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SECOND DIVISION

THE BOARD OF TRUSTEES


OF THE GOVERNMENT SERVICE
INSURANCE SYSTEM and
WINSTON F. GARCIA, in his capacity
as GSIS President and General Manager,
Petitioners,
- versus -

G.R. No. 170463


Present:
CARPIO, J., Chairperson,
NACHURA,
PERALTA,
ABAD, and
MENDOZA, JJ.

ALBERT M. VELASCO and MARIO I. MOLINA,


Respondents.
Promulgated:
February 2, 2011
x--------------------------------------------------x
DECISION

CARPIO, J.:
The Case
This is a petition for review1 of the 24 September 2004 Decision2 and the 7 October 2005 Order3 of the Regional Trial Court of Manila,
Branch 19 (trial court), in Civil Case No. 03-108389. In its 24 September 2004 Decision, the trial court granted respondents Albert M.
Velasco4 and Mario I. Molinas5 (respondents) petition for prohibition. In its 7 October 2005 Order, the trial court denied petitioners
Board of Trustees of the Government Service Insurance System (GSIS) and Winston F. Garcias (petitioners) motion for
reconsideration.
The Facts
On 23 May 2002, petitioners charged respondents administratively with grave misconduct and placed them under preventive
suspension for 90 days.6 Respondents were charged for their alleged participation in the demonstration held by some GSIS
employees denouncing the alleged corruption in the GSIS and calling for the ouster of its president and general manager, petitioner
Winston F. Garcia.7
In a letter dated 4 April 2003, respondent Mario I. Molina (respondent Molina) requested GSIS Senior Vice President Concepcion
L. Madarang (SVP Madarang) for the implementation of his step increment.8 On 22 April 2003, SVP Madarang denied the request
citing GSIS Board Resolution No. 372 (Resolution No. 372)9 issued by petitioner Board of Trustees of the GSIS (petitioner GSIS
Board) which approved the new GSIS salary structure, its implementing rules and regulations, and the adoption of the supplemental
guidelines on step increment and promotion.10 The pertinent provision of Resolution No. 372 provides:
A. Step Increment
xxxx
III. Specific Rules:
x x xx
3. The step increment adjustment of an employee who is on preventive suspension shall be withheld until such time that a
decision on the case has been rendered. x x x x
Respondents also asked that they be allowed to avail of the employee privileges under GSIS Board Resolution No. 306 (Resolution
No. 306) approving Christmas raffle benefits for all GSIS officials and employees effective year 2002.11 Respondents request was
again denied because of their pending administrative case.
On 27 August 2003, petitioner GSIS Board issued Board Resolution No. 197 (Resolution No. 197) approving the following policy
recommendations:
B. On the disqualification from promotion of an employee with a pending administrative case

To adopt the policy that an employee with pending administrative case shall be disqualified from the following during the
pendency of the case:
a) Promotion;
b) Step Increment;
c) Performance-Based Bonus; and
d) Other benefits and privileges.
On 14 November 2003, respondents filed before the trial court a petition for prohibition with prayer for a writ of preliminary
injunction.12 Respondents claimed that they were denied the benefits which GSIS employees were entitled under Resolution No. 306.
Respondents also sought to restrain and prohibit petitioners from implementing Resolution Nos. 197 and 372. Respondents claimed
that the denial of the employee benefits due them on the ground of their pending administrative cases violates their right to be
presumed innocent and that they are being punished without hearing. Respondent Molina also added that he had already earned his
right to the step increment before Resolution No. 372 was enacted. Respondents also argued that the three resolutions were
ineffective because they were not registered with the University of the Philippines (UP) Law Center pursuant to the Revised
Administrative Code of 1987.13
On 24 November 2003, petitioners filed their comment with motion to dismiss and opposition.14 On 2 December 2003, respondents
filed their opposition to the motion to dismiss.15 On 5 December 2003, petitioners filed their reply.16
On 16 January 2004, the trial court denied petitioners motion to dismiss and granted respondents prayer for a writ of preliminary
injunction.17
Petitioners filed a motion for reconsideration.18 In its 26 February 2004 Order, the trial court denied petitioners motion.19
In its 24 September 2004 Decision, the trial court granted respondents petition for prohibition. The dispositive portion of the 24
September 2004 Decision provides:
WHEREFORE, the petition is GRANTED and respondents Board Resolution No. 197 of August 27, 2003 and No. 372 of
November 21, 2000 are hereby declared null and void. The writ of preliminary injunction issued by this Court is hereby made
permanent.
SO ORDERED.20
Petitioners filed a motion for reconsideration. In its 7 October 2005 Order, the trial court denied petitioners motion.
Hence, this petition.

