor General and the Fiscal of the City of Manila, is a proper party in the present proceedings. The unchallenged rule is that the person who impugns the validity of a statute must have a personal and substantial interest in the case such that he has sustained, or will sustain, direct injury as a result of the enforcement. It goes without saying that if Act No. 4221 really violates the Constitution, the People of the Philippines in whose name the present action is brought, has a substantial interest in having it set aside. Of greater import than the damage caused by the illegal expenditure of public funds is the mortal wound inflicted upon the fundamental law by the enforcement of an invalid statute. Hence, the well-settled rule that the State can challenge the validity of its laws. After the war, in Mabanag, et al. vs. Lopez Vito, 78 Phil. 1 (1947), petitioners, senators, congressmen, prominent citizens and taxpayers, were assumed to have the standing to question the constitutionality of the Parity Amendment Resolution (amendment to the Constitution allowing Americans equal rights to exploit our natural resources) through a petition for prohibition. The petition was dismissed because the issue was 192

192 SUPREME COURT REPORTS ANNOTATED Locus Standi: A Mischievous Concept in Law? considered a political question, but the standing of the petitioners were not questioned at all in the main decision. Then in the Emergency Powers Cases led by Araneta vs. Dinglasan, et al., 84 Phil. 368 (1949) petitioners, prominent lawyers, citizens and taxpayers, were found to be wanting in standing or personality to sue, but were still allowed to question the validity of Executive Orders (EOs) issued by Pres. Elpidio Quirino after the war pursuant to Com. Act No. 671 known as Emergency Powers Act. Petitioners contended that this law has ceased to have any force and effect with the convening of Congress after the war. The High Court even at the outset, opted to pass up the objection to the personality or sufficiency of interest of the petitioners. Then it came out with this now famous holding: Above all, the transcendental importance to the public of these cases demands that they be settled promptly and definitely, brushing aside, if we must, technicalities of procedure (Emphasis supplied). In Pascual vs. Sec. of Public Works, et al., 110 Phil. 331 (1960) petitioner, governor of Rizal province was allowed to sue as public official and taxpayer questioning the constitutionality of a law appropriating public funds for roads in a subdivision owned by a senator. The High Court argued that the rule recognizing the taxpayer to assail the constitutionality of legislation appropriating local or state public funds which has been upheld by the Federal Supreme Court x x x has greater application in the Philippines. It concluded that petitioner was not merely a taxpayer but governor of a most populated political subdivision, and the taxpayers therein bear a substantial portion of the burden of taxation. In Gonzales vs. Hechanova, et al., 118 Phil. 1065 (1963), petitioner, Atty. Ramon Gonzales, a rice planter and president of an association of corn and rice planters was found to have standing or locus standi in his petition assailing the legality of government importation of foreign rice since there was a law prohibiting it. The High Court dismissed the claim that petitioner lacked sufficient interest for he owned about 275 193 VOL. 507, NOVEMBER 16, 2006

193 Locus Standi: A Mischievous Concept in Law? hectares of riceland and since public funds would be used to buy rice abroad. It argued that petitioner as taxpayer has sufficient personality and interest to seek judicial assistance with a view to restraining what he believes to be an attempt to unlawfully disburse said funds. In Phil. Constitution Asso., Inc. (Philconsa), Jose E. Romero, et al. vs. Gimenez, 15 SCRA 479 (1965), petitioners, Philconsa, a non-profit civic organization and some prominent individuals were recognized to have standing or locus standi in their petition directly with the High Court assailing the constitutionality of the law granting retirement and vacation benefits to members of Congress. The High Court declared the law unconstitutional after holding that: This Court has repeatedly held that when the petitioner, like in this case, is composed of substantial taxpayers, and the outcome will affect their vital interests, they are allowed to bring the suit (Pascual vs. Secretary, G.R. No. L-10405, December 29, 1960; and Gonzales vs. Hechanova, 60 Off. Gaz. 802 [1963]). Then in Philconsa vs. Mathay, 18 SCRA 300 (1966), petitioner Philconsa was again held to have standing or locus standi to question the constitutionality of a law increasing the salaries of members of Congress. As to the standing of Philconsa, with Filipino citizens and taxpayers as members, the High Court ruled that: As taxpayers, the petitioners may bring an action to restrain officials from wasting public funds through the enforcement of an invalid or unconstitutional law, citing Philconsa vs. Gimenez, supra, and Pascual vs. Sec. of Public Works, supra, etc. b) Tolentino vs. Comelec of 1971 to Placu vs. Cuneta of 1980 In Tolentino vs. Comelec, 41 SCRA 702 (1971), petitioner, a senator was allowed to challenge the constitutionality of the action of the Comelec to hold a plebiscite regarding an amendment to the Constitution reducing the minimum voting age to 18 years old. The High Court granted the petition 194 194 SUPREME COURT REPORTS ANNOTATED Locus Standi: A Mischievous Concept in Law? without even discussing the standing of the petitioner, then Sen. Arturo Tolentino. Thereafter in Tan vs. Macapagal,43 SCRA 677 (1972),

petitioners, private individuals suing as taxpayers were held to have no standing or locus standi to question the constitutionality of the LaurelLeido Resolution in 1971 for the adoption of a form of government other than that outlined in the fundamental law. The High Court through Justice Enrique Fernando, repeated the Laurel dictum that a party impugning the validity of a statute must possess personal and substantial interest in the case. He observed that there was a relaxation of the rule; that there were laws providing for the spending of public funds which were declared unconstitutional by courts at the instance of taxpayers; and that such expenditure amounted to misappropriation of public funds which may be enjoined by a taxpayer. He then declared: Moreover, where a constitutional question is raised, a senator has usually been considered as possessed of the requisite personality to bring a suit. It also proclaimed: x x x as far as taxpayers suit is concerned, this Court is not devoid of discretion as to whether or not it should be entertained. It is our view that a negative answer is indicated. In Aquino, et al. vs. Commission on Elections, et al., 62 SCRA 275 (1975), the petitioners, an incarcerated former senator, bishops and prominent individuals, were held to have no standing to file the petition for prohibition questioning the Presidential Decrees of Pres. Marcos calling for a referendum and appropriating funds therefor as well as his other decrees. The Court categorically concluded even at the outset that petitioners have no personality to file the suit. However, it proceeded to decide the case although it was a wrong remedy as the petition was in the nature of a quo warranto, appropriate only to be filed by the Solicitor General, for persons who assert title to the same office, but because of the farreaching implications of the herein petition, the Court resolved to pass upon the issues raised. Then in Gonzales vs. Marcos, 65 SCRA 624 (1975), the petitioner, Atty. Ramon 195 VOL. 507, NOVEMBER 16, 2006 195 Locus Standi: A Mischievous Concept in Law? Gonzales again, as taxpayer was held this time, to have no personality to question the validity of an Executive Order creating the Cultural Center of the Philippineswhich he claimed had no statutory basis. The High

Court found that the funds to be used for the center came from donations ,and- contributions (not) taxation, petitioner did not have the requisite pecuniary and monetary interest; and petitioner, judged by orthodox legal learning, has not satisfied the elemental requisite for taxpayers suit. It added that even if public funds were used, it still does not necessarily follow that such kind of challenge has to be passed upon. And citing Tan vs. Macapagal, supra, it concluded that the Court is not devoid of discretion as to whether or not it should be entertained. In Sanidad, et al. vs. Commission on Elections, et al., etc., 73 SCRA 333 (1976) petitioners (father and son) were considered to possess standing in their petition for prohibition questioning the power of the President then to propose amendments to the Constitution in the absence of the Interim Batasan Pambansa. On the claim that petitioners have no standing to sue, the High Court held that they possess locus standi (the first time the term was used) to challenge the constitutional premise of certain Presidential Decress (PDs). It added that the PDs may be contested by one who will sustain a direct injury as a result of its enforcement. At the instance of taxpayers, laws providing for the disbursement of public funds may be enjoined, upon the theory that the expenditure of public funds by an office of the State for the purpose of executing an unconstitutional act constitutes misapplication of such funds. x x x x x x The interest of the aforenamed petitioners as taxpayers in the lawful expenditure of these amounts of public money sufficiently clothe them with the personality to litigate the validity of the Decrees appropriating said funds (Emphasis supplied). The High Court reiterated its discretion to entertain such cases, as declared in earlier cases: Moreover, as regards 196 196 SUPREME COURT REPORTS ANNOTATED Locus Standi: A Mischievous Concept in Law? taxpayers suits, this Court enjoys that open discretion to entertain the same or not. For the present case, We deem it sound to exercise that discretion affirmatively so that the authority upon which the disputed Decrees are predicated may be inquired into. Also, in Pasay Law and Conscience Union, Inc. (Placu), et al. vs. Cuneta, 101 SCRA 662 (1980),

petitioner, a civic group which claimed to be dedicated to the rule of law and conscience along with a city chief of police was allowed to question the memorandums of a city mayor designed to clandestinely remove the Chief of Police of the city. It held that: Petitioner Placu, together with real party in interest, petitioner chief of police, is not disqualified to appear as petitioner in this case, because as a non-profit, civic and non-partisan organization, like Philconsa, it is merely interested in upholding the rule of law. c) De La Llana vs. Alba of 1982 to Kapatiran, etc. vs. Tan of 1988 In De La Llana vs. Alba, 112 SCRA 294 (1982), petitioners, a judge and several practicing lawyers were held to have standing to pursue their petition questioning the constitutionality of B.P. Blg. 129 or the Judicial Reorganization Act. The High Court through Justice Fernando declared that the judge falls within the principle in People vs. Vera, supra: that the person who impugns the validity of statute must have a personal and substantial interest in the case. And the lawyers-petitioners, cannot be considered as devoid of any personal and substantial interest on the matter. And then he proceeded to quote from his Concurring Opinion in Aquino vs. Comelec, supra, and cited his earlier ponencia in Tan vs. Macapagal, supra. Justice Aquino in his Concurring Opinion disagreed: They have no personality to assail the constitutionality of the said law even as taxpayers. And the eighth petitioner, a city judge has no cause of action for prohibition. He is not being removed from his position. 197 VOL. 507, NOVEMBER 16, 2006 197 Locus Standi: A Mischievous Concept in Law? In Lozada vs. Commission on Elections, 120 SCRA 337 (1983), petitioners, a practicing lawyer and prospective candidate along with another person as taxpayer were held to be wanting in standing in their petition to compel the Comelec to conduct elections for existing vacancies in the Batasang Pambansa pursuant to the Constitution. The High Court held that petitioners did not have the standing to file and pursue the petition as there was no allegation of illegal spending of tax money. Petitioners complaint against the inaction of Comelec to call a special election, a ministerial duty, therefore, involves no expenditures of public funds. It is only when there is such illegal expenditure that the so-called taxpayer

suit may be allowed. x x x Petitioners standing to sue may not be predicated upon an interest of the kind alleged here, which is held in common by all members of the public because of the necessarily abstract nature of the injury supposedly shared by all citizens. Concrete injury, whether actual or threatened, is that indispensable element of a dispute which serves in part to cast it in a form traditionally capable of judicial resolution. No law was assailed in this case nor were there allegations of illegal disbursement of public funds (Underscoring supplied). In Legaspi vs. Civil Service Commission, 150 SCRA 530 (1987), petitioner, a private individual was held to have standing to demand disclosure of certain records of government employees through mandamus. On the question of personality of petitioner, the High Court explained that the petitioner has firmly anchored his case upon the right of the people to information on matters of public concern, which by its very nature, is a public right. It further declared that when a petition for Mandamus involves the assertion of a public right, the requirement of personal interest is satisfied by the mere fact that the petitioner is a citizen, and therefore part of the general public which possess the right. In Valmonte vs. Phil. Charity Sweepstakes Office, G.R. No. 78716, Sept. 22, 1987 (unreported), petitioner, a practicing 198 198 SUPREME COURT REPORTS ANNOTATED Locus Standi: A Mischievous Concept in Law? lawyer was held to have no standing or locus standi in his direct petition before the High Court assailing the constitutionality of a law allowing Instant Sweepstakes by the Phil. Charity Sweepstakes Office. The petition was dismissed outright but the High Court set forth constitutional standing requirements often cited in subsequent cases: Valmonte brings the suit as a citizen, lawyer, taxpayer and father of three (3) minor children. But nowhere in the petition does petitioner claim that his rights and privileges as a lawyer or citizen have been directly and personally injured by the operation of the Instant Sweepstakes. The interest of a person assailing the constitutionality of statute must be direct and personal. He must be able to show not only that the law is invalid, but also that he has sustained or is in immediate

danger of sustaining some direct injury as a result of its enforcement, and not merely that he suffers thereby in some indefinite way. It must appear that the person complaining has been or is about to be denied some right or privilege to which he is lawfully entitled or that he is about to be subjected to some burdens or penalties by reason of the statute complained of. (Reproduced from Kilosbayan, Inc. vs. Morato, 246 SCRA 540 [1995]). In Kapatiran ng mga Naglilingkod sa Pamahalaan ng Filipinas, Inc., et al. vs. Tan, 163 SCRA 371 (1988), petitioners, an organization of government employees, a labor union and private individuals were not declared to have standing to file and pursue their petitions questioning the constitutionality of the Value Added Tax (VAT) law. However, this deficiency was brushed aside by the High Court. It reasoned: Objections to taxpayers suit for lack of sufficient personality, standing, or interest are, however, in the main procedural matters. Considering the importance to the public of the cases at bar, and in keeping with the Courts duty, under the 1987 Constitution, to determine whether or not the other branches of government have kept themselves within the limits of the Constitution and the laws and that they have not abused the discretion given to them, the Court has brushed aside technicalities of procedure and has taken cognizance of these petitions. 199 VOL. 507, NOVEMBER 16, 2006 199 Locus Standi: A Mischievous Concept in Law? d) Association, etc. vs. Sec. of Agriculture of 1989 to Guingona, Jr. vs. Carague of 1991 In Association of Small Landowners in the Philippines, Inc. vs. Secretary of Agriculture, et al., and related cases,175 SCRA 343 (1989), petitioners, an association of land owners and its members were found to have standing in the several petitions filed with the Supreme Court which involved common legal questions and challenge to the constitutionality of the Comprehensive Agrarian Reform Law of 1988. The High Court held that the requirement of proper partyis satisfied by petitioners and intervenors because each of them has sustained or is in danger of sustaining an immediate injury as a result of the acts or measures complained of. And even if, strictly speaking, they are not covered by

the definition, it is still within the wide discretion of this Court to waive the requirement and so remove the impediment to its addressing and resolving the serious constitutional question raised. The High Court again referred to the oft-cited first Emergency Powers Cases wherein it proceeded to decide the cases in spite of standing or locus standi deficiency of petitioners due to the transcendental importance of the issues. It concluded: We have since then applied this exception in many other cases. In Bugnay Construction and Dev. Corp. vs. Laron,176 SCRA 240 (1989), petitioner, a lawyer for a plaintiff in a case who separately sued as taxpayer the same defendants of that case, over a contract, in another sala, to get a favorable ruling was held to have no standing or locus standi to sue. The contract was between Dagupan City and a third party over the use of a commercial lot owned by the latter. On appeal, when the standing to sue of the lawyer was questioned, the High Court noted that: It is all too ludicrously transparent and readily apparent that respondent Ravanzo merely sought another branch of the same court, figuratively using the hat of a taxpayer, what he failed to obtained in one branch, under the hat of a representing counsel. It thereafter declared that said lawyer: x x x was neither a real party in 200 200 SUPREME COURT REPORTS ANNOTATED Locus Standi: A Mischievous Concept in Law? interest nor could he have validly maintained said case as a so-called taxpayers suit. It concluded: No disbursement of public funds, legal or otherwise, being involved in the challenged transaction, the locus standi claimed by plaintiff x x x is non-existent. In Laurel vs. Garcia, 187 SCRA 797 (1990) and companion cases, petitioners, the vice president of the Philippines and Dionisio Ojeda were not questioned at all as to their standing in their successful petitions filed directly with the High Court assailing the constitutionality of a Executive Order and stop the sale of the well-known Roppongi property in Japan. In Gonzales, et al. vs. Macaraig, Jr., et al., 191 SCRA 452 (1990), petitioners, virtually all the senators as substantial taxpayers whose vital interest may be affected by this case were declared to possess standing in the petitions assailing the constitutionality of presidential

veto of a provision on the 1989 budget bill. On the standing of petitioners, the High Court briefly noted that: Petitioners have also brought this suit as taxpayers. As ruled in Sanidad v. COMELEC, G.R. No. 44640, 12 October 1976, 73 SCRA 333, this Court enjoys the open discretion to entertain taxpayers suits or not. In Tolentino v. COMELEC, No. L-24150, 16 October, 1961, 41 SCRA 702, it was also held that a member of the Senate has the requisite personality to bring a suit where a constitutional issue is raised. In Guingona, Jr., et al. vs. Carague, et al., 196 SCRA 221 (1991), petitioners, two (2) senators were found to have standing in their petition which the High Court noted as a case of first impression that questioned the constitutionality of the automatic appropriation for debt servicing in the 1990 Budget. The High Court assured that: There can be no question that petitioners as senators of the Republic of the Philippines may bring this suit where a constitutional issue is raised. Indeed, even a taxpayer has personality to restrain unlawful expenditures of public funds. 201 VOL. 507, NOVEMBER 16, 2006 201 Locus Standi: A Mischievous Concept in Law? e) Basco vs. Phil. Amusement and Gaming Corp of 1991 to Kilosbayan Inc. vs. Guingona, Jr. of 1994 In Basco vs. Phil. Amusement and Gaming Corp., 197 SCRA 52 (1991), petitioner, a Manila councilor and his law partner, Atty. Edilberto Balce were not categorically declared to possess standing in their petition assailing the constitutionality of the law creating the Philippine Amusement and Gaming Corp. (PAGCOR) but the High Court decided the case anyway. Citing its ruling in Kapatiran etc. vs. Tan, supra,it disregarded the procedural objection of standing of petitioners due to importance of the case and in keeping the Courts duty to see to it that other branches of government followed the Constitution and the law and have not abused their discretion. In Maceda vs. Macaraig, Jr., et al., 197 SCRA 771 (1991), petitioner, a senator also was considered to have standing to file this direct petition with the High Court to annul the rulings of Executive Secretary and other executive officers for exempting the National Power Corp. (NPC) from

indirect tax and duties. The High Court disregarded the claim that petitioner must show that direct injury as a result of the action and that it was not sufficient that is was a mere general interest common to the public: The Court however agrees with the petitioner that as a taxpayer he may file the instant petition following the ruling in Lozada when it involves illegal expenditure of public money. The petition questioned the legality of the tax refund to NPC by way of tax credit certificates and the use of said assigned tax credits by respondent oil companies to pay their tax and duty liabilities to the BIR and Bureau of Customs. (Note: The Lozada case itself did not involve illegal expenditure of public money, although there was a pronouncement that it is only when there is such illegal expenditure that the so-called taxpayer suit may be allowed). In Osmea, et al. vs Commission on Elections, et al., 199 SCRA 750 (1991), petitioners, a provincial governor, other 202 202 SUPREME COURT REPORTS ANNOTATED Locus Standi: A Mischievous Concept in Law? local executives and congressmen were not declared to have standing by the High Court in their petitions assailing the constitutionality of a law providing for synchronized elections in 1992, but it still resolved the issues raised. It declared: We held as early as in the Emergency Power Cases (Araneta v. Dinglasan, 84 Phil. 368; Rodriguez v. Gella, 93 Phil. 603) that where serious constitutional questions are involved the transcendental importance to the public of these cases demands that they be settled promptly and definitely, brushing aside if we must technicalities of procedure. Then it invoked its discretion: As for the alleged procedural flawslack of court standing, etc., assuming the existence of such flaws, the same may be brushed aside, conformably with existing doctrine so that the important constitutional issue raised may be addressed. In Citizen J. Antonio M. Carpio vs. Executive Secretary, 206 SCRA 290 (1992), a petitioner, a Citizen J. Antonio Carpio was entertained in his petition with the High Court claiming the unconstitutionality of the law establishing the Philippine National Police, without ruling on his standing. He was merely referred to as citizen, taxpayer and member of the Philippine Bar sworn to defend the Constitution and his standing was not questioned at all.

In De Guia vs. Commission on Elections, 208 SCRA 420 (1993), petitioner, a municipal councilor who questioned the validity of Comelec Resolution on apportionment of districts for election purposes was found to have no standing but his petition was decided just the same. Petitioner did not allege that he was running for reelection or that he would be prejudiced by the elections. The High Court declared that he does not appear to have a locus standi, a standing in law, a personal or substantial interest. He does not also allege any legal right that has been violated by respondent. If for this alone, petitioner does not appear to have any cause of action. In any case, the High Court invoked the usual excuse for the taking cognizance of a case it wanted to resolve: x x x considering the importance of the issue involved, concerning as it does the political exercise of qualified voters affected by the appor203 VOL. 507, NOVEMBER 16, 2006 203 Locus Standi: A Mischievous Concept in Law? tionment, and petitioner alleging abuse of discretion and violation of the Constitution by respondent, We resolve to brush aside the question of procedural infirmity, even as We perceive the petition to be one of declaratory relief, We so held similarly through Mr. Justice Edgardo L. Paras in Osmea vs. Commission on Elections. In Kilosbayan, Inc. vs. Guingona, Jr., 232 SCRA 110 (1994), the petitioners were held to have standing or locus standi to question the contract for the operation of the lotto system. This decision shall be discussed separately in the later part of this Annotation; f) KMU Center vs. Garcia of 1994 to Bayan vs. Zamora of 2000 In KMU Center vs. Garcia, Jr., et al., 239 SCRA 386 (1994), petitioner, a labor group was allowed to question the constitutionality of the Land Transportation Franchising and Regulatory Board (LTFRB) and the Dept. of Transportation and Communications (DOTC) memorandum circulars and/or orders particularly that which delegated to bus and jeepney transport operators authority to fix transport fares within a certain range, etc. The High Court found that Petitioner KMU has the standing to sue. It further declared that: x x x petitioner, whose members had suffered and continue to suffer grave and irreparable injury and damage from the implementation of the

questioned memoranda, circulars and/or orders, has shown that it has a clear legal right that was violated and continues to be violated with the enforcement of the challenging memoranda, circulars and/or orders. KMU members, who avail of the use of buses, trains and jeepneys everyday, are directly affected by the burdensome cost of arbitrary increase in passenger fares. They are part of the millions of commuters who comprise the riding public. Certainly, their rights must be protected, not neglected or ignored. It invoked again the usual excuse: even if petitioner is not possessed of the standing to sue, this court is ready to brush aside this barren procedural infirmity and recognize the legal standing 204 204 SUPREME COURT REPORTS ANNOTATED Locus Standi: A Mischievous Concept in Law? of the petitioner in view of the transcendental importance of the issues raised. (Underscoring supplied) In Tatad, et al. vs. Garcia, Jr., 243 SCRA 436 (1995), petitioners, three (3) members of the senate suing as senators and as taxpayers, were considered also to possess standing in their petition directly with the Supreme Court questioning the constitutionality of contracts for the construction of the Light Rail Transit System (LRT). On the standing of petitioners, the High Court ruled: The prevailing doctrines to taxpayers suits are to allow taxpayers to question contract entered into by the national government or government-owned or controlled corporation allegedly in contravention of the law (Kilosbayan, Inc. vs. Guingona, 232 SCRA 110 [1994]) and to disallow the same when only municipal contracts are involved (Bugnay Construction and Development Corporation v. Laron, 176 SCRA 240 *1989+). It closed with: For as long as the ruling in Kilosbayan on locus standi is not reversed, we have no choice but to follow it and uphold the legal standing of petitioners as taxpayers to institute the present action. (Note: The petitioner in Bugnay was found to have no standing because the contract did not involve disbursement of public funds, among other grounds, not because a municipal contract was involved.) In Kilosbayan, Inc. vs. Morato, 246 SCRA 540 (1995), the same petitioners questioning the same lotto contract, who were held to have standing or

locus standi, in the first Kilosbayan case (Kilosbayan, Inc. vs. Guingona, Jr.) were stripped of the same, this time. This decision shall also be discussed in the later part of this Annotation. In The Anti-Graft League of the Phil., Inc. vs. San Juan, et al., 260 SCRA 250 (1996), petitioner, a non-profit corporation for the interest of the Republic was found wanting in standing to question the resale price of about 19 hectares land in Ugong, Pasig to its previous owner. The High Court dismissed the petition because petitioner lacked standing or locus standi, and the resale price was even higher with no dis205 VOL. 507, NOVEMBER 16, 2006 205 Locus Standi: A Mischievous Concept in Law? bursement of public funds involved. It also reiterated the requisites for taxpayers suit: a) public funds are illegally disbursed and b) petitioner is directly affected thereby. It noted that standing should not have been an issue in that case since standing is a concept in constitutional law and here no constitutional question is actually involved, (citing Kilosbayan vs. Morato,supra). It concluded that: When, however, no such unlawful spending has been shown, as in the case at bar, petitioner, even as a taxpayer, cannot question the transaction validly executed by and between the Province and Ortigas, for the simple reason that it is not privy to said contract. In other words, petitioner has absolutely no cause of action, and consequently no locus standi, in the instant case. In Telecommunications and Broadcast Attorneys of the Philippines, Inc. (TELEBAP) vs. Commission on Elections, 289 SCRA 337 (1998), petitioners, association of lawyers and a radio-TV Network company were found to have no legal standing and with legal standing respectively in their petition questioning the constitutionality of a section of a law on free use of TV and radio time during elections. As to its standing, the TELEBAP asserted its interest as an association of lawyers of broadcast media companies, as citizens, taxpayers and registered voters. The High Court found that: Petitioner TELEBAP must be held to have no standing. Indeed, a citizen will be allowed to raise a constitutional question only when he can show that he has personally suffered some actual or threatened injury as a result of the allegedly illegal conduct of government; the injury is fairly

traceable to the challenged action. Members of petitioner have not shown that they have suffered harm as a result of the operation of Sec. 92 of BP Blg. 881. But as to the other petitioner, it declared that: GMA Network, Inc., appears to have the requisite standing to bring the constitutional challenge. x x x x x x xxx 206 206 SUPREME COURT REPORTS ANNOTATED Locus Standi: A Mischievous Concept in Law? Petitioners allegation that it will suffer losses again because it is required to provide free airtime is sufficient to give it standing to question the validity of Sec. 92. (Emphasis supplied). In Chavez vs. PCGG, 299 SCRA 744 (1998), petitioner as taxpayer, citizen and former government official was held to have locus standi or standing in asking the High Court to define the nature and the extent of the peoples constitutional right to information on matters of public concern like the disclosure of the negotiations or agreement between the Philippine Commission on Good Government (PCGG) and the Marcoses on the recovery of their ill-gotten wealth. On the standing of petitioner the High Court said: Moreover, the mere fact that he is a citizen satisfies the requirement of personal interest, when the proceeding involves the assertion of a public right, such as in this case. Petitioner invoked several decisions of this Court which have set aside the procedural matter of locus standi, when the subject of the case involved public interest. Finally, it postulated: Access to public documents and records is a public right, and the real parties in interest are the people themselves. In Bayan (Bagong Alyansang Makabayan), et al. vs. Zamora, et al., 342 SCRA 449 (2000), and companion cases. petitioners, cause-oriented groups, legislators, nongovernment organizations, citizens and taxpayers, were held to possess no standing in assailing the controversial Visiting Forces Agreement (VFA) between the Philippines and the United States but the High Court proceeded to decide the case due to the importance of the issue involved. It ruled that petitioners failed to show, to the satisfaction of the court that they have sustained or in

danger of sustaining any direct injury as a result of the enforcement of the VFA. As taxpayers, petitioners have not established that the VFA involves the exercise by Congress of its taxing or spending powers. Hence, petitioners as taxpayers, have no legal standing to assail the legality of the VFA. This time legislators or congressmen, led by Wigberto Taada do not also possess the 207 VOL. 507, NOVEMBER 16, 2006 207 Locus Standi: A Mischievous Concept in Law? requisite locus standi to maintain the present suit. The Integrated Bar of the Philippines was also stripped of standing in these cases for lack of Board Resolution to its National President to commence the action. However, in spite of its holding of lack of standing of the petitioners, in view of the paramount importance and the constitutional significance of the issues raised in the petitions, this Court, in the exercise of its sound discretion, brushes aside the procedural barrier and takes cognizance of the petitions. g) Chavez vs. PEA of 2002 to Francisco vs. MMDA of 2006 In Chavez vs. Public Estates Authority, 384 SCRA 152 (2002), a private citizen and former Solicitor General was held to possess standing in his petition to compel the Public Estates Authority (PEA) to disclose all facts about the negotiations with Amari Coastal Bay and Dev. Corp. (Amari) over reclaimed portion of the Manila Bay and to enjoin the signing of a new agreement. As to the standing of petitioner, the High Court proclaimed: The petitioner has standing to bring this taxpayers suit because the petition seeks to compel PEA to comply with its constitutional duties. It then concluded: We rule that since the instant petition, brought by a citizen, involves the enforcement of constitutional rightsto information and to the equitable diffusion of natural resourcesthe matters of transcendental importance, the petitioner has the requisite locus standi. In Francisco Jr. vs. Nagmamalasakit na mga Manananggol ng mga Manggagawang Pilipino, Inc., et al., 415 SCRA 44 (2003) and 17 companion petitions, some petitioners were held to have standing while others were not, in their petitions claiming as unconstitutional the Second Impeachment Complaint against then Chief Justice Hilario Davide

regarding the illegal disbursement of the Judiciary Development Fund. The petitions were dismissed after the High Court ruled on the locus standi of each of the petitioners. It then reaffirmed that: Locus standi or legal standing has been defined as a 208 208 SUPREME COURT REPORTS ANNOTATED Locus Standi: A Mischievous Concept in Law? personal and substantial interest in the case such that the party has sustained or will sustain direct injury as a result of the government act that is challenged. The High Court clarified: In a long line of cases, however, concerned citizens, taxpayers and legislators when specific requirements have been met, have been given standing by this Court. It then restated the usual requisites that a citizen who sues to assail the constitutionality of a statute must comply with per Valmonte vs. PCSO, supra. Intervenor Soriano, held the view that petitioners lack standing because it was only the Chief Justice who has sustained and will sustain direct personal injurywhich was shared by Amicus Curiae former Solicitor General Estelito Mendoza. The High Court then ruled on the standing or locus standi of the petitioners: a) As taxpayerhe is allowed to sue where there is a claim that public funds are illegally disbursed. The Court invoked its discretion to entertain the petition. It opted to grant standing to most of the petitioners since the impeachment trial will entail expenditure of public funds; b) As legislatorhe has standing to maintain inviolate the prerogatives, powers and privileges vested by the Constitution in his office; c) As the Integrated Bar of the Philippinesit had no standing but since it has advanced constitutional issues which deserve attention of this Court the Court decided to relax the rules on standing and to resolve the issues presented by it; d) Mr. Vallejoshe failed to alleged any interest in the case. He does not have thus standing. e) Two lawyers who adopted the allegations of Candelaria, et al.were allowed to intervene along with the latter;

f) The Manananggol ng mga Manggagawang Pilipino, Inc., et al.it sought to join Petitioner Francisco. They invoked their right as citizens to intervene alleging that they will suffer if this insidious scheme of the minority members of the House of Representatives is successful (How, it was not explained). The Court found that the requisites of intervention had been complied with; 209 VOL. 507, NOVEMBER 16, 2006 209 Locus Standi: A Mischievous Concept in Law? g) A veterans groupwho sought to intervene to raise the additional issue of whether the second impeachment was valid or based on any grounds in the Constitution, aside from alleging transcendental importance of the issues raised in other petitions, was held to possess an the interest in the matter in litigation; h) Sen. Aquilino Pimentelhe was allowed to intervene as he alleged that the submission of the Senate president to the Courts jurisdiction will undermine the independence of the Senate which will sit as an impeachment court; i) And finally, a certain Sorianohe was denied standing in his Motion to Intervene because while he claimed interest as taxpayer, he failed to allege the standing requirement for a taxpayer suit per Dumlao vs. Comelec (95 SCRA 392; 1980). In Province of Batangas vs. Romulo, 429 SCRA 735 (2004), petitioner, as a local government unit was held to have locus standi or standing to file a petition for certiorari, prohibition and mandamus under Rule 65 seeking to declare as unconstitutional certain provisos of the General Appropriations Act (Budget Law) for 1999, 2000 and 2001 insofar as they earmarked certain amounts to local governments and imposed conditions therefor. As to the standing of the province: The Court holds that the petitioner possesses the requisite standing to maintain the present suit. The petitioner, a local government unit, seeks relief in order to protect or vindicate an interest of its own, and of the other LGUs. This interest pertains to the LGUs share in the national taxes or the IRA. The assailed provisions resulted in the diminution of their share in the IRA. It further held: These allegations are sufficient to grant the petitioner standing to question the validity of the assailed provisos x x x x x x the

petitioner clearly has a plain, direct, and adequate interest in the manner and distribution of the IRA among the LGUs. In Jumamil vs Cafe, 470 SCRA 475 (2005), petitioner, a private individual was held to have standing or locus standi to pursue a petition for declaratory relief to declare unconstitutional municipal ordinances appropriating funds for the construction of stalls around a public market in Panabo, Da210 210 SUPREME COURT REPORTS ANNOTATED Locus Standi: A Mischievous Concept in Law? vao Del Norte. After the trial court dismissed his petition for lack of legal standing, the Court of Appeals affirmed the same because he was not a party to the contract being questioned. However, the High Court repeated the usual definition of locus standi or standing, (as set forth at the outset of this Annotation) then argued that the petitioner sued as a taxpayer and not in his personal capacity. It clarified: A taxpayer need not be a party to a contract to challenge its validity. (Note: This seems to conflict with Kilosbayan, Inc. vs. Morato, supra, which ruled that petitioners therein had no standing or locus standi to question the lotto contract because they were not parties thereto). It added that: But this rule on legal standing has been relaxed in a number of occasions. It then cited cases in support of this holding and pointed out that in IBP vs. Zamora, the High Court found that IBP had no locus standi to bring the suit. However, it nevertheless entertained the petition, owing to the importance of the case. It finally set forth alleged determinants of transcendental importance to a case that should vest locus standi to petitioners as enumerated by Justice Feliciano in Kilosbayan, Inc. vs. Guingona, supra. In Olama, et al. vs. PNB, 492 SCRA 343 (2006), petitioners, barangay officials were held to have no standing or locus standi in their petition for mandamus to compel the Philippine National Bank to release Internal Revenue Allotment (IRA). It held that: a petition for mandamus must have been instituted by a party aggrieved by the alleged inaction of any tribunal, corporation, board or person which unlawfully excludes said party from the enjoyment of a legal right. The petitioner in every case must therefore be an aggrieved party in the sense that he possesses a

clear right to be enforced and a direct interest in the duty or act to be performed. The Court will exercise its power of judicial review only if the case is brought before it by a party who has the legal standing to raise the constitutional or legal question. Legal standing means a personal and substantial interest in the case such that the party has sustained or will sustain direct injury as a 211 VOL. 507, NOVEMBER 16, 2006 211 Locus Standi: A Mischievous Concept in Law? result of the government act that is being challenged. Clearly, not only did the petitioner fail to establish a clear legal right to the relief they are seeking, they also failed to make a case of locus standi for themselves in this case. (Note: Is it appropriate to apply the concept of standing or locus standi to petitioner in a petition for mandamus as the sole and main action? Would it be more fitting if the petitioner be described as a real party in interest, the party aggrieved and who would benefit by the avails of the suit? The petition for mandamus, in this case, did not raise any legal or constitutional challenge for which the suitor or petitioner must be clothed with such interest or qualification amounting to standing or locus standi to pursue the case. In fact in mandamus as sole action, there is an assumption that the law sought to be enforced or the action sought to be performed is Constitutional and valid which must be enforced or performed. On the other hand, in a petition involving constitutional or legal challenge, the law or act being enforced is assailed as unconstitutional or illegal.) Finally in this case under Annotation, Eduardo Francisco, Jr. vs. Bayani Fernando, et al., supra, petitioner, the leading petitioner in the Davide impeachment case discussed earlier, was categorically declared to have no standing or locus standi to bring a direct petition before the High Court questioning the constitutionality and legality of the Wet-FlagScheme of the Metro Manila Development Authority. Some find the scheme of rubbing commuters who venture beyond the sidewalks with wet cloth tied to a pole flag wise as bird-brained, asinine, hilarious, farcical or plain silly. But the petitioner saw something seriousa constitutional transgression. The High Court in this brief decision

forthwith dismissed the petition on the main ground of lack of standing or locus standi. It enumerated the settled requisites for a citizen and taxpayer to possess or comply with before he may have standing or locus standi to pursue a constitutional or legal challenge. The terse conclusion: Petitioner meets none of the requirements under either category. 212 212 SUPREME COURT REPORTS ANNOTATED Locus Standi: A Mischievous Concept in Law? The holding in this case was a mere reiteration of settled principles and positions of the High Court on standing or locus standi. Hence, the decision had no new doctrine to offer, particularly on this concept of legal standing or locus standi. VII. KILOSBAYAN, INC. VS. GUINGONA, JR. 232 SCRA 110 (1994) AND KILOSBAYAN, INC. VS. MORATO, 246 SCRA 540 (1995) Two (2) decisions of the High Court (First and Second Kilosbayan cases) are worth discussing here due to the opposite rulings on standing or locus standi of the High Court in a span of about a year, involving the same petitioners and about the same respondents as well as the same issues. These decisions demonstrate only too well the continuing conundrum and partisan confusion that bedevil the courts about the precise nature and proper application of standing or locus standi in our jurisprudence. Let us discuss them: a) The first case was Kilosbayan Inc. vs. Guingona, Jr., supra. The first Kilosbayan case: The petitioners, Kilosbayan, Inc., a non-stock domestic corporation composed of civic spirited citizens, pastors, priests and nuns, committed to truth, justice and renewal, former Sen. Jovito Salonga, some congressmen and other civic leaders in their individual capacities, and as members of this civic group, taxpayers and concerned citizens filed a petition to stop the implementation of the Contract of Lease between the Philippine Charity Sweepstakes Office (PCSO) and the Philippine Gaming Management Corporation (PGMC) for the operation of the on-line lottery system, now well known as Lotto. The petition alleged that the contract would allow the PCSO to operate a lottery system in collaboration or in association with a foreign entity, like the PGMCwhich violated a law prohibiting such arrangement.

Respondents, through the Solicitor General charged that petitioners have no standing to maintain the instant suit 213 VOL. 507, NOVEMBER 16, 2006 213 Locus Standi: A Mischievous Concept in Law? citing Valmonte vs. PCSO, supra, and denied this claim of collaboration or association arguing that PGMC was a mere lessor of the facilities. The High Court held: The preliminary issue on the locus standi of the petitioners should, indeed, be resolved in their favor. A partys standing before this Court is a procedural technicality which it may, in the exercise of its discretion, set aside in view of the importance of the issues raised. It proceeded to cite the first Emergency Powers Cases led by Araneta vs. Dinglasan, supra, that technicalities may be brushed aside due to the transcendental importance of the cases. And as to taxpayers suit, the High Court declared that it is not without discretion as to whether or not it should be entertained citing Sanidad vs. Comelec, supra, and that it enjoys an open discretion to maintain the same or not citing Tan vs. Macapagal, supra. It cited and discussed numerous cases wherein petitioners were held to have standing or locus standi and its liberal policy on the latter as well as its view that objections to taxpayers suit for lack of sufficient personality or standing are mainly procedural matters; and considering the importance of the issues, the High Court may brush aside such technicalities of procedure and may take cognizance of the petition. Held: The contract was declared invalid. On the matter of standing or locus standi, the High Court waxed eloquent: We find the instant petition to be of transcendental importance to the public. The issues it raised are of paramount public interest and of a category even higher than those involved in many of the aforecited cases. The ramifications of such issues immeasurably affect the social, economic, and moral well-being of the people even in the remotest barangays of the country and the counterproductive and retrogressive effects of the envisioned on-line lottery system are as staggering as the billions in pesos it is expected to raise. The legal standing then of the petitioner deserves recognition and, in the exercise of its sound

discretion, this Court hereby brushes aside the procedural barrier which the respondents tried to take advantage of. 214 214 SUPREME COURT REPORTS ANNOTATED Locus Standi: A Mischievous Concept in Law? (Note: Seven (7) justices voted that petitioners possessed standing or locus standi, whereas six (6) voted that they did not. These seven (7) justices also voted to declare the contract invalid whereas the six (6) justices did not express their opinion on the contract in view of their position.) b) The second case was Kilosbayan, Inc. vs. Morato, 246 SCRA 540 (1995) Soon thereafter, the PCSO and the PGMC signed another agreement supposedly conformable to the PCSO charter and this first Kilosbayan decision. The new contract was called Equipment Lease Agreement (ELA) whereby the PCSO would rent the equipment and operate the lottery at agreed percentage of the gross by way of rental. Kilosbayan, Inc. along with about the same personages, again directly filed a similar petition with the High Court for the nullification anew of the contract insisting on its invalidity and violation of a provision of the Constitution. Respondents again questioned the right of petitioners to bring the suit on the ground that, not being parties to the contract of lease which they sought to nullify, they have no personal and substantial interest likely to be injured by the enforcement of the contract. Petitioners argued that the previous ruling in the first Kilosbayan case that they possessed standing was the law of the case and therefore, their standing can no longer be reopened. Held: This time, the High Court declared that petitioners had no standing to sue and the contract was declared valid. The High Court came out with the following holdings: the question of standing or locus standi may be reviewed anew because the second contract was essentially different from the first one; standing or locus standi of petitioners was no longer the issue but whether they were real parties in interest under Rule 3, Sec. 2 of the Rules of Court since standing is a concept in constitutional law and no constitutional question was involved; petitioners were similar to the petitioner in 215

VOL. 507, NOVEMBER 16, 2006 215 Locus Standi: A Mischievous Concept in Law? Valmonte vs. PCSO, supra, who was denied standing; no allegation of spending public funds to make the action a public one; and in actions for annulment of contracts, like this one, the real parties are those parties to it and petitioners who were not parties thereto, do not have such present substantial interest. Finally, the High Court twitted the majority edge in the first case of a hairline 7 to 6 in favor of standing or locus standi for petitioners: The majority was thus a tenuous one that is not likely to be maintained in any subsequent litigation. c) A legal oddity? The High Court declared in the first Kilosbayan case that the issue on petitioners standing or locus standi should, indeed, be resolved in their favorwithout explaining why. It did not test them against the direct and substantial interest requisites of People vs. Vera, supra, and Valmonte vs. PCSO, supra. In fact, the justices studiously avoided categorically declaring that petitioners met the conditions set forth in these cases, in their separate opinions. All that they said was that the rule on standing or locus standi should be relaxed owing to the transcendental importance of the case (See separate opinions of Justices Cruz, Feliciano, and Padilla.) However, in the second Kilosbayan case, the High Court made a complete about-face and reversed its earlier holding and ruled that the same petitioners had no standing or locus standi this time. It declared that the new contract is different from the first one so the holding in the previous case does not preclude determination of their standing in the present suit; and since there was no constitutional law question here, the issue in this case was not standing or locus standi but whether petitioners were the real parties in interest within the meaning of Rule 3, Sec. 2 of the Rules of Court x x x. The Valmonte vs. PCSO, supra, was again cited to support lack of standing or locus standi because petitioners failed to meet the 216 216

SUPREME COURT REPORTS ANNOTATED Locus Standi: A Mischievous Concept in Law? conditions enumerated therein; petitioners lacked substantial interest to bring the suit; there was no allegation that public funds were misspent; and it belittled the one (1) vote advantage of the majority: The majority was thus a tenuous one that is not likely to be maintained in any subsequent litigation. Thus, what happened in these two (2) virtually identical cases may stand out as a legal oddity and unique in the annals of our jurisprudence because the High Court came out with diametrically opposite rulings on standing or locus standi in a brief span of time. d) These cases witnessed justices debating, arguing or even proselytizing their respective views The justices who voted for standing or locus standi in the first Kilosbayan case felt constrained to write separate opinions in the second Kilosbayan case, to defend their earlier positions. Justice Padilla maintained his view in the first Kilosbayan case that that the rule on locus standi, being merely a procedural rule, should be relaxed, as the issue then was of paramount national interest and importance and it should not stand in the way of a review of the new contract. Justice Feliciano also maintained that all the factors which, to my mind, pressed for recognition of locus standi on the part of petitioners in the first Kilosbayan case, still exist. He even warned that the High Court may profoundly regret in the future, the doctrinal ball and chain that we have today chained on our limbs. Justice Regalado lamented that to make the Courts judgment here turn again on technical procedural grounds by hiding within the shroud of the locus standi mystique, does not strike me as decisive and conclusive adjudication. He insisted that the issue of standing or locus standi has already been foreclosed by our judgment in the first lotto case. He found it seemingly odd, if not arcane that petitioners were held to have the requisite locus standi in the first 217 VOL. 507, NOVEMBER 16, 2006 217 Locus Standi: A Mischievous Concept in Law?

case, but are now mysteriously divested of the same in the second case. He also warned that to pay unqualified obeisance to the beguiling locus standi or right of action doctrines posited by the majority in this case would not only be an abdication of a clear judicial duty (Emphasis supplied). Justice Davide who was the ponente in the first Kilosbayan case, was disturbed by the sudden reversal of our rulings in Kilosbayan, Inc. vs. Guingona, et al., on the issue of standing or locus standi in that case. He also warned that such reversal upsets the salutary doctrines of the law of the case, res judicata, and stare decisis. And it puts to jeopardy the faith and confidence of the people, specially the lawyers and litigants, in the certainty and stability of the pronouncements of this Court. He took exception to that part of the ponencia of Justice Mendoza in this second case which belittled the tenuous majority of the first. He pointed out that In his Concurring Opinion in the Tatad case, Justice Mendoza denied locus standi to Tatad, et al., because their case did not have the same importance as the first lotto case, he thereby accepted the concession of standing to the petitioners in the lotto case. I wish to stress the fact that all the Justices who had dissented in the first lotto case on the issue of locus standi were either for the majority opinion or for the concurring opinion in the Tatad case. Hence, I can say that the Tatad case has given vigor and strength to the tenuous majority in the first lotto case. e) The spirited debates among justices still failed to yield a consensus What can we glean from these spirited and pointed exchanges among the justices? It is rare that a preliminary or procedural issue to a case like standing or locus standi has so divided the Court that the justices maintained opposite positions with equal fervor and conviction. In their separate opinions they not only held on but even proselytized their respective views. But from a study of the opinions of those who 218 218 SUPREME COURT REPORTS ANNOTATED Locus Standi: A Mischievous Concept in Law? maintained that petitioners possessed standing or locus standi in the two (2) decisions, it was discernible that these justices insisted it obtained, but they made no efforts to explain why. They were naturally aware of