The Ruling of the Trial Court


On the issue of jurisdiction, the trial court said it can take cognizance of the petition because the territorial area referred to in Section
4, Rule 65 of the Rules of Court does not necessarily delimit to a particular locality but rather to the judicial region where the office or
agency is situated so that the prohibitive writ can be enforced.
On the merits of the case, the trial court ruled that respondents were entitled to all employee benefits as provided under the law by
reason of their employment. According to the trial court, to deny respondents these employee benefits for the reason alone that they
have pending administrative cases is unjustified since it would deprive them of what is legally due them without due process of law,
inflict punishment on them without hearing, and violate their right to be presumed innocent.
The trial court also found that the assailed resolutions were not registered with the UP Law Center, per certification of the Office of the
National Administrative Register (ONAR).21 Since they were not registered, the trial court declared that the assailed resolutions have
not become effective citing Sections 3 and 4, Chapter 2, Book 7 of the Revised Administrative Code of 1987.22
The Issues
Petitioners raise the following issues:
I
Whether the jurisdiction over the subject matter of Civil Case No. 03-108389 (Velasco, et al. vs. The Board of Trustees of
GSIS, et al., RTC-Manila, Branch 19) lies with the Civil Service Commission (CSC) and not with the Regional Trial Court of
Manila, Branch 19.

II
Whether a Special Civil Action for Prohibition against the GSIS Board or its President and General Manager exercising quasilegislative and administrative functions in Pasay City is outside the territorial jurisdiction of RTC-Manila, Branch 19.
III
Whether internal rules and regulations need not require publication with the Office of the National [Administrative] Register for
their effectivity, contrary to the conclusion of the RTC-Manila, Branch 19.
IV
Whether a regulation, which disqualifies government employees who have pending administrative cases from the grant of
step increment and Christmas raffle benefits is unconstitutional.
V
Whether the nullification of GSIS Board Resolutions is beyond an action for prohibition, and a writ of preliminary injunction
cannot be made permanent without a decision ordering the issuance of a writ of prohibition.23

The Ruling of the Court


The petition is partly meritorious.
Petitioners argue that the Civil Service Commission (CSC), not the trial court, has jurisdiction over Civil Case No. 03-108389 because
it involves claims of employee benefits. Petitioners point out that the trial court should have dismissed the case for lack of jurisdiction.
Sections 2 and 4, Rule 65 of the Rules of Court provide:
Sec. 2. Petition for Prohibition. - When the proceedings of any tribunal, corporation, board, officer or person, whether
exercising judicial, quasi-judicial or ministerial functions, are without or in excess of its jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction, and there is no appeal or any other plain, speedy, and adequate
remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the
facts with certainty and praying that judgment be rendered commanding the respondent to desist from further
proceedings in the action or matter specified therein, or otherwise granting such incidental reliefs as law and justice may
require.
Sec. 4. Where petition filed. - The petition may be filed not later than sixty (60) days from notice of the judgment, order or
resolution sought to be assailed in the Supreme Court or, if it related to acts or omissions of a lower court or of a
corporation, board, officer or person in the Regional Trial Court exercising jurisdiction over the territorial area as
defined by the Supreme Court. It may also be filed in the Court of Appeals whether or not the same is in aid of its
appellate jurisdiction, or in the Sandiganbayan if it is in aid of its jurisdiction. If it involves the acts or omissions of a quasijudicial agency, and unless otherwise provided by law or these Rules, the petition shall be filed in and cognizable only by the
Court of Appeals. (Emphasis supplied)

Civil Case No. 03-108389 is a petition for prohibition with prayer for the issuance of a writ of preliminary injunction. Respondents
prayed that the trial court declare all acts emanating from Resolution Nos. 372, 197, and 306 void and to prohibit petitioners from
further enforcing the said resolutions.24 Therefore, the trial court, not the CSC, has jurisdiction over respondents petition for prohibition.
Petitioners also claim that the petition for prohibition was filed in the wrong territorial jurisdiction because the acts sought to be
prohibited are the acts of petitioners who hold their principal office in Pasay City, while the petition for prohibition was filed in Manila.

Section 18 of Batas Pambansa Blg. 129 (BP 129)25 provides:


SEC. 18. Authority to define territory appurtenant to each branch. - The Supreme Court shall define the territory over
which a branch of the Regional Trial Court shall exercise its authority. The territory thus defined shall be deemed to
be the territorial area of the branch concerned for purposes of determining the venue of all suits, proceedings or
actions, whether civil or criminal, as well as determining the Metropolitan Trial Courts, Municipal Trial Courts, and
Municipal Circuit Trial Courts over which the said branch may exercise appellate jurisdiction. The power herein granted shall

be exercised with a view to making the courts readily accessible to the people of the different parts of the region and making
attendance of litigants and witnesses as inexpensive as possible. (Emphasis supplied)

In line with this, the Supreme Court issued Administrative Order No. 326 defining the territorial jurisdiction of the regional trial courts in
the National Capital Judicial Region, as follows:
a. Branches I to LXXXII, inclusive, with seats at Manila over the City of Manila only.
b. Branches LXXXIII to CVII, inclusive, with seats at Quezon City over Quezon City only.
c. Branches CVIII to CXIX, inclusive, with seats at Pasay City over Pasay City only.
xxxx
The petition for prohibition filed by respondents is a special civil action which may be filed in the Supreme Court, the Court of Appeals,
the Sandiganbayan or the regional trial court, as the case may be.27 It is also a personal action because it does not affect the title to, or
possession of real property, or interest therein. Thus, it may be commenced and tried where the plaintiff or any of the principal plaintiffs
resides, or where the defendant or any of the principal defendants resides, at the election of the plaintiff.28 Since respondent Velasco,
plaintiff before the trial court, is a resident of the City of Manila,29 the petition could properly be filed in the City of Manila.30 The choice
of venue is sanctioned by Section 2, Rule 4 of the Rules of Court.
Moreover, Section 21(1) of BP 129 provides:
Sec. 21. Original jurisdiction in other cases. - Regional Trial Courts shall exercise original jurisdiction:
(1) In the issuance of writs of certiorari, prohibition, mandamus, quo warranto, habeas corpus and injunction, which may
be enforced in any part of their respective regions; x x x (Emphasis supplied)
Since the National Capital Judicial Region is comprised of the cities of Manila, Quezon, Pasay, Caloocan, Malabon, Mandaluyong,
Makati, Pasig, Marikina, Paraaque, Las Pias, Muntinlupa, and Valenzuela and the municipalities of Navotas, San Juan, Pateros,
and Taguig, a writ of prohibition issued by the regional trial court sitting in the City of Manila, is enforceable in Pasay City. Clearly, the
RTC did not err when it took cognizance of respondents petition for prohibition because it had jurisdiction over the action and the
venue was properly laid before it.
Petitioners also argue that Resolution Nos. 372, 197, and 306 need not be filed with the UP Law Center ONAR since they are, at
most, regulations which are merely internal in nature regulating only the personnel of the GSIS and not the public.
Not all rules and regulations adopted by every government agency are to be filed with the UP Law Center. Only those of general or of
permanent character are to be filed. According to the UP Law Centers guidelines for receiving and publication of rules and regulations,
interpretative regulations and those merely internal in nature, that is, regulating only the personnel of the Administrative agency and
not the public, need not be filed with the UP Law Center.
Resolution No. 372 was about the new GSIS salary structure, Resolution No. 306 was about the authority to pay the 2002 Christmas
Package, and Resolution No. 197 was about the GSIS merit selection and promotion plan. Clearly, the assailed resolutions pertained
only to internal rules meant to regulate the personnel of the GSIS. There was no need for the publication or filing of these resolutions
with the UP Law Center.
Petitioners insist that petitioner GSIS Board has the power to issue the assailed resolutions. According to petitioners, it was within the
power of petitioner GSIS Board to disqualify respondents for step increment and from receiving GSIS benefits from the time formal
administrative charges were filed against them until the cases are resolved.
The Court notes that the trial court only declared Resolution Nos. 197 and 372 void. The trial court made no ruling on Resolution No.
306 and respondents did not appeal this matter. Therefore, we will limit our discussion to Resolution Nos. 197 and 372, particularly to
the effects of preventive suspension on the grant of step increment because this was what respondents raised before the trial court.
First, entitlement to step increment depends on the rules relative to the grant of such benefit. In point are Section 1(b), Rule II and
Section 2, Rule III of Joint Circular No. 1, series of 1990, which provide:
Rule II. Selection Criteria
Section 1. Step increments shall be granted to all deserving officials and employees x x x