Valmonte vs. PCSO, supra, with those hard-to-surmount conditions or requisites for standing or locus standi. This case was the unerring yardstick of the High Court previous cases, so much so that there was a uniform avoidance in testing the petitioners against that case. Why so, because petitioners would fail the test? The group that insisted the absence of standing or locus standi in petitioners, strongly insisted that they had no personal and substantial interest since they were not privy to the contract nor would be adversely affected thereby. It further downgraded the issue to one of real party in interest under the Rules of Court and not of standing or locus standi since they found out that no constitutional issue was involved. And as a taxpayers suit, the claim of standing or locus standi could not also prosper for there was no allegation of illegal disbursement of public funds. The result is that after extensive and spirited debates among the justices on this issue of standing or locus standi, the jury so to speak, is still out. No convincing consensus has emerged then and up to now. The readers are in the dark and as confused as before. Retired Associate Justice Isagani Cruz, who voted with the majority in the first Kilosbayan case admitted this not a little confusion, to use his words: Locus standi is a judicial concept that has caused not a little confusion even among lawyers because of its inconsistent application by the courts of justice, particularly the Supreme Court. It is often applied by judges as an excuse for not deciding a case notwithstanding the importance of the issues raised and the urgent necessity to rule upon them. x x x x x xxx xxx In the first Emergency Powers Case, 84 Phil. 368, the Supreme Court declared: The transcendental importance of these cases to the public demands that they be acted promptly and definitely brushing 219 VOL. 507, NOVEMBER 16, 2006 219 Locus Standi: A Mischievous Concept in Law? aside, if we must, technicalities of procedure. This has given convenient latitude to judges to apply or brush aside technicalities of procedure on the requirement of locus standi.A case in point is Kilosbayan v. Morato (should be Guingona, Jr.) where in 232 SCRA 111 (should be 110), the

Supreme Court decided that petitioner wasthe proper partyand in 249 SCRA 628 (should be 246 SCRA 540) involving the same subject, held that it was not. (Justice Isagani A. Cruz, Locus Standi, Phil. Daily Inquirer, January 27, 2007, p. A-10; Emphasis supplied). VIII. TRANSCENDENTAL IMPORTANCE: A MAGIC INCANTATION? a) No definition of the term in our jurisprudence Transcendental importance has been another elusive term that recurs and resonates in cases involving standing or locus standi in constitutional and legal challenges before the courts. It made its debut in that famous Emergency Powers Cases led by Araneta vs. Dinglasan,supra, and companion petitions penned by Justice Pedro Tuason. This oft-quoted and tired passage (owing to repeated use since 1949 to the present and counting) is found in the opening lines of this decision: Three of these cases were consolidated for argument and the other two were argued separately on other dates. Inasmuch as all of them present the same fundamental question which, in our view, is decisive, they will be disposed of jointly. For the same reason we will pass up the objection to the personality or sufficiency of interest of the petitioners x x x x x x x x x Above all, the transcendental importance to the public of these cases demands that they be settled promptly and definitely, brushing aside, if we must, technicalities of procedure (Emphasis supplied). Now, about fifty-seven (57) years later, this term is alive and well and in constant harness either by the bar or bench. Lawyers usually allege in their petitions transcendental importance of the issues they raise to catch the attention of the courts. This term had often cropped up whenever stand220 220 SUPREME COURT REPORTS ANNOTATED Locus Standi: A Mischievous Concept in Law? ing or locus standi was discussed (Kapatiran, etc. vs. Tan, supra, Osmea vs. Comelec, supra, KMU vs. Garcia, supra, Basco vs. PAGCOR, supra, Association of Small Landowners vs. Sec. of Agriculture, supra, Bayan vs. Zamora, et al., Chavez vs. PEA, supra, Kilosbayan, Inc. vs. Guingona, Jr., supra, etc.). Thus, it has also become another mischievous concept in law because if the court did not like to hear the case, it downgrades or ignores the claim of importance and sets up standing or locus standi as a

barrier. On the other hand, if the court wants to hear the case, regardless of the standing or locus standi of petitioner, it simply comes up with the following magic incantation or words to the effect: Above all, the transcendental importance to the public of these cases demands that they be settled promptly and definitely, brushing aside, if we must, technicalities of procedure (Araneta vs. Dinglasan, supra). b) "Determinants of Transcendental Importance It is surprising that no definition of transcendental importance has been attempted since it was first used in Araneta vs Dinglasan, supra, in 1949 and thereafter in numerous decisions of the High Court. Francisco vs. Nagmamalasakit, etc. supra, confirmed that there has been no doctrinal definition of this term yet. However, in this same case, certain instructive determinants supposedly of transcendental importance were formulated by Justice Florentino Feliciano in his Concurring Opinion in Kilosbayan Inc. vs. Guingona, Jr., supra: (1) the character of the funds, or other assets involved in the case; (2) the presence of a clear case of disregard of a constitutional or statutory prohibition, etc.; and (3) the lack of any other party with a more direct and specific interest in raising the questions being raised. These so-called determinants were reiterated in the case of Jumamil vs. Cafe, supra. But actually, Justice Feliciano merely referred to them as considerations of principle which, in the present case appear to me to require an affirma221 VOL. 507, NOVEMBER 16, 2006 221 Locus Standi: A Mischievous Concept in Law? tive answer to the question of whether or not petitioners are properly regarded as imbued with the standing necessary to bring and maintain the present petition (Emphasis supplied). Assuming they were intended by Justice Feliciano to be determinants of transcendental importance of the issues or the case, they are incapable of accurately defining its real nature. They do not focus on the nature or value of the issues to the country or the people but on matters that do not actually accord significance to them. Let us examine: a) character of the funds, or assets involved in the casethe character of the funds or assets does not necessarily elevate the level of importance

of the case. Besides, character is vague. How about those cases which do not involve funds or assets like the Emergency Powers Cases led by Araneta vs. Dinglasan, supra? b) clear disregard of the Constitution or the law by public authoritythis does not also elevate the level of importance of the case since this must obtain and be alleged as a requisite for a petition to be accorded due course; and c) lack of party with direct or specific interest to pursue the casethere are always petitioners that can plausibly claim such interest. Besides, our jurisprudence is replete with crusading souls ready to undertake constitutional and legal challenges, unmindful of the expenses, risks, and sacrifices. c) Attempt at definition Transcendental is an adjective. Its verb is transcend, which means in reference to this discussion, to go beyond the limits of; overstep; exceed (a story that transcends belief). The other adjective is transcendent which means transcending; surpassing; excelling; extraordinary; and transcendental is synonymous with transcendent (Websters New World College Dictionary, Fourth Edition, p. 1519). Other meanings of transcendental, however, pertain to philosophical concepts and not relevant here. 222 222 SUPREME COURT REPORTS ANNOTATED Locus Standi: A Mischievous Concept in Law? Hence, transcendental importance means the level of significance or value of constitutional and legal issues raised which go beyond parochial concerns whose resolution will have an impact upon the governance of the country and/or national existence. Perhaps, the pronouncement of the High Court in the first Kilosbayan case is along this definition: We find the instant petition to be of transcendental importance to the public. The issues it raised are of paramount public interest and of a category even higher than those involved in many of the aforecited cases. The ramifications of such issues immeasurably affect the social, economic, and moral well-being of the people even in the remotest barangays of the country and the counter-productive and retrogressive effects of the envisioned on-line lottery system are as staggering as the

billions in pesos it is expected to raise. (Kilosbayan, Inc. vs. Guingona, Jr., supra. Emphasis supplied). IX. OBSERVATIONS What teachings have we gathered from the numerous decisions that discussed or ruled on the issue of standing or locus standi? Let us enumerate some: a) Virtually everyone can be a petitioner From the cases narrated, the following appeared as petitioners: The People of the Philippines or the Government, the Vice President, Senators, Congressmen, government officials, prominent personalities, taxpayers and plain citizens (People vs. Vera, supra, Mabanag vs. LopezVito, supra, Araneta vs. Dinglasan, supra, etc., Laurel vs. Garcia, supra, Chavez vs. PEA, supra, Carpio vs. Executive Secretary, supra; there were also local executives, governors, municipal councilor, barangay official, (Pascual vs. Sec. of Public Works, supra, De Guia vs. Comelec, supra and Olama vs. PNB, supra); there were also civic organizations and association of lawyers (Philconsa vs. Gimenez, Placu vs. Cunera, supra., Kilosbayan, Inc. vs. Guingona, Jr., supra, Telecommunications, etc. vs. Comelec, 223 VOL. 507, NOVEMBER 16, 2006 223 Locus Standi: A Mischievous Concept in Law? supra); there were also associations of planters and their members, (Asso. of Small Landowners, etc. vs. Sec. of Agriculture, supra, Gonzales vs. Hechanova, supra); there were also a trial judge and practicing lawyers, (De la Llana vs. Alba, supra, Lozada vs. Comelec, Valmonte vs. PCSO, supra); there were also a local government unit and a TV network company (Province of Batangas vs. Romulo, supra. and Telecommunications, etc. vs. Comelec, supra); and finally, there were labor and veterans groups (KMU vs. Garcia, supra, Francisco, Jr. vs. Nagmamalasakit, etc., supra). Some of the above petitioners were found to have standing or locus standi, others were assumed to have it, others were merely allowed without even touching on their standing or locus standi, and others were held to have none at all. This only proves the point earlier made that the citizenry may launch into any constitutional or legal challenge before the

courts but not all may be entertained not because they lack the wherewithal but because the court according to its lights, may hold that they did not possess the requisite standing or locus standi. b) Requisites for standing or locus standi are hard to meet Direct/personal and substantial interest The requisites for standing or locus standi set forth by Justice Laurel in People vs. Vera, supra, and its elaboration in Valmonte vs. PCSO, supra, have been hard to meet. Even when the court so declares that they have been met, doubts still linger. His famous dictum was: The unchallenged rule is that the person who impugns the validity of a statute must have a personal and substantial interest in the case such that he has sustained, or will sustain, direct injury as a result of its enforcement. Through the years, the High Court has been shackled to these requisites as enumerated in detail in Valmonte vs. PCSO, supra: 224 224 SUPREME COURT REPORTS ANNOTATED Locus Standi: A Mischievous Concept in Law? 1) The interest of a person assailing the constitutionality of statute must be direct and personal; 2) He must be able to show not only that the law is invalid, but also that he has sustained or is in immediate danger of sustaining some direct injury as a result of its enforcement; 3) It must appear that the person complaining has been or is about to be denied some right or privilege to which he is lawfully entitled or that he is about to be subjected to some burdens or penalties by reason of the statute complained of. Then in this case under Annotation, the requisites were restated. It also reiterated the settled requisites for a taxpayers suit: A citizen can raise a constitutional question only when (1) he can show he has personally suffered some actual or threatened injury because of the alleged illegal conduct of the government; (2) the injury is fairly traceable to the challenged action; and (3) a favorable action will likely redress the injury. On the other hand, a party suing as taxpayer must specifically show that he has a sufficient interest in preventing the illegal expenditure of money raised by taxation and that he will sustain a direct

injury as a result of the enforcement of the questioned statute. Petitioner meets none of the requirements under either category. c) Requisites tested against petitioners in previous cases Many petitioners may flunk when tested against these conditions/requisites. Even the People or the Government may have a hard time surmounting the conditions of Justice Laurel. The idea of the People or Government as possessing personal and material interest in a Probation Law and will suffer direct injury in the enforcement of that law in People vs. Vera, supra, seems not so plausible to some lawyers. There is a presumption which should even be conclusive upon the Government that the laws it passed are constitutional and valid, otherwise it loses credibility. It is up to third parties to question them. Does it make sense for a government to assail its own laws? One instrumentality of the Government being 225 VOL. 507, NOVEMBER 16, 2006 225 Locus Standi: A Mischievous Concept in Law? repulsed or countermanded by the other would certainly reflect lack of common direction and a kind of disarray. Some hold the view that the proper party to challenge the Probation Law should be the accused if he were denied its benefits because his constitutional rights were disregarded. Let us test some petitioners in the cases narrated against the requisites set forth in People vs. Vera, Valmonte vs. PCSO, supra, and Francisco vs. MMDA, supra: In Tolentino vs. Comelec, a senator was allowed to question the reduction of the voting age to 18 years old. Did he have a personal and substantial interest, and would have sustained direct injury if the voting age were thus reduced? In Placu vs. Cuneta, supra, a civic group was allowed to appear because it is merely interested in upholding the law, did it have the personal and substantial interest in the memorandums of the city mayor? Everybody is interested in upholding the law. Does that clothe everybody with standing or locus standi to question orders of local executives? In Maceda vs. Macaraig, supra, a senator was found to have standing to question the legality of tax credit for oil companies. However, the respondents claimed the senator lacked standing for he

should demonstrate his direct and substantial interest and that he would sustain direct injury fom the tax credit practice of the BIR? But the High Court did not address or refute this claim and merely allowed him to pursue the case. In Tatad vs. Garcia, supra, petitioners were held to have standing to question the LRT contract but did they have personal and substantial interest in the contract and did they sustain direct injury from its enforcement? Or were they privy to the contract as the Kilosbayan Inc. vs. Morato, supra, required? Justice Fernando made that postulation in Tan vs. Macapagal, supra: Moreover, where a constitutional question is raised, a senator has usually been considered as possessed of the requisite personality to bring a suit (Tan vs. Macapagal, supra). What is so special about a senator? Many are equally interested in upholding the Constitution and the law and would be willing to bring a suit to this end, but would they be held to have standing or locus standi? The same requisites apply to taxpayers suit. He must also specifically show that he has a sufficient interest in prevent226 226 SUPREME COURT REPORTS ANNOTATED Locus Standi: A Mischievous Concept in Law? ing the illegal expenditure of money raised by taxation and that he will sustain a direct injury as a result of the enforcement of the questioned statute. (Francisco, Jr. vs. Fernando, supra and Anti-Graft League of the Philippines Inc. vs. San Juan, supra) An ordinary individual who, as taxpayer, assails a law is always open to challenge as to his interest in preventing illegal use of funds from a law being assailed. It is usually refuted by showing that he has only an indirect or generalized interest common to other citizens. Thus, the conditions as defined by Justice Fernando in Lozada vs. Comelec, supra, cannot easily be met: Petitioners standing to sue may not be predicated upon an interest of the kind alleged here, which is held in common by all members of the public because of the necessarily abstract nature of the injury supposedly shared by all citizens. Concrete injury, whether actual or threatened, is that indispensable element of a dispute which serves in part to cast it in a form traditionally capable of judicial resolution. When a person suing as a taxpayer is held to have standing or locus standi, we

are confronted with the legal fiction that he has sufficient personal and substantial interest in preventing the same and will suffer direct injury from the enforcement of the questioned statute. As in fiction, this is met with a willing suspension of disbelief a term in literature. But what is really the truth? In KMU vs. Garcia, supra, which held that KMU had standing, the High Court noted that it suffered grave and irreparable injury and damage from these questioned memoranda, circulars etc. of the LTFRB and DOTC. It found that they (its members) avail of the use of buses, trains and jeepneys everyday, are directly affected by the burdensome cost of arbitrary increase in passengers fare. They are part of the millions of commuters who comprise the riding public. Certainly, their rights must be protected, not neglected or ignored. Does this mean that any bus or jeepney passenger could successfully initiate and pursue this same petition? 227 VOL. 507, NOVEMBER 16, 2006 227 Locus Standi: A Mischievous Concept in Law? In Telecommunications, etc. vs. Comelec, supra, the High Court convincingly found that a TV Network had standing to question an election law granting free airtime during elections. This was a clear example of a petitioner with a direct/personal and substantial interest in this law and it would suffer injury from its enforcement, because the High Court found that it lost money before and expected to lose money again from giving free airtime. Some lawyers are looking for this kind of direct and concrete interest in petitioners if we faithfully adhere to requisites of standing or locus standi discussed above. It is perhaps different, if public rights are being asserted because being a citizen is sufficient. As the High Court declared that when a petition for Mandamus involves the assertion of a public right, the requirement of personal interest is satisfied by the mere fact that the petitioner is a citizen, and therefore part of the general public which possess the right (Legaspi vs. Civil Service Commission, supra, and Chavez vs. PEA, supra). d) The Resort to Transcendental Importance and Judicial Discretion

Owing to the seemingly insurmountable requisites for standing or locus standi, the courts tend to avoid confronting them by usually dismissing the latter as a mere procedural barrier or technicality which it could disregard to justify taking cognizance of a case. And the common open sesame invocations are: the transcendental importance of the case/issues which was started by the Emergency Powers Cases led by Araneta vs. Dinglasan, supra, and the exercise of judicial discretion to take or not to take the case as ruled in Gonzales vs. Marcos, supra, Sanidad vs. Comelec, supra, Osmea vs. Comelec, supra, etc. The usual excuse: And even if, strictly speaking, they are not covered by the definition, it is still within the wide discretion of this Court to waive the requirement and so remove the impediment to its addressing 228 228 SUPREME COURT REPORTS ANNOTATED Locus Standi: A Mischievous Concept in Law? and resolving the serious constitutional question raised. (Association of Small Landowners, etc. vs. Secretary of Agriculture, supra). e) Standing or Locus Standi: A procedural or substantive barrier? Much of the problem that has clung to this concept of locus standi from the start has been its classification as a procedural matter that may be waived or set aside if the courts wanted to hear and resolve the issues. Standing or locus standi was referred to as technicalities of procedure (Araneta vs. Dinglasan, supra), as a procedural matter (Kapatiran, etc. vs. Tan, supra) as a procedural flaw (Osmea vs. Comelec, supra), as a barren procedural infirmity (KMU Center Inc. vs. Garcia, supra), as a procedural infirmity (De Guia vs. Comelec, supra), as a procedural barrier (Bayan vs. Zamora, supra) and so on, that may be disregarded or brushed aside owing to the paramount or transcendental importance of the issues, so that the case may be given due course. But is locus standi really procedural in nature? The requisites for its possession are those that inhere in the suitor that they cannot be glossed over without trenching upon his fundamental rights. For example, let us summarize the requisites provided by People vs. Vera, supra, Valmonte vs. PSCO, supra, and Francisco vs. MMDA, supra: a direct and personal interest; injury sustained; denial of right or privilege; and being subjected to burdens or penalties. These requisites are

matters that go into or inhere on the person of the suitor. Can the court validly waive or merely pretend that they do not exist (even if they do) and accordingly, they go away? If standing or locus standi is to public law and real party in interest is to private law, then they must have the same classification, as substantive and not procedural barriers. If a plaintiff in a civil case who is not the real party in interest, the court has no recourse but to dismiss it. Not being a real 229 VOL. 507, NOVEMBER 16, 2006 229 Locus Standi: A Mischievous Concept in Law? party in interest or lack of personality to sue, is a ground for motion to dismiss under lack of cause of action (Casimiro vs. Roque, et al., 98 Phil. 880; 1956 and Regalado, Remedial Compendium, 8th ed., p. 255). The courts desire to give due course to the case cannot prevail over this legal impediment. It cannot exercise discretion to waive this real party in interest requisite, if not met by plaintiff. If real party in interest is a substantive barrier in private law, with more reason that standing or locus standi should also be in public law which addresses questions crucial to national life and interest? Now Chief Justice Puno contended that locus standi is not a plain procedural rule but even a constitutional requirement: It is my respectful submission, however, that we should reexamine De Guia (De Guia vs. Comelec, supra.). It treated the rule on locus standi as a mere procedural rule. It is not a plain procedural rule but a constitutional requirement derived from section 1, Article VIII of the Constitution which mandates courts of justice to settle only actual controversies involving rights which are actually demandable. The phrase has been construed since time immemorial to mean that a party in a constitutional litigation must demonstrate a standing to sue. By downgrading the requirement on locus standi as a procedural rule which can be discarded in the name of public interest, we are in effect amending the Constitution by judicial fiat (Concurring Opinion, Kilosbayan, Inc. vs. Guingona, Jr., supra. Emphasis supplied). f) The need to reexamine this concept of standing or locus standi From the cases narrated, the High Court has not yet come up with a definitive rule when standing or locus standi should be appropriately

applied or withheld. Justice Feliciano conceded that: This is not however, to say that there is somewhere an overarching principle or theory, waiting to be discovered, that permits a ready answer to the question when, or in what types of cases, the need to show locus standi may be relaxed in a greater or lesser degree. To my knowledge, no 230 230 SUPREME COURT REPORTS ANNOTATED Locus Standi: A Mischievous Concept in Law? satisfactory principle or theory has been discovered and none has been crafted, whether in our jurisdiction or in the United States. (Concurring Opinion, Kilosbayan, Inc. vs. Guingona, Jr., supra). As suggested at the start of this Annotation, there is a need to take a hard look and reexamine this concept of standing or locus standi for a petitioner who raises constitutional and legal challenges and those suing as taxpayers. To repeat, the strictures provided in People vs. Vera, supra, Valmonte vs. PCSO, supra, and Francisco, Jr. vs. Fernando, supra, are difficult to surmount that the High Court tended to either brush aside technicalities, lower the barrier or relax the rule. Perhaps, without trenching upon the Constitution as discussed above by Chief Justice Puno, there is need to redefine or redelineate, if possible, these prudential limitations to effect consistency in rulings and enable the courts to address more constitutional and legal issues in the interest of the country. The problem however, is that courts cannot give a blanket recognition of locus standi to everybody under the fiction that the latter possesses the requisite personal and substantial interest. Constitutional and legal challenges do not involve assertion of public right for which the mere fact of being a citizen qualifies anyone to be a petitioner. Otherwise, locus standi as prudential barrier, would have lost its rationale. As philosopher Hannah Arendt observed, if everybody is guilty, then no one is guilty. In other words, if everybody has personal and substantial interest, then no one has that anymore. We can take note of the relaxation in the requisites to make out a case for grave abuse of discretion in a petition for Certiorari under Rule 65 of the Rules of Court. It usually pertains only to such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, or, in other words, where the power is exercised in an arbitrary or despotic

manner by reason of passion or personal hostility, and it must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform the duty en231 VOL. 507, NOVEMBER 16, 2006 231 Locus Standi: A Mischievous Concept in Law? joined or to act in contemplation of law (Regalado, Remedial Law Compedium, 8th Ed., p. 718, citing Benito vs. Comelec, et al., G.R. No. 134913, Jan. 19, 2001 and cases cited therein). The High Court must have realized that there are less dramatic infractions by judicial and executive officers which still amount to grave abuse of discretion. In a recent ruling, even the granting of the order of the Energy Regulatory Commission increasing the generation charge for Meralco without the publication of its Amended Application was stigmatized as grave abuse of discretion (Nasecore, et al. vs. ERC, et al., G.R. No. 163935 dated Feb. 2, 2006 and Aug. 16, 2006). X. CONCLUSION a) The quality of our lawmakers and the laws they pass The quality of many of our lawmakers is much snickered about because some are clowns, comedians, and those suddenly thrust into the intricate and intellectually draining task of lawmaking without the slightest idea what it is all about. Hence, it is expected that there will always be challenges on the kind of laws they would churn out. This holds true with executive and administrative issuances which subvert civil rights of the citizenry. This observation is apt: Some recent laws would indicate that lawmakers not only passed the bar but also stopped there. And to paraphrase another: Men fight for freedom (and basic rights) then start making laws to get rid of them (E.C. Mckenzie, 14,000 Quotations and Quotes, 1980 ed., pp. 293-294). One such law which must have been passed while the lawmakers were in a state of inebriation was RA 9295 which aimed at getting rid of our rights. It was touted about supposedly to develop domestic shipping but its effect was to violate the Constitution, e.g., undue delegation of the power to fix shipping rates to the shipping operators themselves (akin to pedophiles being assigned to guard children), among others. Then officials of the

Maritime Industry Authority (MARINA), who must have also stopped in the same bar and were more inebriated than the 232 232 SUPREME COURT REPORTS ANNOTATED Locus Standi: A Mischievous Concept in Law? lawmakers, came out with equally unconstitutional Implementing Rules and Regulations (IRR) that virtually abolished hearings/oppositions of applications for new franchises for vessels. Thus, entry into operations in a multi-million shipping industry was largely unregulated and as easy as opening a corner sari-sari store, to the detriment of prior operators who invested fortunes in the business. b) The Eugenia T. San Pablo vignette When RA 9295 was passed in May, 2005, Mrs. Eugenia T. San Pablo, a pioneer shipping operator then of four (4) RORO vessels in the Bicol Region since the 1950s filed a 56-page Petition (exclusive of annexes), assailing the constitutionality of this law and the wayward IRR directly before the High Court. She also pleaded transcendental importance of the issues to the shipping industry and to the country. Already reeling from the easy invasion of newcomers through MARINA liberal policy, she had to stop this law which disregarded the time-honored prior operator and protection of investment rules. The High Court was not persuaded and it dismissed the petition outright. It reasoned that even if petitioner has established her locus standi, there is yet no actual case or controversy; and the case should not have been brought directly to the High Court in line with the principle of hierarchy of courtsunless there are special important and compelling reasons therefor, clearly and specifically spelled out in the petition. It concluded that: This Court will not entertain direct resort to it unless the redress desired or the reliefs sought cannot be obtained in the appropriate courts, or where exceptional circumstances justify availment of a remedy within and calling for the exercise of this Courts primary jurisdiction. Here we perceive no sense of urgency. (Eugenia T. San Pablo vs. Maritime Industry Authority, and Administrator Vicente T. Suazo, et al., G.R. No. 167641, Resolution dated May 10, 2005; Unreported; Emphasis supplied). 233

VOL. 507, NOVEMBER 16, 2006 233 Locus Standi: A Mischievous Concept in Law? Some five (5) months after the motion for reconsideration was denied or in December, 2005, she was unable anymore to stanch the financial bleeding from heavy losses due to easy entry of competitors that she was compelled to sell all her vessels to her main competitor and ceased operations. It was the prerogative of the High Court to rule as it did; to apply the principle of hierarchy of courts; to hold that even if there was locus standi there was yet no actual controversy; to hold that there was no exceptional circumstances to justify direct cognizance of the case by the High Court; and to declare that: Here we perceived no sense of urgency. From this case, a harder look at the following may be relevant: As to hierarchy of courtsperhaps there is need for a more consistent application of this principle because in most of the cases reviewed earlier, this was not used as impediment to taking on those cases, namely: Araneta vs. Dinglasan, supra, Mabanag vs. Lopez-Vito, supra, Gonzales vs. Hechanova, supra, Philconsa vs. Gimenez, supra, Philconsa vs. Mathay, supra, Gonzales vs. Comelec, supra, Tolentino vs. Comelec, supra, Aquino vs. Comelec, supra, Sanidad vs. Comelec, supra, De la Llana v. Alba, supra, the two (2) Kilosbayan cases, and a host of other cases. All these cases allowed petitioners to bypass the hierarchy of courts. In fact, this procedural deficiency was not even discussed at all. In Aguino vs. Comelec, supra, the petitioners who directly filed their petition with the High Court, were even held to have no standing at all and the remedy they resorted to was wrong yet the High Court resolved the petition due to the far-reaching implications of the herein petition. In Osmea vs. Comelec, supra, direct resort to the High Court was allowed so that important constitutional questions may be addressed. As to exceptional circumstancesperhaps, there is also a need to provide accurate determinants for this term; and as to the perception of the High Court that there was no sense of urgencyperhaps also, Mrs. San Pablo was not convincing enough in demonstrating her plight which ended in her bankruptcy. 234

234 SUPREME COURT REPORTS ANNOTATED Locus Standi: A Mischievous Concept in Law? c) The locus standi mystique lives on The point here is that in constitutional and legal challenges, locus standi, transcendental importance, or exceptional circumstance and hierarchy of courts elude precise categorization as well as definite and consistent application. Thus, the locus standi mystique, to use the words of Justice Florenz Regalado, remains a riddle wrapped in a mystery inside an enigma, to borrow the description of Russia then by Churchill. Hence, every time a new case comes up with discussions of standing or locus standi, the uncertainty and confusion continue. We are reminded of the words of U.S. Supreme Court Chief Justice William H. Rehnquist in his Dissenting Opinion in Wade vs. Roe (1973): The Courts opinion will accomplish the seemingly impossible feat of leaving this area of the law more confused than it found it. Thus, as we have set forth to inquire at the outset, it is also debatable whether standing or locus standi has advanced the cause of constitutionalism and law, or has promoted judicial ambivalence and abdication of duty. Indeed, there is a need to a) formulate more surmountable and reasonable requisites for standing or locus standi;b) determinine whether it is really a procedural barrier that may be waived by the court at will or a substantive requisite like real party in interest in civil actions which should not and cannot be brushed aside; and c) delineate concrete guidelines when an issue is deemed of transcendental importance, etc., and when it is appropriate to ignore even in the absence of locus standi; and other related questions. d) Death of Certainty and the need for continuing debate Law can not give us certainty. In fact, Justice Oliver Wendell Holmes conceded long ago that certainty is dead. Justice Benjamin Cardozo was disheartened, that there was no solid land of fixed and settled rules. The great jurist lamented through his inimitable musical prose: No doubt the 235 VOL. 507, NOVEMBER 16, 2006 235

Locus Standi: A Mischievous Concept in Law? ideal system, if it were attainable, would be a code at once so flexible and so minute, as to supply in advance for every conceivable situation the just and fitting rule. But life is too complex to bring the attainment of this idea within the compass of human power. (Philip K. Howard, The Death of Common Sense, Random House, 1994, ed., p. 52). Woefully, there is no reason to be optimistic that this concept of standing or locus standi will be ensnared in a definitive jurisprudence in the near future. The High Court should not be blamed for this difficulty because it is in constant quandary as to how to reconcile those hard-tosurmount requisites for standing or locus standi and its desire to address and resolve issues of crucial importance whose resolution is of critical immediacy to the country. Hence, there is a need for a continuing discussion, examination, and debate on important legal concepts or issues, not only on standing or locus standi but also on transcendental importance, exceptional circumstances, hierarchy of courts, and the like which have an immense impact upon jurisprudence and the administration of justice. Finally, the following admonition from a US magistrate to the American judiciary is also relevant to ours: A court which is final and unreviewable needs more careful scrutiny than any other. Unreviewable power is the most likely to self-indulge itself and the least likely to engage in dispassionate selfanalysis. . . In a country like ours, no public institution, or the people who operate it, can be above public debate. (Warren Burger of the U.S. Supreme Court, Circuit Court of Appeals Judge, to Ohio Judicial Conference on September 4, 1968nine months before being named Chief Justice of the United States). o0o [Locus Standi: A Mischievous Concept in Law?, 507 SCRA 181(2006)]

VOL. 166, OCTOBER 18, 1988 533 Eastern Shipping Lines, Inc. vs. POEA No. L-76633. October 18, 1988.* EASTERN SHIPPING LINES, INC., petitioner, vs. PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION (POEA), MINISTER OF LABOR AND EMPLOYMENT, HEARING OFFICER ABDUL BASAR and KATHLEEN D. SACO, respondents. Labor; Overseas Employment; Appeals; Non-exhaustion of administrative remedies, proper; General rule that decisions of the POEA should first be appealed to the NLRC; Case at bar comes under one of the exceptions, as the questions raised are questions of law; Absence of objection by private respondent to petitioners direct resort to the Supreme Court. Ordinarily, the decisions of the POEA should first be appealed to the National Labor Relations Commission, on the theory inter alia that the agency should be given an opportunity to correct the errors, if any, of its subordinates. This case comes under one of the exceptions, however, as the questions the petitioner is raising are essentially questions of law. Moreover, the private respondent herself has not objected to the petitioners direct resort to this Court, observing that the usual procedure would delay the disposition of the case to her prejudice. Same; Same; Overseas employment and contract worker, defined; These definitions clearly apply to the employee as he died under a contract of employment with petitioner alongside petitioners vessel berthed in a foreign country.Under the 1985 Rules and Regulations on Overseas Employment, overseas employment is defined as employment of a worker outside the Philippines, including employment on board vessels plying international waters, covered by a valid contract. A contract worker is described as any person working or who has worked overseas under a valid employment contract and shall include seamen or any person working overseas or who has been employed by another which may be a local employer, foreign employer, principal or partner under a valid employment contract and shall include seamen. These definitions clearly apply to Vitaliano Saco for it is not disputed that he died while under a contract of employment with the petitioner and alongside the

petitioners vessel, the M/V Eastern Polaris, while berthed in a foreign country. _______________ * FIRST DIVISION. 534 534 SUPREME COURT REPORTS ANNOTATED Eastern Shipping Lines, Inc. vs. POEA Same; Same; Same; Submission by petitioner of shipping articles to POEA and payments of contributions to the Welfare Fund are tacit recognition of the nature of the employees appointment at the time of his death. It is worth observing that the petitioner performed at least two acts which constitute implied or tacit recognition of the nature of Sacos employment at the time of his death in 1985. The first is its submission of its shipping articles to the POEA for processing, formalization and approval in the exercise of its regulatory power over overseas employment under Executive Order No. 797. The second is its payment of the contributions mandated by law and regulations to the Welfare Fund for Overseas Workers, which was created by P.D. No. 1694 for the purpose of providing social and welfare services to Filipino overseas workers. Same; Same; Receipt prepared by the office administering the Welfare Fund described the subject of burial benefits as an overseas contract worker.Significantly, the office administering this fund, in the receipt it prepared for the private respondents signature, described the subject of the burial benefits as overseas contract worker Vitaliano Saco. While this receipt is certainly not controlling, it does indicate, in the light of the petitioners own previous acts, that the petitioner and the Fund to which it had made contributions considered Saco to be an overseas employee. Same; Same; Award of death benefits and burial expenses under Memorandum Circular of the POEA.; Circular prescribing a standard contract by foreign and domestic shipping companies deemed written into the contract with the employee and a postulate of the police power of the State.The award of P180,000.00 for death benefits and P12,000.00 for burial expenses was made by the POEA pursuant to its Memorandum Circular No. 2, which became effective on February 1,

1984. This circular prescribed a standard contract to be adopted by both foreign and domestic shipping companies in the hiring of Filipino seamen for overseas employment. A similar contract had earlier been required by the National Seamen Board and had been sustained in a number of cases by this Court. The petitioner claims that it had never entered into such a contract with the deceased Saco, but that is hardly a serious argument. In the first place, it should have done so as required by the circular, which specifically declared that all parties to the employment of any Filipino seamen on board any ocean-going vessel are advised to adopt and use this employment contract effective 01 February 1984 and to desist from using any other format of employment contract effective that date. In the second place, even if it had not done so, the provisions of the said 535 VOL. 166, OCTOBER 18, 1988 535 Eastern Shipping Lines, Inc. vs. POEA circular are nevertheless deemed written into the contract with Saco as a postulate of the police power of the State. Same; Same; Delegation of power; Legislative discretion as to the substantive contents of the law cannot be delegated; What can be delegated is the discretion to determine how the law may be enforced.The second challenge is more serious as it is true that legislative discretion as to the substantive contents of the law cannot be delegated. What can be delegated is the discretion to determine how the law may be enforced, not what the law shall be. The ascertainment of the latter subject is a prerogative of the legislature. This prerogative cannot be abdicated or surrendered by the legislature to the delegate. Same; Same; Same; Accepted tests to determine whether or not there is valid delegation of legislative power.There are two accepted tests to determine whether or not there is a valid delegation of legislative power, viz., the completeness test and the sufficient standard test. Under the first test, the law must be complete in all its terms and conditions when it leaves the legislature such that when it reaches the delegate the only thing he will have to do is enforce it. Under the sufficient standard test, there must be adequate guidelines or limitations in the law to map out the boundaries of the delegates authority and prevent the delegation

from running riot. Both tests are intended to prevent a total transference of legislative authority to the delegate, who is not allowed to step into the shoes of the legislature and exercise a power essentially legislative. Same; Same; Same; Principle of non-delegation of powers is applicable to all the 3 major powers of the government, but is especially important in the case of the legislative power.The principle of non-delegation of powers is applicable to all the three major powers of the Government but is especially important in the case of the legislative power because of the many instances when its delegation is permitted. The occasions are rare when executive or judicial powers have to be delegated by the authorities to which they legally pertain. In the case of the legislative power, however, such occasions have become more and more frequent, if not necessary. This had led to the observation that the delegation of legislative power has become the rule and its non-delegation the exception. Same; Same; Same; Reason for the frequent delegation of power by the legislature.The reason is the increasing complexity of the task of government and the growing inability of the legislature to 536 536 SUPREME COURT REPORTS ANNOTATED Eastern Shipping Lines, Inc. vs. POEA cope directly with the myriad problems demanding its attention. The growth of society has ramified its activities and created peculiar and sophisticated problems that the legislature cannot be expected reasonably to comprehend. Specialization even in legislation has become necessary. To many of the problems attendant upon present-day undertakings, the legislature may not have the competence to provide the required direct and efficacious, not to say, specific solutions. These solutions may, however, be expected from its delegates, who are supposed to be experts in the particular fields assigned to them. Same; Same; Same; Reasons for delegation of legislative powers are particularly applicable to administrative bodies; Delegated power to issue rules to carry out the general provisions of the statute is called power of subordinate legislation.The reasons given above for the delegation of legislative powers in general are particularly applicable to administrative bodies. With the proliferation of specialized activities and

their attendant peculiar problems, the national legislature has found it more and more necessary to entrust to administrative agencies the authority to issue rules to carry out the general provisions of the statute. This is called the power of subordinate legisla-tion. Same; Same; Same; Administrative bodies implement the broad policies by promulgating their supplemental regulations, such as the implementing rules issued by the Department of Labor on the new Labor Code.With this power, administrative bodies may implement the broad policies laid down in a statute by filling in the details which the Congress may not have the opportunity or competence to provide. This is effected by their promulgation of what are known as supplementary regulations, such as the implementing rules issued by the Department of Labor on the new Labor Code. These regulations have the force and effect of law. Same; Same; Same; Memorandum Circular No. 2 which prescribes a model contract is not challenged by the employer.Memorandum Circular No. 2 is one such administrative regulation. The model contract prescribed thereby has been applied in a significant number of cases without challenge by the employer. The power of the POEA (and before it the National Seamen Board) in requiring the model contract is not unlimited as there is a sufficient standard guiding the delegate in the exercise of the said authority. That standard is discoverable in the executive order itself which, in creating the Philippine Overseas Employment Administration, mandated it to protect the rights of overseas Filipino workers to fair and 537 VOL. 166, OCTOBER 18, 1988 537 Eastern Shipping Lines, Inc. vs. POEA equitable employment practices. Same; Same; Same; Sufficient standards of delegation of legislative power.Parenthetically, it is recalled that this Court has accepted as sufficient standards public interest in People v. Rosenthal, justice and equity in Antamok Gold Fields v. CIR, public convenience and welfare in Calalang v. Williams, and simplicity, economy and efficiency in Cervantes v. Auditor General, to mention only a few cases. In the United States, the sense and experience of men was accepted in Mutual Film

Corp. v. Industrial Commission, and national security in Hirabayashi v. United States. Same; Same; Same; Payment of death benefit pension, funeral benefit burial gratuity to private respondent will not preclude allowance of private respondents claim against petitioner which is specifically reserved in the standard contract of employment for Filipino seamen. It is not denied that the private respondent has been receiving a monthly death benefit pension of P514.42 since March 1985 and that she was also paid of P1,000.00 funeral benefit by the Social Security System. In addition, as already observed, she also received a P5,000.00 burial gratuity from the Welfare Fund for Overseas Workers. These payments will not preclude allowance of the private respondents claim against the petitioner because it is specifically reserved in the standard contract of employment for Filipino seamen under Memorandum Circular No. 2, Series of 1984. Same; Same; Same; Provisions under the standard contract of employment for Filipino seamen pursuant to Memorandum Circular No. 2 are manifestations of the State for the working class consistently with the social justice and protection of the working class provisions of the Constitution.The above provisions are manifestations of the concern of the State for the working class, consistently with the social justice policy and the specific provisions in the Constitution calling for the protection of the working class and the promotion of its interest. Same; Same; Same; Due process, not a case of; Administrative agencies vested with two basic powers, quasi-legislative and quasi-judicial; Power of administrative agencies to promulgate implementing rules and regulations and interprets and applies them, not violative of due process as long as the cardinal rights in the Ang Tibay vs. CIR case are observed.One last challenge of the petitioner must be dealt with to close this case. Its argument that it has been denied due process because the same POEA that issued Memorandum Circular 538 538 SUPREME COURT REPORTS ANNOTATED Eastern Shipping Lines, Inc. vs. POEA No. 2 has also sustained and applied it is an uninformed criticism of administrative law itself. Administrative agencies are vested with two

basic powers, the quasi-legislative and the quasi-judicial. The first enables them to promulgate implementing rules and regulations, and the second enables them to interpret and apply such regulations. Examples abound: the Bureau of Internal Revenue adjudicates on its own revenue regulations, the Central Bank on its own circulars, the Securities and Exchange Commission on its own rules, as so too do the Philippine Patent Office and the Videogram Regulatory Board and Civil Aeronautics Administration and the Department of Natural Resources and so on ad infinitum on their respective administrative regulations. Such an arrangement has been accepted as a fact of life of modern governments and cannot be considered violative of due process as long as the cardinal rights laid down by Justice Laurel in the landmark case of Ang Tibay v. Court of Industrial Relations are observed. Same; Same; Same; Doubts regarding the rights of the parties are resolved in favor of private respondent under the principle that those with less in life should have more in law.Whatever doubts may still remain regarding the rights of the parties in this case are resolved in favor of the private respondent, in line with the express mandate of the Labor Code and the principle that those with less in life should have more in law. Same; Same; Same; When the conflicting interests of labor and capital are weighed on the scales of social justice, capital should be counterbalanced with sympathy and compassion the law must accord to labor.When the conflicting interests of labor and capital are weighed on the scales of social justice, the heavier influence of the latter must be counterbalanced by the sympathy and compassion the law must accord the underprivileged worker. This is only fair if he is to be given the opportunityand the rightto assert and defend his cause not as a subordinate but as a peer of management, with which he can negotiate on even plane. Labor is not a mere employee of capital but its active and equal partner. PETITION to review the decision of the Philippine Overseas Employment Administration. The facts are stated in the opinion of the Court. Jimenea, Dala & Zaragoza Law Office for petitioner. The Solicitor General for public respondent. Dizon Law Office for respondent Kathleen D. Saco.