(b) Length of Service For those who have rendered continuous satisfactory service in a particular position for at least three
(3) years.
Rule III. Step Increments
xxxx
Section 2. Length of Service A one (1) step increment shall be granted officials and employees for every three (3) years of
continuous satisfactory service in the position. Years of service in the position shall include the following:
(a) Those rendered before the position was reclassified to a position title with a lower or the same salary grade allocation;
and
(b) Those rendered before the incumbent was transferred to another position within the same agency or to another agency
without a change in position title and salary grade allocation.
In the initial implementation of step increments in 1990, an incumbent shall be granted step increments equivalent to one (1)
step for every three (3) years of continuous satisfactory service in a given position occupied as of January 1, 1990.

A grant of step increment on the basis of length of service requires that an employee must have rendered at least three years of
continuous and satisfactory service in the same position to which he is an incumbent.31 To determine whether service is continuous, it
is necessary to define what actual service is.32 Actual service refers to the period of continuous service since the appointment of the
official or employee concerned, including the period or periods covered by any previously approved leave with pay.33
Second, while there are no specific rules on the effects of preventive suspension on step increment, we can refer to the CSC rules and
rulings on the effects of the penalty of suspension and approved vacation leaves without pay on the grant of step increment for
guidance.
Section 56(d), Rule IV of the Uniform Rules on Administrative Cases in the Civil Service provides:
Section 56. Duration and effect of administrative penalties. - The following rules shall govern in the imposition of
administrative penalties: x x x
(d) The penalty of suspension shall result in the temporary cessation of work for a period not exceeding one (1) year.
Suspension of one day or more shall be considered a gap in the continuity of service. During the period of suspension,
respondent shall not be entitled to all money benefits including leave credits.
If an employee is suspended as a penalty, it effectively interrupts the continuity of his government service at the commencement of the
service of the said suspension. This is because a person under penalty of suspension is not rendering actual service. The suspension
will undoubtedly be considered a gap in the continuity of the service for purposes of the computation of the three year period in the
grant of step increment.34 However, this does not mean that the employee will only be entitled to the step increment after completing
another three years of continuous satisfactory service reckoned from the time the employee has fully served the penalty of
suspension.35 The CSC has taken this to mean that the computation of the three year period requirement will only be extended by the
number of days that the employee was under suspension.36 In other words, the grant of step increment will only be delayed by the
same number of days that the employee was under suspension.
This is akin to the status of an employee who incurred vacation leave without pay for purposes of the grant of step
increment.37 Employees who were on approved vacation leave without pay enjoy the liberal application of the rule on the grant of step
increment under Section 60 of CSC Memorandum Circular No. 41, series of 1998, which provides:
Section 60. Effect of vacation leave without pay on the grant of length of service step increment. - For purposes of computing
the length of service for the grant of step increment, approved vacation leave without pay for an aggregate of fifteen (15)
days shall not interrupt the continuity of the three-year service requirement for the grant of step increment. However, if the
total number of authorized vacation leave without pay included within the three-year period exceeds fifteen (15) days, the
grant of one-step increment will only be delayed for the same number of days that an official or employee was absent
without pay. (Emphasis supplied)
Third, on preventive suspension, Sections 51 and 52, Chapter 7, Subtitle A, Title I, Book V of the Revised Administrative Code of 1987
provide:
SEC. 51. Preventive Suspension. - The proper disciplining authority may preventively suspend any subordinate officer or employee
under his authority pending an investigation, if the charge against such officer or employee involves dishonesty, oppression or grave
misconduct, or neglect in the performance of duty, or if there are reasons to believe that the respondent is guilty of charges which
would warrant his removal from the service.

SEC. 52. Lifting of Preventive Suspension. Pending Administrative Investigation. - When the administrative case against
the officer or employee under preventive suspension is not finally decided by the disciplining authority within the
period of ninety (90) days after the date of suspension of the respondent who is not a presidential appointee, the
respondent shall be automatically reinstated in the service: Provided, That when the delay in the disposition of the case
is due to the fault, negligence or petition of the respondent, the period of delay shall not be counted in computing the period
of suspension herein provided. (Emphasis supplied)
Preventive suspension pending investigation is not a penalty.38 It is a measure intended to enable the disciplining authority to
investigate charges against respondent by preventing the latter from intimidating or in any way influencing witnesses against him.39 If
the investigation is not finished and a decision is not rendered within that period, the suspension will be lifted and the respondent will
automatically be reinstated.
Therefore, on the matter of step increment, if an employee who was suspended as a penalty will be treated like an employee on
approved vacation leave without pay,40 then it is only fair and reasonable to apply the same rules to an employee who was
preventively suspended, more so considering that preventive suspension is not a penalty. If an employee is preventively suspended,
the employee is not rendering actual service and this will also effectively interrupt the continuity of his government service.
Consequently, an employee who was preventively suspended will still be entitled to step increment after serving the time of his
preventive suspension even if the pending administrative case against him has not yet been resolved or dismissed. The grant of step
increment will only be delayed for the same number of days, which must not exceed 90 days, that an official or employee was serving
the preventive suspension.
Fourth, the trial court was correct in declaring that respondents had the right to be presumed innocent until proven guilty. This means
that an employee who has a pending administrative case filed against him is given the benefit of the doubt and is considered innocent
until the contrary is proven.41
In this case, respondents were placed under preventive suspension for 90 days beginning on 23 May 2002. Their preventive
suspension ended on 21 August 2002. Therefore, after serving the period of their preventive suspension and without the
administrative case being finally resolved, respondents should have been reinstated and, after serving the same number of days of
their suspension, entitled to the grant of step increment.
On a final note, social legislation like the circular on the grant of step increment, being remedial in character, should be liberally
construed and administered in favor of the persons to be benefited. The liberal approach aims to achieve humanitarian purposes of
the law in order that the efficiency, security and well-being of government employees may be enhanced.42
WHEREFORE, we DENY the petition. We AFFIRM with MODIFICATION the 24 September 2004 Decision and the 7 October 2005
Order of the Regional Trial Court of Manila, Branch 19 in Civil Case No. 03-108389. We DECLARE the assailed provisions on step
increment in GSIS Board Resolution Nos. 197 and 372 VOID. We MODIFY the 24 September 2004 Decision of the Regional Trial
Court of Manila, Branch 19 and rule that GSIS Board Resolution Nos. 197, 306 and 372 need not be filed with the University of the
Philippines Law Center.
SO ORDERED.

ANTONIO T. CARPIO
Associate Justice

WE CONCUR:

ANTONIO EDUARDO B. NACHURA


Associate Justice

DIOSDADO M. PERALTA ROBERTO A. ABAD


Associate Justice Associate Justice

JOSE C. MENDOZA
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, I certify that the conclusions in the
above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA
Chief Justice

1 Under Rule 45 of the 1997 Rules of Civil Procedure.


2 Rollo, pp. 34-37. Penned by Judge Zenaida R. Daguna.
3 Id. at 38.
4 Respondent Albert M. Velasco holds the position of Attorney V in the Department of Investigation.
5 Respondent Mario I. Molina holds the position of Attorney V in the Legal Department. Sometimes appears in the records as Mario T.
Molina.
6 Records, pp. 24-28.
7 Respondent Albert M. Velasco was also charged with violation of rules on office decorum and gross insubordination.
8 Records, pp. 35-36.
9 Id. at 19-23. Issued on 21 November 2000.
10 Id. at 37.
11 Id. at 33-34. Issued on 23 October 2002.
12 Id. at 5-18.
13 Id. at 38.
14 Id. at 42-46.
15 Id. at 49-52.
16 Id. at 53-58.
17 Id. at 68-70.
18 Id. at 83-88.
19 Id. at 140.
20 Rollo, p. 37.