539 VOL. 166, OCTOBER 18, 1988 539 Eastern Shipping Lines, Inc. vs. POEA CRUZ, J.: The private respondent in this case was awarded the sum of P192,000.00 by the Philippine Overseas Employment Administration (POEA) for the death of her husband. The decision is challenged by the petitioner on the principal ground that the POEA had no jurisdiction over the case as the husband was not an overseas worker. Vitaliano Saco was Chief Officer of the M/V Eastern Polaris when he was killed in an accident in Tokyo, Japan, March 15, 1985. His widow sued for damages under Executive Order No. 797 and Memorandum Circular No. 2 of the POEA. The petitioner, as owner of the vessel, argued that the complaint was cognizable not by the POEA but by the Social Security System and should have been filed against the State Insurance Fund. The POEA nevertheless assumed jurisdiction and after considering the position papers of the parties ruled in favor of the complainant. The award consisted of P180,000.00 as death benefits and P12,000.00 for burial expenses. The petitioner immediately came to this Court, prompting the Solicitor General to move for dismissal on the ground of non-exhaustion of administrative remedies. Ordinarily, the decisions of the POEA should first be appealed to the National Labor Relations Commission, on the theory inter alia that the agency should be given an opportunity to correct the errors, if any, of its subordinates. This case comes under one of the exceptions, however, as the questions the petitioner is raising are essentially questions of law.1 Moreover, the private respondent himself has not objected to the petitioners direct resort to this Court, observing that the usual procedure would delay the disposition of the case to her prejudice. The Philippine Overseas Employment Administration was created under Executive Order No. 797, promulgated on May _______________ 1 Bagatsing v. Ramirez, 74 SCRA 306, Del Mar v. Phil. Veterans

Administration, 51 SCRA 340; Aguilar v. Valencia, 40 SCRA 210;Begosa v. PVA, 32 SCRA 446; Tapales v. President and Board of Regents, 7 SCRA 553; Pascual v. Nueva Ecija Provincial Board, 106 Phil. 466; Mondano v. Silvosa, 97 Phil. 143. 540 540 SUPREME COURT REPORTS ANNOTATED Eastern Shipping Lines, Inc. vs. POEA 1, 1982, to promote and monitor the overseas employment of Filipinos and to protect their rights. It replaced the National Seamen Board created earlier under Article 20 of the Labor Code in 1974. Under Section 4(a) of the said executive order, the POEA is vested with original and exclusive jurisdiction over all cases, including money claims, involving employee-employer relations arising out of or by virtue of any law or contract involving Filipino contract workers, including seamen. These cases, according to the 1985 Rules and Regulations on Overseas Employment issued by the POEA, include claims for death, disability and other benefits arising out of such employment.2 The petitioner does not contend that Saco was not its employee or that the claim of his widow is not compensable. What it does urge is that he was not an overseas worker but a domestic employee and consequently his widows claim should have been filed with Social Security System, subject to appeal to the Employees Compensation Commission. We see no reason to disturb the factual finding of the POEA that Vitaliano Saco was an overseas employee of the petitioner at the time he met with the fatal accident in Japan in 1985. Under the 1985 Rules and Regulations on Overseas Employment, overseas employment is defined as employment of a worker outside the Philippines, including employment on board vessels plying international waters, covered by a valid contract.3 A contract worker is described as any person working or who has worked overseas under a valid employment contract and shall include seamen4 or any person working overseas or who has been employed by another which may be a local employer, foreign employer, principal or partner under a valid employment contract and shall include seamen.5 These definitions clearly apply to Vitaliano Saco for it is not disputed that he died while

under a contract of employment with the petitioner and alongside the petitioners vessel, the M/V Eastern Polaris, while berthed in a foreign country.6 _______________ 2 Sec. 1(d), Rule I, Book VI (1985 Rules). 3 Sec. 1(x), Rule II, Book I (1985 Rules). 4 Sec. 1(g), Rule II, Book I (1985 Rules). 5 Sec. 1(g), Rule II, Book I (1984 Rules). 6 Rollo, p. 171 (POEA Decision, p. 8). 541 VOL. 166, OCTOBER 18, 1988 541 Eastern Shipping Lines, Inc. vs. POEA It is worth observing that the petitioner performed at least two acts which constitute implied or tacit recognition of the nature of Sacos employment at the time of his death in 1985. The first is its submission of its shipping articles to the POEA for processing, formalization and approval in the exercise of its regulatory power over overseas employment under Executive Order NO. 797.7 The second is its payment8 of the contributions mandated by law and regulations to the Welfare Fund for Overseas Workers, which was created by P.D. No. 1694 for the purpose of providing social and welfare services to Filipino overseas workers. Significantly, the office administering this fund, in the receipt it prepared for the private respondents signature, described the subject of the burial benefits as overseas contract worker Vitaliano Saco.9 While this receipt is certainly not controlling, it does indicate, in the light of the petitioners own previous acts, that the petitioner and the Fund to which it had made contributions considered Saco to be an overseas employee. The petitioner argues that the deceased employee should be likened to the employees of the Philippine Air Lines who, although working abroad in its international flights, are not considered overseas workers. If this be so, the petitioner should not have found it necessary to submit its shipping articles to the POEA for processing, formalization and approval or to contribute to the Welfare Fund which is available only to overseas workers. Moreover, the analogy is hardly appropriate as the employees

of the PAL cannot under the definitions given be considered seamen nor are their appointments coursed through the POEA. The award of P180,000.00 for death benefits and P12,000.00 for burial expenses was made by the POEA pursuant to its Memorandum Circular No. 2, which became effective on February 1, 1984. This circular prescribed a standard contract to be adopted by both foreign and domestic shipping companies in the hiring of Filipino seamen for overseas employment. A _______________ 7 Ibid., pp. 169-170 (POEA Decision, pp. 6-7). 8 Rollo, pp. 213-217. 9 Annex A of Private Respondents Comment (Rollo, p. 230). 542 542 SUPREME COURT REPORTS ANNOTATED Eastern Shipping Lines, Inc. vs. POEA similar contract had earlier been required by the National Seamen Board and had been sustained in a number of cases by this Court.10 The petitioner claims that it had never entered into such a contract with the deceased Saco, but that is hardly a serious argument. In the first place, it should have done so as required by the circular, which specifically declared that all parties to the employment of any Filipino seamen on board any ocean-going vessel are advised to adopt and use this employment contract effective 01 February 1984 and to desist from using any other format of employment contract effective that date. In the second place, even if it had not done so, the provisions of the said circular are nevertheless deemed written into the contract with Saco as a postulate of the police power of the State.11 But the petitioner questions the validity of Memorandum Circular No. 2 itself as violative of the principle of non-delega-tion of legislative power. It contends that no authority had been given the POEA to promulgate the said regulation; and even with such authorization, the regulation represents an exercise of legislative discretion which, under the principle, is not subject to delegation. The authority to issue the said regulation is clearly provided in Section 4(a) of Executive Order No. 797, reading as follows:

x x x The governing Board of the Administration (POEA), as hereunder provided, shall promulgate the necessary rules and regulations to govern the exercise of the adjudicatory functions of the Administration (POEA). Similar authorization had been granted the National Seamen Board, which, as earner observed, had itself prescribed a standard shipping contract substantially the same as the format adopted by the POEA. The second challenge is more serious as it is true that legislative discretion as to the substantive contents of the law cannot _______________ 10 Bagong Filipinas Overseas Corp. v. NLRC, 135 SCRA 278; Virgen v. NLRC, 125 SCRA 577; Norse Management v. NSB, et al., 117 SCRA 486; Vir-gen v. NLRC, 115 SCRA 347. 11 Stone v. Mississippi, 101 US 814. 543 VOL. 166, OCTOBER 18, 1988 543 Eastern Shipping Lines, Inc. vs. POEA be delegated. What can be delegated is the discretion to determine how the law may be enforced, not what the law shall be. The ascertainment of the latter subject is a prerogative of the legislature. This prerogative cannot be abdicated or surrendered by the legislature to the delegate. Thus, in Ynot v. Intermediate Apellate Court,12 which annulled Executive Order No. 626, this Court held: We also mark, on top of all this, the questionable manner of the disposition of the confiscated property as prescribed in the questioned executive order. It is there authorized that the seized property shall be distributed to charitable institutions and other similar institutions as the Chairman of the National Meat Inspection Commission may see fit, in the case of carabaos. (Italics supplied.) The phrase may see fit is an extremely generous and dangerous condition, if condition it is. It is laden with perilous opportunities for partiality and abuse, and even corruption. One searches in vain for the usual standard and the reasonable guidelines, or better still, the limitations that the said officers must observe when they make their distribution. There is none. Their options are apparently boundless. Who shall be the fortunate beneficiaries of their generosity and by what criteria shall they be chosen? Only the

officers named can supply the answer, they and they alone may choose the grantee as they see fit, and in their own exclusive discretion. Definitely, there is here a roving commission, a wide and sweeping authority that is not canal-ized within banks that keep it from overflowing, in short a clearly profligate and therefore invalid delegation of legislative powers. There are two accepted tests to determine whether or not there is a valid delegation of legislative power, viz, the completeness test and the sufficient standard test. Under the first test, the law must be complete in all its terms and conditions when it leaves the legislature such that when it reaches the delegate the only thing he will have to do is enforce it.13 Under the sufficient standard test, there must be adequate guidelines or limitations in the law to map out the boundaries of the delegates authority and prevent the delegation from running riot.14 _______________ 12 148 SCRA 659. 13 People v. Vera, 65 Phil. 56. 14 Cervantes v. Auditor General, 91 Phil. 359; People v. Rosenthal, 68 Phil. 328. 544 544 SUPREME COURT REPORTS ANNOTATED Eastern Shipping Lines, Inc. vs. POEA Both tests are intended to prevent a total transference of legislative authority to the delegate, who is not allowed to step into the shoes of the legislature and exercise a power essentially legislative. The principle of non-delegation of powers is applicable to all the three major powers of the Government but is especially important in the case of the legislative power because of the many instances when its delegation is permitted. The occasions are rare when executive or judicial powers have to be delegated by the authorities to which they legally pertain. In the case of the legislative power, however, such occasions have become more and more frequent, if not necessary. This had led to the observation that the delegation of legislative power has become the rule and its non-delegation the exception.

The reason is the increasing complexity of the task of government and the growing inability of the legislature to cope directly with the myriad problems demanding its attention. The growth of society has ramified its activities and created peculiar and sophisticated problems that the legislature cannot be expected reasonably to comprehend. Specialization even in legislation has become necessary. To many of the problems attendant upon present-day undertakings, the legislature may not have the competence to provide the required direct and efficacious, not to say, specific solutions. These solutions may, however, be expected from its delegates, who are supposed to be experts in the particular fields assigned to them. The reasons given above for the delegation of legislative powers in general are particularly applicable to administrative bodies. With the proliferation of specialized activities and their attendant peculiar problems, the national legislature has found it more and more necessary to entrust to administrative agencies the authority to issue rules to carry out the general provisions of the statute. This is called the power of subordinate legislation. With this power, administrative bodies may implement the broad policies laid down in a statute by filling in the details which the Congress may not have the opportunity or competence to provide. This is effected by their promulgation of what are known as supplementary regulations, such as the imple545 VOL. 166, OCTOBER 18, 1988 545 Eastern Shipping Lines, Inc. vs. POEA menting rules issued by the Department of Labor on the new Labor Code. These regulations have the force and effect of law. Memorandum Circular No. 2 is one such administrative regulation. The model contract prescribed thereby has been applied in a significant number of the cases without challenge by the employer. The power of the POEA (and before it the National Seamen Board) in requiring the model contract is not unlimited as there is a sufficient standard guiding the delegate in the exercise of the said authority. That standard is discoverable in the executive order itself which, in creating the Philippine Overseas Employment Administration, mandated it to protect the rights

of overseas Filipino workers to fair and equitable employment practices. Parenthetically, it is recalled that this Court has accepted as sufficient standards public interest in People v. Rosenthal,15 justice and equity in Antamok Gold Fields v. CIR,16 public convenience and welfare in Calalang v. Williams,17 and simplicity, economy and efficiency in Cervantes v. Auditor General,18 to mention only a few cases. In the United States, the sense and experience of men was accepted in Mutual Film Corp. v. Industrial Commission,19 and national security in Hirabayashi v. United States.20 It is not denied that the private respondent has been receiving a monthly death benefit pension of P514.42 since March 1985 and that she was also paid a P1,000.00 funeral benefit by the Social Security System. In addition, as already observed, she also received a P5,000.00 burial gratuity from the Welfare Fund for Overseas Workers. These payments will not preclude allowance of the private respondents claim against the petitioner because it is specifically reserved in the standard contract of employment for Filipino seamen under Memorandum Circular No. 2, Series of 1984, that _______________ 15 Supra. 16 70 Phil. 340. 17 70 Phil. 726. 18 Supra. 19 236 U.S. 247. 20 320 U.S. 99. 546 546 SUPREME COURT REPORTS ANNOTATED Eastern Shipping Lines, Inc. vs. POEA Section C. Compensation and Benefits. 1. In case of death of the seamen dialing the term of his Contract, the employer shall pay his beneficiaries the amount of: a. P220,000.00 for master and chief engineers b. P180,000.00 for other officers, including radio operators and master electricians

c. P130,000.00 for ratings. 2.It is understood and agreed that the benefits mentioned above shall be separate and distinct from, and will be in addition to whatever benefits which the seaman is entitled to under Philippine laws. x x x x. 3. x x x c. If the remains of the seaman is buried in the Philippines, the owners shall pay the beneficiaries of the seaman an amount not exceeding P18,000.00 for burial expenses. The underscored portion is merely a reiteration of Memorandum Circular No. 22, issued by the National Seamen Board on July 12, 1976, providing as follows: Income Benefits under this Rule Shall be Considered Additional Benefits. All compensation benefits under Title II, Book Four of the Labor Code of the Philippines (Employees Compensation and State Insurance Fund) shall be granted, in addition to whatever benefits, gratuities or allowances that the seaman or his beneficiaries may be entitled to under the employment contract approved by the NSB. If applicable, all benefits under the Social Security Law and the Philippine Medicare Law shall be enjoyed by the seaman or his beneficiaries in accordance with such laws. The above provisions are manifestations of the concern of the State for the working class, consistently with the social justice policy and the specific provisions in the Constitution calling for the protection of the working class and the promotion of its interest. One last challenge of the petitioner must be dealt with to close this case. Its argument that it has been denied due process because the same POEA that issued Memorandum Circular No. 2 has also sustained and applied it is an uninformed criticism of administrative law itself. Administrative agencies are vested with two basic powers, the quasilegisla547 VOL. 166, OCTOBER 18, 1988 547 Eastern Shipping Lines, Inc. vs. POEA

tive and the quasi-judicial. The first enables them to promulgate implementing rules and regulations, and the second enables them to interpret and apply such regulations. Examples abound: the Bureau of Internal Revenue adjudicates on its own revenue regulations, the Central Bank on its own circulars, the Securities and Exchange Commission on its own rules, as so too do the Philippine Patent Office and the Videogram Regulatory Board and the Civil Aeronautics Administration and the Department of Natural Resources and so on ad infinitum on their respective administrative regulations. Such an arrangement has been accepted as a fact of life of modern governments and cannot be considered violative of due process as long as the cardinal rights laid down by Justice Laurel in the landmark case of Ang Tibay v. Court of Industrial Relations21 are observed. Whatever doubts may still remain regarding the rights of the parties in this case are resolved in favor of the private respondent, in line with the express mandate of the Labor Code and the principle that those with less in life should have more in law. When the conflicting interests of labor and capital are weighed on the scales of social justice, the heavier influence of the latter must be counterbalanced by the sympathy and compassion the law must accord the underprivileged worker. This is only fair if he is to be given the opportunityand the rightto assert and defend his cause not as a subordinate but as a peer of management, with which he can negotiate on even plane. Labor is not a mere employee of capital but its active and equal partner. WHEREFORE, the petition is DISMISSED, with costs against the petitioner. The temporary restraining order dated December 10, 1986 is hereby LIFTED. It is so ordered. Narvasa, Gancayco, Grio-Aquino and Medialdea, JJ., concur. Petition, dismissed. _______________ 21 69 Phil. 635. 548 548 SUPREME COURT REPORTS ANNOTATED Zoleta vs. Drilon

Notes.View that an administrative regulation improperly delegated is null and void. However, it may be considered as expressing the executive view which is entitled to great respect. (National Federation of Sugar Workers (NFSW) vs. Ovejera, 114 SCRA 354.) Administrative agencies may not disregard the essential requirements of due process (New Filipino Maritime Agencies, Inc. vs. Rivera, 83 SCRA 602.) o0o [Eastern Shipping Lines, Inc. vs. POEA, 166 SCRA 533(1988)]

VOL. 156, DECEMBER 18, 1987 629 Cebu Institute of Technology (CIT) vs. Ople No. L-58870. December 18, 1987.* CEBU INSTITUTE OF TECHNOLOGY (CIT), petitioner, vs. HON. BLAS OPLE, in his capacity as Minister, Ministry of Labor and Employment, JULIUS ABELLA, ARSENIO ABELLANA, RODRIGO ALIWALAS, ZOSIMO ALMOCERA, GERONIDES ANCOG, GREGORIO ASIA, ROGER BAJARIAS, BERNARDO BALATAYO, JR., BASILIO CABALLES, DEMOCRITO TEVES, VOLTAIRE DELA CERNA, ROBERTO COBARRUBIAS, VILMA GOMEZ CHUA, RUBEN GALLITO, EDGARDO CONCEPCION, VICTOR COQUILLA, JOSE DAKOYKOY, PATERNO WONG, EVELYN LACAYA, RODRIGO GONZALES, JEOGINA GOZO, MIGUEL CABALLES, CONSUELO JAVELOSA, QUILIANO LASCO, FRANKLIN LAUTA, JUSTINIANA LARGO, RONALD LICUPA, ALAN MILANO, MARIA MONSANTO, REYNALDO NOYNAY, RAMON PARADELA, NATALIO PLAZA, LUZPURA QUIROGA, NOE RODIS, COSMENIA SAAVEDRA, _______________ * EN BANC. 630 630 SUPREME COURT REPORTS ANNOTATED Cebu Institute of Technology (CIT) vs. Ople LEONARDO SAGARIO, LETICIA SERRA, SIEGFREDO TABANAG, LUCINO TAMAOSO, DANILO TERANTE, HELEN CALVO TORRES, ERNESTO VILLANUEVA, DOLORES VILLONDO, EDWARD YAP, ROWENA VIVARES, DOLORES SANANAM, RODRIGO BACALSO, YOLANDA TABLANTE, ROMERO BALATUCAN, CARMELITA LADOT, PANFILO CANETE, EMMANUEL CHAVEZ, JR., SERGIO GALIDO, ANGEL COLLERA, ZOSIMO CUNANAN, RENE BURT LLANTO, GIL BATAYOLA, VICENTE DELANTE, CANDELARIO DE DIOS, JOSE MA. ESTELLA, NECITA TRINIDAD, ROTELLO ILUMBA, TEODORICO JAYME, RAYMUNDO ABSIN, RUDY MANEJA, REYNA RAMOS, ANASTACIA BLANCO, FE DELMUNDO, ELNORA MONTERA, MORRISON MONTESCLAROS, ELEAZAR PANIAMOGAN, BERNARDO PILAPIL, RODOLFO POL, DEMOSTHENES REDOBLE, PACHECO ROMERO,

DELLO SABANAL, SARAH SALINAS, RENATO SOLATORIO, EDUARDO TABLANTE, EMMANUEL TAN, FELICISIMO TESALUNA, JOSE VERALLO, JR., MAGDALENO VERGARA, ESMERALDA ABARQUEZ, MAC ARTHUR DACUYCUY ACOMPANADA, TRINIDAD ADLAWAN, FE ELIZORDO ALCANTARA, REOSEBELLA AMPER, ZENAIDA BACALSO, ELIZA BADANA, GEORGIA BAS, ERLINDA BURIAS, ELDEFONSO BURIAS, CORAZON CASENAS, REGINO CASTAEDA, GEORGE CATADA, CARMENCITA G. CHAVEZ, LORETIA CUNANAN, FLORES DELFIN, TERESITA ESPINO, ELVIE GALANZA, AMADEA GALELA, TERESITA JUNTILLA, LEONARDA KAPUNGAN, ADORACION LANAWAN, LINDA LAYAO, GERARDO LAYSON, VIRGILIO LIBETARIO, RAYMOND PAUL LOGARTA, NORMA LUCERO, ANATOLIA MENDEZ, ELIODORO MENDEZ, JUDALINE MONTE, ELMA OCAMPO, ESTEFA OLIVARES, GEORGE ORAIS, CRISPINA PALANG, GRETA PEGARIDO, MELBA QUIACHON, REMEDIOS QUIROS, VIRGINIA RANCES, EDNA DELOS REYES VICENTE TAN, EMERGENCIA ROSELL, JULIETA TATING, MERCIA TECARRO, FELISA VERGARA WEMINA VILLACIN, MACRINA YBARSABAL 631 VOL. 156, DECEMBER 18, 1987 631 Cebu Institute of Technology (CIT) vs. Ople MILAGROS CATALAN, JULIETA AQUINDE, SONIA ARTIAGA, MA. TERESITA OBANDO, ASUNCION ABAYAN, ESTHER CARREON, ECHEVARRE, BUENAFE SAMSON, CONCEPCION GONZALES, VITALIANA VENERACION, LEONCIA ABELLAR, REYNITA VILLACARLOS. respondents. No. L-68345. December 18, 1987.* DIVINE WORD COLLEGE OF LEGAZPI, petitioner, vs. The Honorable Deputy Minister of Labor and Employment, VICENTE LEOGARDO, JR., the HONORABLE REGIONAL DIRECTOR (Regional Office No. 5) of the Ministry of Labor & Employment GERARDO S. CASTILLO, CECILIA MANUEL and other alleged complainants, respondents, Nos. L-69224-5. December 18, 1987.* FAR EASTERN UNIVERSITY EMPLOYEES LABOR UNION, petitioner, vs. FAR EASTERN UNIVERSITY and the NATIONAL LABOR RELATIONS COMMISSION, respondents. No. L-70832. December 18, 1987.*

GREGORIO T. FABROS, ROGELIO B. DE GUZMAN, CRESENCIANO ESPINO, JOSE RAMOS SUNGA, BAYLON BANEZ, FERNANDO ELESTERIO, ISMAEL TABO, AMABLE TUIBEO, CELSO TUBAY, RAFAEL HERNANDEZ, GERONIMO JASARENO, MEL BALTAZAR, MA. LOURDES PASCUAL, T. DEL ROSARIO ACADEMY TEACHERS and EMPLOYEES ASSOCIATION, DENNIS MONTE, BECKY TORRES, LOIDA VELASCO, ROMLY NERY, DAISY N. AMPIG, PATRICIO DOLORES, ROGELIO RAMIREZ, and NILDA L. SEVILLA, petitioners, vs. The HON. JAIME C. LAYA, in his capacity as Minister of Education, Culture and Sports, respondents. _______________ * EN BANC. 632 632 SUPREME COURT REPORTS ANNOTATED Cebu Institute of Technology (CIT) vs. Ople No. L-76521. December 18, 1987.* JASMIN BISCOCHO, ROWENA MARIANO, AGNES GALLEGO, MA. ANA ORDENES, ISABEL DE LEON, LUZVIMINDA FIDEL, MARIQUIT REYES, SOTERA ORTIZ, ANGELINA ROXAS, BITUIN DE PANO, ELIZABETH ORDEN, APOLLO ORDEN, GUILLERMA CERCANO, IMELDA CARINGAL, EFREN BATIFORA, ROSIE VALDEZ, DELIA QUILATEZ, FELIX RODRIGUEZ, OSCAR RODRIGUEZ, JOVITA CEREZO, JOSEFINA BONDOC, BELEN POSADAS, DOLORES PALMA, ANTONINA CRUZ, CONRADO BANAYAT, TERESITA LORBES, and CORAZON MIRANDA, petitioners, vs. THE HONORABLE AUGUSTO SANCHEZ, in his capacity as Minister of Labor and Employment, ESPIRITU SANTO PAROCHIAL SCHOOL AND ESPIRITU SANTO PAROCHIAL SCHOOL FACULTY ASSOCIATION, respondents. No. L-76596. December 18, 1987.* RICARDO C. VALMONTE and CORAZON BADIOLA, petitioners, vs. THE HONORABLE AUGUSTO SANCHEZ, in his capacity as Minister of Labor and Employment, ESPIRITU SANTO PAROCHIAL SCHOOL FACULTY ASSOCIATION, and ESPIRITU SANTO PAROCHIAL SCHOOL, respondents. Constitutional Law; Courts; The function of the Court is limited to the judicial task of saying what the law is as enacted by the law making body.Amidst these opposing forces the task at hand becomes saddled with the resultant implications that the interpretation of the law would

bear upon such varied interests. But this Court can not go beyond what the legislature has laid down. Its duty is to say what the law is as enacted by the lawmaking body. That is not the same as saying what the law should be or what is the correct rule in a given set of circumstances. It is not the province of the judiciary to look into the wisdom of the law nor to question the policies adopted by the legislative branch. Nor is it the business of this Tribunal to remedy every unjust situation that may arise from the application of a particular law. It is for the legislature to enact _______________ * EN BANC. 633 VOL, 156, DECEMBER 18, 1987 633 Cebu Institute of Technology (CIT) vs. Ople remedial legislation if that be necessary in the premises. But as always, with apt judicial caution and cold neutrality, the Court must carry out the delicate function of interpreting the law, guided by the Constitution and existing legislation and mindful of settled jurisprudence. The Court's function is therefore limited, and accordingly, must confine itself to the judicial task of saying what the law is, as enacted by the lawmaking body, Same; Same; Same; Allowances and benefits chargeable against proceeds of tuition fee increases which the law allows for return on investments of schools have no other resources.This Court has consistently held, beginning with the University of the East case, that if the schools have no resources other than those derived from tuition fee increases, allowances and benefits should be charged against the proceeds of tuition fee increases which the law allows for return on investments under section 3(a) of Pres. Dec. No. 451, therefore, not against the 60% portion allocated for increases in salaries and wages (See 117 SCRA at 571). This ruling was reiterated in the University of Pangasinan case and in the Saint Louis University case. This interpretation of the law is consistent with the legislative intent expressed in the Decree itself, i.e., to alleviate the sad plight of private schools and that of their personnel wrought by slump in enrollment and increasing operational costs on the part of the schools, and the increasing costs of living on the part of the personnel (Preamble, Pres.

Dec. No. 451). While coming to the aid of the private school system by simplifying the procedure for increasing tuition fees, the Decree imposes as a condition for the approval of any such increase in fees, the allocation of 60% of the incremental proceeds thereof, to increases in salaries or wages of school personnel. This condition makes for a quid pro quo of the approval of any tuition fee hike by a school, thereby assuring the school personnel concerned, of a share in its proceeds. The condition having been imposed to attain one of the main objectives of the Decree, which is to help the school personnel cope with the increasing costs of living, the same cannot be interpreted in a sense that would diminish the benefit granted said personnel. Same; Same; Same; Same; Allowances not included in the concept of salaries or wages.ln the light of existing laws which exclude allowances from the basic salary or wage in the computation of the amount of retirement and other benefits payable to an employee, this Court will not adopt a different meaning of the terms "salaries or wages" to mean the opposite, i.e, to include allowances in the concept of salaries or wages. 634 634 SUPREME COURT REPORTS ANNOTATED Cebu Institute of Technology (CIT) vs. Ople Same; Same; Same; Same; Same; Implementing rules and regulations promulgated by the then MECS that allowances and other benefits can be charged against the 60% proceeds of the tuition fee increase were ultra vires and not binding upon the court.As to the alleged implementing rules and regulations promulgated by the then MECS to the effect that allowances and other benefits may be charged against the 60% portion of the proceeds of tuition fee increases provided for in Section 3(a) of Pres. Dec. No. 451, suffice it to say that these were issued ultra vires, and therefore not binding upon this Court. Rules and regulations promulgated in accordance with the power conferred by law would have the force and effect of law [Victorias Milling Company, Inc. v. Social Security Commission, 114 Phil. 555 (1962)] if the same are germane to the subjects of the legislation and if they conform with the standards prescribed by the same law [People v. Maceren, G.R. No. L32166, October 18, 1977, 79 SCRA 450]. Since the implementing rules

and regulations cited by the private schools adds allowances and other benefits to the items included in the allocation of 60% of the proceeds of tuition fee increases expressly provided for by law, the same were issued in excess of the rule-making authority of said agency, and therefore without binding effect upon the courts. At best the same may be treated as administrative interpretations of the law and as such, they may be set aside by this Court in the final determination of what the law means. Same; Same; Same; Section 42 of BP Blg. 232 repeals Presidential Decree No. 451.The Court after comparing section 42 of B.P. Blg. 232 and Pres. Dec. No. 451, particularly section 3(a) thereof, finds evident irreconcilable differences. Under Pres. Dec. No. 451, the authority to regulate the imposition of tuition and other school fees or charges by private schools is lodged with the Secretary of Education and Culture (Sec. 1), whereas section 42 of B.P. Blg. 232 liberalized the procedure by empowering each private school to determine its rate of tuition and other school fees or charges. Pres. Dec. No. 451 provides that 60% of the incremental proceeds of tuition fee increases shall be applied or used to augment the salaries and wages of members of the faculty and other employees of the school, while B.P. Blg. 232 provides that the increment shall be applied or used in accordance with the regulations promulgated by the MECS. A closer look at these differences eads the Court to resolve the question in favor of repeal. As pointed out by the Solicitor General, three aspects of the disputed provisions of law support the above conclusion. First, the legislative authority under Pres. Dec. No. 451 retained the power to 635 VOL. 156, DECEMBER 18, 1987 635 Cebu Institute of Technology (CIT) vs. Ople apportion the incremental proceeds of the tuition fee increases; such power is delegated to the Ministry of Education and Culture under B.P. Blg. 232. Second, Pres. Dec. No. 451- limits the application or use of the increment to salary or wage increase, institutional development, student assistance and extension services and return on investment, whereas B.P. Blg. 232 gives the MECS discretion to determine the application or use of the increments. Third, the extent of the application or use of the increment under Pres. Dec. No. 451 is fixed at the pre-determined

percentage allocations: 60% for wage and salary increases, 12% for return in investment and the balance of 28% to institutional development, student assistance and extension services, while under B.P. Blg. 232, the extent of the allocation or use of the increment is likewise left to the discretion of the MECS. The legislative intent to depart from the statutory limitations under Pres. Dec. No. 451 is apparent in the second sentence of section 42 of B.P. Blg. 232. Pres. Dec. No. 451 and section 42 of B.P. Blg. 232 which cover the same subject matter, are so clearly inconsistent and incompatible. with each other that there is no other conclusion but that the latter repeals the former in accordance with section 72 of B.P. Blg. 232 to wit: Sec. 72. Repealing clause.All laws or parts thereof inconsistent with any provision of this Act shall be deemed repealed or modified, as the case may be. Same; Delegation of legislative power; Statutory grant of rulemaking power to administrative agencies like the Secretary of Education is a valid exception to the rule on non-delegation of legislative power; Requisites.The statutory grant of rule-making power to administrative agencies like the Secretary of Education is a valid exception to the rule on non-delegation of legislative power provided two conditions concur, namely: 1) the statute is complete in itself, setting forth the policy to be executed by the agency, and 2) said statute fixes a standard to which the latter must conform. Civil Procedure; Certiorari and/or Prohibition only persons aggrieved by the act or proceeding in question may file a petition for certiorari and/or prohibition.This Court finds merit in the respondents' objection. Under Rule 65 of the Rules of Court (Secs. 1 and 2), only a person aggrieved by the act or proceeding in question may file a petition for certiorari and/or prohibition. The Valmonte petition fails to indicate how the petitioners would be aggrieved by the assailed Order. It appears that the petitioners are not parties and never at any time intervened in the conciliation conferences and arbitration proceedings before the respondent Minister. The parties therein, who stand to be directly affected by the Order of the respon636 636 SUPREME COURT REPORTS ANNOTATED Cebu Institute of Technology (CIT) vs. Ople

dent Minister, do not contest the validity of said Order. The petition does not even state that petitioners act as representative of the parents' association in the School or in behalf of other parents similarly situated. Same; Same; Same; Motion for Reconsideration should first be availed of before filing a petition for certiorari and prohibition.If indeed, petitioners Valmonte and Badiola are aggrieved by the said Order, they should have intervened and moved for a reconsideration of respondent Minister's Order before filing the instant petition. Petitioners failed to show that the case falls under any one of the recognized exceptions to the rule that a motion for reconsideration should first be availed of before filing a petition for certiorari and prohibition. Same; Due Process; Administrative agencies not strictly bound by the technical rules of procedure.lt could not therefore be contended that the petitioner was deprived of his right to be heard when it appears on the record that it was permitted to ventilate its side of the issues. There was sufficient compliance with the requirements of due process. In the face of the well-settled principle that administrative agencies are not strictly bound by the technical rules of procedure, this Court dismisses the petitioner's claim that formal investigative and arbitration proceedings should be conducted. "While a day in court is a matter of right in judicial proceedings, in administrative proceedings it is otherwise since they rest upon different principles." Labor Law; Employees; Incentive Leave Benefits; Petitioner's teaching personnel not deemed field personnel; Claim that private respondents are not entitled to the service leave benefit cannot be sustained.The phrase "those who are engaged on task or contract basis" should however, be related with "field personnel," applying the rule on ejusdem generis that general and unlimited terms are restrained and limited by the particular terms that they follow. [Vera v. Cuevas, G.R. No. L-33693, May 31, 1979, 90 SCRA 379]. Clearly, petitioner's teaching personnel cannot be deemed field personnel which refers "to non-agricultural employees who regularly perform their duties away from the principal place of business or branch office of the employer and whose actual hours of work in the field cannot be determined with reasonable certainty. [Par. 3, Article 82, Labor Code of the Philippines]. Petitioner's claim that private respondents are not entitled to the service incentive leave benefit cannot therefore be sustained. 637

VOL. 156, DECEMBER 18, 1987 637 Cebu Institute of Technohgy (CIT) vs. Ople Same; Power to Investigate; Secretary of Labor or his duly authorized representatives are accorded power to investigate complaints for noncompliance with labor laws.Contrary to the petitioner's protestation of lack of jurisdiction, the Secretary of Labor or his duly authorized representatives (which includes Regional Directors) are accorded the power to investigate complaints for noncompliance with labor laws, particularly those which deal with labor standards such as payment of wages and other forms of compensation, working hours, industrial safety, etc. Same; Same; Same; Labor Standard cases arising from violation of labor standard laws under the exclusive original jurisdiction of the Regional Director.Furthermore, Policy Instruction No. 6 which deals with the distribution of jurisdiction over labor cases restates inter alia that "(L)abor standards cases arising from violation of labor standards laws discovered in the course of inspection or complaints where employeremployee relations still exist" are under the exclusive original jurisdiction of the Regional Director. Even assuming that respondent Regional Director was without jurisdiction to entertain the case at bar, petitioner is now barred at this stage to claim lack of jurisdiction having actively participated in the proceedings below. Petitioner never questioned the jurisdiction of the respondent Regional Director. Same; Allowances; Transportation allowances a form of bonus equivalent to the 13th month pay.This Court sustains the aforequoted view of public respondent. The benefit herein designated as "transportation allowance" is a form of bonus equivalent to the 13th month pay. Nevertheless, where this does not amount to 1/12 of the employees basic salary, the employer shall pay the difference. CORTES, J.: Six cases involving various private schools, their teachers and nonteaching school personnel, and even parents with children studying in said schools, as well as the then Minister of Labor and Employment, his Deputy, the National Labor Relations Commission, and the then Minister of Education, Culture and Sports, have been consolidated in this single

Decision in order to dispose of uniformly the common legal issue raised therein, namely, the allocation of the incremental proceeds of authorized tuition fee increases of private schools provided for in section 3 (a) of Presidential Decree No. 451, and 638 638 SUPREME COURT REPORTS ANNOTATED Cebu Institute of Technology (CIT) us. Ople thereafter, under the Education Act of 1982 (Batas Pambansa Blg. 232). Specifically, the common problem presented by these cases requires an interpretation of section 3(a) of Pres. Decree No. 451 which states: SEC. 3. Limitations.The increase in tuition or other school fees or other charges as well as the new fees or charges authorized under the next preceding section shall be subject to the following conditions: (a) That no increase in tuition or other school fees or charges shall be approved unless sixty (60%) per centum of the proceeds is allocated for increase in salaries or wages of the members of the faculty and all other employees of the school concerned, and the balance for institutional development, student assistance and extension services, and return to investments: Provided, That in no case shall the return to investments exceed twelve (12%) per centum of the incremental proceeds; * * * In addition, there is also a need for a pronouncement on the effect of the subsequent enactment of B.P. Blg. 232 which provides for the allocation of tuition fee increases in section 42 thereof. In a nutshell, the present controversy was precipitated by the claims of some school personnel for allowances and other benefits and the refusal of the private schools concerned to pay said allowances and benefits on the ground that said items should be deemed included in the salary increases they had paid out of the 60% portion of the proceeds from tuition fee increases provided for in section 3 (a) of Pres. Decree No. 451. The interpretation and construction of laws being a matter of judicial power and duty [Marbury v. Madison, 1 Cranch 137 (1803); Endencia v. David, 93 Phil. 696 (1953)], this Court has been called upon to resolve the controversy.

In the process of reading and at times, having to decipher, the numerous pleadings filed in the six cases, the Court found that the main issue has been approached by the parties from almost diametrical points, thereby bringing into focus three sub-issues: first, whether or not allowances and other fringe 639 VOL. 156, DECEMBER 18, 1987 639 Cebu Institute of Technology (CIT) vs. Ople benefits of faculty members and other school employees may be charged against the 60% portion of the tuition fee increases provided for in section 3(a) of Pres. Dec. No. 451: second, whether or not the same items may be charged against said portion under the provisions of B.P. Blg. 232: and, third, whether or not schools and their employees may enter into a collective bargaining agreement allocating more than 60% of said incremental proceeds for salary increases and other benefits of said employees. After these sub-issues have been resolved, the Court will tackle the other incidents attending the individual cases, seriatim. The factual antecedents that brought these cases before this Tribunal are as follows: I. FACTUAL BACKGROUND OF EACH CASE A. CEBU INSTITUTE OF TECHNOLOGY CASE This case originated from a Complaint filed with the Regional Office No. VII of the Ministry of Labor on February 11, 1981 against petitioner Cebu Institute of Technology (CIT) by private respondents, Panfilo Canete, et al., teachers of CIT, for non-payment of: a) cost of living allowances (COLA) under Pres. Dec. Nos. 525, 1123, 1614, 1678 and 1713, b) thirteenth (13th) month pay differentials and c) service incentive leave. By virtue of an Order issued by the then Deputy Minister of Labor Carmelo C. Noriel, a labor-management committee composed of one representative each from the Ministry of Labor and Employment (MOLE), the Minister of Education, Culture and Sports (MECS), and two representatives each from CIT and from the teachers was created. Said committee was to ascertain compliance with the legal requirements for the payment of COLA, thirteenth (13th) month pay and service incentive leave [Rollo, p. 84].

The position taken by CIT during the conference held by the labor management committee was that it had paid the allowances mandated by various decrees but the same had been integrated in the teacher's hourly rate. It alleged that the 640 640 SUPREME COURT REPORTS ANNOTATED Cebu Institute of Technology (CIT) vs. Ople payment of COLA by way of salary increases is in line with Pres. Dec. No. 451. It also claimed in its position paper that it had paid thirteenth month pay to its employees and that it was exempt from the payment of service incentive leave to its teachers who were employed on contract basis [Rollo, pp. 8586]. After the report and recommendation of the committee, herein public respondent, then Minister of Labor and Employment issued the assailed Order dated September 29, 1981 and held that the basic hourly rate designated in the Teachers' Program is regarded as the basic hourly rate of teachers exclusive of the COLA, and that COLA should not be taken from the 60% incremental proceeds of the approved increase in tuition fee. The dispositive portion of the Order reads: PREMISES CONSIDERED, CIT is hereby ordered to pay its teaching staff the f ollowing: 1) COLA under P.D.'s 525 and 1123 from February 1978 up to 1981; 2) COLA under P.D.'s 1614, 1634, 1678 and 1713; and 3) Service incentive ve lea ve from 1978 up to 1981. CIT is further directed to integrate into the basic salaries of its teachers and (sic) COLA under P.D.'s 525 and 1123 starting on January 1981, pursuant to P.D. 1751. For purposes of integration, the hourly rate shown in its Teachers' Program for school year 198182 shall be considered as the basic hourly rate. SO ORDERED. Petitioner assails the aforesaid Order in this Special Civil Action of Certiorari with Preliminary Injunction and/or Restraining Order. The Court issued a Temporary Restraining Order on December 7, 1981 against the enforcement of the questioned Order of the Minister of Labor and Employment. B. DIVINE WORD COLLEGE OF LEGAZPI CASE

Upon a complaint filed by ten faculty members for alleged noncompliance by herein petitioner Divine Word College of 641 VOL. 156, DECEMBER 18, 1987 641 Cebu Institute of Technology (CIT) vs. Ople Legazpi with, among others, Pres. Dec. No. 451, i.e., allowances were charged to the 60% incremental proceeds of tuition fee increase, the Labor Regulation Section of Regional Office No. V (Legazpi City) of the Ministry of Labor and Employment conducted an inspection of the employment records of said school. On the basis of the report on the special inspection that the school did not comply with Pres. Dec. No. 451, herein respondent Regional Director issued an Order dated May 30, 1983, requiring compliance by the Divine Word College. The latter filed a Memorandum of Appeal from said Order which the Regional Director treated as a Motion for Reconsideration. Upon failure of the school to comply with the aforesaid Order, another Order (August 2, 1983) was issued by herein respondent Regional Director requiring herein petitioner to pay the faculty members-complainants (herein private respondents) the amounts indicated therein or the total sum of Six Hundred Seventeen Thousand Nine Hundred Sixty Seven Pesos and Seventy Seven Centavos (P617,967.77). Petitioner's Motion for Reconsideration of the Order was denied. On appeal, the respondent Deputy Minister of Labor and Employment affirmed the Order of the Regional Director, viz: Coming now to the substantial merit of the case, we share the view that the emergency allowances due the complainants under the several presidential decrees (PD's 525, 1123, etc.) cannot be charged by the respondent against the 60% of the incremental proceeds from increase in tuition fees authorized under PD 451, not only because as per decision of the Supreme Court (UE vs. UE Faculty Association, et. al., G.R. No. 57387, September 30, 1982) said allowances whether mandated by law or secured by collective bargaining should be taken only from the return to investment referred to in the decree if the school has no other resources to grant the allowances but not from the 60% incremental proceeds, but also because to hold otherwise would, to our mind,

inevitably result in the loss of one benefit due the complainantsthat is the salary or wage increase granted them by PD 451. * * * In other words, we believe that by paying the complainants' allowances out of the 60% incremental proceeds intended for their salary increase they are practically being deprived of one benefittheir share in the 60% incremental proceeds in terms of 642 642 SUPREME COURT REPORTS ANNOTATED Cebu Institute of Technology (CIT) vs. Ople salary or wage increase. WHEREFORE, for the reasons abovestated, the Order appealed from is hereby AFFIRMED, and the appeal DISMISSED, for lack of merit. SO ORDERED. (Annex "K" to Petition; Rollo, p. 108,110). This special civil action of Certiorari and Prohibition with Preliminary Injunction questions the interpretation of, and application by the respondent Deputy Minister, of the provisions of Pres. Dec. No, 451, as set forth in the assailed Order. On March 25, 1985, after considering the allegations, issues and arguments adduced in the Petition as well as the Comment thereon of the public respondent and dispensing with the private respondents' Comment, the Court resolved to dismiss the Petition for lack of merit (Rollo, p. 198). On April 26, 1985, petitioner filed a Motion for Reconsideration with Motion to Consider the Case En Banc. On June 26, 1985 the First Division of the Court referred the case to the Court En Banc for consolidation with G.R. No. 70832, entitled "Gregorio T. Fabros, et. al. vs. Hon. Jaime C. Laya, etc." since it involves the same issue on the application of 60% incremental proceeds of authorized tuition fee increases [Rollo, p. 235]. The Court EN BANC resolved to accept the case. (Resolution of July 16, 1985). These cases were further consolidated with other cases involving the same issues. C. FAR EASTERN UNIVERSITY CASE On December 17, 1978, petitioner Union filed with the Ministry of Labor and Employment a complaint against respondent University for non-

payment of legal holiday pay and under-payment of the thirteenth (13th) month pay. On July 7, 1979, while the case was pending, the Union President, in his personal capacity, filed another complaint for violation of Pres. Dec. No. 451 against the same respondent. The two cases were forthwith consolidated and jointly heard and tried. On March 10, 1980, Labor Arbiter Ruben A. 643 VOL. 156, DECEMBER 18, 1987 643 Cebu Institute of Technology (CIT) vs. Ople Aquino promulgated a decision the dispositive portion of which is quoted hereunder: RESPONSIVE TO THE FOREGOING, respondent is hereby directed, within ten (10) days from receipt hereof, to: 1. To (sic) pay the paid legal holidays that it withdrew since January 14, 1976 up to the present; and 2. Pay the 13th month pay differential of complainant's for the covered period December 16, 1975 to December 17, 1978, date of filing of complaint for non-payment of legal holiday pay and under payment of the 13th month pay, and thereafter. Barred forever are money claims beyond three (3) years from the time the course (sic) of action occurred. Respondent's formula on transportation allowance which was deducted from the 13th month pay is thus subject to this prescriptive period, for purposes of computation of differentials for the 13th month pay. The claim under PD 451 is hereby dismissed for lack of merit. SO ORDERED. (Annex "E" to Petition; Rollo, p. 55, 65-66). Both parties appealed the decision of the Labor Arbiter. On September 18, 1984, the respondent Commission disposed of the appeal in the following manner: RESPONSIVE TO THE FOREGOING, the Decision of Labor Arbiter Ruben A. Aquino in the instant case dated March 10, 1980 is hereby Modified in the sense that complainant's claims for legal holiday pay and 13th month pay are likewise dismissed for lack of merit and the dismissal of the claim under P.D. 451 is hereby Affirmed en (sic) toto. (Annex "A" to Petition: Rollo, p. 24, 35).

Petitioner's Motion for Reconsideration dated September 29, 1984 was denied for lack of merit on November 8, 1984. Before this Court is the petition on certiorari filed by the Union assailing the abovementioned decision of the Commissioner. D. FABROS CASE 644 644 SUPREME COURT REPORTS ANNOTATED Cebu Institute of Technology (CIT) vs. Ople This petition is in the nature of a class suit brought by petitioners in behalf of the faculty members and other employees of more than 4000 private schools nationwide. Petitioners seek to enjoin the implementation of paragraphs 7 to 7.5 of MECS Order No. 5, series of 1985 on the ground that the said order is null and void for being contrary to Pres. Dec. No. 451 and the rulings of the Supreme Court in the cases of University of the East v. UE Faculty Association [G.R. No. L-57387, September 20, 1982, 117 SCRA 554], University of Pangasinan Faculty Union v. University of Pangasinan and NLRC [G.R. No. 63122, February 20, 1984, 127 SCRA 691], St. Louis University Faculty Club v. NLRC and St. Louis University [G.R. No. 65585, September 28, 1984, 132 SCRA 380]. On September 11, 1982, Batas Pambansa Blg. 232 (Education Act of 1982) was signed into law. On the matter of tuition and other school fees of private schools, section 42 of said law provides as follows: Sec. 42. Tuition and other School Fees.Each private school shall determine its rate of tuition and other school fees or charges. The rates and charges adopted by schools pursuant to this provision shall be collectible, and their application or use authorized, subject to rules and regulations promulgated by the Ministry of Education, Culture and Sports. (Italics supplied). Invoking section 42 of B.P. Blg. 232, among others, as its legal basis, the then Minister of Education Jaime C. Laya promulgated on April 1,1985 the disputed MECS Order No. 25, s. 1985 entitled Rules and Regulations To Implement the Provisions of B.P. Blg. 232. The Education Act of 1982, Relative to Student Fees for School Year 1985-1986. The relevant portions of said Order are quoted hereunder: 7. Application or Use of Tuition and Other School Fees or Charges.

7.1 The proceeds from tuition fees and other school charges as well as other income of each school, shall be treated as an institutional fund which shall be administered and managed for the support of school purposes strictly: Provided, That for the purpose of generating additional financial resources or income for the opera 645 VOL. 156, DECEMBER 18, 1987 645 Cebu Institute of Technology (CIT) vs. Ople tional support and maintenance of each school, two or more schools may pool their institutional funds, in whole or in part, subject to the prior approval of their respective governing boards. 7.2 Tuition fees shall be used to cover the general expenses of operating the school in order to allow it to meet the minimum standards required by the Ministry or any other higher standard, to which the school aspires. They may be used to meet the costs of operation for maintaining or improving the quality of instruction/training/research through improved facilities and through the payment of adequate and competitive compensation for its faculty and support personnel, including compliance with mandated increases in personnel compensation and/or allowance. 7.3 Tuition fees shall be used to cover minimum and necessary costs including the following: (a) compensation of school personnel such as teaching or academic staff, school administrators, academic nonteaching personnel, and non-academic personnel, (b) maintenance and operating expenses, including power and utilities, rentals, depreciation, office supplies; and (c) interest expenses and installment payments on school debts. 7.4 Not less than sixty (60) percent of the incremental tuition proceeds shall be used for salaries or wages, allowances and fringe benefits of faculty and support staff, including cost of living allowance, imputed costs of contributed services, thirteenth (13th) month pay, retirement fund contributions, social security, medicare, unpaid school personnel claims, and payments as may be prescribed by mandated wage orders. collective bargaining agreements and voluntary employer practices, Provided: That increases in fees specifically authorized for the purposes

listed in paragraph 4.3.3 hereof shall be used entirely for those purposes. (Italics supplied). 7.5 Other student fees and charges as may be approved, including registration, library, laboratory, athletic, application, testing fees and charges shall be used exclusively for the indicated purposes, including (a) the acquisition and maintenance of equipment, furniture and fixtures, and buildings, (b) the payment of debt amortization and interest charges on debt incurred for school laboratory, athletic, or other purposes, and (c) personal services and maintenance and operating expenses incurred to operate the facilities or services f or which f ees and charges are collected. The Petition prayed f or the issuance of a temporary restraining order which was granted by this Court after hearing. The dispositive portion of the resolution dated May 28, 1985 reads 646 646 SUPREME COURT REPORTS ANNOTATED Cebu Institute of Technology (CIT) vs. Ople as follows: After due consideration of the allegations of the petition dated May 22, 1985 and the arguments of the parties, the Court Resolved to ISSUE, effective immediately and continuing until further orders from this Court, a TEMPORARY RESTRAINING ORDER enjoining the respondent from enforcing or implementing paragraphs 7.4 to 7.5 of MECS Order No. 25, s. 1985, which provide for the use and application of sixty per centum (60%) of the increases in tuition and other school fees or charges authorized by public respondent for the school year 1985-1986 in a manner inconsistent with section 3(a), P.D. No. 451, (which allocates such 60% of the increases exclusively 'for increases in salaries or wages of the members of the faculty and other employees of the school concerned.') and directing accordingly that such 60% of the authorized increases shall be held in escrow by the respective colleges and universities, i.e., shall be kept intact and not disbursed for any purpose pending the Court's resolution of the issue of the validity of the aforementioned MECS Order in question. (Rollo, p. 21). In the same resolution, the Philippine Association of Colleges and Universities (PACU) was impleaded as respondent.

Subsequent to the issuance of this resolution, four (4) schools, represented in this petition, moved for the lifting of the temporary restraining order as to them. In separate resolutions, this Court granted their prayers. Ateneo de Manila University, De La Salle University (Taft Avenue) and De La Salle University-South, through their respective counsels, manifested that for the school year 19851986, tuition fee increase was approved by the MECS and that on the basis of Pres. Dec. No. 451, 60% of the tuition fee increases shall answer for salary increase. However, a budgeted salary increase, exclusive of living allowances and other benefits, was approved for the same school year which when computed amounts to more than the 60%. This Court granted the motions in separate resolutions lifting the temporary restraining order with respect to these schools in order that they may proceed with the implementation of the general salary increase for their employees. In the case of St. Louis University, its Faculty Club, Ad647 VOL. 156, DECEMBER 18, 1987 647 Cebu Institute of Technology (CIT) vs. Ople ministrative Personnel Association and the University itself joined in a petition seeking for leave that 49% of the increase in tuition and other fees for school year 1985-1986 be released. Petitioners manifested that the remaining balance shall continue to be held in escrow by the University. In a resolution dated January 28, 1986, the Court resolved as follows: Accordingly, the Temporary Restraining Order issued by this Court on May 28, 1985 is hereby ordered LIFTED with respect to Saint Louis University of Baguio City in order that it may proceed immediately with the implementation of salary increases for its employees. D. BISCOCHO CASE The Espiritu Santo Parochial School and the Espiritu Santo Parochial School Faculty Association were parties to a labor dispute which arose from a deadlock in collective bargaining. The parties entered into conciliation proceedings. The union went on strike after efforts at the conciliation failed. Subsequently, a return to work agreement was forged

between the parties and both agreed to submit their labor dispute to the jurisdiction of the Minister of Labor. In the exercise of his power to assume jurisdiction, the Ministry of Labor and Employment issued an Order dated April 14,1986 which provides for the following: IN CONSIDERATION OF ALL THE FOREGOING, the Ministry hereby declares the strike staged by the Union to be legal and orders the following: a) the School to submit the pertinent record of employment of Romualdo Noriego to the Research and Information Division of the NLRC for computation of his underpayment of wages and for the parties to abide by the said computation; b) the School to submit all pertinent record of collections of tuition fee increases for school year (sic) 1982-1983, 1983-1984 and 1984-1985 to the Research and Information Division of the NLRC for proper computation and for equal distribution of the amount to all 648 648 SUPREME COURT REPORTS ANNOTATED Cebu Institute of Technology (CIT) vs. Ople employees and teachers during the abovementioned school year (sic) as their salary adjustment under P.D. 451; c) the parties to wait for the final resolution of the llegal dismissal (case) docketed as NLRC NCR Case No. 5-1450-85 and to abide by the said resolution; d) to furnish the MECS a copy of this order for them to issue the guidelines in the implementation of PRODED Program; e)the parties to execute a collective bargaining agreement with an economic package equivalent to 90% of the proceeds from tuition fee increases for school year 1985-1986, and another 90% for school year 1986-1987 and 85% for school year 1987-1988. The amount aforementioned shall be divided equally to all members of the bargaining unit as their respective salary adjustments. Such other benefits being enjoyed by the members of the bargaining unit prior to the negotiation of the CBA shall remain the same and shall not be reduced.

f)the School to deduct the amount equivalent to ten (10%) per cent of the backwages payable to all members of the bargaining unit as negotiation fee and to deliver the same to the Union Treasurer for proper disposition. (Italics supplied). SO ORDERED. (Rollo, pp. 16-17) Pursuant to the said order, private respondent Union agreed to incorporate in their proposed collective bargaining agreement (CBA) A) with the School the following: 2) The Union and School Administration will incorporate the following in their CBAA 1) The computation of the tuition fee increase shall be gross to gross from which the corresponding percentage of 90% will be taken. The resulting amount will be divided among 141 5 employees for 1985-86 and 132.5 employees for 1986-87. A- the resulting increase will be added to basic and divided by 13.3 to arrive at monthly increase in basic. The other 1/2 will be divided by 12.3 to arrive at monthly increase in living allowance. * * * 4) x 649 x x

to the 60% incremental proceeds under Pres. Dec. No. 451 which provide for the exclusive application of the 60% incremental proceeds to basic salary. Acting on the petitioners' prayer, this Court immediately issued a temporary restraining order on November 25, 1986 "... enjoining the respondents from enforcing, implementing and proceeding with the questioned order of April 14,1986 and collective bargaining agreement executed between respondents Union and the School Administration in pursuance thereof." [Rollo, p. 20]. F. VALMONTE CASE This Petition was filed by parents with children studying at respondent school, Espiritu Santo Parochial School to nullify the Order dated April 14, 1986 issued by public respondent, then Minister of Labor and Employment, specifically paragraphs (e) and (f) thereof, quoted in the Biscocho case. The award contained in the said Order is the result of the assumption of jurisdiction by the public respondent over a labor dispute involving the private respondents school and faculty association, The latter had earlier filed a notice of strike because of a bargaining deadlock on the demands of its 650 650 SUPREME COURT REPORTS ANNOTATED Cebu Institute of Technology (CIT) vs. Ople members for additional economic benefits. After numerous conciliation conferences held while the union was on strike, the parties voluntarily agreed that the public respondent shall assume jurisdiction over all the disputes between them. As to the subject matter of the instant case, the public respondent found that the latest proposals of the respondent school was to give 85% of the proceeds from tuition fee increases for the school years to be divided among the teachers and employees as salary adjustments. What the respondent faculty association offered to accept was a package of 95% for school year 1985-1986, 90% for school year 1986-1987. The respondent school offered to strike the middle of the two positions, hence the Order complained of by the petitioners [See Annex "A", Petition; Rollo, pp. 9, 14-15; Comment of the Respondent Faculty Association; Rollo, p. 26].

VOL. 156, DECEMBER 18, 1987 649 Cebu Institute of Technology (CIT) vs. Ople Upon request/demand of the Union, School will deduct from backwages of managerial employees and others outside the bargaining unit what Union will charge its own members in the form of attorney 's fees, special assessment and union dues/agency fee. 5) The signing of the CBA and payment of backwages and others shall be on November 26,1986 at the Espiritu Santo Parochial School Library. (Rollo, pp. 3-4). The herein petitioners, Jasmin Biscocho and 26 others, all employees and faculty members of the respondent School, filed the present petition for prohibition to restrain the implementation of the April 14, 1986 Order of respondent Labor Minister as well as the agreements arrived at pursuant thereto. They contend that said Order and agreements affect their rights

II. RESOLUTION OF THE COMMON LEGAL ISSUE This long-drawn controversy has sadly placed on the balance diverse interests, opposed yet intertwined, and all deserving, and demanding, the protection of the State. On one arm of the balance hang the economic survival of private schools and the private school system, undeniably performing a complementary role in the State's efforts to maintain an adequate educational system in the country. Perched precariously on the other arm of the same balance is the much-needed financial uplift of schoolteachers, extolled for all times as the molders of the minds of youth, hence of every nation's future. Ranged with them with needs and claims as insistent are other school personnel. And then, anxiously waiting at the sidelines, is the interest of the public at large, and of the State, in the continued availability to all who desire it, highstandard education consistent with national goals, at a reasonable and aff ordable price. Amidst these opposing forces the task at hand becomes saddled with the resultant implications that the interpretation of the law would bear upon such varied interests. But this Court can not go beyond what the legislature has laid down. Its duty is to say what the law is as enacted by the lawmaking body. That is not the same as saying what the law should be or what 651 VOL. 156, DECEMBER 18, 1987 651 Cebu Institute of Technology (CIT) vs. Ople is the correct rule in a given set of circumstances. It is not the province of the judiciary to look into the wisdom of the law nor to question the policies adopted by the legislative branch. Nor is it the business of this Tribunal to remedy every unjust situation that may arise from the application of a particular law. It is for the legislature to enact remedial legislation if that be necessary in the premises. But as always, with apt judicial caution and cold neutrality, the Court must carry out the delicate function of interpreting the law, guided by the Constitution and existing legislation and mindful of settled jurisprudence. The Court's function is therefore limited, and accordingly, must confine itself to the judicial task of saying what the law is, as enacted by the lawmaking body. FIRST SUB-ISSUE

A. Whether or not allowances and other fringe benefits of employees may be charged against the 60% portion of the incremental proceeds provided for in sec. 3(a) of Pres. Dec. No. 451. 1. Arguments raised in the Cebu Institute of Technology case In maintaining its position that the salary increases it had paid to its employees should be considered to have included the COLA, Cebu Institute of Technology (CIT) makes reference to Pres. Dec. No. 451 and its Implementing Rules. The line of reasoning of the petitioner appears to be based on the major premise that under said decree and rules, 60% of the incremental proceeds from tuition fee increases may be applied to salaries, allowances and other benefits of teachers and other school personnel. In support of this major premise, petitioner cites various implementing rules and regulations of the then Minister of Education, Culture and Sports, to the effect that 60% of the incremental proceeds may be applied to salaries, allowances and other benefits for members of the faculty and other school personnel [Petition citing Implementing Rules and Regulations of Pres. Dec. No. 451 of various dates; Rollo, pp. 318-320]. Petitioner concludes that the salary increases it had granted the CIT teachers out of the 60% portion of the incremental proceeds of its tuition fee increases from 1974-1980 652 652 SUPREME COURT REPORTS ANNOTATED Cebu Institute of Technology (CIT) vs. Ople pursuant to Pres. Dec. No. 451 and the MECS implementing rules and regulations must be deemed to have included the COLA payable to said employees for those years [Rollo, pp. 9111. With leave of Court, the Philippine Association of Colleges and Universities, filed its Memorandum as Intervenor in support of the proposition that schools may pay the COLA to faculty members and other employees out of the 60% of the increase in tuition fees. In addition to the arguments already set forth in the memorandum of the petitioner CIT, intervenor PACU attacks the Decision of this Court in University of the East v. University of the East Faculty Association, et. al., G.R. No. 57387 as "not doctrinal" and inapplicable to the CIT case. The

Court held in the UE case, which was promulgated on September 30, 1982, during the pendency of these cases, that: . . . allowances and benefits should be chargeable to the return to investment referred to in Sec. 3(a), if the schools should happen to have no other resources than incremental proceeds of authorized tuition fee increases. . . (See Dispositive Portion of the Decision) Intervenor PACU alleges that the aforecited U.E. decision does not categorically rule that COLA and other fringe benefits should not be charged against the 60% incremental proceeds of the authorized tuition fee increase. The Solicitor General, on the other hand, argues in support of the Order of the public respondent that Pres. Dec. No. 451 allocates the 60% proceeds of tuition fee increases exclusively for salary increases of teachers and non-teaching supportive personnel of the school concerned, and that the Decree does not provide that said salary increases would take the place of the COLA [Rollo, p. 244-245], He cites as authority for this stance, two (2) memoranda of the then President dated June 6, 1978 and March 30, 1979 both of which provide that the 60% incremental proceeds of tuition fee increases "shall be allocated for the increase in the salaries of teachers and supportive personnel." Anent the U.E. case, the Solicitor General states that the Supreme Court in deciding said case took note of the stand of the Office of the President that the 60% incremental proceeds shall be solely applied to salaries of faculty members and 653 VOL. 156, DECEMBER 18, 1987 653 Cebu Institute of Technology (CIT) vs. Ople employees. On August 7, 1986, considering the supervening events, including the change of administration, that have transpired during the pendency of these cases, the Court required the Solicitor General to state whether or not he maintains the action and position taken by his predecessor-inoffice. In his Compliance with said Resolution, the Solicitor General Manifested the position that: a. If the tuition fee increase was collected during the effectivity of Presidential Decree No. 451, 60% thereof shall answer exclusively for

salary increase of school personnel. Other employment benefits shall be covered by the 12% allocated for return of investment, this is in accordance with the ruling of this Honorable Court in University of the East vs. U.E. Faculty Association, et. al (117 SCRA 554), x x x and reiterated in University of Pangasinan Faculty Union v. University of Pangasinan, et. al. (127 SCRA 691) and St. Louis Faculty Club v. NLRC (132 SCRA 380). b. If the salary increase was collected during the effectivity of Batas Pambansa Blg. (sic) 232, 60% thereof shall answer not only for salary increase of school personnel but also for other employment benefits. (Rollo, at pp. 513-514) 2. Arguments raised in the Divine Word College Case Petitioner Divine Word College of Legazpi (DWC) advances the theory that the COLA, 13th month pay and other personnel benefits decreed by law, must be deemed chargeable against the 60% portion allocated for increase of salaries or wages of faculty and all other school employees. In support of this stance, petitioner points out that said personnel benefits are not included in the enumeration of the items for which the balance (less 60%) or 40% portion of the incremental proceeds may be alloted under section 3(a) of Pres. Dec. No. 451 [Rollo, pp. 29-30. Petitioner likewise cites the interpretation of the respondent Minister of Education, Culture and Sports [embodied in the Implementing Rules and Regulations of P.D. 451, DEC Issuance, May 13, 1987; Rollo, p. 30], that the 60% incremental proceeds of authorized tuition fee increases may be applied to increases in emoluments and/or benefits for 654 654 SUPREME COURT REPORTS ANNOTATED Cebu Institute of Technology (CIT) vs. Ople members of faculty, including staff and administrative employees of the school as the valid interpretation of the law, as against that made by the respondent Deputy Minister of Labor in the assailed Order. If the latter interpretation is upheld, petitioner would go as far as questioning the constitutionality of Pres. Dec. No. 451 upon the ground that the same discriminates against the petitioner and other private schools as a class of employers. According to the petitioner, the discrimination takes the form of requiring said class of employers to give 60% of their profits to

their employees in addition to the COLA mandated by law, while other employers have to contend only with salary increases and COLA [Petition; Rollo, p. 46]. With regard to the Decision of this Court in the U.E. case, petitioner claims exemption therefrom upon the ground that the Court's interpretation of a law cannot be applied retroactively to parties who have relied upon the previous administrative interpretation which has not been declared invalid or unconstitutional [Petition; Rollo, pp. 50-51]. Petitioner further argues on this point that if the court had intended to invalidate the MECS interpretation of the Decree, it should have positively stated so in the Decision [Petition; Rollo, p. 50]. The Comment of the public respondents cite as settled jurisprudence applicable to the case at bar, the ruling of this Court in the U.E. case, supra, which was reiterated in the subsequent cases of University of Pangasinan Faculty Union v. University of Pangasinan, et al, and St. Louis Faculty Club v. NLRC, et al. Public respondents Deputy Minister of Labor and Employment and Regional Director of the MOLE (Region V) likewise attack the validity of the Revised Implementing Rules and Regulations of Pres. Dec. No. 451 cited by the petitioner insofar as said rules direct the allotment of the 60% of incremental proceeds from tuition fee hikes for retirement plan, faculty development and allowances. They argue that said rules and regulations were invalid for having been promulgated in excess of the rule-making authority of the then Minister of Education under Pres. Dec. No. 451 which mandates that the 655 VOL. 156, DECEMBER 18, 1987 655 Cebu Institute of Technology (CIT) vs. Ople 60% of incremental proceeds from tuition fee hikes should be allotted solely for salary increases [Comment; Rollo, pp. 184185]. Finally, with respect to the issue on the alleged unconstitutionality of Pres. Dec. No. 451, the public respondents posit that a legislation (such as Pres. Dec. No. 451) which affects a particular class does not infringe the constitutional guarantee of equal protection of the law as long as it applies uniformly and without discrimination to everyone of that class [Comment; Rollo, p. 14].

3. Arguments raised in the Far Eastern University case It is the petitioner's contention that in respect of Pres. Dec. No. 451, the decision of the NLRC is a defiance of the rulings of this Court in the cases of University of the East v. U.E. Faculty Association, et al and of University of Pangasinan Faculty Union v. University of Pangasinan and NLRC (supra). The Union submits that monetary benefits, other than increases in basic salary, are not chargeable to the 60% incremental proceeds. The respondent University in its Comment dated June 13, 1982 refers to Article 97(f) of the Labor Code which provides a definition of the term "wages" to support its position that "salaries or wages" as used in Pres. Dec. No. 451 should be interpreted to include other benefits in terms of money. As mentioned in the Cebu Institute of Technology case, the Solicitor General filed its Compliance with this Court's resolution dated August 7, 1986 requiring him to manifest whether public respondents maintain the position they have taken in these consolidated cases. The resolution of September 25, 1986 required petitioners to Comment on said Compliance. The Comment dated December 6,1986 was received by this Court after petitioner Union was required to show cause why no disciplinary action should be taken against them for failure to comply earlier. The Union agreed with the position taken by the Solicitor General that under Pres. Dec. No. 451, 60% of the tuition fee increases, shall answer exclusively for salary increase. However, it expressed disagreement with the opinion that during the effectivity of B.P. Blg. 232, the 60% incremen656 656 SUPREME COURT REPORTS ANNOTATED Cebu Institute of Technology (CIT) vs. Ople tal proceeds shall answer not only for salary increases but also for other employment benefits. The Union argues that whereas "Pres. Dec. No. 451 is a law on a particular subject, viz., increase of tuition fee by educational institutions and how such increase shall be allocated, B.P. Blg. 232 is not a law on a particular subject of increase of tuition fee . . .; at most it is a general legislation on tuition fee as it touches on such subject in general." [Comment on Compliance; Rollo, p. 376], Suppletory

to its argument that B.P. Blg. 232 did not impliedly repeal Pres. Dec. No. 451, the Union also invokes the principle that a special or particular law cannot be repealed by a general law. RESOLUTION OF THE FIRST SUB-ISSUE This Court has consistently held, beginning with the University of the East case, that if the schools have no resources other than those derived from tuition fee increases, allowances and benefits should be charged against the proceeds of tuition fee increases which the law allows for return on investments under section 3(a) of Pres. Dec. No. 451, therefore, not against the 60% portion allocated for increases in salaries and wages (See 117 SCRA at 571). This ruling was reiterated in the University of Pangasinan case and in the Saint Louis University case. There is no cogent reason to reverse the Court's ruling in the aforecited cases. Section 3(a) of Pres. Dec. No. 451 imposes among the conditions for the approval of tuition fee increases, the allocation of 60% per cent of the incremental proceeds thereof for increases in salaries or wages of school personnel, and not for any other item such as allowances or other fringe benefits. As aptly put by the Court in University of Pangasinan Faculty Union v. University of Pangasinan, supra: x x x The sixty (60%) percent incremental proceeds from the tuition increase are to be devoted entirely to wage or salary increases which means increases in basic salary. The law cannot be construed to include allowances which are benefits over and above the basic salaries of the employees. To charge such benefits to the 60% incremental proceeds would be to reduce the increase in basic salary provided by law, an increase intended also to help the teachers and 657 VOL. 156, DECEMBER 18, 1987 657 Cebu Institute of Technology (CIT) vs. Ople other workers tide themselves and their families over these difficult economic times. [I talics supplied] (127 SCRA 691, 702). This interpretation of the law is consistent with the legislative intent expressed in the Decree itself, i.e., to alleviate the sad plight of private schools and that of their personnel wrought by slump in enrollment and increasing operational costs on the part of the schools, and the increasing costs of living on the part of the personnel (Preamble, Pres.

Dec. No. 451). While coming to the aid of the private school system by simplifying the procedure for increasing tuition fees, the Decree imposes as a condition for the approval of any such increase in fees, the allocation of 60% of the incremental proceeds thereof, to increases in salaries or wages of school personnel. This condition makes for a quid pro quo of the approval of any tuition fee hike by a school, thereby assuring the school personnel concerned, of a share in its proceeds. The condition having been imposed to attain one of the main objectives of the Decree, which is to help the school personnel cope with the increasing costs of living, the same cannot be interpreted in a sense that would diminish the benef it granted said personnel. In the light of existing laws which exclude allowances from the basic salary or wage in the computation of the amount of retirement and other benefits payable to an employee, this Court will not adopt a different meaning of the terms "salaries or wages" to mean the opposite, i.e. to include allowances in the concept of salaries or wages. As to the alleged implementing rules and regulations promulgated by the then MECS to the effect that allowances and other benefits may be charged against the 60% portion of the proceeds of tuition fee increases provided for in Section 3(a) of Pres. Dec. No. 451, suffice it to say that these were issued ultra vires, and therefore not binding upon this Court. The rule-making authority granted by Pres. Dec. No. 451 is confined to the implementation of the Decree and to the imposition of limitations upon the approval of tuition fee increases, to wit: SEC. 4. Rules and Regulations.The Secretary of Education and Culture is hereby authorized, empowered and directed to issue 658 658 SUPREME COURT REPORTS ANNOTATED Cebu Institute of Technology (CIT) vs. Ople the requisite rules and regulations for the effective implementation of this Decree. He may, in addition to the requirements and limitations provided for under Sections 2 and 3 hereof, impose other requirements and limitations as he may deem proper and reasonable. The power does not allow the inclusion of other items in addition to those for which 60% of the proceeds of tuition fee increases are allocated under Section 3(a) of the Decree. Rules and regulations

promulgated in accordance with the power conferred by law would have the force and effect of law [Victorias Milling Company, Inc. v. Social Security Commission, 114 Phil. 555 (1962)] if the same are germane to the subjects of the legislation and if they conform with the standards prescribed by the same law [People v. Maceren, G.R. No. L32166, October 18, 1977, 79 SCRA 450]. Since the implementing rules and regulations cited by the private schools adds allowances and other benefits to the items included in the allocation of 60% of the proceeds of tuition fee increases expressly provided for by law, the same were issued in excess of the rule-making authority of said agency, and therefore without binding effect upon the courts. At best the same may be treated as administrative interpretations of the law and as such, they may be set aside by this Court in the final determination of what the law means. SECOND SUB-ISSUE B. Whether or not allowances and other fringe benefits may be charged against the 60% portion of the incremental proceeds of tuition fee increases upon the effectivity of the Education Act of 1982 (B.P. Blg. 232). 1. Arguments raised in the Fabros case In assailing MECS Order No. 25, s. 1985, petitioners argue that the matter of allocating the proceeds from tuition fee increases is still governed by Pres. Dec. No. 451. It is their opinion that section 42 of B.P. Blg. 232 did not repeal Pres. Dec. No. 451 for the following reasons: first, there is no conflict between section 42 of B.P. Blg. 232 and section 3(a) of Pres. 659 VOL. 156, DECEMBER 18, 1987 659 Cebu Institute of Technology (CIT) vs, Ople Dec. No. 451 or any semblance of inconsistency to deduce a case of a repeal by implication: second, Pres. Dec. No. 451 is a specific law upon a particular subjectthe purposes and distribution of the incremental proceeds of tuition fee increases, while B.P. Blg. 232 is a general law on the educational system; as such, a specific law is not repealed by a subsequent general law in the absence of a clear intention; and third, Pres. Dec. No. 451 is still the only law on the subject of tuition fee increases there being no prescription or provision in section 42 of B.P.

Blg. 232 or elsewhere in the law. They furthermore aver that the disputed MECS Order which imposed additional burdens against the 60% incremental proceeds of tuition fee increases are not provided in either Pres. Dec. No. 451 or B.P. Blg. 232. The logical result as intimated by petitioners is that the inclusion of paragraph 7.4 and related paragraphs 7 to 7.3 and 7.5 in the questioned MECS order contravenes the statutory authority granted to the public respondent, and the same are theref ore, void. Respondent PACU takes the contrary view contending that MECS Order No. 25, s. 1985, complies with the mandate of section 42 of B.P. Blg. 232 which law had already repealed Pres. Dec. No. 451. PACU notes that the University of the East case invoked by petitioners is not applicable because the issue in that case does not involve the effect of B.P. Blg. 232 on Pres. Dec. No. 451. The Solicitor General, representing the public respondent, after giving a summary of the matters raised by petitioner and respondent PACU, points out that the decisive issue in this case is whether B.P. Blg. 232 has repealed Pres. Dec. No. 451 because on the answer to this question depends the validity of MECS Order No. 25, s. 1985. Public respondent holds the view consistent with that of PACU on the matter of B.P. Blg. 232 having repealed Pres. Dec. No. 451. To support this contention, the Solicitor General compared the respective provisions of the two laws to show the inconsistency and incompatibility which would result in a repeal by implication. RESOLUTION OF THE SECOND SUB-ISSUE On the matter of tuition fee increases section 42 of B.P. Blg. 660 660 SUPREME COURT REPORTS ANNOTATED Cebu Institute of Technology (CIT) vs. Ople 232 provides: SEC. 42. Tuition and Other School Fees.Each private school shall determine its rate of tuition and other school fees or charges. The rates and charges adopted by schools pursuant to this provision shall be collectible and their application or use authorized, subject to rules and regulations promulgated by the Ministry of Education, Culture and Sports. (Italics supplied).

The enactment of B.P. Blg. 232 and the subsequent issuance of MECS Order No. 25, s. 1985 revived the old controversy on the application and use of the incremental proceeds from tuition fee increases. As can be gleaned from the pleadings and arguments of the parties in these cases, one side, composed of the teachers and other employees of the private schools, insist on the applicability of section 3(a) of Pres. Dec. No. 451 as interpreted and applied in the University of the East, University of Pangasinan and St. Louis University cases, while the private schools uphold the view that the matter of allocating the incremental proceeds from tuition fee increases is governed by section 42 of B.P. Blg. 232 as implemented by the MECS Rules and Regulations. As stated, the latter's argument is premised on the allegation that B.P. Blg. 232 impliedly repealed Pres. Dec. No. 451. On the second sub-issue, therefore, this Court upholds the view taken by the Solicitor General in the Fabros case, that the decisive issue is whether B.P. Blg. 232 has repealed Pres. Dec. No. 451. In recognition of the vital role of private schools in the country's educational system, the government has provided measures to regulate their activities. As early as March 10, 1917, the power to inspect private schools, to regulate their activities, to give them official permits to operate under certain conditions and to revoke such permits for cause was granted to the then Secretary of Public Instruction by Act No. 2706 as amended by Act No. 3075 and Commonwealth Act No. 180. Republic Act No. 6139, enacted on August 31, 1970, provided for the regulation of tuition and other fees charged by private schools in order to discourage the collection of exorbitant and unreasonable fees. In an effort to simplify the "cumbersome 661 VOL. 156, DECEMBER 18, 1987 661 Cebu Institute of Technology (CIT) vs. Ople and time consuming" procedure prescribed under Rep. Act No. 6139 and "to alleviate the sad plight of private schools," Pres, Dec. No. 451 was enacted on May 11, 1974. While this later statute was being implemented, the legislative body envisioned a comprehensive legislation which would introduce changes and chart directions in the

educational system, hence, the enactment of B.P. Blg. 232. What then was the effect of B.P. Blg. 232 on Pres. Dec. No. 451? The Court after comparing section 42 of B.P. Blg. 232 and Pres. Dec. No. 451, particularly section 3(a) thereof, finds evident irreconcilable differences. Under Pres. Dec. No. 451, the authority to regulate the imposition of tuition and other school fees or charges by private schools is lodged with the Secretary of Education and Culture (Sec. 1), where section 42 of B.P. Blg. 232 liberalized the procedure by empowering each private school to determine its rate of tuition and other school fees or charges. Pres. Dec. No. 451 provides that 60% of the incremental proceeds of tuition fee increases shall be applied or used to augment the salaries and wages of members of the faculty and other employees of the school, while B.P. Blg. 232 provides that the increment shall be applied or used in accordance with the regulations promulgated by the MECS. A closer look at these differences leads the Court to resolve the question in favor of repeal. As pointed out by the Solicitor General, three aspects of the disputed provisions of law support the above conclusion. First, the legislative authority under Pres. Dec. No. 451 retained the power to apportion the incremental proceeds of the tuition fee increases; such power is delegated to the Ministry of Education and Culture under B.P. Blg. 232. Second, Pres. Dec. No. 451 limits the application or use of the increment to salary or wage increase, institutional development, student assistance and extension services and return on investment, whereas B.P. Blg. 232 gives the MECS discretion to determine the application or use of the increments. Third, the extent of the application or use of the increment under Pres. Dec. No. 451 is fixed at the pre-determined percentage allocations; 60% for wage and salary increases, 12% for return in investment and the balance of 28% 662 662 SUPREME COURT REPORTS ANNOTATED Cebu Institute of Technology (CIT) vs. Ople to institutional development, student assistance and extension services, while under B.P; Blg. 232, the extent of the allocation or use of the increment is likewise left to the discretion of the MECS.

The legislative intent to depart from the statutory limitations under Pres. Dec. No. 451 is apparent in the second sentence of section 42 of B.P. Blg. 232. Pres. Dec. No. 451 and section 42 of B.P. Blg. 232 which cover the same subject matter, are so clearly inconsistent and incompatible with each other that there is no other conclusion but that the latter repeals the former in accordance with section 72 of B.P. Blg. 232 to wit: Sec. 72. Repealing clause.All laws or parts thereof inconsistent with any provision of this Act shall be deemed repealed or modified, as the case may be. Opinion No. 16 of the Ministry of Justice dated January 29, 1985, quoted below, supports the above conclusion: Both P.D. No. 451 and B.P. Blg. 232 deal with the imposition of tuition and other school fees or charges and their use and application, although the latter is broader in scope as it covers other aspects of the education system. We note substantial differences or inconsistencies between the provisions of the two laws. P.D. No. 451 prescribes certain limitations in the increase of tuition and other school fees and their application, whereas the latter law, B.P. Blg. 232 is silent on the matter. Under P.D. 451, rates of tuition/school fees need prior approval of the Secretary of Education, Culture (now Minister of Education, Culture and Sports), who also determines the reasonable rates for new school fees, whereas under B.P. Blg. 232, each private school determines its rate of tuition and other school fees or charges. P.D. No. 451 authorizes the Secretary of Education and Culture to issue requisite rules and regulations to implement the said Decree and for that purpose, he is empowered to impose other requirements and limitations as he may deem proper and reasonable in addition to the limitations prescribed by the Decree for increases in tuition fees and school charges, particularly, the limitations imposed in the allocation of increases in fees and charges, whereas under B.P. Blg. 232, the collection and application or use of rates and charges adopted by the school are subject to rules and regulations promulgated by the Ministry of Education, Culture and Sports without 663 VOL. 156, DECEMBER 18, 1987 663 Cebu Institute of Technology (CIT) vs. Ople

any mention of the statutory limitations on the application or use of the fees or charges. The authority granted to private schools to determine its rates of tuition and unconditional authority vested in the Ministry of Education, Culture and Sports to determine by rules and regulations the collection and application or use of tuition or fees rates and charges under B.P. Blg. 232 constitute substantial and irreconcilable incompatibility with the provisions of P.D. No. 451, which should be for that reason deemed to have been abrogated by the subsequent legislation. Moreover, B.P. Blg. 232 is a comprehensive legislation dealing with the establishment and maintenance of an integrated system of education and as such, covers the entire subject matter of the earlier law, P.D. No. 451. The omission of the limitations or conditions imposed in P.D. No. 451 for increases in tuition fees and school charges is an indication of a legislative intent to do away with the said limitations or conditions. (Crawford, supra, p. 674). It has also been said that an act which purports to set out in full all that it intends to contain, operates as a repeal of anything omitted which was contained in the old act and not included in the amendatory act." (People vs. Almuete, 69 SCRA 410; People vs. Adillo, 68 SCRA 90) (Ministry of Justice, Op. No. 16, s. 1985). Having concluded that under B.P. Blg. 232 the collection and application or use of tuition and other school fees are subject only to the limitations under the rules and regulations issued by the Ministry, the crucial point now shifts to the said implementing rules. The guidelines and regulations on tuition and other school fees issued after the enactment of B.P. Blg. 232 consistently permit the charging of allowances and other benefits against the 60% incremental proceeds. Such was the tenor in the MECS Order No. 23, s. 1983; MECS Order No. 15, s. 1984; MECS Order No. 25, s. 1985; MECS Order No. 22, s. 1986; and DECS Order No. 37, s. 1987. The pertinent portion of the latest order reads thus: In any case of increase at least sixty percent (60%) of the incremental proceeds should be allocated for increases in or provisions for salaries or wages, allowances and fringe benefits of faculty and other staff, including accruals to cost of living allowance, 13th month 664

664 SUPREME COURT REPORTS ANNOTATED Cebu Institute of Technology (CIT) vs. Ople pay, social security, medicare and retirement contribution and increases as may be provided in mandated wage orders, collective bargaining agreements or voluntary employer practices. The validity of these orders, particularly MECS Order No. 25, s. 1985, is attacked on the ground that the additional burdens charged against "... the 60% of the proceeds of the increases in tuition fees constitute both as [sic] an excess of statutory authority and as (sic) a substantial impairment of the accrued, existing and protected rights and benefits of the members of faculty and non-academic personnel of private schools." [Memorandum for Petitioners; Rollo, p. 191]. Petitioners allege that these additional burdens under the MECS Order are not provided in the law itself, either in section 42 of B.P. Blg. 232 or section 3(a) of Pres. Dec. No. 451, except increases in salaries in the latter provision. Section 42 of B.P. Blg. 232 grants to the Minister of Education (now Secretary of Education) rule-making authority to fill in the details on the application or use of tuition fees and other school charges. In the same vein is section 70 of the same law which states: SEC. 70. Rule-making Authority.The Minister of Education, Culture and Sports charged with the administration and enforcement of this Act, shall promulgate the necessary implementing rules and regulations. Contrary to the petitioners' insistence that the questioned rules and regulations contravene the statutory authority granted to the Minister of Education, this Court finds that there was a valid exercise of rule-making authority. The statutory grant of rule-making power to administrative agencies like the Secretary of Education is a valid exception to the rule on nondelegation of legislative power provided two conditions concur, namely: 1) the statute is complete in itself, setting forth the policy to be executed by the agency, and 2) said statute fixes a standard to which the latter must conform [Vigan Electric Light Co., Inc. v. Public Service Commission, G.R. No. L-19850, January 30, 1964, and Pelaez v. Auditor General, G.R. No. L-23825, December 24, 1965]. 665 VOL. 156, DECEMBER 18, 1987

665 Cebu Institute of Technology (CIT) vs. Ople The Education Act of 1982 is "an act providing for the establishment and maintenance of an integrated system for education'' with the f ollowing basic policy: It is the policy of the State to establish and maintain a complete, adequate and integrated system of education relevant to the goals of national development. Toward this end, the government shall ensure, within the context of a free and democratic system, maximum contribution of the educational system to the attainment of the following national development goals: 1. To achieve and maintain an accelerating rate of economic development and social progress; 2. To assure the maximum participation of all the people in the attainment and enjoyment of the benefits of such growth; and 3. To achieve and strengthen national unity and consciousness and preserve, develop and promote desirable cultural, moral and spiritual values in a changing world. The State shall promote the right of every individual to relevant quality education, regardless of sex, age, creed, socio-economic status, physical and mental conditions, racial or ethnic origin, political or other affiliation. The State shall therefore promote and maintain equality of access to education as well as the enjoyment of the benefits of education by all its citizens. The State shall promote the right of the nation's cultural communities in the exercise of their right to develop themselves within the context of their cultures, customs, traditions, interests and belief, and recognizes education as an instrument for their maximum participation in national development and in ensuring their involvement in achieving national unity. (Section 3, Declaration of Basic Policy). With the foregoing basic policy as well as specific policies clearly set forth in its various provisions, the Act is complete in itself and does not leave any part of the policy-making, a strictly legislative function, to any administrative agency. Coming now to the presence or absence of standards to guide the Minister of Education in the exercise of rule-making power, the pronouncement in Edu v. Ericta [G.R. No. L-32096, October 24, 1970, 35 SCRA 481, 497] is relevant:

The standard may be either expressed or implied. If the former, 666 666 SUPREME COURT REPORTS ANNOTATED Cebu Institute of Technology (CIT) vs. Ople the non-delegation objection is easily met. The standard though does not have to be spelled out specifically. It could be implied from the policy and purpose of the act considered as a whole. In the Reflector Law, clearly the legislative objective is public safety. What is sought to be attained as in Calalang v. Williams is "safe transit upon the roads." (Italics supplied). Thus, in the recent case of Tablarin, et al v. Hon. Gutierrez, et al, {G.R. No. 78164, July 31, 1987], the Court held that the necessary standards are set forth in Section 1 of the 1959 Medical Act, i.e., "the standardization and regulation of medical education" as well as in other provisions of the Act. Similarly, the standards to be complied with by Minister of Education in this case may be found in the various policies set forth in the Education Act of 1982. MECS Order No. 25, s. 1985 touches upon the economic relationship between some members and elements of the educational community, i.e., the private schools and their faculty and support staff. In prescribing the minimum percentage of tuition fee increments to be applied to the salaries, allowances and fringe benefits of the faculty and support staff, the Act affects the economic status and the living and working conditions of school personnel, as well as the funding of the private schools. The policies and objectives on the welfare and interests of the various members of the educational community are found in section 5 of B.P. Blg. 232. which states: SEC. 5. Declaration of Policy and Objectives.It is likewise declared government policy to foster, at all times, a spirit of shared purposes and cooperation among the members and elements of the educational community, and between the community and other sectors of society, in the realization that only in such an atmosphere can the true goals and objectives of education be fulfilled. Moreover, the State shall: 1. Aid and support the natural right and duty of parents in the rearing of the youth through the educational system.

2. Promote and safeguard the welfare and interests of the students by defining their rights and obligations, according them privileges, and encouraging the establishment of sound relationships between them and the other members of the school community 667 VOL. 156, DECEMBER 18, 1987 667 Cebu Institute of Technology (CIT) vs. Ople 3. Promote the social and economic status of all school personnel, uphold their rights, define their obligations, and improve their living and working conditions and career prospects. 4. Extend support to promote the viability of those institutions through which parents, students and school personnel seek to attain their educational goals. On the other hand, the policy on the funding of schools in general, are laid down in section 33: SEC. 33. Declaration of PolicyIt is hereby declared to be a policy of the State that the national government shall contribute to the financial support of educational programs pursuant to the goals of education as declared in the Constitution. Towards this end, the government shall: 1. Adopt measures to broaden access to education through financial assistance and other forms of incentives to schools, teachers, pupils and students; and 2. Encourage and stimulate private support to education through, inter alia, fiscal and other assistance measures. Given the abovementioned policies and objectives, there are sufficient standards to guide the Minister of Education in promulgating rules and regulations to implement the provisions of the Education Act of 1982. As in the Ericta and Tablarin cases, there is sufficient compliance with the requirements of the non-delegation principle. THIRD SUB-ISSUE C. Whether or not schools and their employees may enter into a collective bargaining agreement allocating more than 60% of said incremental proceeds for salary increases and other benefits of said employees. 1. Arguments raised in the Biscocho and Valmonte cases

Assailed by the petitioners in the Biscocho and the Valmonte cases is the Order of the respondent Minister of Labor directing the execution of a CBA A between the school and the respondent Espiritu Santo Parochial School Faculty 668 668 SUPREME COURT REPORTS ANNOTATED Cebu Institute of Technology (CIT) vs. Ople Association which provides for an economic package equivalent to 90% of the proceeds of tuition fee increases for school year 1985-1986, another 90% for school year 1986-1987 and 85% for school year 19871988. Pursuant to said Order, petitioners in the Biscocho case allege that the parties had agreed to incorporate in their CBA a provision which allocates one-half (1/2) of the 90% portion of the proceeds or 45% to increases in the monthly basic salaries and the other one-half (1/2) or 45% to increases in monthly living allowance. The petitioners in the two cases seek the nullification of the MOLE Order for exactly opposite reasons. In the Biscocho case, the controversy springs from what petitioners perceive to be a diminution of the benefits to be received by the school employees insofar as the CBA allocates only 45% for salary increases instead of 60%, which petitioners claim to be the portion set aside by Pres. Dec. No. 451 for that purpose. Parenthetically, the case questions the allocation of the remaining 45% of the 90% economic package under the CBA, to allowances. Stripped down to its essentials, the question is whether or not the 90% portion of the proceeds of tuition fee increases alloted for the economic package may be allocated for both salary increases and allowances. On the other hand, petitioners in the Valmonte case believe that the MOLE cannot order the execution of a CBA which would allocate more than 60% of the proceeds of tuition fee increases for salary increases of school employees. Furthermore, petitioners question the authority of the then Minister of Labor and Employment to issue the aforequoted Order insofar as this allocates the tuition fee increases of the respondent private school. According to them, only the Minister of Education, Culture and Sports has the authority to promulgate rules and regulations on the use of tuition fees and increases thereto, pursuant to the provisions of B.P. Blg. 232. They further argue that the assailed Order

collides with the provisions of Pres. Dec. No. 451 insofar as it allocates 90% of the tuition fee increases for salary adjustments of the members of the bargaining unit which exceeds the 60% of the said increases allocated by the Decree f or the same purpose. Before delving further into the questions raised, this Court 669 VOL. 156, DECEMBER 18, 1987 669 Cebu Institute of Technology (CIT) vs. Ople notes that in the Valmonte case, respondent Minister and respondent Faculty Association raise a procedural objection to the filing of the Petition: the standing of the petitioners to bring this suit. Both respondents decry the petitioners' lack of the interest required in Rule 65 of the Rules of Court for the filing of the Petition for Certiorari and Prohibition, since the latter do not appear to be in any way aggrieved by the enforcement of the Order. Petitioners-parents did not even participate in the proceedings below which led to the issuance of the assailed Order. This Court finds merit in the respondents' objection. Under Rule 65 of the Rules of Court (Secs. 1 and 2), only a person aggrieved by the act or proceeding in question may file a petition for certiorari and/or prohibition. The Valmonte petition fails to indicate how the petitioners would be aggrieved by the assailed Order. It appears that the petitioners are not parties and never at any time intervened in the conciliation conferences and arbitration proceedings before the respondent Minister. The parties therein, who stand to be directly affected by the Order of the respondent Minister, do not contest the validity of said Order. The petition does not even state that petitioners act as representative of the parents' association in the School or in behalf of other parents similarly situated. If indeed, petitioners Valmonte and Badiola are aggrieved by the said Order, they should have intervened and moved for a reconsideration of respondent Minister's Order before filing the instant petition. Petitioners failed to show that the case falls under any one of the recognized exceptions to the rule that a motion for reconsideration should first be availed of bef ore f iling a petition f or certiorari and prohibition.

In view of the foregoing, the resolution of the third sub-issue will be based mainly on the arguments raised in the Biscocho case. RESOLUTION OF THE THIRD SUB-ISSUE The Biscocho case involves the issue on the allocation of the incremental proceeds of the tuition fee increases applied for by the respondent Espiritu Santo Parochial School for school 670 670 SUPREME COURT REPORTS ANNOTATED Cebu Institute of Technology (CIT) vs. Ople years 1985-1986, 1986-1987, and 1987-1988. With the repeal of Pres. Dec. No. 451 by B.P. Blg. 232, the allocation of the proceeds of any authorized tuition fee increase must be governed by specific rules and regulations issued by the Minister (now Secretary) of Education pursuant to his broadened rulemaking authority under section 42 of the new law. Thus, insofar as the proceeds of the authorized tuition fee increases for school year 1985-1986 are concerned, the allocation must conform with the pertinent section of MECS Order No. 25, s. 1985, to wit: 7. Application or Use of Tuition and Other School Fees or Charges. x x x 7.4 Not less than sixty (60) percent of the incremental tuition proceeds shall be used for salaries or wages, allowances and fringe benefits of faculty and support staff, including cost of living allowance, imputed costs of contributed services, thirteenth (13th) month pay, retirement fund contributions, social security, medicare, unpaid school personnel claims, and payments as may be prescribed by mandated wage orders, collective bargaining agreements and voluntary employer practices: Provided, That increases in fees specifically authorized for the purposes listed in paragraph 4.3.3 hereof shall be used entirely for those purposes. x x x With regard to the proceeds of the tuition fee increases for school year 1986-1987, the applicable rules are those embodied in MECS Order No. 22, s. 1986 which made reference to MECS Order No. 25, s. 1985, the pertinent portion of which is quoted above.

Finally, as to the proceeds of the tuition fee increases for school year 1987-1988, DECS Order No. 37, s. 1987 must apply: c. Allocation of Incremental Proceeds (1) In any case of increase at least sixty percent (60%) of the incremental proceeds should be allocated for increases in or provisions for salaries or wages, allowances and fringe benefits of faculty and 671 VOL. 156, DECEMBER 18, 1987 671 Cebu Institute of Technology (CIT) vs. Ople other staff, including accruals to cost of living allowance, 13th month pay, social security, medicare and retirement contributions and increases as may be provided in mandated wage orders, collective bargaining agreements or voluntary employer practices. (2) Provided, that in all cases of increase the allocation of the incremental proceeds shall be without prejudice to the Supreme Court cases on the interpretation and applicability of existing legislations on tuition and other fees especially on the allocation and use of any incremental proceeds of tuition and other fees increases. (Italics supplied). x x x Based on the aforequoted MECS and DECS rules and regulations which implement BP Blg. 232, the 60% portion of the proceeds of tuition fee increases may now be allotted for both salaries and allowances and other benefits. The 60% figure is, however, a minimum which means that schools and their employees may agree on a larger portion, or in this case, as much as 90% for salaries and allowances and other benefits. This is not in anyway to allow diminution or loss of the portion allotted for institutional development of the school concerned. Thus, paragraph 7.5 of MECS Order No. 25, series of 1985 specifically provides that other student fees and charges like registration, library, laboratory or athletic fees shall be used exclusively for the purposes indicated. III. RESOLUTION OF THE SPECIFIC ISSUES CEBU INSTITUTE OF TECHNOLOGY CASE Petitioner assigns three other errors in the petition for certiorari: 1

RESPONDENT MINISTER OF THE MINISTRY OF LABOR AND EMPLOYMENT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO A DENIAL OF DUE PROCESS OF LAW IN DIRECTLY ISSUING THE ORDER DATED SEPTEMBER 29, 1981 WITHOUT CONDUCTING A FORMAL INVESTIGATION ATION AND ARBITRATION PROCEEDINGS. 672 672 SUPREME COURT REPORTS ANNOTATED Cebu Institute of Technology (CIT) vs. Ople 2 PUBLIC RESPONDENT ERRED IN NOT DECLARING THAT PETITIONER IS EXEMPTED AND/OR NOT OBLIGED TO PAY SERVICE INCENTIVE LEAVE. 3 PUBLIC RESPONDENT ERRED IN NOT DECLARING THAT PRIVATE RESPONDENTS' CLAIMS FOR COLA AND SERVICE INCENTIVE LEAVE ARE FULLY BARRED BY LACHES AND/OR EXTINGUISHED BY PRESCRIPTION. 1. Petitioner assails the Order of the Minister of Labor on the ground that the same was issued without the benefit of a hearing and was merely based on the report of the labormanagement committee which is allegedly without power to pass upon the issues raised. On this premise, petitioner claims that it was denied its right to due process. Petitioner's contention is without merit. The LaborManagement Committee was empowered to investigate the complaint against the petitioner for non-payment of the cost of living allowance, 13th month pay and service incentive leave from 1974-1981 [Annex "F"; Rollo, p. 37]. In the committee, petitioner was represented by its counsel, registrar and assistant accountant and in the conferences that were held, the representatives of the petitioner were present. Furthermore, the petitioner's position paper submitted to the committee reflects that in all the deliberations, it was never denied the right to present evidence and be heard on all the issues raised, particularly to demonstrate that it had complied with the various COLA, 13th month pay and service incentive leave decrees. The evidence presented during the conferences and the position paper of the parties were made the basis of the

committee's report and recommendation which in turn became the basis of the order of the Minister of Labor directing the petitioner to pay the complainants their COLA and service incentive leave benefits. It could not therefore be contended that the petitioner was deprived of his right to be heard when it appears on the record 673 VOL. 156, DECEMBER 18, 1987 673 Cebu Institute of Technology (CIT) vs. Ople that it was permitted to ventilate its side of the issues. There was sufficient compliance with the requirements of due process. In the face of the well-settled principle that administrative agencies are not strictly bound by the technical rules of procedure, this Court dismisses the petitioner's claim that formal investigative and arbitration proceedings should be conducted. "While a day in court is a matter of right in judicial proceedings, in administrative proceedings it is otherwise since they rest upon different principles." [Cornejo v. Gabriel and Provincial Board of Rizal, 41 Phil. 188 (1920); Tajonera v. Lamaroza, G.R. Nos. L-48907 and L49035, December 19,1981,110 SCRA 438]. 2. Going now to the matter of service incentive leave benefits, petitioner claims that private respondents are engaged by the school on a contract basis as shown by the individual teachers contract which defines the nature, scope and period of their employment; hence, they are not entitled to the said benefit according to Rule V of the Implementing Rules and Regulations of the Labor Code to wit: SEC. 1. Coverage.This rule [on Service Incentive Leave] shall apply to all employees, except: x x x (d) Field personnel and other employees whose performance is unsupervised by the employer including those who are engaged on task or contract basis, purely commission basis, or those who are paid in a fixed amount for performing work irrespective of the time consumed in the performance thereof; (MOLE Rules and Regulations, Rule V, Book III). The phrase "those who are engaged on task or contract basis" should however, be related with "field personnel," applying the rule on ejusdem generis that general and unlimited terms are restrained and limited by

the particular terms that they follow, [Vera v. Cuevas, G.R. No. L-33693, May 31, 1979, 90 SCRA 379]. Clearly, petitioner's teaching personnel cannot be deemed field personnel which refers "to non-agricultural employees who regularly perform their duties away from the principal place of business or branch office of the employer and whose actual hours of work in the field cannot be determined 674 674 SUPREME COURT REPORTS ANNOTATED Cebu Institute of Technology (CIT) vs. Ople with reasonable certainty. [Par. 3, Article 82, Labor Code of the Philippines]. Petitioner's claim that private respondents are not entitled to the service incentive leave benefit cannot therefore be sustained. 3. As a last ditch effort to bar private respondents' claims, petitioner asserts that the same are barred by laches and/or extinguished by prescription according to Article 291 of the Labor Code which provides: Art. 291. Money claims.All money claims arising from employeremployee relations accruing during the effectivity of this Code shall be filed within three (3) years from the time the cause of action accrued; otherwise, they shall be forever barred. x x x All money claims accruing prior to the effectivity of this Code shall be filed with the appropriate entities established under this Code within one (1) year from the date of effectivity, and shall be processed or determined in accordance with implementing rules and regulations of the Code; otherwise, they shall be forever barred. Considering that the complaint alleging non-payment of benefits was filed only on February 11, 1981, petitioner argues that prescription has already set in. From the aforequoted provision, it is not fully accurate to conclude that the entire claims for COLA and service incentive leave are no longer recoverable. This Court finds no reason to disturb the following pronouncement of the Minister of Labor: x x x

Simply stated, claims for COLA under P.D. 525, which took effect on August 1, 1974, for the months of August, September and October 1974 must be filed within one (1) year from November 1, 1974, otherwise they shall be considered prescribed; claims under the same decree that accrued on or after November 1,1974 should be initiated within three (3) years from the date of accrual thereof, otherwise the same shall be deemed extinguished. Although this particular claim was filed on February 11, 1981, petitioners herein are entitled to COLA under P.D. 525 from February 1978 up to the present since the COLA that accrued in February 1978 has not yet prescribed at the time that the claim was filed in February 1981. In the same vein, petitioners herein should be granted COLA under P.D. 1123 from 675 VOL. 156, DECEMBER 18, 1987 675 Cebu Institute of Technology (CIT) vs. Ople February 1978 up to 1981 inasmuch as said decree became effective only on May 11, 1977. Further, petitioners are entitled to the full amount of COLA provided under P.D.'s 1614, 1634, 1678 and 1713. It must be pointed out that the earliest of the just cited four (4) decrees, i.e., P.D. 1614, just took effect on April 1, 1979. Thus, the prescriptive period under Art. 292 of the Labor Code, as amended, does not as yet apply to money claims under the just mentioned decrees. DIVINE WORD COLLEGE CASE In assailing the disputed Order, petitioner contends that the public respondents acted with grave and patent abuse of discretion amounting to lack of jurisdiction in that: 1. The Regional Director has no jurisdiction over money claims arising f from employer-employee relationship; and 2. The Regional Director and Deputy Minister of Labor adopted the report of the Labor Standards Division without affording the petitioner the opportunity to be heard. 1. Petitioner school claims that the case at bar is a money claim and should therefore be within the original and exclusive jurisdiction of the Labor Arbiter pursuant to article 217 of the Labor Code, as amended. It appears from the record, however, that the original complaint filed by ten (10) faculty members of the Divine Word College was for non-

compliance with Pres. Dec. No. 451 and with Labor Code provisions on service incentive leave, holiday and rest day pay and which complaint specifically prayed that an inspection of the College be conducted. Contrary to the petitioner's protestation of lack of jurisdiction, the Secretary of Labor or his duly authorized representatives (which includes Regional Directors) are accorded the power to investigate complaints for non-compliance with labor laws, particularly those which deal with labor standards such as payment of wages and other forms of compensation, working hours, industrial safety, etc.. This is provided for in article 128 of the Labor Code, as amended: 676 676 SUPREME COURT REPORTS ANNOTATED Cebu Institute of Technology (CIT) vs. Ople Art. 128. Visitorial and enforcement power. (a) The Secretary of Labor or his duly authorized representatives, including labor regulation officers, shall have access to employers' records and premises at any time of the day or night, whenever work is being undertaken therein, and the right to copy therefrom, to question any employee and investigate any fact, condition or matter which may be necessary to determine violations or which may aid in the enforcement of this Code and of any labor law, wage order or rules and regulations issued pursuant thereto. (b) The Secretary of Labor or his duly authorized representatives shall have the power to order and administer, after due notice and hearing, compliance with the labor standards provisions of this Code based on the findings of labor regulation officers or industrial safety engineers made in the course of inspection, and to issue writs of execution to the appropriate authority for the enforcement of their order, except in cases where the employer contests the findings of the labor regulations officer and raises issues which cannot be resolved without considering evidentiary matters that are not verifiable in the normal course of inspection. (Italics supplied). Furthermore, Policy Instruction No. 6 which deals with the distribution of jurisdiction over labor cases restates inter alia that "(L)abor standards cases arising from violation of labor standards laws discovered in the course of inspection or complaints where employer-employee relations

still exist" are under the exclusive original jurisdiction of the Regional Director. Even assuming that respondent Regional Director was without jurisdiction to entertain the case at bar, petitioner is now barred at this stage to claim lack of jurisdiction having actively participated in the proceedings below. Petitioner never questioned the jurisdiction of the respondent Regional Director. 2. The petitioner claims that it was never afforded the opportunity to be heard and was therefore denied due process. There is no dispute that an inspection of the College was conducted after a complaint by some faculty members was filed with the Regional Office of the Ministry of Labor and Employment. A report was submitted on the basis of the findings contained therein. Petitioner was furnished a copy of said 677 VOL. 156, DECEMBER 18, 1987 677 Cebu Institute of Technology (CIT) vs. Ople report to which it filed a comment. Finding this to be without merit, the Regional Director issued an order giving petitioner ten (10) days to manifest its compliance with the findings, otherwise, another would be issued to enforce payment. Petitioner appealed but instead of resolving the memorandum of appeal, which the Regional Director treated as a motion for reconsideration, said Director issued another Order dated August 2, 1983 directing the payment of the employees' share in the sixty (60%) percent incremental proceeds. Petitioner moved for a reconsideration of the latest order which the Regional Director, however, denied, thereby elevating the case to the Office of the Minister of Labor and Employment. The foregoing facts demonstrate that petitioner had the opportunity to refute the report on the inspection conducted. It submitted a comment thereto, which was in effect its position paper. The arguments therein and evidence attached thereto were considered by respondent Regional Director in the order issued subsequently. They, therefore, had ample opportunity to present their side of the controversy. What due process contemplates is not merely the existence of an actual hearing. The "right to be heard" focuses more on the substance rather

than the form. In the case at bar, petitioner was actually heard through the pleadings that it filed with the Regional Office V. As it itself admitted in its petition that it was afforded the right to be heard on appeal [See Rollo, p. 58], petitioner cannot therefore insist that it was denied due process. FAR EASTERN UNIVERSITY CASE 1 Two other issues are raised in this petition, to wit: WHETHER OR NOT 'TRANSPORTATION ALLOWANCE' SHOULD BE CONSIDERED AS 'EQUIVALENT' TO 13THMONTH PAY UNDER PRES. DEC. NO. 851. 2 WHETHER OR NOT LEGAL-HOLIDAY PAY BENEFIT COULD 678 678 SUPREME COURT REPORTS ANNOTATED Cebu Institute of Technology (CIT) vs. Ople BE VALIDLY WITHDRAWN AFTER BEING PRACTICED CONTINUOUSLY FOR EIGHT (8) MONTHS. 1. The issue on the thirteenth (13th) month pay involves an interpretation of the provisions of Pres. Dec. No. 851 which requires all employers "to pay all their employees receiving a basic salary of not more than P 1,000 a month, regardless of the nature of the employment, a 13th-month pay" (Sec. 1). However, "employer[s] already paying their employees a 13thmonth pay or its equivalent are not covered" (Sec. 2). (Italics supplied) The Rules and Regulations Implementing Pres. Dec. No. 851 provide the following: SEC. 3. EmployeesThe Decree shall apply to all employers except to: x x x c) Employers already paying their employees 13th-month or more in a calendar year or its equivalent at the time of this issuance; x x x

The term "its equivalent" as used in paragraph (c) hereof shall include Christmas bonus, mid-year bonus, profit-sharing payments and other cash bonuses amounting to not less than 1/12th of the basic salary but shall not include cash and stock dividends, cost of living allowances and all other allowances regularly enjoyed by the employer, as well as nonmonetary benefits. Where an employer pays less than 1/12th of the employees basic salary, the employer shall pay the difference. In the case at bar, the 13th month pay is paid in the following manner: FOR REGULAR EMPLOYEES: Transportation Allowance (TA) 50% of basic for the first year of service plus additional 5% every year thereafter but not to exceed 100% of basic salary Christmas Bonus (CB) 50% of basic salary for the first year of service plus additional 679 VOL. 156, DECEMBER 18, 1987 679 Cebu Institute of Technology (CIT) vs. Ople 5% every year thereafter but not to exceed 100% of basic salary. For employees who have served the University for more than 10 years, the University pays them emoluments equivalent to the 14 months salaries. 13th Month Pay Formula: Monthly Rate x No. of months served for the year __________________Less TA/CB = 13th Mo. pay 12 months FOR CASU AL EMPLOYEES: 13th Month Pay Formula:

Add salaries from 16 December of previous year to 15th December of present year [and] divide by 12 months = 13th Mo. Pay (Rollo, pp. 60, 72). The University's answer to the Union's claim of underpayment of the 13th month pay is that the "transportation allowance" paid to its employees partakes the nature of a midyear bonus which under section 2 of Pres. Dec. No. 851 and section 3(c) of the Implementing Rules and Regulations is equivalent to the 13th month pay. The Labor Arbiter ordered FEU to pay the 13th month pay differentials of the complainants reasoning that: CLEARLY, transportation allowance cannot be considered as "equivalent" of 13th month pay as it is neither a Christmas bonus, midyear bonus, profit sharing payment, or other cash bonuses, pursuant to paragraphs (c) and (e), Section 3 of PD 851. The regularity of its payment further cements this proposition. PERFORCE, complainants are underpaid of their 13th month pay in an amount equivalent to 50% of their basic salary for the 1st year of service, plus additional 5% every year thereafter but not to exceed 100% of their basic salary which, per respondent's formula, corresponds to their transportation allowance. (Rollo, p. 61). On appeal, the Third Division of the National Labor Relations Commission reversed the Labor Arbiter's ruling by dismissing the complainant's claim for underpayment of the 680 680 SUPREME COURT REPORTS ANNOTATED Cebu Institute of Technology (CIT) vs. Ople 13th month pay for lack of merit. The NLRC ruled that: From the above findings and conclusion, it is clear that insofar as employees with ten (10) years of service or more are concerned, they receive the equivalent of one (1) month pay for Christmas bonus and another one (1) month pay as transportation allowance or a total of fourteen (14) months salary in a year. Obviously, this group of employees are fully paid of their 13th month pay and are not therefore subject to the instant claim. As it is only those with less than ten (10) years of service are included or encompassed by the Labor Arbiter's resolution on this particular issue. With this clarification, we shall now

proceed to discuss the crux of the controversy, that is, the determination of whether or not the so designated "transportation allowance" being paid to the employees should be considered among those deemed equivalent to 13th month pay. As adverted earlier, the Labor Arbiter opined that it cannot be so considered as the equivalent of 13th month pay. x x x In passing upon the issue, we deemed it best to delve deeper into the nature and intendment of the transportation allowances as designated by both the complainants and the respondent. Complainants claim that the transportation allowance they enjoy has always been called and termed allowance and never as bonus since the time the same was given to them. They assert that it simply was intended as an allowance and not a bonus. It would appear however that complainants do not dispute respondent's stand that transportation allowance is being paid only every March of each year as distinguished from other allowances that are being paid on a monthly basis or on a bi-monthly basis; that the amount of transportation allowance to be paid is dependent on the length of service of the employee concerned (i.e. 50% basic in the first year and additional 5% for each succeeding years, etc.); that the said method of computing the amount of the transportation allowance to be paid the complainants is identical to that used in determining Christmas bonus (respondent's exhibit 8) that the reason behind said transportation allowance is to financially assist employees in meeting their tax obligations as the same become due on or about the month of March of each year. x x x We are inclined to believe and so hold that by the manner by which said transportation allowance is being paid (only once a year) as well as the method in determining the amount to be paid (similar 681 VOL. 156, DECEMBER 18, 1987 681 Cebu Institute of Technology (CIT) vs. Ople

to Christmas bonus) and considering further the reason behind said payment (easing the burden of taxpayer-employee), the said transportation allowance given out by respondent while designating as such, partakes the nature of a mid-year bonus. It bears to note in passing that in providing for transportation allowance, respondent was not compelled by law nor by the CBA (Annex "A" of respondent's Appeal) as nowhere in the CBA nor in the Labor Code can be found any provision on transportation allowance. It was therefore a benefit that stemmed out purely from the voluntary act and generosity of the respondent FEU. Moreover, said transportation allowance is only being paid once a year. On the other hand, regular allowances not considered as 13th month pay equivalent under P.D. 851, to our mind, refer to those paid on regular intervals and catering for specific employees' needs and requirements that recur on a regular basis. Verily, if the intendment behind the disputed transportation allowance is to answer for the daily recurring transportation expenses of the employees, the same should have been paid to employees on regular periodic intervals. All indications, as we see it, point out to conclusion that the disputed transportation allowance, while dominated as such apparently for lack of better term, is in fact a form of bonus doled out by the respondent during the month of March every year. Hence, we hold that it is one of those that can very well be considered as equivalent to the 13th month pay (Rollo, pp. 73, 74, 75, 76). This Court sustains the aforequoted view of public respondent. The benefit herein designated as "transportation allowance" is a form of bonus equivalent to the 13th month pay. Nevertheless, where this does not amount to 1/12 of the employees basic salary, the employer shall pay the dif ference. The evident intention of the law was to grant an additional income in the form of a 13th month pay to employees not already receiving the same. This Court ruled in National Federation of Sugar Workers (NFSW) v. Ovejera: [G.R. No. 59743, May 31, 1982, 114 SCRA 354]. Otherwise put, the intention was to grant some reliefnot to all workersbut only to the unfortunate ones not actually paid a 13th month salary or what amounts to it, by whatever name called: but it was not envisioned that a double burden would be imposed on the employer already paying his employees a 13th month pay or its equivalent whether out of pure generosity or on the basis of a bind

682 682 SUPREME COURT REPORTS ANNOTATED Cebu Institute of Technology (CIT) vs. Ople ing agreement and, in the latter case, regardless of the conditional character of the grant (such as making the payment dependent on profit), so long as there is actual payment. Otherwise, what was conceived to be a 13th month salary would in effect become a 14th or possibly 15th month pay. x x x Pragmatic considerations also weigh heavily in favor of crediting both voluntary and contractual bonuses for the purpose of determining liability for the 13th month pay. To require employers (already giving their employees a 13th month salary or its equivalent) to give a second 13th month pay would be unfair and productive of undesirable results. To the employer who had acceded and is already bound to give bonuses to his employees, the additional burden of a 13th month pay would amount to a penalty for his munificence or liberality. The probable reaction of one so circumstanced would be to withdraw the bonuses or resist further voluntary grants for fear that if and when a law is passed giving the same benefits, his prior concessions might not be given due credit; and this negative attitude would have an adverse impact on the employees (pp. 369, 370). The case of Dole Philippines, Inc. v. Leogardo [G.R. No. 60018, October 23, 1982, 117 SCRA 938 (1982)], citing the ruling in the above case also pointed out that: To hold otherwise would be to impose an unreasonable and undue burden upon those employers who had demonstrated their sensitivity and concern for the welfare of their employees. A contrary stance would indeed create an absurd situation whereby an employer who started giving his employees the 13th month pay only because of the unmistakable force of the law would be in a far better position than another who, by his own magnanimity or by mutual agreement, had long been extending his employees the benefits contemplated under PD No. 851, by whatever nomenclature these benefits have come to be known.

Indeed, PD No. 851, a legislation benevolent in its purpose, never intended to bring about such oppressive situation. (p. 944) 2. Presidential Decree No. 570-A was issued on November 1, 1974 amending certain articles of Presidential Decree No. 442 (Labor Code of the Philippines promulgated on May 1, 1974 which took effect six months thereafter). Section 28 thereof provides that: 683 VOL. 156, DECEMBER 18, 1987 683 Cebu Institute of Technology (CIT) vs. Ople Section 28. A new provision is hereby substituted in lieu of the original provision of Article 258 of the same Code to read as follows: Art. 258. Right to holiday pay (a) Every worker shall be paid his regular holidays, except in retail and service establishments regularly employing less than ten (10) workers; (b) The term 'holiday' as used in this Chapter, shall include: New Year's day, Maundy Thursday, Good Friday, the ninth of April, the first of May, the twelfth of June, the fourth of July, the thirtieth of November, the twenty fifth and thirtieth of December and the day designated by law f or holding a general election. (c)When employer may require work on holidays. The employer may require an employee to work on any holiday but such employee shall be paid a compensation equivalent twice his regular rate. Presidential Decree No. 850 issued on December 16, 1975 also amending certain articles of Pres. Dec. No. 442 adopted the aforequoted provision. Two months later, on February 16, 1976, the Rules and Regulations Implementing the Labor Code, as amended, was released the pertinent portion of which states that: Section 2. Status of employees paid by the monthEmployees who are uniformly paid by the month, irrespective of the number of working days therein, with a salary of not less than the statutory or established minimum wage shall be presumed to be paid for all days in the month whether worked or not. For this purpose, the monthly minimum wage shall not be less than the statutory minimum wage multiplied by 365 days divided by twelve. Section 3. Holiday PayEvery employer shall pay his employees their regular daily wage for any unworked regular holiday.

As used in the Rule, the term 'holiday' shall exclusively refer to: New Year's Day, Maundy Thursday, Good Friday, the ninth of April, the first of May, the twelfth of June, the fourth of July, the thirtieth of November, the twenty-fifth and thirtieth of December and the day designated by law for a general election or national referendum or plebiscite (MOLE Rules and Reg. Book III, Rule IV, sec. 2 (1976). 684 684 SUPREME COURT REPORTS ANNOTATED Cebu Institute of Technology (CIT) vs. Ople After one week, on February 23, 1976, the Minister of Labor issued Policy Instruction No. 9, to clarify further the right to holiday pay, thus: The Rules Implementing PD 850 have clarified the policy in the implementation of the ten (10) paid legal holidays. Before PD 850, the number of working days a year in a firm was considered important in determining entitlement to the benefit. Thus, where an employee was working for at least 313 days, he was definitely already paid. If he was working for less than 313, there was no certainty whether the ten (10) paid legal holidays were already paid to him or not. The ten (10) paid legal holidays law, to start with, is intended to benefit principally daily employees. In the case of monthly, only those whose monthly salary did not yet include payment for the ten (10) paid legal holidays are entitled to the benefit. Under the rules implementing PD 850, this policy has been fully clarified to eliminate controversies on the entitlement of monthly paid employees. The new determining rule is this: If the monthly paid employee is receiving not less than P240, the maximum monthly minimum wage, and his monthly pay is uniform from January to December, he is presumed to be already paid the ten (10) paid legal holidays. However, if deductions are made from his monthly salary on account of holidays in months where they occur, then he is entitled to the ten (10) legal holidays. These new interpretations must be uniformly and consistently upheld. This issuance shall take effect immediately. In the meantime, respondent University paid its employees holiday pay for the following days: DATE

HOLIDAYS PAID June 9, 1975 for the previous nine legal holidays August, 1975 for the previous June 12 and July 4 Jan. 14, 1976 for the previous Nov. 30, Dec. 25 and 30 and Jan. 1 After January 14, 1976, however, the University ceased paying the holiday pay allegedly by reason of Policy Instruction No. 9. Specifically, the University claimed that the monthly salary of its employees was, as of 1976, more than P240.00 685 VOL. 156, DECEMBER 18, 1987 685 Cebu Institute of Technology (CIT) vs. Ople without deductions from their monthly salary on account of holidays in months where they occurred and that therefore, by virtue of Policy Instruction No. 9, they were no longer entitled to the ten paid legal holidays. Petitioners, upon the other hand, contend that Policy Instruction No. 9 could not have possibly been the reason that prompted the University to withdraw such benefits from its faculty and employees because said implementing rule was issued only on April 23, 1976 or four months later. The Labor Arbiter ruled in favor of the complainant Union for the reason that ". . . the payment of the 10-paid legal holiday benefits from June 8, 1975 up to January 14, 1976 is considered an employer practice that can no longer be withdrawn." [Decision; Rollo, p. 59]. As in the case of the 13th month pay, the NLRC reversed the Labor Arbiter's ruling. The NLRC held that: Apparently, Arbiter Ruben Aquino concluded that payment by the respondent of the legal holiday pay preceded the eff ectivity of the Rules and Regulations Implementing P.D. 850 and which rules took effect on February 16, 1976. Hence, his conclusion that the payment of the legal holiday pay stemmed out from company practice and not from law.

Tracing back, however, the payments made by respondent of said holiday pay will show that, if ever, the same was made pursuant to P.D. 570-A which took effect on November 1, 1974. Noteworthy is the undisputed fact that respondent first paid its employees legal holiday pay in June 1975 corresponding to nine (9) legal holidays. It bears to note that from the time of the effectivity of P.D. 570-A which was in November of 1974 up to June of 1975, the time respondent first paid legal holiday pay for nine (9) legal holidays, there, were indeed more or less nine legal holidays that transpired to wit: November 30, 1974, December 25, 1974, December 30, 1974, January 1, 1975, February 27, 1975 (Referendum Day), Maundy Thursday of 1975, Good Friday of 1975, April 9, 1975 and finally, May 1st of 1975. We are therefore inclined to lend credence to respondent's claim that the payment of legal holiday pay was in fact made pursuant to law, P.D. 570-A in particular, it is not one that arose out of company practice or policy. Finding that said payment was made based on an honest although erroneous interpretation of law, which interpretation was later on corrected by the issuance (sic) of Policy Instruction No. 9 and 686 686 SUPREME COURT REPORTS ANNOTATED Cebu Institute of Technology (CIT) vs. Ople which issuance prompted respondent to withdraw the holiday pay benefits extended to the employees who were paid on a regular monthly basis, and finding further that under Policy Instructions No. 9, said subject employees are deemed paid their holiday pay as they were paid on a monthly basis at a wage rate presumably above the statutory minimum, we believe and so hold that the withdrawal of said holiday pay benefit was valid and justifiable under the circumstances (Rollo, pp. 334). This Court cannot sustain the foregoing decision of public respondent. Said decision relied on Section 2, Rule IV, Book III of the implementing rules and on Policy Instruction No. 9 which were declared by this Court to be null and void in Insular Bank of Asia and America Employee's Union (IBAAEU) v. Inciong (G.R. No. 52415, October 23, 1984, 132 SCRA 663]. In disposing of the issue at hand, this Court reiterates the ruling in that case, to wit:

WE agree with the petitioner's contention that Section 2, Rule IV, Book III of the implementing rules and Policy Instruction No. 9 issued by the then Secretary of Labor are null and void since in the guise of clarifying the Labor Code's provision on holiday pay, they in f act amended them by enlarging the scope of their exclusion. x x x It is elementary in the rules of statutory construction that when the language of the law is clear and unequivocal the law must be taken to mean exactly what it says. In the case at bar, the provisions of the Labor Code on the entitlement to the benefits of holiday pay are clear and explicitit provides for both the coverage of and exclusion from the benefits. In Policy Instruction No. 9, the then Secretary of Labor went as far as to categorically state that the benefit is principally intended for daily paid employees, when the law clearly states that every worker shall be paid their regular holiday pay. This is a flagrant violation of the mandatory directive of Article 4 of the Labor Code, which states that "All doubts in the implementation and interpretation of the provisions of this Code, including its implementing rules and regulations, shall be resolved in favor of labor." Moreover, it shall always be presumed that the legislature intended to enact a valid and permanent statute which would have the most beneficial effect that its language permits (Orlosky vs. Haskell, 155 A. 112). (pp. 673-4). 687 VOL. 156, DECEMBER 18, 1987 687 Cebu Institute of Technology (CIT) vs. Ople BISCOCHO CASE At issue also in this petition is whether the 60% incremental proceeds may be subjected to attorney's fees, negotiation fees, agency fees and the like. The Court notes the fact that there are two classes of employees among the petitioners: (1) those who are members s of the bargaining unit and (2) those who are not members of the bargaining unit. The first class may be further subdivided into two: those who are members of the collective bargaining agent and those who are not.

It is clear that the questioned Order of the respondent Minister applies only to members of the bargaining unit. The CBA prepared pursuant to said Order, however, covered employees who are not members of the bargaining unit, although said CBA had not yet been signed at the time this petition was filed on November 24, 1986. Assuming it was signed thereafter, the inclusion of employees outside the bargaining unit should be nullified as this does not conform to said order which directed private respondents to execute a CBA covering only members of the bargaining unit. Being outside the coverage of respondent Minister's order, and thus, not entitled to the economic package involved therein, employees who are non-members of the bargaining unit should not be assessed negotiation fees, attorney's fees, agency fees and the like, for the simple reason that the resulting collective bargaining agreement does not apply to them. It should be clear, however, that while non-members of the bargaining unit are not entitled to the economic package provided by said order, they are, in lieu thereof, still entitled to their share in the 60% incremental proceeds of increases in tuition or other school fees or charges. As far as assessment of fees against employees of the collective bargaining unit who are not members of the collective bargaining agent is concerned, Article 249 of the Labor Code, as amended by B.P. Blg. 70, provides the rule: Art. 249. Unfair labor practices of employers. x x x x 688 688 SUPREME COURT REPORTS ANNOTATED Cebu Institute of Technology (CIT) vs. Ople (e)x x x Employees of an appropriate collective bargaining unit who are not members of the recognized collective bargaining agent may be assessed a reasonable fee equivalent to the dues and other fees paid by members of the recognized collective bargaining agent, if such nonunion members accept the benefits under the collective agreement. . . Employees of the collective bargaining unit who are not members of the collective bargaining agent have to pay the foregoing fees if they accept the benefits under the collective bargaining agreement and if such fees

are not unreasonable. Petitioners who are members of the bargaining unit failed to show that the equivalent of ten (10%) percent of their backwages sought to be deducted is unreasonable. WHEREFORE, the Court rules: CEBU INSTITUTE OF TECHNOLOGY CASE In G.R. No. 58870, the Order of respondent Minister of Labor and Employment dated September 29, 1981 is SUSTAINED insofar as it ordered petitioner Cebu Institute of Technology to pay its teaching staff the following: (1) Cost of living allowance under Pres. Dec. Nos. 525 and 1123 from February 1978 up to 1981; (2) Cost of living allowance under Pres. Dec. Nos. 1614, 1634, 1678 and 1713; and (3) Service incentive leave due them from 1978. The Temporary Restraining Order issued by this Court on December 7, 1981 is hereby LIFTED and SET ASIDE. No costs. DIVINE WORD COLLEGE CASE The petition in G.R. No. 68345 is DENIED for lack of merit. The questioned Orders of respondent Deputy Minister of Labor and Employment, dated December 19, 1983 and July 4, 1984 are SUSTAINED insofar as said Orders denied the payment of the emergency cost of living allowances of private 689 VOL. 156, DECEMBER 18, 1987 689 Cebu Institute of Technology (CIT) vs. Ople respondents faculty teachers of the Divine Word College of Legazpi out of the sixty (60%) incremental proceeds of tuition and other school fee increases collected during the effectivity of Pres. Dec. No. 451. The Rules and Regulations implementing Pres. Dec. No. 451 are hereby declared invalid for being ultra vires. No costs. FAR E ASTERN UNIVERSITY CASE The Decision of public respondent National Labor Relations Commission dated September 18,1984 is REVERSED insofar as it affirmed in toto the dismissal of petitioner Far Eastern University Employee Labor Union's claim under Pres. Dec. No. 451 and its claim for payment of holiday pay,

Private respondent Far Eastern University is therefore ordered to pay its employees the following: (1) Their sixty (60) percent share in the increases in tuition and other school fees or charges which shall be allocated exclusively for increase in salaries or wages if the tuition or other school fee increase was collected during the effectivity of Pres. Dec. No. 451; (2) Their claim for holiday pay which was withdrawn since January 14, 1976 up to the present. The Decision of respondent National Labor Relations Commission, however, is SUSTAINED insofar as it denied petitioner's claim for thirteenth (13th) month pay. No costs. FABROS CASE In G.R. No. 70832, the Petition for Certiorari and Prohibition is DISMISSED. MECS Order No. 25. s. 1985, particularly paragraphs 7.0 to 7.5 thereof, which provide for the use and application of sixty (60%) percent of the increases in tuition and other school fees or charges, having been issued pursuant to B.P. Blg. 232 which repealed Pres. Dec. No. 451, is hereby declared VALID. The Temporary Restraining Order issued by this Court dated May 29, 1985 is LIFTED and SET ASIDE. No costs. 690 690 SUPREME COURT REPORTS ANNOTATED Cebu Institute of Technology (CIT) us. Ople BISCOCHO CASE The assailed portions of the Order of the Minister of Labor and Employment dated April 14, 1986 are AFFIRMED. The collective bargaining agreement prepared pursuant thereto should, however, be MODIFIED to cover only members of the bargaining unit. Only petitioners who are members of the collective bargaining unit, if they accept the benefits under the resulting collective bargaining agreement, shall be charged ten (10%) percent of the payable backwages as negotiation fees. The Temporary Restraining Order dated November 25, 1986 is LIFTED and SET ASIDE. No costs. VALMONTE CASE The petition in G.R. No. 76596 is DISMISSED for lack of merit.

Effective September 11, 1982, the application and use of the proceeds from increases in tuition fees and other schools fees or charges shall be governed by section 42 of B.P. Blg. 232 as implemented by the Rules and Regulations issued by the then Ministry, now Department of Education, Culture and Sports. SO ORDERED. Teehankee (C.J.), Yap, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Gancayco, Bidin and Sarmiento, JJ., concur. Fernan, J., no part. Formerly counsel for Cebu Institute of Technology. Narvasa, J., no part. Made public statements in some of the issues prior to joining the Court. Cruz, J., no part as this is connected with the UE case in which I am directly involved. Padilla, J., no part; respondent school's counsel in G.R. Nos. 76521 & 76596 is my brother. Notes.Mandamus to compel payment of back salary does not lie, unless right of petition to backpay is well-defined. (Sales vs. Mathay, 129 SCRA 180.) 691 VOL. 156, DECEMBER 18, 1987 691 Fortuno vs. Palma Regular professors and teachers are entitled to ECOLA during the semestral breaks, their "absence" from work not being of their own will. (University of Pangasinan Faculty Union us. University of Pangasinan, 127 SCRA 691.) o0 [Cebu Institute of Technology (CIT) vs. Ople, 156 SCRA 629(1987)]

VOL. 207, APRIL 8, 1992 801 Al-Amanah Islamic Investment Bank of the Phils. vs. Civil Service Commission G.R. No. 100599. April 8, 1992.* AL-AMANAH ISLAMIC INVESTMENT BANK OF THE PHILIPPINES, petitioner, vs. THE HONORABLE CIVIL SERVICE COMMISSION and NAPOLEON M. MALBUN, respondents. Constitutional Law; Administrative Law; Civil Service Law; The Civil Service Commission considers as mitigating circumstances: (1) length of service, and (2) first offense.It is to be noted that the private respondent was found guilty of approving a series of accountants blocking sheets containing and showing thirteen (13) transgressions of the branch cashier wherein the latter approved unauthorized withdrawal against unfunded deposits ranging from P10,000.00 to P86,570.00 which are beyond the P5,000.00 limit that a branch cashier is authorized to approve as regards cash withdrawals to the detriment of the petitioner bank. In fact, the petitioner bank lost P597,450.05 as a result of these unauthorized withdrawals. Under these circumstances, we cannot categorize the private respondents grave misconduct as first offense. The private respondent committed thirteen (13) offenses at different times. The private respondents repeated transgressions, standing alone, warrant dismissal. Same; Constitutional Commissions; Civil Service Commission; The civil service shall be administered by the Civil Service Commission. ________________ * EN BANC. 802 802 SUPREME COURT REPORTS ANNOTATED Al-Amanah Islamic Investment Bank of the Phils. vs. Civil Service Commission It embraces all branches, subdivisions, instrumentalities, and agencies of the Government including government-owned or controlled

corporations with original charters.The Commission is the central personnel agency of the government. It is the repository of all government appointments as well as all records of final decisions in administrative cases against government employees. Hence, it is deemed to have judicial notice of such prior conviction of the private respondent. What the Commission should have done, therefore, was to notify the private respondent to rebut such document. At any rate, the records reveal that the document showing prior conviction of the private respondent is indisputable. Necessarily, even if we consider the private respondents repeated violations as one offense, the admission of this document would readily reveal that this is not his first offense. Same; Statutes; Due process; The requirement of prior publication seeks to prevent abuses by the lawmakers and ensure the peoples right to information.The records show that the Circular was filed with the University of the Philippines Law Center only on May 17, 1991. Section 4, Chapter 2, Book VII of the Revised Administrative Code of 1987 provides that x x each rule shall become effective fifteen (15) days from the date of filing x x x. The Commission issued its resolution on March 21, 1991. Verily, the Commission erred in applying the said circular insofar as it benefited the private respondent. The Memorandum Circular was not yet in effect at the time. The well-entrenched principle is that a statute operates prospectively only and not retroactively, unless the legislative intent to the contrary is made manifest either by the express terms of the statute or by necessary implication. (Nilo v. Court of Appeals, 128 SCRA 519 [1984] cited in Puzon v. Abellera, 169 SCRA 789 [1989]). We rule that the same principle is applicable to administrative rules and regulations issued by the government agencies in their duty to implement laws. The Memorandum Circular does not indicate that it should be applied retroactively, hence the general rule that a statute operates prospectively must be followed. Remedial Law; Evidence; The rules of evidence are specifically applicable only in judicial proceedings.It is true that the document showing the private respondents prior conviction in 1979 is not a newly discovered evidence but forgotten evidence considering that the same already existed or was available before or during the trial which was known and obtainable by the petitioner bank and could have been presented were it not for the oversight or forgetfulness of the petitioner (Tumang v. Court of Appeals, 172 SCRA 328 [1989]), and

803 VOL. 207, APRIL 8, 1992 803 Al-Amanah Islamic Investment Bank of the Phils. vs. Civil Service Commission therefore, applying rigid technical rules, such document is not admissible as evidence against the private respondent. However, administrative agencies like the Civil Service Commission exercising quasijudicial functions are free from the rigidity of certain procedural requirements. (Esquig v. Civil Service Commission, 188 SCRA 166 [1990] We rule that in the case of the document showing prior conviction of the private respondent, such should have been admitted considering that it is a public document and within the judicial notice of the Commission. Section 12(4) of Chapter 3, Book VII of the Revised Administrative Code of 1987 provides: Sec. 12, Rules of Evidence.In a contested case: (1) x x (2) x x (3) x x (4) the agency may take judicial notice of judicially cognizable facts and of generally cognizable technical or scientific facts within its specialized knowledge. The parties shall be notified and afforded an opportunity to contest the facts so noticed. PETITION for review from the resolutions of the Civil Service Commission. The facts are stated in the opinion of the Court. Andres R. Amante, Jr. for petitioner. Paulino R. Ersando for private respondent. GUTIERREZ, JR., J.: Petitioner Al-Amanah Islamic Investment Bank of the Philippines, formerly Philippine Amanah Bank (PAB) accuses public respondent Civil Service Commission (CSC) of grave abuse of discretion in imposing the minimum penalty of suspension of one (1) year under CSC Memorandum Circular No. 8, s. 1970 on private respondent Napoleon M. Malbun, the Branch Manager of the bank in Cagayan de Oro City. The bank deemed the penalty incommensurate with the CSCs finding that the private respondent was guilty of a serious grave misconduct. The facts of the case are not disputed. They are stated in the CSCs Resolution No. 90-1014, to wit:

Respondent/Appellant Malbun was formally charged by the then PAB Acting President Farouk A. Carpizo for Neglect of Duty, Inefficiency and Incompetence arising from the alleged unauthorized and illegal encashment of commercial checks drawn against uncleared and unfunded deposits. Said checks were all deposited, through a series of 804 804 SUPREME COURT REPORTS ANNOTATED Al-Amanah Islamic Investment Bank of the Phils. vs. Civil Service Commission several deposits, in the Savings Account of one Portri Gandarosa in the PAB, Cagayan de Oro Branch. The transactions under question covered the period from January 28, 1986 to September 5, 1986. The alleged deposits were allegedly approved by the former Cashier, Zenaida B. Sayson and all withdrawals were made and approved by the said branch accountant and approved by the Respondent/Appellant as Branch Manager. Be it noted, that during those times of the alleged commission of the said irregularities, Respondent/Appellant Malbun was then the Manager of the Cagayan de Oro Branch. The then PAB Acting President created an Investigating Committee, which after due notice and hearing, submitted the following findings and recommendation, as follows: There is no proof that respondent Malbun tolerated the anomalies nor is there any showing that he benefited directly or indirectly from the transactions to the detriment of the bank and therefore he is presumed to have acted in good faith. But for his failure to give a convincing proof that he exercised due care and diligence like a good father of a family in the performance of his duties, is hereby found guilty of NEGLECT OF DUTY. xxxx xxxx xxxx Respondent joined the bank on April 16, 1974. Under the Civil Service Rules, Neglect of Duty is a light offense. Credited in his favor are three (3) mitigating circumstances (length of service, first offense and good faith) with no aggravating circumstances, hence, the imposable penalty would be the minimum for light offense. (Reprimand or fine or suspension from one to ten days in its minimum period.).

Upon receipt of the report of the Investigating Committee, the same was referred by the then PAB Acting President to the Corporate Secretary, Atty. Ernesto Duran for comment and recommendation, who recommended that Respondent/Appellant Malbun should be charged of either Misconduct or Conduct Prejudicial to the Best Interest of the Bank; that nevertheless, even under the charge of Neglect of Duty for which he was found guilty by the Investigating Committee, a higher penalty is imposable under CSC Memorandum Circular No. 8, s. 1970; that Malbun must also be found guilty of violating the Central Banks Manual of Regulations for Banks and other Financial Intermediaries; and that contrary to the findings of the Investigating Committee that there are no aggravating circumstances, abuse of confidence should be considered against him. The then PAB Acting President submitted both the Report of the Investigating Committee and the recommendation of Atty. Duran to the PAB Board of Directors for appropriate action. 805 VOL. 207, APRIL 8, 1992 805 Al-Amanah Islamic Investment Bank of the Phils. vs. Civil Service Commission The PAB Board of Directors, in its Resolution No. 1714-K, dated March 7, 1989, resolved to approve the finding of the Investigating Committee that Respondent/Appellant Malbun is guilty of Neglect of Duty with an imposable penalty of Forced Resignation without prejudice to Reinstatement. Respondent/Appellant Malbun appealed to the MSPB, which found out and ruled, as follows: After a careful and thorough evaluation of all the records of the case, this Board agrees with the findings of the Investigating Committee that there is no proof that respondent-appellant Malbun tolerated the anomalies nor is there any showing that he benefited directly or indirectly from the transactions to the detriment of the Bank and therefore is presumed to have acted in good faith. However, for his failure to exercise due care and diligence of a good father of a family in the performance of his duties and observance of his obligation, respondent Malbun is hereby found guilty of Neglect of Duty and is

hereby meted the penalty of suspension for six (6) months notwithstanding the presence of mitigating circumstances of length of service considering that the Bank suffered loss of money. Loss or abuse of confidence cannot be considered as an aggravating circumstance being analogous to the other grave circumstances as contended by the Acting President of the Philippine Amanah Bank. (Rollo, pp. 35-37) xxx xxx xxx After a review of the facts and documents submitted pertaining to the instant appeal, the Commission finds Respondent/Appellant Malbun guilty not only of Gross Neglect of Duty, which is a less grave offense under CSC Memorandum Circular No. 8, s. 1970 but also of Grave Misconduct and Conduct Prejudicial to the Best interest of the Service which are grave offenses under the same Memorandum Circular. In this regard, as correctly alleged by the then PAB Acting President Carpizo in his Comment on Appellants Appeal to the MSPB dated July 26, 1989, thus: The appellant is fully aware that his previous position as Branch Manager of Cagayan de Oro is lodged with very high responsibility. The exercise of his responsibilities is not merely ministerial but laden with decision making. Out there, in his own branch, he is a little president whose actuation and decision must be endowed with great prudence and care lest incompetence and inefficiency will result into financial loss. x x x x x. 806 806 SUPREME COURT REPORTS ANNOTATED Al-Amanah Islamic Investment Bank of the Phils. vs. Civil Service Commission True, it is the Branch Cashier, Zenaida Sayson, that solely approved the series of withdrawals against unfunded deposits. But the appellant was fully aware that under the Banks Manual on Signing Authority, a Branch Cashier is authorized to approve cash withdrawals up to P5,000.00 and beyond such amount the approval of the Branch Manager is required. x x x x x. The series of unauthorized withdrawals made upon the sole authority of the Cashier ranges from a minimum withdrawn amount of P10,000.00 to a maximum amount of P86,500.00 blatantly beyond the authority of the Cashier. And what was aggravating was the fact that it

was committed thirteen (13) times under the very nose of the appellant from 28 January 1986 up to 05 September 1986. Yet due to the sheer incompetence, appellant even approved the series of accountants blocking sheets containing and showing the unauthorized withdrawals made by the Branch Cashier. x x x x x. xxx xxx xxx The argument of the appellant that the approval of the Accountants blocking sheets does not mean approval of the irregular transactions is flimsy and incongruous with the Banks Job Description Manual which provides that: I.Basic Function of the Branch ManagerAssumes direct control, responsibility for and supervision over activities and business affairs of the Branch. II.ResponsibilitiesReviews daily transactions and results of operations; analyzes trends in deposit, withdrawals, clearing operations; cash position, fund transfers, loaning grants and collection. From the foregoing, it is crystal clear therefore that the function and responsibilities of a Branch Manager is (sic) not merely ministerial but laden with decision-making and analysis of transactions and results of operation, particularly those involving money matters. In the instant case, when the appellant was then a Branch Manager, he was expected and presumed to have read, reviewed and analyzed the contents of the Accountants blocking sheets containing the anomalous transactions including the supporting proof sheets and withdrawal slips made on the unfunded deposits. But the appellant was remiss in observing even the ordinary care and prudence in the discharge of his function and responsibilities. How can he argue that his approval of the Accountants blocking sheet does not mean he approved of the irregular transaction, when under the Banks Job Description Manual, he is responsible and duty bound to review daily 807 VOL. 207, APRIL 8, 1992 807 Al-Amanah Islamic Investment Bank of the Phils. vs. Civil Service Commission transactions and results of operations, analyze trends in deposit withdrawals, clearing operations, cash position, fund transfers, loan

grants and collections which were all reflected, stated and contained in the Accountants blocking sheets. By affixing his signature in the Accountants blocking sheets which contain and carry the irregular transactions he is grossly incompetent and negligent in the observance and discharge of his duties and responsibilities spelled out in the Banks Job Description Manual. Be it noted that the Investigating Committee, the PAB Board of Directors and the MSPB are one in their findings that Respondent/ Appellant Malbun is guilty of Neglect of Duty. However, based on the facts and circumstances of the instant case vis-a-vis CSC Memorandum Circular No. 8, s. 1970, which does not penalize Neglect of Duty but Gross Neglect of Duty as a less grave offense, respondent/appellant Malbun should have been charged and found guilty of Gross Neglect of Duty. Nevertheless, considering that he is now found guilty of the said offense by this Commission based on the aforesaid allegations, he should also be penalized for Serious/Grave Misconduct and Conduct Prejudicial to the interest of the Banking System. The Supreme Court in the case of Oyao v. Pabatao (78 SCRA 93) ruled that a transgression of some established and definite rule of action, more particularly, unlawful behavior or gross negligence by the public officer is a Serious Misconduct. A Serious or Grave Misconduct is a grave offense under the said CSC Memorandum Circular No. 8, s. 1970. Be that as it may, considering the existence of the two (2) mitigating circumstances of length of service in the government service and first offense and the aggravating circumstance of abuse of confidence, the minimum of the penalty for grave offense under CSC Memorandum Circular No. 8, s. 1970 of suspension of one (1) year is imposable. (Rollo, pp. 38-40) The petitioner bank filed a motion for reconsideration of the aforesaid resolution stating therein that the circumstance of prior conviction of the private respondent in 1979 for neglect of duty as charged and upon suspension from the service for four (4) months effective upon receipt of this approval, xxx (Rollo, p. 11) should be considered in determining the proper penalty (which should be dismissal) to be imposed on the private respondent. 808 808 SUPREME COURT REPORTS ANNOTATED

Al-Amanah Islamic Investment Bank of the Phils. vs. Civil Service Commission The CSC, however, refused to consider this prior conviction of the private respondent on the ground that this is not a newly discovered evidence and that the petitioner in its exercise of reasonable diligence could have discovered and produced the document during the hearing conducted or could have presented the same in its appeal to the Merit Systems Protection Board (MSPB) as well as in the Commission. In a resolution dated November 14, 1991, we gave due course to the petition. The petition is impressed with merit. Section 695 of the Revised Administrative Code of 1917 provides that a civil service subordinate officer or employee, may for neglect of duty or violation of reasonable office regulations x x x be removed from the service. Moreover, Memorandum Circular No. 8, Series of 1970 of the Civil Service Commission (Guidelines in the Application of Penalties) provides the penalties for grave offenses, to wit: 1. Transfer or demotion in rank or salary from two to three grades or suspension for one year in its minimum period. 2. Forced resignation without prejudice to reinstatement to forced resignation with prejudice to reinstatement in its medium period. 3. Dismissal in its maximum period. The following are considered mitigating circumstances: 1. Physical illness 2. Good faith 3. Length of service in the government. 4. Analogous circumstances. The Civil Service Commission considered as mitigating circumstances: (1) length of service, and (2) first offense. The CSC also considered abuse of confidence as aggravating circumstance. The records show that the private respondent joined the bank on April 16, 1974. He committed the offense in 1986. Hence, there is no dispute that length of service in the government can be considered a mitigating circumstance in his favor. 809 VOL. 207, APRIL 8, 1992 809

Al-Amanah Islamic Investment Bank of the Phils. vs. Civil Service Commission However, we do not agree that the mitigating circumstance of first offense can be considered in favor of the private respondent. It is to be noted that the private respondent was found guilty of approving a series of accountants blocking sheets containing and showing thirteen (13) transgressions of the branch cashier wherein the latter approved unauthorized withdrawal against unfunded deposits ranging from P10,000.00 to P86,570.00 which are beyond the P5,000.00 limit that a branch cashier is authorized to approve as regards cash withdrawals to the detriment of the petitioner bank. In fact, the petitioner bank lost P597,450.05 as a result of these unauthorized withdrawals. Under these circumstances, we cannot categorize the private respondents grave misconduct as first offense. The private respondent committed thirteen (13) offenses at different times. The private respondents repeated transgressions, standing alone, warrant dismissal. Thus, we ruled in the case of Philippine National Bank v. Intermediate Appellate Court (187 SCRA 757 [1990]): The Court of Appeals reduced the penalty from dismissal to suspension for six (6) months without pay by reason of mitigating circumstances good faith and disparity between the penalties imposed on the respondent and on other implicated offenders. While it may indeed be questionable that other persons were not as severely punished, (unfortunately they are beyond the courts reach), petitioners repeated violations (92 times), standing alone, merit dismissal. In Policarpio v. Fajardo (Adm. Matter No. P-312, 78 SCRA 210), gross misconduct in office by a sheriff was punished by dismissal from the service with forfeiture of all benefits. This was reiterated in Abdulwahid v. Reyes (Adm. Matter No. P-902 & 926, Jan. 31, 1978; Antonio v. Diaz, Adm. Matter No. P-1568, 94 SCRA 890), where a deputy sheriff found guilty of serious misconduct in office was likewise dismissed. Good faith cannot be appreciated in favor of private respondent considering the repeated violations. (at p. 762) Moreover, we agree with the petitioner that prior conviction should have been considered by the Commission in imposing the proper penalty on the private respondent although it was presented only in the petitioners motion for reconsideration/ motion for new trial. It is true that the document showing the private respondents

810 810 SUPREME COURT REPORTS ANNOTATED Al-Amanah Islamic Investment Bank of the Phils. vs. Civil Service Commission prior conviction in 1979 is not a newly discovered evidence but forgotten evidence considering that the same already existed or was available before or during the trial which was known and obtainable by the petitioner bank and could have been presented were it not for the oversight or forgetfulness of the petitioner (Tumang v. Court of Appeals, 172 SCRA 328 [1989]), and therefore, applying rigid technical rules, such document is not admissible as evidence against the private respondent. However, administrative agencies like the Civil Service Commission exercising quasi-judicial functions are free from the rigidity of certain procedural requirements. (Esquig v. Civil Service Commission, 188 SCRA 166 [1990] We rule that in the case of the document showing prior conviction of the private respondent, such should have been admitted considering that it is a public document and within the judicial notice of the Commission. Section 12(4) of Chapter 3, Book VII of the Revised Administrative Code of 1987 provides: Sec. 12, Rules of Evidence. In a contested case: (1) x x (2) x x (3) x x (4) the agency may take judicial notice of judicially cognizable facts and of generally cognizable technical or scientific facts within its specialized knowledge. The parties shall be notified and afforded an opportunity to contest the facts so noticed. (Official Gazette, Vol. 83, No. 39, p. 171) The Commission is the central personnel agency of the government. It is the repository of all government appointments as well as all records of final decisions in administrative cases against government employees. Hence, it is deemed to have judicial notice of such prior conviction of the private respondent. What the Commission should have done, therefore, was to notify the private respondent to rebut such document. At any rate, the records reveal that the document showing prior conviction of

the private respondent is indisputable. Necessarily, even if we consider the private respondents repeated violations as one offense, the admission of this document would readily reveal 811 VOL. 207, APRIL 8, 1992 811 Al-Amanah Islamic Investment Bank of the Phils. vs. Civil Service Commission that this is not his first offense. But the Commission also applied CSC Memorandum Circular No. 6, Series of 1991, to wit: x x x *I+n the appreciation of any mitigating circumstances in favor of the respondent in an administrative case and/or aggravating circumstances against him, the same must be invoked or pleaded by the proper party, otherwise the said circumstances shall not be considered in the determination of the proper penalty to be imposed against the respondent concerned. (Rollo, pp. 56-57) to the instant case. The Commission held that the Memorandum Circular should be applied retroactively insofar as it benefits the respondent but it would not be applied to increase the penalty imposable to the private respondent otherwise this will be tantamount to violating the prohibition on ex-post facto law as the Memorandum was issued after the commission of the offense. The records show that the Circular was filed with the University of the Philippines Law Center only on May 17, 1991. Section 4, Chapter 2, Book VII of the Revised Administrative Code of 1987 provides that x x each rule shall become effective fifteen (15) days from the date of filing x x x. The Commission issued its resolution on March 21, 1991. Verily, the Commission erred in applying the said circular insofar as it benefited the private respondent. The Memorandum Circular was not yet in effect at the time. The well-entrenched principle is that a statute operates prospectively only and not retroactively, unless the legislative intent to the contrary is made manifest either by the express terms of the statute or by necessary implication. (Nilo v. Court of Appeals, 128 SCRA 519 [1984] cited in Puzon v. Abellera, 169 SCRA 789 [1989]). We rule that the same principle is applicable to administrative rules and regulations issued by the government agencies in their duty to implement laws. The

Memorandum Circular does not indicate that it should be applied retroactively, hence the general rule that a statute operates prospectively must be followed. With the foregoing considerations, the only remaining mitigating circumstance in favor of the private respondent is length 812 812 SUPREME COURT REPORTS ANNOTATED Al-Amanah Islamic Investment Bank of the Phils. vs. Civil Service Commission of service. This is, however, offset by the aggravating circumstance of abuse of confidence found by the Commission. Under these circumstances, we rule that the proper penalty for the repeated offenses committed by the private respondent against the beneficial interest of the petitioner is dismissal from the government service with forfeiture of benefits. And finally, the Civil Service Commission totally ignored the fact that the respondent is a Bank Manager who is in charge of daily transactions involving millions of pesos. There is a tremendous difference between the degree of responsibility, care, and trustworthiness expected of a clerk or ordinary employee in the bureaucracy and that required of bank managers, cashiers, finance officers, and other officials directly handling large sums of money and properties. The standards in the interpretation of good faith, due care, diligence of a good father of a family, neglect of duty, grave misconduct and conduct prejudicial to the interest of the service are not rigid or inflexible terms to be applied like the bed of Procrustes without considering attendant circumstances. Certainly, a bank manager who did not learn from an earlier four months suspension for neglect of duty in 1979 and who allowed kiting operations under his very nose to happen in 1986 until his bank lost P597,450.05 should not be returned to his former position as Bank Manager. There is no room for negligence and carelessness in managing a bank. WHEREFORE, the instant petition is GRANTED. The questioned Resolutions of the Civil Service Commission are REVERSED and SET ASIDE. Private respondent NAPOLEON M. MALBUN is ordered DISMISSED from the government service with forfeiture of benefits.

SO ORDERED. Melencio-Herrera, Cruz, Paras, Feliciano, Padilla, Bidin, Grio-Aquino, Medialdea, Regalado, Davide, Jr., Romero and Nocon, JJ., concur. Narvasa (C.J.), On leave. Bellosillo, J., No part. Did not participate in deliberations. 813 VOL. 207, APRIL 8, 1992 813 Al-Amanah Islamic Investment Bank of the Phils. vs. Civil Service Commission Petition granted; resolutions reversed and set aside. Note.The right to dismiss or otherwise impose disciplinary sanctions upon an employee for just cause and valid cause, pertains in the first place to the employer, as well as the authority to determine the existence of said cause in accordance with the norms of due process. (Richardson v. Demetriou, 142 SCRA 505). o0o 814 [Al-Amanah Islamic Investment Bank of the Phils. vs. Civil Service Commission, 207 SCRA 801(1992)]

VOL. 233, JULY 5, 1994 665 Realty Exchange Venture Corporation vs. Sendino G.R. No. 109703. July 5, 1994.* REALTY EXCHANGE VENTURE CORPORATION AND/OR MAGDIWANG REALTY CORPORATION, petitioner, vs. LUCINA S. SENDINO and the OFFICE OF THE EXECUTIVE SECRETARY, Office of the President, Malacaang, Manila, respondents. Administrative Law; Rules of procedure are as a matter of course construed liberally in proceedings before administrative bodies.It is settled that rules of procedure are as a matter of course construed liberally in proceedings before administrative bodies. In the instant case, the original suit for specific performance and damages was filed by the private respondent with the HLURB-OAALA, an administrative body not hamstrung by the strict procedural technicalities of the Rules of Court. Under the circumstances, it was certainly appropriate for the HLURBOAALA to have acted on the substantive questions relating to the validity of petitioners unilateral rescission of the contract without unduly concerning itself with a mere procedural slip, the non-joinder of private petitioners husband in the original complaint before the HLURB. Moreover, since petitioners participated in the administrative proceedings without objecting to or raising the procedural infirmity, they were certainly estopped from raising it on appeal before the Office of the President and before this Court. Same; Abolition of office; In spite of the Aquino Governments stated intention of eradicating what it considered the vestiges of the previous regime, it was not its intention to create a vacuum by abolishing those juridical entities, agencies, corporations attached to or supervised by the Ministry of Human Settlements which performed vital admin-istrative functions.Proceeding to the principal issues raised by the petitioner, while E.O. 85 dated 12 December 1986 abolished the Ministry of Human Settlements (MHS), it is patently clear from a reading of its provisions that the said executive order did not abolish the Human Settlements Regulatory Commission (HSRC) which continued to exercise its powers and functions even after the Ministry of Human Settlements ceased to exist. In spite of the Aquino Governments stated intention of eradicating

what it considered the vestiges of the previous regime, it was not its intention to create a vacuum by abolishing those juridical entities, agencies, corporations, etc., attached to or supervised by the _______________ * FIRST DIVISION. 666 666 SUPREME COURT REPORTS ANNOTATED Realty Exchange Venture Corporation vs. Sendino MHS, which performed vital administrative functions. Same; Housing and Land Use Regulatory Board (HLURB); Organizational background of the HLURB; Being the sole regulatory body for housing and land development, HLURB would have been reduced to a functionally sterile entity if it lacked the powers exercised by its predecessor which included the power to settle disputes concerning land use and housing development and acquisition.Pursuant to Section 3 of E.O. 85, the President subsequently issued Executive Order No. 90, series of 1986, recognizing the Human Settlements Regulatory Commission (renamed the HLURB) as one of the principal housing agencies of the government. Prior to this, Executive Order No. 648 in 1981 transferred all the functions of the National Housing Authority (pursuant to Presidential Decrees Nos. 957, 1216 and 1344) to the Human Settlements Regulatory Commission (HSRC) consolidating all regulatory functions relating to land use and housing development in a single entity. Being the sole regulatory body for housing and land development, the renamed body, the HLURB, would have been reduced to a functionally sterile entity if, as the petitioner contends, it lacked the powers exercised by its predecessor which included the power to settle disputes concerning land use and housing development and acquisition. Same; Same; Same; Jurisdiction; One thrust of the multiplication of administrative agencies is that the interpretation of certain contracts and agreements and the determination of private rights under these agreements is no longer a uniquely judicial function.Clearly, therefore, the HLURB properly exercised its jurisdiction over the case filed by the petitioners with its adjudicative body, the OAALA, in ordering petitioners to comply with their obligations arising from the Reservation Agreement.

In general, the quantum of judicial or quasi-judicial powers which an administrative agency may exercise is defined in the agencys enabling act. In view of the Courts pronouncement in United Housing Corporation vs. Hon. Dayrit, supra, recognizing the HLURB as the successor agency of the HSRCs powers and functions, it therefore follows that the transfer of such functions from the NHA to the HRSC effected by Section 8 of E.O. 648, series of 1981, thereby resulted in the acquisition by the HLURB of adjudicatory powers which included the power to (h)ear and decide cases of unsound real estate business practices . . . and cases of specific performance. Obviously, in the exercise of its powers and functions, the HLURB must interpret and apply contracts, determine the rights of the parties under these contracts, and award damages whenever appropriate. We fail to see how the HSRC which possessed jurisdiction over the actions for specific performance for 667 VOL. 233, JULY 5, 1994 667 Realty Exchange Venture Corporation vs. Sendino contractual and statutory obligations filed by buyers of subdivision lots against developershad suddenly lost its adjudicatory powers by the mere fiat of a change in name through E.O 90. One thrust of the multiplication of administrative agencies is that the interpretation of such contracts and agreements and the determination of private rights under these agreements is no longer a uniquely judicial function. The absence of any provision, express or implied, in E.O. 90, repealing those quasi-judicial powers inherited by the HSRC from the National Housing Authority, furthermore militates against petitioners position on the question. Same; Same; Delegation of powers; The power conferred upon an administrative agency to issue rules and regulations necessary to carry out its functions has been held to be an adequate source of authority to delegate a particular function, unless by express provision of the Act or by implication it has been withheld.Going to petitioners contention that the decision of the OAALA should have been rendered by the Board of Commissioners sitting en banc, we find ample authorityboth in the statutes and in jurisprudencejustifying the Boards act of dividing itself

into divisions of three. Under Section 5 of E.O. 648 which defines the powers and duties of the Commission, the Board is specifically mandated to (a)dopt rules of procedure for the conduct of its business and perform such functions necessary for the effective accomplishment of (its) above mentioned functions. Since nothing in the provisions of either E.O. 90 or E.O. 648 denies or withholds the power or authority to delegate adjudicatory functions to a division, we cannot see how the Board, for the purpose of effectively carrying out its administrative responsibilities and quasi-judicial powers as a regulatory body should be denied the power, as a matter of practical administrative procedure, to constitute its adjudicatory boards into various divisions. After all, the power conferred upon an administrative agency to issue rules and regulations necessary to carry out its functions has been held to be an adequate source of authority to delegate a particular function, unless by express provision of the Act or by implication it has been withheld. Same; Same; Subdivisions; Installment Sales; R.A. 6552; Words and Phrases; Sale under P.D. 957 includes all transactions concerning land and housing acquisition, including reservation agreements, and a cancellation of the contract by owner or developer without observing the condition for a notarial act is invalid and improper.As the Solicitor General correctly pointed out, RA 6552 makes no distinction between option and sale which, under P.D. 957 also includes an exchange or attempt to sell, an option of sale or purchase, a solicitation of a sale or an offer to sell directly. This all-embracing definition virtually includes 668 668 SUPREME COURT REPORTS ANNOTATED Realty Exchange Venture Corporation vs. Sendino all transactions concerning land and housing acquisition, including reservation agreements. Since R.A. 6552 mandates cancellation by notarial actamong other requirementsbefore any cancellation of a contract may be effected, petitioners precipitate cancellation of its contract with private respondent without observing the conditions imposed by the said law was invalid and improper. Same; Same; Same; Same; The Supreme Court can take judicial notice of the pernicious practice involving virtual contracts of adhesion entrapping innocent buyers through default clauses guaranteeing huge monetary

windfalls for the developers in the event their buyers default by failing to come up with certain requirements.The acute housing shortage problem has prompted thousands of middle and lower class buyers of houses and lots and condominium units to enter into all sorts of agreements with private housing developers involving all manner of installment schemes under contracts drawn exclusively by these developers. Many of these virtual contracts of adhesion entrap innocent buyers by requiring cash deposits under reservation agreements which include, sometimes in the fine print, default clauses guaranteeing huge monetary windfalls for the developers in the event that their buyers (oftentimes for the flimsiest of reasons) default by failing to come up with certain requirements. While the Court can take judicial notice of this pernicious practice, it can only hope that future legislation would address the need to protect the innocent middle or lower class home purchaser. In the case of the individual victim, this Court can only go to the extent of awarding such damages as may be proper under the peculiar circumstances of the cases brought before it. PETITION for certiorari to set aside a decision of the Office of the President. The facts are stated in the opinion of the Court. Siruelo, Muyco & Associates Law Office for petitioner. Sisenando Villaluz, Jr. for private respondent. KAPUNAN, J.: Private respondent Lucina C. Sendino entered into a reservation agreement with Realty Exchange Venture, Inc. (REVI) for a 120-square meter lot in Raymondville Subdivision in Sucat, Paraaque for P307,800.00 as its purchase price.1 She paid _______________ 1 Rollo, p. 29. 669 VOL. 233, JULY 5, 1994 669 Realty Exchange Venture Corporation vs. Sendino

P1,000.00 as partial reservation fee on January 15, 1989 and completed payment of this fee on January 20, 1989 by paying P4,000.00.2 On July 18, 1989, private respondent paid REVI P16,600.00 as full downpayment on the purchase price.3 However, she was advised by REVI to change her co-maker, which she agreed, asking for an extension of one month to do so. For alleged non-compliance with the requirement of submission of the appropriate documents under the terms of the original agreement,4 REVI, through its Vice-President for Marketing, informed respondent of the cancellation of the contract on the 31st of July 1989.5 On April 20, 1990, private respondent filed a complaint for Specific Performance against REVI with the office of Appeals, Adjudication and Legal Affairs (OAALA) of the Housing and Land Use Regulatory Board (HLURB) asking that respondent be ordered: 1. To comply and continue with the sale of the house and lot, Block 4, Lot 17 at the Raymondville Subdivision, Sucat Road, Paraaque, Metro Manila; 2. To pay complainant actual, nominal and moral damages, the amount of which will be proved in the hearing; 3. To pay complainant attorneys fee in the sum of P10,000.00; 4. To pay complainant exemplary damages in the sum of P10,000.00 to set an example and to avoid a repetition of such illegal and unsound business practices of the respondent.6 _______________ 2 Id., Annexes A, B and C. 3 Id., at p. 31, Annex D. 4 Supra, Note 1. The provision on cancellation in the original agreement between the parties states: IV. Cancellation A. Failure to remit the full downpayment or to submit the required documents on the date stipulated in items I and II shall result in automatic cancellation without the need for prior notice to the buyer. 5 Id., at p. 33, Annex E. 6 Id., at p. 27, Annex A. 670 670

SUPREME COURT REPORTS ANNOTATED Realty Exchange Venture Corporation vs. Sendino This petition was amended on August 17, 1990 by impleading petitioners Magdiwang Realty Corporation (MRC) which appeared to be the registered owner of the subject lot as per TCT No. 76023. On April 3, 1991 the HLURB, whose authority to hear and decide the complaint was challenged by REVI in its answer,7 rendered its judgment in favor of private respondent and ordered petitioners to continue with the sale of the house and lot and to pay private respondent P5,000 as moral damages, P5,000 as exemplary damages and P6,000 as attorneys fees and costs of the suit.8 An appeal from this decision was taken to the HLURB OAALA Arbiter, which affirmed the Boards decision. The decision of the OAALA Arbiter was appealed to the Office of the President, herein public respondent. On January 7, 1993, the public respondent rendered its decision dismissing the petitioners appeal. Motion for reconsideration of the decision was denied by the public respondent on January 26, 1993. Consequently petitioners come before this Court, in this petition, which the Court resolves to treat as a petition for certiorari, raising the following issues: I PUBLIC RESPONDENT COMMITTED SERIOUS ERROR IN DECLARING THAT THE HOUSING AND LAND USE REGULATORY BOARD HAS QUASI-JUDICIAL FUNCTIONS, NOTWITHSTANDING ABSENCE OF EXPRESS GRANT BY EXECUTIVE ORDER NO. 90 OF DECEMBER 17, 1986 WHICH CREATED IT. AND EVEN IF THE HLURB WAS QUASI-JUDICIAL FUNCTIONS, PUBLIC RESPONDENT LIKEWISE SERIOUSLY ERRED IN DECLARING THAT THE BOARD OF COMMISSIONERS IS ALLOWED TO SIT IN A DECISION TO RENDER JUDGMENT AND TO DELEGATE ITS QUASI-JUDICIAL AUTHORITY TO A SUBORDINATE OFFICE. II PUBLIC RESPONDENT GRAVELY ABUSED ITS DISCRETION IN DECLARING THAT THE LOT SUBJECT OF THE CONTRACT SOUGHT TO BE ENFORCED IS PARAPHERNAL _______________

7 Id., at p. 26. 8 Id., at p. 36. 671 VOL. 233, JULY 5, 1994 671 Realty Exchange Venture Corporation vs. Sendino DESPITE ADMISSION OF ITS CONJUGAL NATURE. III PUBLIC RESPONDENT GRAVELY ABUSED ITS DISCRETION IN DECLARING THAT ONLY NOTARIAL NOTICE OF RESCISSION MAY VALIDLY CANCEL A RESERVATION AGREEMENT PURSUANT TO REPUBLIC ACT NO. 6552. As the first and third issues raised by the petitioners strike at the core of the case at bench, this Court deems it appropriate to initially dispose of the issue of private respondents capacity to bring her complaint before the HLURB-OAALA. It is settled that rules of procedure are as a matter of course construed liberally in proceedings before administrative bodies.9 In the instant case, the original suit for specific performance and damages was filed by the private respondent with the HLURB-OAALA, an administrative body not hamstrung by the strict procedural technicalities of the Rules of Court. Under the circumstances, it was certainly appropriate for the HLURB-OAALA to have acted on the substantive questions relating to the validity of petitioners unilateral rescission of the contract without unduly concerning itself with a mere procedural slip, the non-joinder of private petitioners husband in the original complaint before the HLURB. Moreover, since petitioners participated in the administrative proceedings without objecting to or raising the procedural infirmity, they were certainly estopped from raising it on appeal before the Office of the President and before this Court. Proceeding to the principal issues raised by the petitioner, while E.O. 85 dated 12 December 1986 abolished the Ministry of Human Settlements (MHS), it is patently clear from a reading of its provisions that the said executive order did not abolish the Human Settlements Regulatory Commission (HSRC) which continued to exercise its powers and functions even after the Ministry of Human Settlements ceased to exist. In spite of

the Aquino Governments stated intention of eradicating what it considered the vestiges of the previous regime, it was not its _______________ 9 Police Commission v. Lood, 127 SCRA 757, 761 (1984). 672 672 SUPREME COURT REPORTS ANNOTATED Realty Exchange Venture Corporation vs. Sendino intention to create a vacuum by abolishing those juridical entities, agencies, corporations, etc., attached to or supervised by the MHS, which performed vital administrative functions. Per-tinently, Section 3 of E.O. 85 mandates that: x x x The final disposition and final organizational alignment or attachment of the juridical entities, agencies, corporations and councils attached to, or under the administrative supervision of the MHS including their respective existing projects, appropriations and other assets shall be subject to subsequent enactments by the President. Pursuant to this provision therefore, the President subsequently issued Executive Order No. 90, series of 1986, recognizing the Human Settlements Regulatory Commission (renamed the HLURB) as one of the principal housing agencies of the government. Prior to this, Executive Order No. 648 in 1981 transferred all the functions of the National Housing Authority (pursuant to Presidential Decrees Nos. 957, 1216 and 1344) to the Human Settlements Regulatory Commission (HSRC) consolidating all regulatory functions relating to land use and housing development in a single entity.10 Being the sole regulatory body for housing and land development, the renamed body, the HLURB,11 would have been reduced to a functionally sterile entity if, as the petitioner contends, it lacked the powers exercised by its predecessor which included the power to settle disputes concerning land use and housing development and acquisition. Moreover, this Court has had the occasion to definitively rule on the question as to whether or not the Housing and Land Use Regulatory Board could exercise the same quantum of judicial or quasi-judicial powers possessed by the HSRC under the Ministry of Human Settlements in the exercise of its regulatory functions when it held, in United Housing Corporation vs. Hon. Dayrit12 that:

As explicitly provided by law, jurisdiction over actions for specific performance of contractual and statutory obligations filed by buyers of _______________ 10 Exec. Order No. 648, sec. 8 (1981). 11 Exec. Order No. 90 (1986). 12 181 SCRA 295 (1990). 673 VOL. 233, JULY 5, 1994 673 Realty Exchange Venture Corporation vs. Sendino subdivision lot or condominium unit against the owner or developer, is vested exclusively in the HSRC, Section 1 of PD 1344, in no uncertain terms, provides: Section 1. In the exercise of its functions to regulate real estate trade and business and in addition to its powers provided for in Presidential Decree No. 957, the National Housing Authority shall have exclusive jurisdiction to hear and decide cases of the following nature: A. Unsound real estate business practices; B. Claims involving refund and any other claims filed by subdivision lot or condominium unit buyer against the project owner, developer, dealer, broker or salesman; and C. Cases involving specific performance of contractual and statutory obligations filed by buyers of subdivision lot or condominium unit against the owner, developer, dealer, broker or salesman. (Italics Ours) This is reinforced by section 8 of EO 648 (otherwise known as the Charter of the Human Settlements Regulatory Commission) which took effect on February 7, 1981, thus: Section 8. Transfer of Functions.The Regulatory functions of the National Housing Authority pursuant to Presidential Decree Nos. 957, 1216, 1344 and other related laws are hereby transferred to the Human Settlements Regulatory Commission. x x x Among the regulatory functions are x x x (11) Hear and decide cases of unsound real estate business practices, claims involving refund filed against project owners, developers, dealers, brokers, or salesmen and cases of specific performance (Italics Ours).

Private respondents reliance, therefore, on sections 1 and 8 of the Judiciary Reorganization Act of 1980 is untenable. Thus, as correctly pointed out by petitioner, section 19, paragraph 6 of said law is material to the issue of where jurisdiction lies, and We quote: Section 19. x x x (6) In all other cases not within the exclusive jurisdiction of any court, tribunal, persons or body exercising judicial or quasijudicial functions. xxx xxx xxx Neither can We accede to private respondents claim that resort to the courts is justified under section 41 of PD 957 specifically under the phrase legal remedies that may be available to aggrieved subdivision lot buyers. There is no question that a statute may vest exclusive original jurisdiction in an administrative agency over certain disputes and 674 674 SUPREME COURT REPORTS ANNOTATED Realty Exchange Venture Corporation vs. Sendino controversies falling within the agencys special expertise. The constitutionality of such grant of exclusive jurisdiction to the National Housing Authority (now Housing and Land Use Regulatory Board) over cases involving the sale of lots in commercial subdivisions was upheld in Tropical Homes Inc. v. National Housing Authority (152 SCRA 540 [1987]) and again sustained in a later decision in Antipolo Realty Corporation v. National Housing Authority (153 SCRA 399 [1987]) where We restated that the National Housing Authority (now HLURB) shall have exclusive jurisdiction to regulate the real estate trade and business in accordance with the terms of PD No. 957 which defines the quantum of judicial or quasi-judicial powers of said agency.13 Clearly, therefore, the HLURB properly exercised its jurisdiction over the case filed by the petitioners with its adjudicative body, the OAALA, in ordering petitioners to comply with their obligations arising from the Reservation Agreement. In general, the quantum of judicial or quasijudicial powers which an administrative agency may exercise is defined in the agencys enabling act. In view of the Courts pronouncement in United Housing Corporation vs. Hon. Dayrit, supra, recognizing the HLURB as the successor agency of the HSRCs powers and functions, it

therefore follows that the transfer of such functions from the NHA to the HRSC effected by Section 8 of E.O. 648, series of 1981, thereby resulted in the acquisition by the HLURB of adjudicatory powers which included the power to (h)ear and decide cases of unsound real estate business practices . . . and cases of specific performance.14 Obviously, in the exercise of its powers and functions, the HLURB must interpret and apply contracts, determine the rights of the parties under these contracts, and award damages whenever appropriate.15 We fail _______________ 13 Id., at 291-293 (1990). 14 P.D. 957, sec. 1. 15 C.T. Torres Enterprises, Inc. v. Hibionada, 191 SCRA 268, 272 (1990). While the award for damages is an essentially judicial function normally exercised only by courts of justice, this departure from the usual allocation of governmental powers was justified by expediency or the need of the government to respond swiftly and competently to the pressing problems of the modern world. Id., at 273. This Court traced the source of the Boards competence to award damages in Solid Homes, Inc. v. Payawal, 177 SCRA 72 (1989) thus: 675 VOL. 233, JULY 5, 1994 675 Realty Exchange Venture Corporation vs. Sendino to see how the HSRCwhich possessed jurisdiction over the actions for specific performance for contractual and statutory obligations filed by buyers of subdivision lots against developershad suddenly lost its adjudicatory powers by the mere fiat of a change in name through E.O. 90. One thrust of the multiplication of administrative agencies is that the interpretation of such contracts and agreements and the determination of private rights under these agreements is no longer a uniquely judicial function.16 The absence of any provision, express or implied, in E.O. 90, repealing those quasi-judicial powers inherited by the HSRC from the National Housing Authority, furthermore militates against petitioners position on the question. Going to petitioners contention that the decision of the OAALA should have been rendered by the Board of Commissioners sitting en banc, we

find ample authorityboth in the statutes and in jurisprudence justifying the Boards act of dividing itself into divisions of three. Under Section 5 of E.O. 648 which defines the powers and duties of the Commission, the Board is specifically mandated to (a)dopt rules of procedure for the conduct of its business and perform such functions necessary for the effective accomplishment of (its) above mentioned functions. Since nothing in the provisions of either E.O. 90 or E.O. 648 denies or withholds the power or authority to delegate adjudicatory functions to a division, we cannot see how the Board, for the purpose of effectively carrying out its administrative responsibilities and quasijudicial powers as a regulatory body should be denied the power, as a matter of practical administrative procedure, to constitute its adjudicatory boards into various divisions. After all, the power conferred upon an administrative agency to issue rules and regulations necessary to carry out its functions has been held to be an adequate source of authority to delegate a particular function, unless by express provision of the Act or by implication _______________ (W)e find that this was part of the exclusive power conferred upon at by P.D. No. 1344 to hear and decide claims involving refund and any other claims filed by subdivision lot or condominium unit buyers against the project owners, developers . . . Id., at 78. 16 Antipolo Realty Corp. v. National Housing Authority, 153 SCRA 399 (1987). 676 676 SUPREME COURT REPORTS ANNOTATED Realty Exchange Venture Corporation vs. Sendino it has been withheld.17 The practical necessity of establishing a procedure whereby cases are decided by three (3) Commissioners furthermore assumes greater significance when one notes that the HLURB, as constituted, only has four (4) full time commissioners and five (5) part time commissioners to deal with all the functions, administrative, adjudicatory, or otherwise, entrusted to it.18 As the Office of the President noted in its February 26, 1993 Resolution denying petitioners Motion for Reconsideration, it is impossible and very

impractical to gather the four (4) full time and five (5) part time commissioners (together) just to decide a case. Considering that its part time commissioners act merely in an ex-officio capacity, requiring a majority of the Board to sit en banc on each and every case brought before it would result in an administrative nightmare.19 Finally, petitioners assertion that RA 6552 is inapplicable in the instant case because the said law does not apply to cases of reservation agreements finds no merit in the case at bench in view of Section 24 of P.D. 957 which provides: _______________ 17 Fleming v. Mohawk Wrecking and Lumber Co., 331 U.S. 111-124, cited in American Tobacco Co. v. Director of Patents, 67 SCRA 287, 292 (1975). 18 Rollo, pp. 100-101, Annex J. 19 Under Section 5(J), Article IV of E.O. 648, Series of 1981 as amended by E.O. 90, Series of 1986, the recent rules of procedure promulgated by the Board in Resolution No. R-538, Series of 1994 enumerate the composition of the HLURB Board of Commissioners as follows: Section 1.Membership The Board of Commissioners shall be composed of the following: 1. The Chairman, Housing and Urban Development Coordinating Council (HUDCC), as Ex-Officio Chairman; 2. The Four Full-Time Commissioners; 3. The Ex-Officio Commissioners referred to in Executive Order 648, representing x x x: a. The Department of Justice b. The Department of the National Economic and Development Authority; c. The Department of Local Government; and d. The Department of Public Works and Highways, (1a) (Emphasis supplied). 677 VOL. 233, JULY 5, 1994 677 Realty Exchange Venture Corporation vs. Sendino Sec. 24. Failure to Pay Installments.The rights of the buyer in the event of his failure to pay the installments due for reasons other than

the failure of the owner or developer to develop the project shall be governed by Republic Act No. 6552. As the Solicitor General correctly pointed out, RA 6552 makes no distinction between option and sale20 which, under P.D. 957 also includes an exchange or attempt to sell, an option of sale or purchase, a solicitation of a sale or an offer to sell directly.21 This all-embracing definition virtually includes all transactions concerning land and housing acquisition, including reservation agreements. Since R.A. 6552 mandates cancellation by notarial actamong other requirementsbefore any cancellation of a contract may be effected, petitioners precipitate cancellation of its contract with private respondent without observing the conditions imposed by the said law was invalid and improper. In fine, the HLURB-OAALA acted within the scope of its authority in ordering petitioners to comply and continue with the sale of the house and lot subject of the contract between the original parties. It cannot be gainsaid that the quasi-judicial functions exercised by the body are necessary incidents to the proper exercise of its powers and functions under E.O. 90 and the laws enacted delineating the scope of authority of its Board of Commissioners. Denying the body those functions so necessary in carrying out its power to regulate housing and land use results in its effective emasculation as an important regulatory body in an area vital to the national economy. _______________ 20 R.A. 6552, sec. 3(b). 21 P.D. 957, sec. 2, provides: (b) Sale or sell. Sale or sell shall include every disposition, or attempt to dispose for a valuable consideration, of a subdivision lot and other improvements thereon, if any, in a subdivision project or a condominium unit in a condominium project. Sale and sell shall also include a contract of purchase and sale, an exchange or attempt to sell, a solicitation of a sale, or an offer to sell directly or by an agent or by a circular, letter, advertisement or otherwise. 678 678 SUPREME COURT REPORTS ANNOTATED Realty Exchange Venture Corporation vs. Sendino

The acute housing shortage problem has prompted thousands of middle and lower class buyers of houses and lots and condominium units to enter into all sorts of agreements with private housing developers involving all manner of installment schemes under contracts drawn exclusively by these developers. Many of these virtual contracts of adhesion entrap innocent buyers by requiring cash deposits under reservation agreements which include, sometimes in the fine print, default clauses guaranteeing huge monetary windfalls for the developers in the event that their buyers (oftentimes for the flimsiest of reasons) default by failing to come up with certain requirements. While the Court can take judicial notice of this pernicious practice, it can only hope that future legislation would address the need to protect the innocent middle or lower class home purchaser. In the case of the individual victim, this Court can only go to the extent of awarding such damages as may be proper under the peculiar circumstances of the cases brought before it. WHEREFORE, premises considered, the petition is hereby DISMISSED for lack of merit. Costs against petitioners. SO ORDERED. Cruz (Chairman), Davide, Jr., Bellosillo and Quiason, JJ., concur. Petition dismissed. Note.The mere execution of the deed of sale in a public document is equivalent to the delivery of the property (Manuel R. Dulay Enterprises, Inc. vs. Court of Appeals, 225 SCRA 678 [1993]). Note.The promulgation of the Amparo Rule was an exercise for the first time of the Supreme Courts expanded power to promulgate rules to protect our peoples constitutional rights, which made its maiden appearance in the 1987 Constitution in response to the Filipino experience of the martial law regime. The Amparo Rule was intended to address the intractable problem of extralegal killings and enforced disappearances. Extralegal killings are killings committed without due process of law, i.e., without legal safeguards or judicial proceedings, while enforced disappearances are attended by the following characteristics: an arrest, detention or abduction of a person by a government official or organized groups or private individuals acting with the direct or indirect acquiescence of the government; the refusal of the State to disclose the fate or whereabouts of the person concerned or a refusal to acknowledge the deprivation of liberty which places such

persons outside the protection of law. (Secretary of National Defense vs. Manalo, 568 SCRA 1 [2008]) o0o

G.R. No. 183517. June 22, 2010.* PHILIPPINE INTERNATIONAL TRADING CORPORATION, petitioner, vs. COMMISSION ON AUDIT, respondent. Statutory Construction; It is a rule in statutory construction that every part of the statute must be interpreted with reference to the context, i.e., that every part of the statute must be considered together with the other parts, and kept subservient to the general intent of the whole enactment.It is a rule in statutory construction that every part of the statute must be interpreted with reference to the context, i.e., that every part of the statute must be considered together with _______________ * EN BANC. 462 462 SUPREME COURT REPORTS ANNOTATED Philippine International Trading Corporation vs. Commission on Audit the other parts, and kept subservient to the general intent of the whole enactment. Because the law must not be read in truncated parts, its provisions must be read in relation to the whole law. The statutes clauses and phrases must not, consequently, be taken as detached and isolated expressions, but the whole and every part thereof must be considered in fixing the meaning of any of its parts in order to produce a harmonious whole. Consistent with the fundamentals of statutory construction, all the words in the statute must be taken into consideration in order to ascertain its meaning. Same; Government-owned and -Controlled Corporations; Retirement Benefits; Temporary and limited application of the more beneficent gratuities provided under Section 6 of Executive Order No. 756 is in accord with the pre-existing and general prohibition against separate or supplementary insurance retirement and/or pension plans under Section 28, Subsection (b) of Commonwealth Act No. 186.In reconciling

Section 6 of Executive Order No. 756 with Section 28, Subsection (b) of Commonwealth Act No. 186, as amended, uppermost in the mind of the Court is the fact that the best method of interpretation is that which makes laws consistent with other laws which are to be harmonized rather than having one considered repealed in favor of the other. Time and again, it has been held that every statute must be so interpreted and brought in accord with other laws as to form a uniform system of jurisprudenceinterpretere et concordare legibus est optimus interpretendi. Thus, if diverse statutes relate to the same thing, they ought to be taken into consideration in construing any one of them, as it is an established rule of law that all acts in pari materia are to be taken together, as if they were one law. We find that a temporary and limited application of the more beneficent gratuities provided under Section 6 of Executive Order No. 756 is in accord with the pre-existing and general prohibition against separate or supplementary insurance retirement and/or pension plans under Section 28, Subsection (b) of Commonwealth Act No. 186. Same; Same; Same; In the absence of a manifest and specific intent from which the same may be gleaned, Section 6 of Executive Order No. 756 cannot be construed as an additional alternative to existing general retirement laws and/or an exception to the prohibition against separate or supplementary insurance retirement or pension plans.In the absence of a manifest and specific intent from 463 VOL. 621, JUNE 22, 2010 463 Philippine International Trading Corporation vs. Commission on Audit which the same may be gleaned, moreover, Section 6 of Executive Order No. 756 cannot be construed as an additional alternative to existing general retirement laws and/or an exception to the prohibition against separate or supplementary insurance retirement or pension plans as aforesaid. Aside from the fact that a meaning that does not appear nor is intended or reflected in the very language of the statute cannot be placed therein by construction, petitioner would likewise do well to remember that repeal of laws should be made clear and express. Repeals by implication are not favored as laws are presumed to be passed with deliberation and full knowledge of all laws existing on the subject, the

congruent application of which the courts must generally presume. For this reason, it has been held that the failure to add a specific repealing clause particularly mentioning the statute to be repealed indicates that the intent was not to repeal any existing law on the matter, unless an irreconcilable inconsistency and repugnancy exists in the terms of the new and old laws. Same; Same; Retirement; The prohibition against separate or supplementary insurance and/or retirement plan under Section 28, Subsection (b) of Commonwealth Act No. 186 was meant to prevent the undue and iniquitous proliferation of such plans in different government offices.In the case of Conte v. Commission on Audit, 264 SCRA 19 (1996), this Court ruled that the prohibition against separate or supplementary insurance and/or retirement plan under Section 28, Subsection (b) of Commonwealth Act No. 186 was meant to prevent the undue and iniquitous proliferation of such plans in different government offices. Both before the issuance and after the effectivity of Executive Order Nos. 756 and 877, petitioners employees were governed by and availed of the same retirement laws applicable to other government employees in view of the absence of a specific provision thereon under Presidential Decree No. 252, its organic law, and Presidential Decree No. 1071, otherwise known as the Revised Charter of the PITC. As appropriately pointed out by respondent, petitioners observance of said general retirement laws may be gleaned from the fact that the Reserve for Retirement Gratuity and Commutation of Leave Credits for its employees were based only on their basic salary and did not include allowances they received. No less than Eligia Romero, petitioners employee whose claim for retirement differentials triggered the instant inquiry, was 464 464 SUPREME COURT REPORTS ANNOTATED Philippine International Trading Corporation vs. Commission on Audit granted benefits under Republic Act No. 1616 upon her retirement on December 31, 1983. PETITION for review on certiorari of a decision of the Court of Appeals. The facts are stated in the opinion of the Court. The Government Corporate Counsel for petitioner.

The Solicitor General for respondent. PEREZ, J.: The inclusion of allowances in the computation of the retirement/separation benefits of the employees of petitioner Philippine International Trading Corporation (PITC) is at issue in this petition for certiorari filed pursuant to Rules 64 and 65 of the 1997 Rules of Civil Procedure, seeking the nullification and setting aside of the adverse rulings dated July 4, 2003 and February 15, 2008 issued by respondent Commission on Audit (COA). The Facts Created pursuant to Presidential Decree No. 252 dated July 21, 1973, petitioner is a government-owned and controlled corporation tasked with promoting and developing Philippine trade in pursuance of national economic development. Subsequent to the repeal of said law with the May 9, 1977 issuance of Presidential Decree No. 1071, otherwise known as the Revised Charter of the Philippine International Trading Corporation, then President Ferdinand E. Marcos issued Executive Order No. 756 on December 28, 1981, authorizing the reorganization of petitioner pursuant to his legislative powers to amend charters of government corporations through executive orders in turn issued pursuant to Presidential Decree No. 1416, as amended by Presidential Decree No. 1772. On February 18, 1983, President Marcos issued Executive Order No. 877, authorizing further the reor465 VOL. 621, JUNE 22, 2010 465 Philippine International Trading Corporation vs. Commission on Audit ganization of petitioner for the purpose of accelerating and expanding the countrys export concerns.1 On December 31, 1983, Eligia Romero, an officer of petitioner, opted to retire under Republic Act No. 1616 and received a total of P286,780.00 as gratuity benefits for services rendered from 1955 to 1983. Immediately rehired on contractual basis, it appears that said employee remained in the service of petitioner until her compulsory retirement on April 27, 2000. In July 1, 1955 to April 27, 2000, net of the P286,780.00 gratuity benefits she received in 1983, Ms. Romero filed a July 16, 2001

request, seeking from petitioner payment of retirement differentials on the strength of Section 6 of Executive Order No. 756. Said provision states that any officer or employee who retires, resigns, or is separated from the service shall be entitled to one month pay for every year of service computed at highest salary received including allowances, in addition to the other benefits provided by law, regardless of any provision of law or regulations to the contrary.2 Confronted with the question of whether the computation of Ms. Romeros retirement benefits should include the allowances she had received while under its employ, petitioner sent queries to respondent and the Office of the Government Corporate Counsel regarding the application of Section 6 of Executive Order No. 756. On August 20, 2002, then Government Corporate Counsel Amado D. Valdez issued Opinion No. 197, Series of 2002, espousing a literal interpretation and application of the aforesaid provision. Invoking the principle that retirement laws should be liberally construed and administered in favor of the persons intended to be benefited thereby, said opinion declared that, pursuant to the subject provision, the basis for the computation of the retirement benefits of petitioners employees should be the highest basic salary _______________ 1 Rollo, pp. 6-7. 2 Id., at pp. 24-25. 466 466 SUPREME COURT REPORTS ANNOTATED Philippine International Trading Corporation vs. Commission on Audit received by them, including allowances not integrated into the basic pay.3 On the other hand, on July 4, 2003, COA Assistant Commissioner and General Counsel Raquel R. Habitan issued the first assailed ruling, the 6th Indorsement dated July 4, 2003, finding the denial of Ms. Romeros claim for retirement differentials in order. Taking appropriate note of the fact that the Reserve for Retirement Gratuity and Commutation of Leave Credits of petitioners employees did not include allowances outside of the basic salary, said officer ruled that Executive Order No. 756 was a special law issued only for the specific purpose of reorganizing petitioner

corporation. Although it was subsequently adverted to in Executive Order No. 877, Section 6 of Executive Order No. 756 was determined to be intended for employees retired, separated or resigned in connection with petitioners reorganization and was not meant to be a permanent retirement scheme for its employees.4 Elevated by petitioner on appeal before the respondent,5 the foregoing ruling was affirmed in the second assailed ruling, the Decision No. 2008023 dated February 15, 2008,6 which likewise discounted the legal basis for Ms. Romeros claim for retirement differentials. Finding that Section 6 of Executive Order No. 756 was simply an incentive to encourage employees to resign or retire at the height of petitioners reorganization, said decision went on to make the following pronouncements, to wit: Moreover, RA No. 4968 prohibits the creation of any insurance retirement plan by any government agency and government-owned or controlled corporation other than the GSIS, viz.: _______________ 3 Id., at pp. 29-36. 4 Id., at pp. 22-23. 5 Id., at pp. 37-43. 6 Id., at pp. 24-28. 467 VOL. 621, JUNE 22, 2010 467 Philippine International Trading Corporation vs. Commission on Audit Section 10. Subsection (b) of Section twenty-eight of the same Act, as amended is hereby amended to read as follows: (b) Hereafter no insurance or retirement plan for officers or employees shall be created by the employer. All supplementary retirement or pension plans heretofore in force in any government office, agency, or instrumentality or corporation owned or controlled by the government, are hereby declared inoperative or abolished: Provided, That the rights of those who are already eligible to retire thereunder shall not be affected. The Supreme Court explained the rationale of the above provisions in Avelina B. Conte et al. vs. Commission on Audit, G.R. No. 116422, November 4, 1996, thusly:

Said Sec. 28 (b) as amended by RA 4968 in no uncertain terms bars the creation of any insurance or retirement planother than the GSISfor government officers and employees, in order to prevent the undue and iniquitous proliferation of such plans. It is beyond cavil that Res. 56 contravenes the said provision of law and is therefore invalid, void and of no effect. To ignore this and rule otherwise would be tantamount to permitting every other government office or agency to put up its own supplementary retirement benefit plan under the guise of such financial assistance. (Emphasis ours) To hold that Section 6 of E.O. 756 is a retirement law for PITC employees other than the GSIS law would run counter to the policy of the state to prevent the undue and iniquitous proliferation of retirement plans that would unduly promote the inequality of treatment in the retirement benefits of government employees.7 Hence, this petition. _______________ 7 Id., at pp. 27-28. 468 468 SUPREME COURT REPORTS ANNOTATED Philippine International Trading Corporation vs. Commission on Audit The Issues Petitioner seeks the nullification and setting aside of the assailed rulings on the following grounds, to wit: A. RESPONDENT COMMISSION GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN ISSUING THE FIRST ASSAILED RULING, OPINING THAT SECTION 6 OF EO 756 WAS NOT MEANT TO BE A PERMANENT RETIREMENT SCHEME OF THE PITC. B. RESPONDENT COMMISSION GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN ISSUING THE SECOND ASSAILED RULING DENYING PITCS REQUEST FOR RECONSIDERATION OF THE ABOVE OPINION OF COA GENERAL COUNSEL RAQUEL HABITAN, LIKEWISE HOLDING THAT SECTION 6 of EO 756 WAS NOT MEANT TO BE A PERMANENT SCHEME OF THE PITC.

C. RESPONDENT COMMISSION GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN ISSUING THE ASSAILED RULINGS WHICH ARE CONTRARY TO SETTLED JURISPRUDENCE THAT RETIREMENT LAWS ARE LIBERALLY CONSTRUED AND ADMINISTERED IN FAVOR OF THE PERSONS INTENDED TO BE BENEFITTED AND THAT ALL DOUBTS AS TO THE INTENT OF THE LAW SHOULD BE RESOLVED IN FAVOR OF THE RETIREE TO ACHIEVE ITS HUMANITARIAN PURPOSES. D. RESPONDENT COMMISSION GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN RELYING ON SECTION 10 of RA 4968 AS TO THE ALLEGED PROHIBITION AGAINST ANY INSURANCE OR RETIREMENT PLAN OR RETIREMENT PLAN OTHER THAN THE GSIS, SAID LAW HAVING BEEN PASSED PRIOR TO THE ISSUANCE OF EO 469 VOL. 621, JUNE 22, 2010 469 Philippine International Trading Corporation vs. Commission on Audit 756. OTHERWISE STATED, SECTION 10 OF RA 4968 IS DEEMED REVISED, AMENDED, SUPERSEDED OR REPEALED BY EO 756 PURSUANT TO THE REPEALING CLAUSE OF SAID EO 756.8 The Courts Ruling We find the petition bereft of merit. It is a rule in statutory construction that every part of the statute must be interpreted with reference to the context, i.e., that every part of the statute must be considered together with the other parts, and kept subservient to the general intent of the whole enactment.9 Because the law must not be read in truncated parts, its provisions must be read in relation to the whole law. The statutes clauses and phrases must not, consequently, be taken as detached and isolated expressions, but the whole and every part thereof must be considered in fixing the meaning of any of its parts in order to produce a harmonious whole.10 Consistent with the fundamentals of statutory construction, all the words in the statute must be taken into consideration in order to ascertain its meaning.11

Applying the foregoing principles to the case at bench, we find it well worth emphasizing at the outset that Executive Order No. 75612 was meant to reorganize petitioners corporate set-up. While incorporating amendments of petitioners Revised Charter under Presidential Decree No. 1071 with provisions _______________ 8 Id., at pp. 7-8. 9 Land Bank of the Philippines v. AMS Farming Corporation, G.R. No. 174971. October 15, 2008, 569 SCRA 154, 183. 10 Mactan-Cebu International Airport Authority v. Urgello, G.R. No. 162288. April 4, 2007, 520 SCRA 515, 535. 11 Smart Communications, Inc. vs. The City of Davao, G.R. No. 155491, September 16, 2008, 565 SCRA 237, 247-248. 12 Authorizing the Reorganization of the Philippine International Trading Corporation. 470 470 SUPREME COURT REPORTS ANNOTATED Philippine International Trading Corporation vs. Commission on Audit relating to the subscription of its capital,13 the establish-ment of subsidiaries, including joint ventures,14 the composition15 and grant of additional powers to its Board of _______________ 13 SECTION 1. Subscription to Capital.The provisions of Section 3 of Presidential Decree No. 1071 otherwise known as The Revised Charter of the Philippine International Trading Corporation notwithstanding the forty percent (40%) share in the authorized capital stock of the Corporation allocated for the private sector which is equivalent to 800,00 shares with the total par value of P80,000,000 is hereby transferred to and assumed by the National Development Company; Likewise, the shares allocated to the Philippine National Bank and the Development Bank of the Philippines as specified in the same Section, which have not been subscribed and paid for amounting to P39,000,000 representing 390,000 shares are transferred to and assumed by the

National Development Company which shall be fully subscribed and paid-up after the issuance of this Order. The Budget Ministry is directed to release to the Corporation to carry out its functions the unpaid balance of the share of the National Government amounting to P74,000,000.00. 14 SECTION 2. Subsidiaries.The Corporation may establish subsidiary companies, including joint ventures, as may be decided by the Board with such participation as it may deem proper and necessary in the performance of its powers and functions, any provisions of law to the contrary notwithstanding. Such subsidiaries created and registered with the Securities and Exchange Commission shall be entitled to all the incentives and privileges granted by law to private enterprise engaged in business activities. 15 SECTION 3. The Board of Directors.The Corporation shall be governed by a Board of Directors which shall be composed of the Minister of Trade and Industry as Chairman, the President of the Corporation as Vice-Chairman, and the Director-General of the National Economic and Development Authority, the Minister of Agriculture, the Minister of Natural Resources, Vice-Chairman of the Board of Investments, the General Manager of the National Development Company, a representatives from the Office of the President, the Chairman of the Board of Governors of the Development Bank of the Philippines, the President of the Philippine Na471 VOL. 621, JUNE 22, 2010 471 Philippine International Trading Corporation vs. Commission on Audit Directors,16 the appointment of its President,17 the grant of incentive scheme to its officers and employees18 as well as its _______________ tional Bank, and a representative from the private sector to be appointed by the President, as members. The members of the Board may, whenever unable to attend its meetings, be represented by their duly designated representatives who

shall have the same powers, duties and privileges in those meetings as the members they represent. 16 SECTION 4. Powers of the Board.In addition to the powers granted under Presidential Decree No. 1071, any provision of law, rule or regulation to contrary notwithstanding, the Board shall have the following powers: 1) To reorganize the structure of the Corporation, in accordance with its expanded role in the development of Philippine trade, with such officers and employees as may be needed and determine their competitive salaries and reasonable allowances and other benefits to effectively carry out its powers and functions. 2) To organize an Executive Committee within their ranks, to decide on urgent matters subject to the confirmation of the Board in its proper meetings or, pending such board meetings, to make corporate decisions as needed by referendum or referral to individual members of the Board to be implemented if concurred in by the majority of the required quorum. 3) To determine reasonable rates of per diems and allowances for its members, for their travel and those of its officers and employees, local or foreign, as well as the reasonable remuneration for overtime services and other official business as may be required by the exigencies of this service. 17 SECTION 5. The President of the Corporation.The President of the Corporation shall be appointed by the President of the Philippines. 18 SECTION 7. Incentive Scheme.The Corporation is hereby authorized to grant incentives to its officers and employees and other persons deputized, detailed or assigned to serve it which shall be drawn from gross income and commissions from marketing operations and other income but excluding income from money market placements; Provided, however, That the total amount of the incentives granted in any one year shall not exceed five percent (5%) of said income from marketing operations and other income, excluding 472 472 SUPREME COURT REPORTS ANNOTATED Philippine International Trading Corporation vs. Commission on Audit

authority to deputize commercial attaches19 and to grant franchises to operate Philippine trade houses abroad,20 Section 4 (1) of Executive Order No. 756 specifically authorized petitioners Board of Directors to reorganize the structure of the Corporation, in accordance with its expanded role in the development of Philippine trade, with such officers and employees as may be needed and determine their competitive salaries and reasonable allowances and other benefits to effectively carry out its powers and functions. For this purpose, Section 6 of the same law provides as follows: SECTION 6. Exemption from OCPC.In recognition of the special nature of its operations, the Corporation shall continue to be exempt from the application of the rules and regulations of the Office of the Compensation and Position Classification or any other similar agencies that may be established hereafter as provided under Presi_______________ those from money market placements, during the particular year; and Provided, finally, That the distribution thereof shall be in such manner and/or amounts as may be approved by the Board. 19 SECTION 8. Deputization of Commercial Attaches.The Corporation, in coordination with the Ministry of Trade and Industry, is hereby authorized to deputize the Commercial Attaches to act as its representatives in their respective areas of assignments to, among others, initials and/or pursue trade opportunities, follow-up on pending business activities including transactional activities and keep the Corporation informed of all opportunities and developments that will enhance the establishment of Philippine presence in that market and any other activity as may be authorized by the Ministry of Trade and Industry. For this purpose, said attaches shall be directed by the Corporation and be provided with appropriate support to carry out the assignment. Such deputization shall be implemented in accordance with the proper guidelines jointly adopted by the Corporation and the Ministry of Trade and Industry for the different areas of assignment. 20 SECTION 9. Franchise for Philippine Trade House.The authority to grant franchises to operate and maintain Philippine Trade Houses abroad is hereby vested in the Corporation. For this purpose, the Corporation

shall determine the guidelines for the establishment and operation of said trade houses. 473 VOL. 621, JUNE 22, 2010 473 Philippine International Trading Corporation vs. Commission on Audit dential Decree No. 1071. Likewise, any officer or employee who retires, resigns, or is separated from the service shall be entitled to one month pay for every year of service computed at highest salary received including all allowances, in addition to the other benefits provided by law, regardless of any provision of law or regulations to the contrary; Provided, That the employee shall have served in the Corporation continuously for at least two years: Provided, further, That in case of separated employees, the separation or dismissal is not due to conviction for any offense the penalty for which includes forfeiture of benefits: and Provided, finally, That in the commutation of leave credits earned, the employees who resigned, retired or is separated shall be entitled to the full payment therefor computed with all the allowances then being enjoyed at the time of resignation, retirement of separation regardless of any restriction or limitation provided for in other laws, rules or regulations. (Italics supplied) As an adjunct to the reorganization mandated under Executive Order No. 756, we find that the foregoing provision cannot be interpreted independent of the purpose or intent of the law. Rather than the permanent retirement law for its employees that petitioner now characterizes it to be, we find that the provision of gratuities equivalent to one month pay for every year of service computed at highest salary received including all allowances was clearly meant as an incentive for employees who retire, resign or are separated from service during or as a consequence of the reorganization petitioners Board of Directors was tasked to implement. As a temporary measure, it cannot be interpreted as an exception to the general prohibition against separate or supplementary insurance and/or retirement or pension plans under Section 28, Subsection (b) of Commonwealth Act No. 186,21 amended. Pursuant to Section 10 of Republic Act No. 496822 which was approved on June 17, 1967, said latter provision was amended to read as follows: _______________

21 The Government Service Insurance Act. 22 An Act Amending Further Commonwealth Act Numbered One Hundred Eighty-Six, As Amended. 474 474 SUPREME COURT REPORTS ANNOTATED Philippine International Trading Corporation vs. Commission on Audit Section 10. Subsection (b) of Section twenty-eight of the same Act, as amended is hereby further amended to read as follows: (b) Hereafter no insurance or retirement plan for officers or employees shall be created by any employer. All supplementary retirement or pension plans heretofore in force in any government office, agency, or instrumentality or corporation owned or controlled by the government, are hereby declared inoperative or abolished: Provided, That the rights of those who are already eligible to retire thereunder shall not be affected. In reconciling Section 6 of Executive Order No. 756 with Section 28, Subsection (b) of Commonwealth Act No. 186,23 as amended, uppermost in the mind of the Court is the fact that the best method of interpretation is that which makes laws consistent with other laws which are to be harmonized rather than having one considered repealed in favor of the other.24 Time and again, it has been held that every statute must be so interpreted and brought in accord with other laws as to form a uniform system of jurisprudenceinterpretere et concordare legibus est optimus interpretendi.25 Thus, if diverse statutes relate to the same thing, they ought to be taken into consideration in construing any one of them, as it is an established rule of law that all acts in pari materia are to be taken together, as if they were one law.26 We find that a temporary and limited application of the more beneficent gratuities provided under Section 6 of Executive Order No. 756 is in accord with the pre-existing and general prohibition against separate or supplementary insurance retirement and/or pension plans under Section 28, Subsection (b) of Commonwealth Act No. 186. _______________ 23 The Government Service Insurance Act.

24 Akbayan-Youth v. Commission on Elections, 407 Phil. 618, 639; 355 SCRA 318 (2001). 25 City Warden of the Manila City Jail vs. Estrella, 416 Phil. 634, 656; 364 SCRA 257, 278 (2001). 26 Vda. de Urbano vs. Government Service Insurance System, 419 Phil. 948, 969-970; 367 SCRA 672, 691 (2001). 475 VOL. 621, JUNE 22, 2010 475 Philippine International Trading Corporation vs. Commission on Audit In the absence of a manifest and specific intent from which the same may be gleaned, moreover, Section 6 of Executive Order No. 756 cannot be construed as an additional alternative to existing general retirement laws and/or an exception to the prohibition against separate or supplementary insurance retirement or pension plans as aforesaid. Aside from the fact that a meaning that does not appear nor is intended or reflected in the very language of the statute cannot be placed therein by construction,27 petitioner would likewise do well to remember that repeal of laws should be made clear and express. Repeals by implication are not favored as laws are presumed to be passed with deliberation and full knowledge of all laws existing on the subject,28 the congruent application of which the courts must generally presume.29 For this reason, it has been held that the failure to add a specific repealing clause particularly mentioning the statute to be repealed indicates that the intent was not to repeal any existing law on the matter, unless an irreconcilable inconsistency and repugnancy exists in the terms of the new and old laws.30 The dearth of merit in petitioners position is rendered even more evident when it is borne in mind that Executive Order No. 756 was subsequently repealed by Executive Order No. 877 which was issued on February 18, 1983 to hasten the reorganization of petitioner, in light of changing circumstances and developments in the world market. For purposes of clarity, the full text of Executive Order No 877 is reproduced hereunder, viz.: _______________

27 Government Service and Insurance System v. Commission on Audit, 484 Phil. 507, 517; 441 SCRA 532, 545 (2004). 28 Recaa, Jr. v. Court of Appeals, 402 Phil. 26, 35; 349 SCRA 24, 33 (2001). 29 Republic v. Marcopper Mining Corporation, 390 Phil. 708, 730; 335 SCRA 386, 408 (2000). 30 Commission on Audit of the Province of Cebu v. Province of Cebu, 422 Phil. 519, 529; 371 SCRA 196, 203-204 (2001). 476 476 SUPREME COURT REPORTS ANNOTATED Philippine International Trading Corporation vs. Commission on Audit EXECUTIVE ORDER NO. 877 AUTHORIZING THE REORGANIZATION OF THE PHILIPPINE INTERNATIONAL TRADING CORPORATION CREATED UNDER PRESIDENTIAL DECREE NO. 1071, AS AMENDED WHEREAS, it is the declared policy of the New Republic to pursue national development with renewed dedication and determination; WHEREAS, there is a need to position and gear up the countrys export marketing resources in anticipation of a recovery in the world economy; WHEREAS, the Philippine International Trading Corporation, hereinafter referred to as the Corporation, is in the vanguard of marketing Philippine exports worldwide; WHEREAS, in order to accelerate and expand its exports, there is a need to upgrade the management and marketing expertise of the Corporation consistent with the requirements of international marketing; WHEREAS, in the light of the foregoing, the reorganization of the Corporation becomes imperative; WHEREAS, under Presidential Decree No. 1416, as amended, the President is empowered to undertake such organizational changes as may be necessary in the light of changing circumstances and development; NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution, and the authority vested on me by Presidential Decree No. 1416, as amended, do hereby order and direct:

1. Reorganization.The Minister of Trade and Industry is hereby designated Chief Executive Officer of the Corporation with full powers to restructure and reorganize the Corporation and to determine or fix its staffing pattern, compensation structure and related organizational requirements. The Chairman shall complete such restructuring and reorganization within six (6) months from the date of this Executive Order. All personnel of the Corporation who are not reappointed by the Chairman under the new reorganized structure of the Corporation shall be deemed laid off; provided, that personnel so laid off shall be entitled to the benefits accruing to 477 VOL. 621, JUNE 22, 2010 477 Philippine International Trading Corporation vs. Commission on Audit separated employees under Executive Order No. 756 amending the Revised Chapter of the Corporation. 2. Functions of Chairman.The Chairman of the Corporation shall have the following functions and powers: a. Exercise all the powers incident to the functions of a Chief Executive Officer, including supervision and control over all personnel of the Corporation; b. Review, develop, supervise and direct the export marketing thrusts and strategy of the Corporation; c. Upon recommendation of the President of the Corporation, appoint personnel of the Corporation in executive and senior management positions; d. Call meetings of the Board of Directors and of the Executive Committee of the Corporation. 3. Personnel Recruitment and Other Services.In recognition of the special nature of its operation, the Corporation shall, in recruiting personnel and in availing of outside technical services, continue to be exempt from OCPC rules and regulations pursuant to Section 6 of Executive Order No. 756 and Section 28 of Presidential Decree No. 1071. In addition, the provision of Section 7 of Executive Order No. 756 is hereby reaffirmed. 4. Repealing Clause.All provisions of Presidential Decree No. 1071 and Executive Order No. 756, as well as of other laws, decrees, executive

orders or issuances, or parts thereof, that are in conflict with this Executive Order, are hereby repealed or modified accordingly. 5. Effectivity.This Executive Order shall take effect immediately. DONE in the City of Manila, this 18th day of February, in the year of Our Lord, Nineteen Hundred and Eighty-Three. (Italics supplied) Specifically mandated to be accomplished within the limited timeframe of six months from the issuance of the law, the reorganization under Executive Order No. 877 clearly supplanted that which was provided under Executive Order No. 756. Nowhere is this more evident than Section 4 of said lat478 478 SUPREME COURT REPORTS ANNOTATED Philippine International Trading Corporation vs. Commission on Audit ter law which provides that, All provisions of Presidential Decree No. 1071 and Executive Order No. 756, as well as of other laws, decrees, executive orders or issuances, or parts thereof that are in conflict with this Executive Order, are hereby repealed or modified accordingly. In utilizing the computation of the benefits provided under Section 6 of Executive Order No. 756 for employees considered laid off for not being reappointed under petitioners new reorganized structure, Executive Order No. 877 was correctly interpreted by respondent to evince an intent not to extend said gratuity beyond the six-month period within which the reorganization is to be accomplished. In the case of Conte v. Commission on Audit,31 this Court ruled that the prohibition against separate or supplementary insurance and/or retirement plan under Section 28, Subsection (b) of Commonwealth Act No. 186 was meant to prevent the undue and iniquitous proliferation of such plans in different government offices. Both before the issuance and after the effectivity of Executive Order Nos. 756 and 877, petitioners employees were governed by and availed of the same retirement laws applicable to other government employees in view of the absence of a specific provision thereon under Presidential Decree No. 252,32 its organic law, and Presidential Decree No. 1071, otherwise known as the Revised Charter of the PITC. As appropriately pointed out by respondent, petitioners observance of said general retirement laws may be gleaned from the fact that the Reserve for Retirement Gratuity and Commutation

of Leave Credits for its employees were based only on their basic salary and did not include allowances they received. No less than Eligia Romero, petitioners employee whose claim for retirement differentials triggered _______________ 31 332 Phil. 20; 264 SCRA 19 (1996). 32 Authorizing the Creation of a Philippine International Trading Corporation Appropriating Funds Therefor And For Other Purposes. 479 VOL. 621, JUNE 22, 2010 479 Philippine International Trading Corporation vs. Commission on Audit the instant inquiry, was granted benefits under Republic Act No. 1616 upon her retirement on December 31, 1983. It doesnt help petitioners cause any that Section 6 of Executive Order No. 756, in relation to Section 3 of Executive Order No. 877, was further amended by Republic Act No. 6758,33 otherwise known as the Compensation and Classification Act of 1989. Mandated under Article IX B, Section 534 of the Constitution,35 Section 436 of Republic Act No. 6758 specifically extends its coverage to government owned and controlled corporations like petitioner. With this Courts ruling in Philippine International Trading Corporation v. Commission _______________ 33 An Act Prescribing A Revised Compensation and Classification System In The Government And For Other Purposes. 34 Sec. 5. The Congress shall provide for the standardization of compensation of government officials and employees, including those in government-owned or controlled corporations with original charters, taking into account the nature of the responsibilities pertaining to, and the qualifications required for their positions. 35 Valdez vs. Government Service Insurance System, G.R. No. 146175, June 30, 2008, 556 SCRA, 580, 593. 36 SEC. 4. Coverage.The Compensation and Position Classification System herein provided shall apply to all positions, appointive or elective, on full or part-time basis, now existing or hereafter created in

the government, including government-owned or controlled corporations and government financial institutions. The term government refers to the Executive, the Legislative and the Judicial Branches and the Constitutional Commissions and shall include all, but shall not be limited to, departments, bureaus, offices, boards, commissions, courts, tribunals, councils, authorities, administrations, centers, institutes, state colleges and universities, local government units, and the armed forces. The term government-owned or controlled corporations and financial institutions shall include all corporations and financial institutions owned or controlled by the National Government, whether such corporations and financial institutions perform governmental or proprietary functions. 480 480 SUPREME COURT REPORTS ANNOTATED Philippine International Trading Corporation vs. Commission on Audit on Audit37 to the effect that petitioner is included in the coverage of Republic Act No. 6758, it is evidently no longer exempted from OCPC rules and regulations, in keeping with said laws intent to do away with multiple allowances and other incentive packages as well as the resultant differences in compensation among government personnel. In the context of petitions for certiorari like the one at bench, grave abuse of discretion is understood to be such capricious and whimsical exercise of jurisdiction as is equivalent to lack of jurisdiction.38 It is tantamount to an evasion of a positive duty or to virtual refusal to perform a duty enjoined by law, or to act at all in contemplation of law, as when the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility.39 As the Constitutional office tasked with the duty to examine, audit and settle all accounts pertaining to the revenue, and receipts of and expenditures or uses of funds and property, owned or held in trust by or pertaining to the government or any of its subdivisions,40 respondent committed no grave abuse of discretion in disapproving petitioners utilization of Section 6 of Executive Order No. 756 in the computation of its employees retirement benefits. WHEREFORE, the petition is DENIED for lack of merit. SO ORDERED.

Corona (C.J.), Carpio-Morales, Velasco, Jr., Nachura, Leonardo-De Castro, Brion, Peralta, Bersamin, Del Castillo, Abad and Villarama, Jr., JJ., concur. _______________ 37 Philippine International Trading Corporation v. Commission on Audit, 368 Phil. 478; 309 SCRA 177 (1999). 38 Nepomuceno vs. Court of Appeals, 363 Phil. 304, 308; 303 SCRA 679, 682 (1999). 39 J.L. Bernardo Construction vs. Court of Appeals, 381 Phil. 25, 36; 324 SCRA 24, 34 (2000). 40 Belicena v. Secretary of Finance, 419 Phil. 792, 799; 367 SCRA 504, 509 (2001). [Philippine International Trading Corporation vs. Commission on Audit, 621 SCRA 461(2010)]

VOL. 298, OCTOBER 14, 1998 83 Commissioner of Internal Revenue vs. Court of Appeals G.R. No. 124043. October 14, 1998.* COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. COURT OF APPEALS, COURT OF TAX APPEALS and YOUNG MENS CHRISTIAN ASSOCIATION OF THE PHILIPPINES, INC., respondents. Taxation; Court of Tax Appeals; Factual findings of the CTA, when supported by substantial evidence, will not be disturbed on appeal unless it is shown that the court committed gross error in the appreciation of facts.Indeed, it is a basic rule in taxation that the factual findings of the CTA, when supported by substantial evidence, will not be disturbed on appeal unless it is shown that the said court committed gross error in the appreciation of facts. In the present case, this Court finds that the February 16, 1994 Decision of the CA did not deviate from this rule. The latter merely applied the law to the facts as found by the CTA and ruled on the issue raised by the CIR: Whether or not the collection or earnings of rental income from the lease of certain premises and income earned from parking fees shall fall under the last paragraph of Section 27 of the National Internal Revenue Code of 1977, as amended. Same; Same; Distinction between a question of law and a question of fact.The distinction between a question of law and a question of fact is clear-cut. It has been held that *t+here is a question of law in a given case when the doubt or difference arises as to what the law is on a certain state of facts; there is a question of fact when the doubt or difference arises as to the truth or falsehood of alleged facts. Same; Tax Exemptions; Court has always applied the doctrine of strict interpretation in construing tax exemptions.Because taxes are the lifeblood of the nation, the Court has always applied the doctrine of strict interpretation in construing tax exemptions. Furthermore, a claim of statutory exemption from taxation should be manifest and unmistakable from the language of the law on which it is based. Thus, the claimed exemption must expressly be granted in a statute stated in a language too clear to be mistaken. _______________ * FIRST DIVISION.

84 84 SUPREME COURT REPORTS ANNOTATED Commissioner of Internal Revenue vs. Court of Appeals Same; Same; The exemption claimed by the YMCA is expressly disallowed by the very wording of the last paragraph of then Section 27 of the NIRC; Court is duty-bound to abide strictly by its literal meaning and to refrain from resorting to any convoluted attempt at construction.In the instant case, the exemption claimed by the YMCA is expressly disallowed by the very wording of the last paragraph of then Section 27 of the NIRC which mandates that the income of exempt organizations (such as the YMCA) from any of their properties, real or personal, be subject to the tax imposed by the same Code. Because the last paragraph of said section unequivocally subjects to tax the rent income of the YMCA from its real property, the Court is duty-bound to abide strictly by its literal meaning and to refrain from resorting to any convoluted attempt at construction. Same; Same; Private respondent is exempt from the payment of property tax, but not income tax on the rentals from its property. Private respondent also invokes Article XIV, Section 4, par. 3 of the Charter, claiming that the YMCA is a non-stock, non-profit educational institution whose revenues and assets are used actually, directly and exclusively for educational purposes so it is exempt from taxes on its properties and income. We reiterate that private respondent is exempt from the payment of property tax, but not income tax on the rentals from its property. The bare allegation alone that it is a non-stock, nonprofit educational institution is insufficient to justify its exemption from the payment of income tax. Same; Constitutional Law; YMCA is not a school or an educational institution.The term educational institution or institution of learning has acquired a well-known technical meaning, of which the members of the Constitutional Commission are deemed cognizant. Under the Education Act of 1982, such term refers to schools. The school system is synonymous with formal education, which refers to the hierarchically structured and chronologically graded learnings organized and provided by the formal school system and for which certification is required in order for the learner to progress through the grades or move

to the higher levels. The Court has examined the Amended Articles of Incorporation and By-Laws of the YMCA, but found nothing in them that even hints that it is a school or an educational institution. 85 VOL. 298, OCTOBER 14, 1998 85 Commissioner of Internal Revenue vs. Court of Appeals BELLOSILLO, J., Dissenting Opinion Taxation; Court of Tax Appeals; Court held and found YMCA to be an educational institution exclusively devoted to educational and charitable purposes and not operated for profit.In YMCA of Manila v. Collector of Internal Revenue this Court categorically held and found YMCA to be an educational institution exclusively devoted to educational and charitable purposes and not operated for profit. The purposes of the Association as set forth in its charter and constitution are to develop the Christian character and usefulness of its members, to improve the spiritual, intellectual, social and physical condition of young men and to acquire, hold, mortgage and dispose of the necessary lands, buildings and personal property for the use of said corporation exclusively for religious, charitable and educational purposes, and not for investment or profit. PETITION for review on certiorari of a decision of the Court of Appeals. The facts are stated in the opinion of the Court. The Solicitor General for petitioner. Gancayco, Balasbas & Santos for private respondent. PANGANIBAN, J.: Is the income derived from rentals of real property owned by the Young Mens Christian Association of the Philippines, Inc. (YMCA)established as a welfare, educational and charitable non-profit corporation subject to income tax under the National Internal Revenue Code (NIRC) and the Constitution? The Case This is the main question raised before us in this petition for review on certiorari challenging two Resolutions issued by

86 86 SUPREME COURT REPORTS ANNOTATED Commissioner of Internal Revenue vs. Court of Appeals the Court of Appeals1 on September 28, 19952 and February 29, 19963 in CA GR SP No. 32007. Both Resolutions affirmed the Decision of the Court of Tax Appeals (CTA) allowing the YMCA to claim tax exemption on the latters income from the lease of its real property. The Facts The facts are undisputed.4 Private Respondent YMCA is a non-stock, non-profit institution, which conducts various programs and activities that are beneficial to the public, especially the young people, pursuant to its religious, educational and charitable objectives. In 1980, private respondent earned, among others, an income of P676,829.80 from leasing out a portion of its premises to small shop owners, like restaurants and canteen operators, and P44,259.00 from parking fees collected from non-members. On July 2, 1984, the commissioner of internal revenue (CIR) issued an assessment to private respondent, in the total amount of P415,615.01 including surcharge and interest, for deficiency income tax, deficiency expanded withholding taxes on rentals and professional fees and deficiency withholding tax on wages. Private respondent formally protested the assessment and, as a supplement to its basic protest, filed a letter dated October 8, 1985. In reply, the CIR denied the claims of YMCA. Contesting the denial of its protest, the YMCA filed a petition for review at the Court of Tax Appeals (CTA) on March _______________ 1 Special Former Fourth Division composed of J. Nathanael P. de Pano, Jr., presiding justice and ponente; and JJ. Fidel P. Purisima (now an associate justice of the Supreme Court) and Corona Ibay-Somera, concurring. 2 Rollo, pp. 42-48. 3 Ibid., pp. 50-51. 4 See Memorandum of private respondent, pp. 1-10 and Memorandum of petitioner, pp. 3-10; rollo, pp. 149-158 and 192-199, respectively. See also Decision of the CTA, pp. 1-21; rollo, pp. 69-89.

87 VOL. 298, OCTOBER 14, 1998 87 Commissioner of Internal Revenue vs. Court of Appeals 14, 1989. In due course, the CTA issued this ruling in favor of the YMCA: x x x *T+he leasing of *private respondents+ facilities to small shop owners, to restaurant and canteen operators and the operation of the parking lot are reasonably incidental to and reasonably necessary for the accomplishment of the objectives of the [private respondents]. It appears from the testimonies of the witnesses for the [private respondent] particularly Mr. James C. Delote, former accountant of YMCA, that these facilities were leased to members and that they have to service the needs of its members and their guests. The rentals were minimal as for example, the barbershop was only charged P300 per month. He also testified that there was actually no lot devoted for parking space but the parking was done at the sides of the building. The parking was primarily for members with stickers on the windshields of their cars and they charged P.50 for non-members. The rentals and parking fees were just enough to cover the costs of operation and maintenance only. The earning[s] from these rentals and parking charges including those from lodging and other charges for the use of the recreational facilities constitute [the] bulk of its income which [is] channeled to support its many activities and attainment of its objectives. As pointed out earlier, the membership dues are very insufficient to support its program. We find it reasonably necessary therefore for [private respondent] to make [the] most out [of] its existing facilities to earn some income. It would have been different if under the circumstances, [private respondent] will purchase a lot and convert it to a parking lot to cater to the needs of the general public for a fee, or construct a building and lease it out to the highest bidder or at the market rate for commercial purposes, or should it invest its funds in the buy and sell of properties, real or personal. Under these circumstances, we could conclude that the activities are already profit oriented, not incidental and reasonably necessary to the pursuit of the objectives of the association and therefore, will fall under the last paragraph of Section 27 of the Tax Code and any income derived therefrom shall be taxable.

Considering our findings that *private respondent+ was not engaged in the business of operating or contracting [a] parking lot, we find no legal basis also for the imposition of [a] deficiency fixed tax and [a] contractors tax in the amount*s+ of P353.15 and P3,129.73, respectively. xxx xxx xxx 88 88 SUPREME COURT REPORTS ANNOTATED Commissioner of Internal Revenue vs. Court of Appeals WHEREFORE, in view of all the foregoing, the following assessments are hereby dismissed for lack of merit: 1980 Deficiency Fixed TaxP353.15; 1980 Deficiency Contractors TaxP3,129.23; 1980 Deficiency Income TaxP372,578.20. While the following assessments are hereby sustained: 1980 Deficiency Expanded Withholding TaxP1,798.93; 1980 Deficiency Withholding Tax on WagesP33,058.82 plus 10% surcharge and 20% interest per annum from July 2, 1984 until fully paid but not to exceed three (3) years pursuant to Section 51(e)(2) & (3) of the National Internal Revenue Code effective as of 1984.5 Dissatisfied with the CTA ruling, the CIR elevated the case to the Court of Appeals (CA). In its Decision of February 16, 1994, the CA6 initially decided in favor of the CIR and disposed of the appeal in the following manner: Following the ruling in the afore-cited cases of Province of Abra vs. Hernando and Abra Valley College, Inc. vs. Aquino, the ruling of the respondent Court of Tax Appeals that the leasing of petitioners (herein respondents) facilities to small shop owners, to restaurant and canteen operators and the operation of the parking lot are reasonably incidental to and reasonably necessary for the accomplishment of the objectives of the petitioners, and the income derived therefrom are tax exempt, must be reversed. WHEREFORE, the appealed decision is hereby REVERSED in so far as it dismissed the assessment for: 1980 Deficiency Income Tax P 353.15, 1980 Deficiency Contractors Tax

P 3,129.23, & 1980 Deficiency Income Tax P372,578.20, but the same is AFFIRMED in all other respect.7 _______________ 5 CTA Decision, pp. 16-18 and 2-21; rollo, pp. 84-86 and 88-89. 6 Penned by J. Asaali S. Isnani and concurred in by JJ. Nathanael P. De Pano, Jr., chairman, and Corona Ibay-Somera of the Fourth Division. 7 Rollo, pp. 39-40. 89 VOL. 298, OCTOBER 14, 1998 89 Commissioner of Internal Revenue vs. Court of Appeals Aggrieved, the YMCA asked for reconsideration based on the following grounds: I The findings of facts of the Public Respondent Court of Tax Appeals being supported by substantial evidence [are] final and conclusive. II The conclusions of law of *p+ublic *r+espondent exempting *p+rivate [r]espondent from the income on rentals of small shops and parking fees [are] in accord with the applicable law and jurisprudence.8 Finding merit in the Motion for Reconsideration filed by the YMCA, the CA reversed itself and promulgated on September 28, 1995 its first assailed Resolution which, in part, reads: The Court cannot depart from the CTAs findings of fact, as they are supported by evidence beyond what is considered as substantial. xxx xxx xxx The second ground raised is that the respondent CTA did not err in saying that the rental from small shops and parking fees do not result in the loss of the exemption. Not even the petitioner would hazard the suggestion that YMCA is designed for profit. Consequently, the little income from small shops and parking fees help[s] to keep its head above the water, so to speak, and allow it to continue with its laudable work.

The Court, therefore, finds the second ground of the motion to be meritorious and in accord with law and jurisprudence. WHEREFORE, the motion for reconsideration is GRANTED; the respondent CTAs decision is AFFIRMED in toto.9 The internal revenue commissioners own Motion for Reconsideration was denied by Respondent Court in its second _______________ 8 CA Resolution, p. 2; rollo, p. 43. 9 Ibid., pp. 2, 6-7; rollo, pp. 43, 47-48. 90 90 SUPREME COURT REPORTS ANNOTATED Commissioner of Internal Revenue vs. Court of Appeals assailed Resolution of February 29, 1996. Hence, this petition for review under Rule 45 of the Rules of Court.10 The Issues Before us, petitioner imputes to the Court of Appeals the following errors: I In holding that it had departed from the findings of fact of Respondent Court of Tax Appeals when it rendered its Decision dated February 16, 1994; and II In affirming the conclusion of Respondent Court of Tax Appeals that the income of private respondent from rentals of small shops and parking fees *is+ exempt from taxation.11 This Courts Ruling The petition is meritorious. First Issue: Factual Findings of the CTA Private respondent contends that the February 16, 1994 CA Decision reversed the factual findings of the CTA. On the other hand, petitioner argues that the CA merely reversed the ruling of the CTA that the leasing of private respondents facilities to small shop owners, to

restaurant and canteen operators and the operation of parking lots are reasonably incidental to and reasonably necessary for the accomplishment of the objectives of the private respondent and that the _______________ 10 The case was submitted for resolution on April 27, 1998, upon receipt by this Court of private respondents Reply Memorandum. 11 Petitioners Memorandum, pp. 10-11; rollo, pp. 199-200. 91 VOL. 298, OCTOBER 14, 1998 91 Commissioner of Internal Revenue vs. Court of Appeals income derived therefrom are tax exempt.12 Petitioner insists that what the appellate court reversed was the legal conclusion, not the factual finding, of the CTA.13 The commissioner has a point. Indeed, it is a basic rule in taxation that the factual findings of the CTA, when supported by substantial evidence, will not be disturbed on appeal unless it is shown that the said court committed gross error in the appreciation of facts.14 In the present case, this Court finds that the February 16, 1994 Decision of the CA did not deviate from this rule. The latter merely applied the law to the facts as found by the CTA and ruled on the issue raised by the CIR: Whether or not the collection or earnings of rental income from the lease of certain premises and income earned from parking fees shall fall under the last paragraph of Section 27 of the National Internal Revenue Code of 1977, as amended.15 Clearly, the CA did not alter any fact or evidence. It merely resolved the aforementioned issue, as indeed it was expected to. That it did so in a manner different from that of the CTA did not necessarily imply a reversal of factual findings. The distinction between a question of law and a question of fact is clearcut. It has been held that *t+here is a question of law in a given case when the doubt or difference arises as to what the law is on a certain state of facts; there is a question of fact when the doubt or difference arises as to the truth or falsehood of alleged facts.16 In the present case, the CA did not doubt, much less change, the facts narrated by the CTA. It merely applied the law to the facts. That its interpretation or _______________

12 Ibid., p. 16; rollo, p. 205. 13 Ibid., p. 17; rollo, p. 206. 14 Commissioner of Internal Revenue v. Mitsubishi Metal Corp., 181 SCRA 214, 220, January 22, 1990. 15 Rollo, p. 36. 16 Ramos, et al. v. Pepsi Cola Bottling Co. of the P.I., et al., 19 SCRA 289, 292, February 9, 1967, per Bengzon, J.; citing II Martin, Rules of Court in the Philippines, 255 and II Bouviers Law Dictionary, 2784. 92 92 SUPREME COURT REPORTS ANNOTATED Commissioner of Internal Revenue vs. Court of Appeals conclusion is different from that of the CTA is not irregular or abnormal. Second Issue: Is the Rental Income of the YMCA Taxable? We now come to the crucial issue: Is the rental income of the YMCA from its real estate subject to tax? At the outset, we set forth the relevant provision of the NIRC: SEC. 27. Exemptions from tax on corporations.The following organizations shall not be taxed under this Title in respect to income received by them as such xxx xxx xxx (g) Civic league or organization not organized for profit but operated exclusively for the promotion of social welfare; (h) Club organized and operated exclusively for pleasure, recreation, and other non-profitable purposes, no part of the net income of which inures to the benefit of any private stockholder or member; xxx xxx xxx Notwithstanding the provisions in the preceding paragraphs, the income of whatever kind and character of the foregoing organizations from any of their properties, real or personal, or from any of their activities conducted for profit, regardless of the disposition made of such income, shall be subject to the tax imposed under this Code. (As amended by Pres. Decree No. 1457) Petitioner argues that while the income received by the organizations enumerated in Section 27 (now Section 26) of the NIRC is, as a rule,

exempted from the payment of tax in respect to income received by them as such, the exemption does not apply to income derived x x x from any of their properties, real or personal, or from any of their activities conducted for profit, regardless of the disposition made of such income x x x. Petitioner adds that rental income derived by a taxexempt organization from the lease of its properties, real or personal, [is] not, therefore, exempt from income taxation, 93 VOL. 298, OCTOBER 14, 1998 93 Commissioner of Internal Revenue vs. Court of Appeals even if such income [is] exclusively used for the accomplishment of its objectives.17 We agree with the commissioner. Because taxes are the lifeblood of the nation, the Court has always applied the doctrine of strict interpretation in construing tax exemptions.18 Furthermore, a claim of statutory exemption from taxation should be manifest and unmistakable from the language of the law on which it is based. Thus, the claimed exemption must expressly be granted in a statute stated in a language too clear to be mistaken.19 In the instant case, the exemption claimed by the YMCA is expressly disallowed by the very wording of the last paragraph of then Section 27 of the NIRC which mandates that the income of exempt organizations (such as the YMCA) from any of their properties, real or personal, be subject to the tax imposed by the same Code. Because the last paragraph of said section unequivocally subjects to tax the rent income of the YMCA from its real property,20 the Court is duty-bound to abide strictly by its literal meaning and to refrain from resorting to any convoluted attempt at construction. It is axiomatic that where the language of the law is clear and unambiguous, its express terms must be applied.21 Parenthetically, a consideration of the question of construction must not even begin, particularly when such question is on whether to apply a strict construction or a liberal one on statutes that _______________ 17 Memorandum for Petitioner, pp. 21-22; rollo, pp. 210-211.

18 See Commissioner of Internal Revenue v. Court of Appeals, 271 SCRA 605, 613, April 18, 1997. 19 Davao Gulf Lumber Corporation v. Commissioner of Internal Revenue and Court of Appeals, GR No. 117359, p. 15, July 23, 1998, per Panganiban, J. 20 Justice Jose C. Vitug, Compendium of Tax Law and Jurisprudence, p. 75, 4th revised ed. (1989); and De Leon, Hector S., The National Internal Revenue Code Annotated, p. 108, 5th ed. (1994), citing a BIR ruling dated May 6, 1975. 21 See Ramirez v. Court of Appeals, 248 SCRA 590, 596, September 28, 1995. 94 94 SUPREME COURT REPORTS ANNOTATED Commissioner of Internal Revenue vs. Court of Appeals grant tax exemptions to religious, charitable and educational propert*ies+ or institutions.22 The last paragraph of Section 27, the YMCA argues, should be subject to the qualification that the income from the properties must arise from activities conducted for profit before it may be considered taxable.23 This argument is erroneous. As previously stated, a reading of said paragraph ineludibly shows that the income from any property of exempt organizations, as well as that arising from any activity it conducts for profit, is taxable. The phrase any of their activities conducted for profit does not qualify the word properties. This makes income from the property of the organization taxable, regardless of how that income is usedwhether for profit or for lofty non-profit purposes. Verba legis non est recedendum. Hence, Respondent Court of Appeals committed reversible error when it allowed, on reconsideration, the tax exemption claimed by YMCA on income it derived from renting out its real property, on the solitary but unconvincing ground that the said income is not collected for profit but is merely incidental to its operation. The law does not make a distinction. The rental income is taxable regardless of whence such income is derived and how it is used or disposed of. Where the law does not distinguish, neither should we. Constitutional Provisions on Taxation

Invoking not only the NIRC but also the fundamental law, private respondent submits that Article VI, Section 28 of par. 3 of the 1987 Constitution,24 exempts charitable institutions _______________ 22 Cooley, Thomas M., The Law of Taxation, p. 1415, Vol. II, 4th ed. (1924). 23 Reply Memorandum of private respondent, p. 10; rollo, p. 234. 24 Charitable institutions , churches and parsonages or convents appurtenant thereto, mosques, non-profit cemeteries, and all lands, buildings, and improvements actually, directly, and exclu 95 VOL. 298, OCTOBER 14, 1998 95 Commissioner of Internal Revenue vs. Court of Appeals from the payment not only of property taxes but also of income tax from any source.25 In support of its novel theory, it compares the use of the words charitable institutions, actually and directly in the 1973 and the 1987 Constitutions, on the one hand; and in Article VI, Section 22, par. 3 of the 1935 Constitution, on the other hand.26 Private respondent enunciates three points. First, the present provision is divisible into two categories: (1) *c+haritable institutions, churches and parsonages or convents appurtenant thereto, mosques and nonprofit cemeteries, the incomes of which are, from whatever source, all tax-exempt;27 and (2) *a+ll lands, buildings and improvements actually and directly used for religious, charitable or educational purposes, which are exempt only from property taxes.28 Second, Lladoc v. Commissioner of Internal Revenue,29 which limited the exemption only to the payment of property taxes, referred to the provision of the 1935 Constitution and not to its counterparts in the 1973 and the 1987 Constitutions.30 Third, the phrase actually, directly and exclusively used for religious, charitable or educational purposes refers not only to all lands, buildings and improvements, but also to the above-quoted first category which includes charitable institutions like the private respondent.31 ________________

sively used for religious, charitable, or educational purposes shall be exempt from taxation. (Italics copied from Reply Memorandum of Private Respondent, p. 7; rollo, p. 231) 25 Reply Memorandum of private respondent, p. 7; rollo, p. 231. 26 Cemeteries, churches, and parsonages or convents appurtenant thereto, and all lands, buildings, and improvements actually, directly, and exclusively used for religious, charitable, or educational purposes shall be exempt from taxation. 27 Reply Memorandum of private respondent, pp. 7-8; rollo, pp. 231232. 28 Ibid., p. 8; rollo, p. 232. 29 14 SCRA 292, June 16, 1965. 30 Reply Memorandum of private respondent, pp. 6-7; rollo, pp. 230231. 31 Ibid., p. 9; rollo, p. 233. 96 96 SUPREME COURT REPORTS ANNOTATED Commissioner of Internal Revenue vs. Court of Appeals The Court is not persuaded. The debates, interpellations and expressions of opinion of the framers of the Constitution reveal their intent which, in turn, may have guided the people in ratifying the Charter.32 Such intent must be effectuated. Accordingly, Justice Hilario G. Davide, Jr., a former constitutional commissioner, who is now a member of this Court, stressed during the Concom debates that x x x what is exempted is not the institution itself x x x; those exempted from real estate taxes are lands, buildings and improvements actually, directly and exclusively used for religious, charitable or educational purposes.33 Father Joaquin G. Bernas, an eminent authority on the Constitution and also a member of the Concom, adhered to the same view that the exemption created by said provision pertained only to property taxes.34 In his treatise on taxation, Mr. Justice Jose C. Vitug concurs, stating that *t+he tax exemption covers property taxes only.35 Indeed, the income tax exemption claimed by private respondent finds no basis in Article VI, Section 28, par. 3 of the Constitution.

Private respondent also invokes Article XIV, Section 4, par. 3 of the Charter,36 claiming that the YMCA is a non-stock, non-profit educational institution whose revenues and assets are used actually, directly and exclusively for educational purposes so it is exempt from taxes on its properties and in_______________ 32 Nitafan v. Commissioner of Internal Revenue, 152 SCRA 284, 291-292, July 27, 1987. 33 Record of the Constitutional Commission, Vol. Two, p. 90. 34 Bernas, Joaquin G., The 1987 Constitution of the Republic of the Philippines: A Commentary, p. 720, 1996 ed.; citing Lladoc v. Commissioner of Internal Revenue, supra, p. 295. 35 Vitug, supra, p. 16. 36 All revenues and assets of non-stock, non-profit educational institutions used actually, directly, and exclusively for educational purposes shall be exempt from taxes and duties. Upon the dissolution or cessation of the corporate existence of such institutions, their assets shall be disposed of in the manner provided by law. 97 VOL. 298, OCTOBER 14, 1998 97 Commissioner of Internal Revenue vs. Court of Appeals come.37 We reiterate that private respondent is exempt from the payment of property tax, but not income tax on the rentals from its property. The bare allegation alone that it is a non-stock, non-profit educational institution is insufficient to justify its exemption from the payment of income tax. As previously discussed, laws allowing tax exemption are construed strictissimi juris. Hence, for the YMCA to be granted the exemption it claims under the aforecited provision, it must prove with substantial evidence that (1) it falls under the classification non-stock, non-profit educational institution; and (2) the income it seeks to be exempted from taxation is used actually, directly, and exclusively for educational purposes. However, the Court notes that not a scintilla of evidence was submitted by private respondent to prove that it met the said requisites.

Is the YMCA an educational institution within the purview of Article XIV, Section 4, par. 3 of the Constitution? We rule that it is not. The term educational institution or institution of learning has acquired a wellknown technical meaning, of which the members of the Constitutional Commission are deemed cognizant.38 Under the Education Act of 1982, such term refers to schools.39 The school system is synonymous with formal education,40 which refers to the hierarchically structured and chronologically graded learnings organized and provided by the formal school system and for which certification is required in order for the learner to progress through the grades or move to the higher levels.41 The Court has examined the Amended Articles of Incorporation42 and _______________ 37 Reply Memorandum of private respondent, p. 20; rollo, p. 244. 38 See Krivenko v. Register of Deeds of Manila, 79 Phil. 461, 468 (1947). 39 Section 26, Batas Pambansa Blg. 232. 40 Section 19, Batas Pambansa Blg. 232. 41 Section 20, Batas Pambansa Blg. 232. 42 Exhibit B, BIR Records, pp. 54-56. 98 98 SUPREME COURT REPORTS ANNOTATED Commissioner of Internal Revenue vs. Court of Appeals By-Laws43 of the YMCA, but found nothing in them that even hints that it is a school or an educational institution.44 Furthermore, under the Education Act of 1982, even non-formal education is understood to be school-based and private auspices such as foundations and civic-spirited organizations are ruled out.45 It is settled that the term educational institution, when used in laws granting tax exemptions, refers to a x x x school seminary, college or educational establishment x x x.46 Therefore, the private respondent cannot be deemed one of the educational institutions covered by the constitutional provision under consideration. x x x Words used in the Constitution are to be taken in their ordinary acceptation. While in its broadest and best sense education embraces all forms and phases of instruction, improvement and development of mind and body, and as well of religious and moral sentiments, yet in the

common understanding and application it means a place where systematic instruction in any or all of the useful branches of learning is given by methods common to schools and institutions of learning. That we conceive to be the true intent and scope of the term [educational institutions,+ as used in the Constitution.47 Moreover, without conceding that Private Respondent YMCA is an educational institution, the Court also notes that the former did not submit proof of the proportionate amount of the subject income that was actually, directly and exclu_______________ 43 Exhibit C, BIR Records, pp. 27-53. 44 This is in stark contrast to its predecessor, the YMCA of Manila. In YMCA of Manila v. Collector of Internal Revenue (33 Phil. 217, 221 [1916]), cited by private respondent, it was noted that the said institution had an educational department that taught courses in various subjects such as law, commerce, social ethics, political economy and others. 45 Dizon, Amado C., Education Act of 1982 Annotated, Expanded and Updated, p. 72 (1990). 46 84 CJS 566. 47 Kesselring v. Bonnycastle Club, 186 SW2d 402, 404 (1945). 99 VOL. 298, OCTOBER 14, 1998 99 Commissioner of Internal Revenue vs. Court of Appeals sively used for educational purposes. Article XIII, Section 5 of the YMCA by-laws, which formed part of the evidence submitted, is patently insufficient, since the same merely signified that *t+he net income derived from the rentals of the commercial buildings shall be apportioned to the Federation and Member Associations as the National Board may decide.48 In sum, we find no basis for granting the YMCA exemption from income tax under the constitutional provision invoked. Cases Cited by Private Respondent Inapplicable The cases49 relied on by private respondent do not support its cause. YMCA of Manila v. Collector of Internal Revenue50 and Abra Valley College, Inc. v. Aquino51 are not applicable, because the controversy in

both cases involved exemption from the payment of property tax, not income tax. Hospital de San Juan de Dios, Inc. v. Pasay City52 is not in point either, because it involves a claim for exemption from the payment of regulatory fees, specifically electrical inspection fees, imposed by an ordinance of Pasay Cityan issue not at all related to that involved in a claimed exemption from the payment of income taxes imposed on property leases. In Jesus Sacred Heart College v. Com. of Internal Revenue,53 the party therein, which claimed an exemption from the payment of income tax, was an educational institution which submitted substantial evidence that the income subject of the controversy had been devoted or used solely for educational purposes. On the other hand, the private respondent in the present case has not given any proof that it is an educational institution, or that ________________ 48 By-Laws of the YMCA, p. 22; BIR Records, p. 31. 49 Reply Memorandum of private respondent, pp. 14-16; rollo, pp. 238240. 50 Supra. 51 162 SCRA 106, June 15, 1988. 52 16 SCRA 226, February 28, 1966. 53 95 SCRA 16, May 24, 1954. 100 100 SUPREME COURT REPORTS ANNOTATED Commissioner of Internal Revenue vs. Court of Appeals part of its rent income is actually, directly and exclusively used for educational purposes. Epilogue In deliberating on this petition, the Court expresses its sympathy with private respondent. It appreciates the nobility of its cause. However, the Courts power and function are limited merely to applying the law fairly and objectively. It cannot change the law or bend it to suit its sympathies and appreciations. Otherwise, it would be overspilling its role and invading the realm of legislation. We concede that private respondent deserves the help and the encouragement of the government. It needs laws that can facilitate, and

not frustrate, its humanitarian tasks. But the Court regrets that, given its limited constitutional authority, it cannot rule on the wisdom or propriety of legislation. That prerogative belongs to the political departments of government. Indeed, some of the members of the Court may even believe in the wisdom and prudence of granting more tax exemptions to private respondent. But such belief, however wellmeaning and sincere, cannot bestow upon the Court the power to change or amend the law. WHEREFORE, the petition is GRANTED. The Resolutions of the Court of Appeals dated September 28, 1995 and February 29, 1996 are hereby REVERSED and SET ASIDE. The Decision of the Court of Appeals dated February 16, 1995 is REINSTATED, insofar as it ruled that the income derived by petitioner from rentals of its real property is subject to income tax. No pronouncement as to costs. SO ORDERED. Davide, Jr. (Chairman), Vitug and Quisumbing, JJ., concur. Bellosillo, J., Please see Dissenting Opinion. 101 VOL. 298, OCTOBER 14, 1998 101 Commissioner of Internal Revenue vs. Court of Appeals DISSENTING OPINION BELLOSILLO, J.: I vote to deny the petition. The basic rule is that the factual findings of the Court of Tax Appeals when supported by substantial evidence will not be disturbed on appeal unless it is shown that the court committed grave error in the appreciation of facts.1 In the instant case, there is no dispute as to the validity of the findings of the Court of Tax Appeals that private respondent Young Mens Christian Association (YMCA) is an association organized and operated exclusively for the promotion of social welfare and other non-profitable purposes, particularly the physical and character development of the youth.2 The enduring objectives of respondent YMCA as reflected in its Constitution and Bylaws are: (a) To develop well-balanced Christian personality, mission in life, usefulness of individuals, and the promotion of unity among Christians

and understanding among peoples of all faiths, to the end that the Brotherhood of Man under the Fatherhood of God may be fostered in an atmosphere of mutual respect and understanding; (b) To promote on equal basis the physical, mental, and spiritual welfare of the youth, with emphasis on reverence for God, social discipline, responsibility for the common good, respect for human dignity, and the observance of the Golden Rule; (c) To encourage members of the Young Mens Christian Associations in the Philippines to participate loyally in the life of their respective churches; to bring these churches closer together; and to participate in the effort to realize the church Universal; (d) To strengthen and coordinate the work of the Young Mens Christian Associations in the Philippines and to foster the extension of the Youth Mens Christian Associations to new areas; _______________ 1 Commissioner of Internal Revenue v. Mitsubishi Metal Corporation, G.R. No. 54908, 22 January 1995, 181 SCRA 2140. 2 Rollo, p. 76. 102 102 SUPREME COURT REPORTS ANNOTATED Commissioner of Internal Revenue vs. Court of Appeals (e) To help its Member Associations develop and adopt their programs to the needs of the youth; (f) To assist the Member Associations in developing and maintaining a high standard of management, operation and practice; and (g) To undertake and sponsor national and international programs and activities in pursuance of its purposes and objectives.3 Pursuant to these objectives, YMCA has continuously organized and undertaken throughout the country various programs for the youth through actual workshops, seminars, training, sports and summer camps, conferences on the cultivation of Christian moral values, drug addiction, out-of-school youth, those with handicap and physical defects and youth alcoholism. To fulfill these multifarious projects and attain the laudable objectives of YMCA, fund raising has become an indispensable and integral part of the activities of the Association. YMCA derives its funds

from various sources such as membership dues, charges on the use of facilities like bowling and billiards, lodging, interest income, parking fees, restaurant and canteen. Since the membership dues are very minimal, the Association derives funds from rentals of small shops, restaurant, canteen and parking fees. For the taxable year ending December 1980, YMCA earned gross rental income of P676,829.00 and P44,259.00 from parking fees which became the subject of the questioned assessment by petitioner. The majority of this Court upheld the findings of the Court of Tax Appeals that the leasing of petitioners facilities to small shop owners and to restaurant and canteen operators in addition to the operation of a parking lot are reasonably necessary for and incidental to the accomplishment of the objectives of YMCA.4 In fact, these facilities are leased to members in order to service their needs and those of their guests. The rentals are minimal, such as, the rent of P300.00 for the bar_______________ 3 Rollo, pp. 76-77. 4 Rollo, p. 84. 103 VOL. 298, OCTOBER 14, 1998 103 Commissioner of Internal Revenue vs. Court of Appeals bershop. With regard to parking space, there is no lot actually devoted therefor and the parking is done only along the sides of the building. The parking is primarily for members with car stickers but to non-members, parking fee is P0.50 only. The rentals and parking fees are just enough to cover the operation and maintenance costs of these facilities. The earnings which YMCA derives from these rentals and parking fees, together with the charges for lodging and use of recreational facilities, constitute the bulk or majority of its income used to support its programs and activities. In its decision of 16 February 1994, the Court of Appeals thus committed grave error in departing from the findings of the Court of Tax Appeals by declaring that the leasing of YMCAs facilities to shop owners and restaurant operators and the operation of a parking lot are used for commercial purposes or for profit, which fact takes YMCA outside the

coverage of tax exemption. In later granting the motion for reconsideration filed by respondent YMCA, the Court of Appeals correctly reversed its earlier decision and upheld the findings of the Court of Tax Appeals by ruling that YMCA is not designed for profit and the little income it derives from rentals and parking fees helps maintain its noble existence for the fulfillment of its goals for the Christian development of the youth. Respondent YMCA is undoubtedly exempt from corporate income tax under the provisions of Sec. 27, pars. (g) and (h), of the National Internal Revenue Code, to wit: Sec. 27. Exemptions from tax on corporations.The following organizations shall not be taxed under this Title in respect to income received by them as suchx x x x (g) civic league or organization not organized for profit but operated exclusively for the promotion of social welfare; (h) club organized and operated exclusively for pleasure, recreation and other non-profitable purposes, no part of the net income of which inures to the benefit of any private stockholder or member x x x x Notwithstanding the provisions in the preceding paragraphs, the income of whatever kind and character of the foregoing organizations from any of their properties, real or personal, or from any of their activities conducted for profit, regardless of the 104 104 SUPREME COURT REPORTS ANNOTATED Commissioner of Internal Revenue vs. Court of Appeals disposition made of such income, shall be subject to tax imposed under this Code. The majority of the Court accepted petitioners view that while the income of organizations enumerated in Sec. 27 are exempt from income tax, such exemption does not however extend to their income of whatever kind or character from any of their properties real or personal regardless of the disposition made of such income; that based on the wording of the law which is plain and simple and does not need any interpretation, any income of a tax exempt entity from any of its properties is a taxable income; hence, the rental income derived by a tax exempt organization from the lease of its properties is not therefore

exempt from income taxation even if such income is exclusively used for the accomplishment of its objectives. Income derived from its property by a tax exempt organization is not absolutely taxable. Taken in solitude, a word or phrase such as, in this case, the income of whatever kind and character x x x from any of their properties might easily convey a meaning quite different from the one actually intended and evident when a word or phrase is considered with those with which it is associated.5 It is a rule in statutory construction that every part of the statute must be interpreted with reference to the context, that every part of the statute must be considered together with the other parts and kept subservient to the general intent of the whole enactment.6 A close reading of the last paragraph of Sec. 27 of the National Internal Revenue Code, in relation to the whole section on tax exemption of the organizations enumerated therein, shows that the phrase conducted for profit in the last paragraph of Sec. 27 qualifies, limits and describes the income of whatever kind and character of the foregoing or________________ 5 Sajonas v. Court of Appeals, G.R. No. 102377, 5 July 1996, 258 SCRA 79. 6 Paras v. Commission on Elections, G.R. No. 123169, 4 No-vember 1996, 264 SCRA 49. 105 VOL. 298, OCTOBER 14, 1998 105 Commissioner of Internal Revenue vs. Court of Appeals ganizations from any of their properties, real or personal, or from any of their activities in order to make such income taxable. It is the exception to Sec. 27 pars. (g) and (h) providing for the tax exemptions of the income of said organizations. Hence, if such income from property or any other property is not conducted for profit, then it is not taxable. Even taken alone and understood according to its plain, simple and literal meaning, the word income which is derived from property, real or personal, provided in the last paragraph of Sec. 27 means the amount of money coming to a person or corporation within a specified time as profit from investment; the return in money from ones business or capital invested.7 Income from property also means gains and profits

derived from the sale or other disposition of capital assets; the money which any person or corporation periodically receives either as profits from business, or as returns from investments.8 The word income as used in tax statutes is to be taken in its ordinary sense as gain or profit.9 Clearly, therefore, income derived from property whether real or personal connotes profit from business or from investment of the same. If we are to apply the ordinary meaning of income from property as profit to the language of the last paragraph of Sec. 27 of the NIRC, then only those profits arising from business and investment involving property are taxable. In the instant case, there is no question that in leasing its facilities to small shop owners and in operating parking spaces, YMCA does not engage in any profit-making business. Both the Court of Tax Appeals, and the Court of Appeals in its resolution of 25 September 1995, categorically found that these activities conducted on YMCAs property were aimed not only at fulfilling the needs and requirements of its members as part of YMCAs youth program but, more impor________________ 7 Moreno, Federico B., Philippine Law Dictionary, Third Edition. 8 Sibal, Jose Agaton R., Philippine Legal Encyclopedia, 1986 Edition. 9 Words and Phrases, Vol. 20A, 1959 Ed., p. 1616. 106 106 SUPREME COURT REPORTS ANNOTATED Commissioner of Internal Revenue vs. Court of Appeals tantly, at raising funds to finance the multifarious projects of the Association. As the Court has ruled in one case, the fact that an educational institution charges tuition fees and other fees for the different services it renders to the students does not in itself make the school a profitmaking enterprise that would place it beyond the purview of the law exempting it from taxation. The mere realization of profits out of its operation does not automatically result in the loss of an educational institutions exemption from income tax as long as no part of its profits inures to the benefit of any stockholder or individual.10 In order to claim exemption from income tax, a corporation or association must show that

it is organized and operated exclusively for religious, charitable, scientific, athletic, cultural or educational purposes or for the rehabilitation of veterans, and that no part of its income inures to the benefit of any private stockholder or individual.11 The main evidence of the purpose of a corporation should be its articles of incorporation and bylaws, for such purpose is required by statute to be stated in the articles of incorporation, and the by-laws outline the administrative organization of the corporation which, in turn, is supposed to insure or facilitate the accomplishment of said purpose.12 The foregoing principle applies to income derived by tax exempt corporations from their property. The criterion or test in order to make such income taxable is when it arises from purely profit-making business. Otherwise, when the income derived from use of property is reasonable and incidental to the charitable, benevolent, educational or religious purpose for which the corporation or association is created, such income should be tax-exempt. ________________ 10 Collector of Internal Revenue v. University of the Visayas, L-13554, 28 February 1961, 1 SCRA 669. 11 Ibid. 12 Jesus Sacred Heart College v. Collector of Internal Revenue, 95 Phil. 16 [1954]. 107 VOL. 298, OCTOBER 14, 1998 107 Commissioner of Internal Revenue vs. Court of Appeals In Hospital de San Juan de Dios, Inc. v. Pasay City13 we held In this connection, it should be noted that respondent therein is a corporation organized for charitable, educational and religious purposes; that no part of its net income inures to the benefit of any private individual; that it is exempt from paying income tax; that it operates a hospital in which MEDICAL assistance is given to destitute persons free of charge; that it maintains a pharmacy department within the premises of said hospital, to supply drugs and medicines only to charity and paying patients confined therein; and that only the paying patients are required to pay the medicines supplied to them, for which

they are charged the cost of the medicines, plus an additional 10% thereof, to partly offset the cost of medicines supplied free of charge to charity patients. Under these facts we are of the opinion and so hold that the Hospital may not be regarded as engaged in business by reason of said sale of medicines to its paying patients x x x x (W)e held that the UST Hospital was not established for profit-making purposes, despite the fact that it had 140 paying beds, because the same were maintained only to partly finance the expenses of the free wards containing 203 beds for charity patients. In YMCA of Manila v. Collector of Internal Revenue,14 this Court explained It is claimed however that the institution is run as a business in that it keeps a lodging and boarding house. It may be admitted that there are 64 persons occupying rooms in the main building as lodgers or roomers and that they take their meals at the restaurant below. These facts however are far from constituting a business in the ordinary acceptation of the word. In the first place, no profit is realized by the association in any sense. In the second place it is undoubted, as it is undisputed, that the purpose of the association is not primarily to obtain the money which comes from the lodgers and boarders. The real purpose is to keep the membership continually within the sphere of influence of the institution; and thereby to prevent, as far as possible, the opportunities which vice presents to ________________ 13 No. L-19371, 28 February 1966, 16 SCRA 226. 14 33 Phil. 217 [1916]. 108 108 SUPREME COURT REPORTS ANNOTATED Commissioner of Internal Revenue vs. Court of Appeals young men in foreign countries who lack home or other similar influences. The majority, if not all, of the income of the organizations covered by the exemption provided in Sec. 27, pars. (g) and (h), of the NIRC are derived from their properties, real or personal. If we are to interpret the last paragraph of Sec. 27 to the effect that all income of whatever kind from

the properties of said organization, real or personal, are taxable, even if not conducted for profit, then Sec. 27, pars. (g) and (h), would be rendered ineffective and nugatory. As this Court elucidated in Jesus Sacred Heart College v. Collector of Internal Revenue,15 every responsible organization must be so run as to at least insure its existence by operating within the limits of its own resources, especially its regular income. It should always strive whenever possible to have a surplus. If the benefits of the exemption would be limited to institutions which do not hope or propose to have such surplus, then the exemption would apply only to schools which are on the verge of bankruptcy. Unlike the United States where a substantial number of institutions of learning are dependent upon voluntary contributions and still enjoy economic stability, such as Harvard, the trust fund of which has been steadily increasing with the years, there are and there have always been very few educational enterprises in the Philippines which are supported by donations, and these organizations usually have a very precarious existence.16 Finally, the non-taxability of all income and properties of educational institutions finds enduring support in Art. XIV, Sec. 4, par. 3, of the 1987 Constitution (3) All revenues and assets of non-stock, non-profit educational institutions used actually, directly and exclusively for educational purposes shall be exempt from taxes and duties. Upon the dissolution or cessation of the corporate existence of such institu_______________ 15 See Note 11. 16 Ibid. 109 VOL. 298, OCTOBER 14, 1998 109 Commissioner of Internal Revenue vs. Court of Appeals tions, their assets shall be disposed of in the manner provided by law. In YMCA of Manila v. Collector of Internal Revenue17 this Court categorically held and found YMCA to be an educational institution exclusively devoted to educational and charitable purposes and not operated for profit. The purposes of the Association as set forth in its

charter and constitution are to develop the Christian character and usefulness of its members, to improve the spiritual, intellectual, social and physical condition of young men and to acquire, hold, mortgage and dispose of the necessary lands, buildings and personal property for the use of said corporation exclusively for religious, charitable and educational purposes, and not for investment or profit. YMCA has an educational department, the aim of which is to furnish, at much less than cost, instructions on subjects that will greatly increase the mental efficiency and wage-earning capacity of young men, prepare them in special lines of business and offer them special lines of study. We ruled therein that YMCA cannot be said to be an institution used exclusively for religious purposes or an institution devoted exclusively for charitable purposes or an institution devoted exclusively to educational purposes, but it can be truthfully said that it is an institution used exclusively for all three purposes and that, as such, it is entitled to be exempted from taxation. Petition granted. Resolutions reversed and set aside. Note.Tax exemptions (and, we might add, refunds in the nature of exemptions) must be strictly construed against the taxpayer and liberally in favor of the state. (Magsaysay Lines, Inc. vs. Court of Appeals, 260 SCRA 513 [1996]) o0o _______________ [Commissioner of Internal Revenue vs. Court of Appeals, 298 SCRA 83(1998)]

144 SUPREME COURT REPORTS ANNOTATED Land Bank of the Philippines vs. Court of Appeals G.R. No. 126332. November 16, 1999.* LAND BANK OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS and MARCIA E. RAMOS, respondents. Courts; Jurisdiction; Agrarian Reform; The original and exclusive jurisdiction of the Regional Trial Court pursuant to Section 57 of Republic Act 6657 would be undermined if the DAR would vest in administrative

officials original jurisdiction in compensation cases and make the Regional Trial Court an appellate court for the review of administrative decisions.It is clear from Sec. 57 that the RTC, sitting as a Special Agrarian Court, has original and exclusive jurisdiction over all petitions for the determination of just compensation to landowners. This original and exclusive jurisdiction of the RTC would be undermined if the DAR would vest in administrative officials original jurisdiction in compensation cases and make the RTC an appellate court for the review of administrative decisions. Thus, although the new rules speak of directly appealing the decision of adjudicators to the RTCs sitting as Special Agrarian Courts, it is clear from Sec. 57 that the original and exclusive jurisdiction to determine such cases is in the RTCs. Any effort to transfer such jurisdiction to the adjudicators and to convert the original jurisdiction of the RTCs into an appellate jurisdiction would be contrary to Sec. 57 and therefore would be void. Thus, direct resort to the SAC by private respondent is valid. Same; Same; Same; Administrative Law; Exhaustion of Administrative Remedies; Moot and Academic Questions; The doctrine of exhaustion of administrative remedies is inapplicable when the issue is rendered moot and academic.With the issue of jurisdiction of SAC already settled, this Court finds it unnecessary to determine whether the order to transfer ownership of subject lands from private respondent to the Republic of the Philippines before the DARAB had settled with finality the matter of their proper valuation qualifies as an exception to the doctrine of exhaustion of administrative remedies. Moreover, the doctrine of exhaustion of administrative remedies is inapplicable when the issue is rendered moot and academic, as in the instant case where the DARAB dismissed the valuation proceedings before it on 29 November 1993. _______________ * SECOND DIVISION. 145 VOL. 318, NOVEMBER 16, 1999 145 Land Bank of the Philippines vs. Court of Appeals Same; Same; Same; Pleadings and Practice; Pre-Trial Conferences; Where the parties have agreed during the pre-trial conference before the

Special Agrarian Court that the valuation shall be determined on the basis of the formula provided in DAR Admin. Order No. 6, Series of 1992, that formula must be followed subject to the amendatory provisions of DAR Admin. Order No. 11, Series of 1994.Since the parties have agreed during the pre-trial conference before the SAC that the valuation shall be determined on the basis of the formula provided in DAR Admin. Order No. 6, Series of 1992, that formula must be followed subject to the amendatory provisions of DAR Admin. Order No. 11, Series of 1994. However, the facts required for the computation are unavailable before us. Hence, the matter must be remanded to the SAC for the recomputation of the just compensation in accordance with hereinmentioned formula. Agrarian Reform; Just Compensation; Irrigation canals are considered improvements, hence relevant only in estimating the total value of the property.Petitioner questions the coverage under RA 6657 of the two (2) irrigation canals within subject areas and pegging the compensation therefor at P350,000.00. We agree. These irrigation canals should not have been separately valued as what the appellate court did in the instant case. The irrigation canals are considered improvements on the two (2) parcels of land of private respondent, hence relevant only in estimating the total value of her property. No separate valuation is necessary. The SAC should take note of this in recomputing the value of the property involved to determine the just compensation. PETITION for review on certiorari of a decision and a resolution of the Court of Appeals. The facts are stated in the opinion of the Court. Gonzales, Aquino & Associates for petitioner. Renan E. Ramos for private respondent. 146 146 SUPREME COURT REPORTS ANNOTATED Land Bank of the Philippines vs. Court of Appeals BELLOSILLO, J.: This petition for review on certiorari under Rule 45 of the Revised Rules of Court seeks the reversal of the Decision1 of the Court of Appeals in

CA-G.R. SP Nos. 38795 and 38885 dated 27 June 1996 which modified the decision2 of RTC-Br. 23 of Cabanatuan City acting as a Special Agrarian Court in Agrarian Case No. 90 (AF) dated 25 September 1995. The petition also prays for the reversal of the Resolution3 of the Court of Appeals dated 29 August 1996 denying petitioners motion for reconsideration. Private respondent Marcia E. Ramos inherited from her father two (2) parcels of land in Barangay Macatbong, Cabanatuan City, some twelve (12) kilometers away from the center of the city, covered by TCT Nos. T8774 and T-36576 containing 36.6125 and 32.1675 hectares, respectively. Both were classified as ricelands in their tax declarations for 1985. On 15 June 1988, RA 6657 otherwise known as the Comprehensive Agrarian Reform Law (CARL) of 1988,4 took effect. Section 19 thereof provides for an additional five percent (5%) cash payment for landowners who would voluntarily offer their lands for sale to the government for distribution to farmer-beneficiaries.5 On 3 April 1989, induced by the incentive, private respondent and her husband wrote then Department of Agrarian Reform (DAR) Secretary Philip Ella Juico offering for sale her lands covered by TCT Nos. T-8774 and T-36576, which were her own paraphernal property. Private respondent however manifested her intention to re_______________ 1 Penned by Associate Justice Oswaldo D. Agcaoili, concurred in by Associate Justices Jesus M. Elbinias and Eubulo G. Verzola (Twelfth Division). 2 Penned by Presiding Judge Andres R. Amante, Jr. 3 See Note 1. 4 Sec. 71 of RA 6657. 5 Sec. 19. Incentives for Voluntary Offers for Sale.Landowners, other than banks and other financial institutions, who voluntarily offer their lands for sale shall be entitled to an additional five percent (5%) cash payment. 147 VOL. 318, NOVEMBER 16, 1999 147

Land Bank of the Philippines vs. Court of Appeals tain twenty-nine (29) hectares for herself, her husband and their eight (8) children. Photocopies of two (2) land titles, latest tax declarations, Listasaka and voluntary offer to sell forms and other documents accompanied the letter. The Listasaka form and letter of intent indicated a price of only P40,000.00 per hectare because private respondent was allegedly in a tight financial bind with six (6) of her eight (8) children taking long courses in college. She thought that a low valuation for the lands would facilitate payment of just compensation to her by the government. On 24 July 1991, after a two (2)-year hiatus, DAR Regional Director Antonio M. Nuesa sent a notice of acquisition to private respondent informing her that the DAR had decided to acquire 21.1675 hectares of the 32.1675 hectares covered by TCT No. T-36576. The land, classified as idle and abandoned, was placed under the Voluntary Offer to Sell (VOS) program. On 28 August 1991 Nuesa sent private respondent another notice of acquisition where she was informed that the DAR had decided to acquire under its Compulsory Acquisition (CA) scheme 18.6125 hectares of the 36.6125 hectares covered by TCT No. T-8774. The land was also classified as idle and abandoned. Meanwhile, Lolita C. Cruz, Head of the Land Bank of the Philippines Land Valuation and Landowners Compensation Office, wrote private respondent on 24 July 1991 requiring her to submit a Sworn Statement of Average Production and Net Income. In compliance, Ramos sent an affidavit stating inter alia the lowest average yield of eighty (80) cavans per hectare. On 18 November 1991 Nuesa notified private respondent of the DAR valuation of P395,591.44 or P9,944.48 per hectare covering 39.78 hectares, subject to price adjustments to conform with the actual area covered as determined by a final land survey. The valuation was based on the ocular inspection report dated 13 May 1991 of which private respondent denied having been notified. On 23 December 1991 private respondent wrote Nuesa rejecting the P9,944.48 per hectare valuation offer of the DAR 148 148 SUPREME COURT REPORTS ANNOTATED

Land Bank of the Philippines vs. Court of Appeals as it was not the just compensation she expected for her lands. Thus, the case was elevated to the Department of Agrarian Reform Adjudication Board (DARAB) which ordered two (2) ocular inspections of subject two (2) parcels of land.6 On 2 January 1992 Nuesa sent a memorandum-letter to the Regional Agrarian Reform Adjudicator instructing the latter to conduct summary administrative proceedings for the final valuation of the lands of private respondent. LBP Valuation Manager Cruz was also requested to open a trust account in the name of private respondent for the cash portion of the value of the property as determined by the DAR. Private respondent was then required by the DARAB to file her memorandum in order to counter the initial findings of the DAR. The LBP also submitted its memorandum. Another ocular inspection was thereafter ordered and finally conducted on 22 May 1992. On 1 July 1992 the government through the Department of Environment and Natural Resources (DENR)Bureau of Lands, together with private respondent and her husband, identified, surveyed and segregated subject lands. On 24 August 1992 the complete survey returns on the lands were submitted by the DENR through its Community Environment and Natural Resources officer of Cabanatuan City Romeo Buenaventura. On 12 October 1992 Nuesa ordered the Register of Deeds of Cabanatuan City to transfer ownership of subject lands from private respondent to the Republic of the Philippines. However, before the transfer of ownership could be effected, the DARAB issued an order of revaluation dated 30 October 1992 based on its findings that five (5) to nine (9) hectares of subject lands were actually being cultivated on a rotation basis and not idle as earlier classified. The foregoing, more particularly Nuesas order to transfer ownership over subject lands without waiting for their revaluation, prompted Ramos to file a complaint for just com_______________ 6 LVC VOS Case No. 047-NE92. 149 VOL. 318, NOVEMBER 16, 1999 149

Land Bank of the Philippines vs. Court of Appeals pensation before the Regional Trial Court (RTC) of Cabanatuan City, acting as a Special Agrarian Court (SAC), on 23 November 1992. The complaint was filed against Jesli Lapus, in his capacity as President of LBP, Ernesto D. Garilao, in his capacity as Acting Secretary of DAR, Lolita C. Cruz, in her capacity as Head of LBP Land Valuation and Landowners Compensation Office, and Antonio M. Nuesa, in his capacity as Regional Director of DAR. LBP officials Lapus and Cruz filed a joint answer dated 8 February 1993 claiming that agrarian reform did not partake of an eminent domain proceeding so that the doctrine of just compensation would not apply. They prayed for the dismissal of the complaint because of private respondents failure to exhaust all administrative remedies available to her before filing the case with the SAC. DAR officials Garilao and Nuesa, for their part, filed a motion to dismiss the complaint contending that the SAC was not the proper forum to hear and decide the case because of private respondents failure to exhaust administrative remedies. On 13 April 1993 the SAC denied the motion to dismiss. At the pre-trial conference on 15 November 1993 the parties ruled out the possibility of amicably settling the case. They however agreed (a) That the land in question as per ocular inspection on October 1, 1993 is planted with rice and not idle which the defendant LBP admitted with the qualification that a portion is still idle; (b) That the government from time to time changes the valuation formula for the purchase of privately-owned land subjected to CARP to the advantage of the government which was likewise admitted by the defendant LBP; (c) That the formula for the correct valuation of the property is that provided for under Admin. Order No. 6, Series of 1992, of the DAR which was also admitted by the defendant LBP; and (d) That the DARAB thru the Provincial Adjudicator Jose Reyes issued an Order dated October 30, 1992 which was admitted by both defendants. 150 150 SUPREME COURT REPORTS ANNOTATED Land Bank of the Philippines vs. Court of Appeals

On 29 November 1993 the case before the DARAB was dismissed to pave way for the disposition of the case in the regular court.7 In the meantime, DAR Secretary Garilao issued Admin. Order No. 11, Series of 1994, revising the rules and regulations covering the valuation of lands voluntarily offered or compulsorily acquired as embodied in Admin. Order No. 6, Series of 1992. On 25 September 1995 the SAC rendered its decision ordering the LBP and the DAR to pay private respondent just compensation for her lands in the amount of P2,146,396.90 or P53,956.67 per hectare with legal interest from 3 April 1989when the offer was madeuntil fully paid. The SAC also declared private respondent entitled to the additional five percent (5%) cash payment under Sec. 19 of RA 66578 by way of incentive for her voluntarily offering subject lands for sale.9 The SAC found the valuation of private respondent to be cumbersomely high for the government and the farmerbeneficiaries considering that the factors she adopted in arriving at said valuation were not adequately substantiated and therefore inconclusive. The valuation by the LBP and the DAR, on the other hand, appeared to be unrealistically low and its bases were but assumptions of facts unsupported by credible evidence. Thus, the SAC was left with no other recourse but to take the middle ground wherein the needs of the parties would be reasonably accommodated, i.e., the price set by private respondent when she first offered subject lands for voluntary acquisition and the inflation rate recognized and provided for by the LBP and the DAR.10 Both parties, private respondent Marcia E. Ramos on one hand, and the DAR through Secretary Garilao and DAR Regional Director for Region III Nuesa on the other, filed their _______________ 7 Rollo, p. 50. 8 See Note 5. 9 Rollo, pp. 29-49. 10 Ibid. 151 VOL. 318, NOVEMBER 16, 1999 151 Land Bank of the Philippines vs. Court of Appeals

respective petitions for review with the Court of Appeals. The LBP did not appeal but filed its comment on the petitions. The DAR questioned the jurisdiction of the SAC contending that the latter could not take cognizance of the case pending its resolution before the DARAB as the preliminary determination of just compensation by the DARAB was a condition sine qua non before the filing of the case of this nature with the SAC.11 Private respondent, on her part, questioned the valuation given by the SAC for being contrary to the principle of just compensation provided by the law. She insisted that her property must be valued at P150,000.00 per hectare and that even assuming that her evidence could not substantiate it, the formula agreed upon by the parties during the pretrial conference wherein they stipulated that LAND VALUE = (CAPI_______________ 11 Rule II, DARAB New Rules of Procedure. Sec. 1. Primary and Exclusive Original and Appellate Jurisdiction.The Board shall have primary and exclusive jurisdiction, both original and appellate, to determine and adjudicate all agrarian disputes involving the implementation of the Comprehensive Agrarian Reform Program (CARP) under RA 6657, Executive Nos. 228, 229 and 129-A, RA 3844, as amended by RA 6389, PD 27 and other agrarian laws and their implementing rules and regulations. Specifically, such jurisdiction shall include but not limited to cases involving the following: x x x x (b) the valuation of land and the preliminary determination and payment of just compensation, fixing and collection of lease rentals, disturbance compensation, amortization payments and similar disputes concerning the functions of the Land Bank of the Philippines x x x x Sec. 11. Land Valuation and Preliminary Determination and Payment of Just Compensation.The decision of the Adjudicator on land valuation and preliminary determination and payment of just compensation shall not be appealable to the Board but shall be brought directly to the Regional Trial Court designated as Special Agrarian Court within fifteen (15) days from receipt of the notice thereof. Any party shall be entitled for only one motion for reconsideration. 152 152

SUPREME COURT REPORTS ANNOTATED Land Bank of the Philippines vs. Court of Appeals TALIZED NET INCOME x .9) + (MARKET VALUE x .1)12 should have been used by the trial court. Private respondent further demanded that she be paid a total of P350,000.00 for the two (2) irrigation canals situated within the areas to be expropriated. The LBP through Lapus and Cruz submitted its comment on the petitions. The LBP did not contradict the position of the DAR that private respondent should have waited for the termination of the land valuation case with the DARAB before seeking relief from the courts.13 The LBP, however, contended that the compensation as determined by the SAC must be upheld as it was not only in accordance with Sec. 17 of RA 665714 and applicable DAR administrative orders on land valuation but it was likewise just and fair to private respondent, the government and the farmer-beneficiaries of the lands. On 27 June 1996 the Court of Appeals granted the petition of private respondent but denied that of the DAR. The appellate court acknowledged the primary jurisdiction of the DARAB in the determination of just compensation but ruled that such jurisdiction was not exclusive as the courts of justice, particularly the RTCs acting as Special Agrarian Courts, could also acquire jurisdiction as provided under Sec. 57 of RA ________________ 12 DAR Admin. Order No. 6, Series of 1992. 13 Sec. 16(f) of RA 6657.Any party who disagrees with the decision (of the DARAB) may bring the matter to the court of proper jurisdiction for the final determination of just compensation. 14 Sec. 17. Determination of Just Compensation.In determining just compensation, the cost of acquisition of the land, the current values of like properties, its nature, actual use and income, the sworn valuation by the owner, the tax declarations, and the assessment made by the government assessors shall be considered. The social and economic benefits contributed by the farmers and farmworkers and by the Government to the property as well as the nonpayment of taxes or loans secured from any government financing institution on the said land shall be considered as additional factors to determine its valuation. 153

VOL. 318, NOVEMBER 16, 1999 153 Land Bank of the Philippines vs. Court of Appeals 6657.15 It further declared that noncompliance with the rule on exhaustion of administrative remedies did not affect the courts jurisdiction but only deprived private respondent of a cause of action. Nevertheless, it noted that the doctrine recognized certain exceptions which could be applied to the instant case, i.e., that ownership over private respondents property was already transferred in the name of the Republic of the Philippines prior to the final determination of just compensation by