21 Records, p. 38.
22 SEC. 3. Filing. - (1) Every agency shall file with the University of the Philippines Law Center three (3) certified copies of every rule
adopted by it. Rules in force on the date of effectivity of this Code which are not filed within three (3) months from that date shall not
thereafter be the basis of any sanction against any party of persons.
(2) The records officer of the agency, or his equivalent functionary, shall carry out the requirements of this section under pain of
disciplinary action.
(3) A permanent register of all rules shall be kept by the issuing agency and shall be open to the public inspection.
SEC. 4. Effectivity. - In addition to other rule-making requirements provided by law not inconsistent with this Book, each rule shall
become effective fifteen (15) days from the date of filing as above provided unless a different date is fixed by law, or specified in the
rule in cases of imminent danger to public health, safety and welfare, the existence of which must be expressed in a statement
accompanying the rule. The agency shall take appropriate measures to make emergency rules known to persons who may be
affected by them.
23 Rollo, p. 157.
24 Records, p. 16.
25 The Judiciary Reorganization Act of 1980.
26 Dated 19 January 1983.
27 Rules of Court, Sec. 4, Rule 65.
28 Rules of Court, Sec. 2, Rule 4.
29 Records, p. 7. In the petition for prohibition, respondent Velasco stated that his residence is at 639-A Cristobal
Street, Sampaloc, Manila.
30 See Notre Dame de Lourdes Hospital v. Mallare-Phillips, 274 Phil. 467 (1991).
31 CSC Resolution No. 02-1479, Sison, Maricon Re: Query; Step Increment, 8 November 2002.
32 Id.
33 Section 28, CSC Memorandum Circular No. 41, series of 1988. Also known as the Revised Omnibus Rules on Leave.
34 CSC Resolution No. 021564, Traspadillo, John Marlon M. - Re: Step Increment; Suspension as a Gap in the Service, 17 December
2002.
35 Id.
36 Id.
37 Id.
38 Section 24 of Rule XIV of the Omnibus Rules Implementing Book V of the Administrative Code of 1987 and other Pertinent Civil
Service Laws. Section 24 provides:
SEC. 24. Preventive suspension is not a punishment or penalty for misconduct in office but is considered to be a preventive measure.
39 Juan v. People of the Philippines, 379 Phil. 125 (2000); Gloria v. Court of Appeals, 365 Phil. 744 (1999).
40 CSC Resolution No. 021564, Traspadillo, John Marlon M. - Re: Step Increment; Suspension as a Gap in the Service, 17 December
2002.
41 CSC Resolution No. 992456, Asperilla, Dominador O. - Re: Special Leave Benefits; Query, 5 November 1999.
42 Tria v. Employees Compensation Commission, G.R. No. 96787, 8 May 1992, 208 SCRA 834; Ortiz v. COMELEC, 245 Phil. 780
(1988).

EN BANC
WILLIAM C. DAGAN, CARLOS G.R. No. 175220
H. REYES, NARCISO MORALES,
BONIFACIO MANTILLA, Present:
CESAR AZURIN, WEITONG LIM,
MA. TERESA TRINIDAD, MA. PUNO, C.J.,
CARMELITA FLORENTINO, QUISUMBING,
Petitioners, YNARES-SANTIAGO,
CARPIO,
AUSTRIA-MARTINEZ,
CORONA,
- versus - CARPIO MORALES,
AZCUNA,
TINGA,
CHICO-NAZARIO,
VELASCO, JR.,
PHILIPPINE RACING COMMISSION, NACHURA,
MANILA JOCKEY CLUB, INC., and LEONARDO DE CASTRO,
PHILIPPINE RACING CLUB, INC., BRION, and
Respondents PERALTA, JJ.
Promulgated:
February 12, 2009
x ----------------------------------------------------------------------------------- x

DECISION
TINGA, J.:
The subject of this petition for certiorari is the decision [1] of the Court of Appeals in CA-G.R. SP No. 95212,
affirming in toto the judgment[2] of the Regional Trial Court of Makati in Civil Case No. 04-1228.

The controversy stemmed from the 11 August 2004 directive[3] issued by the Philippine Racing Commission (Philracom)
directing the Manila Jockey Club, Inc. (MJCI) and Philippine Racing Club, Inc. (PRCI) to immediately come up with their respective
Clubs House Rule to address Equine Infectious Anemia (EIA) [4] problem and to rid their facilities of horses infected with EIA. Said
directive was issued pursuant to Administrative Order No. 5 [5] dated 28 March 1994 by the Department of Agriculture declaring it
unlawful for any person, firm or corporation to ship, drive, or transport horses from any locality or place except when accompanied by
a certificate issued by the authority of the Director of the Bureau of Animal Industry (BAI).[6]
In compliance with the directive, MJCI and PRCI ordered the owners of racehorses stable in their establishments to submit
the horses to blood sampling and administration of the Coggins Test to determine whether they are afflicted with the EIA
virus. Subsequently, on 17 September 2004, Philracom issued copies of the guidelines for the monitoring and eradication of EIA.[7]

Petitioners and racehorse owners William Dagan (Dagan), Carlos Reyes, Narciso Morales, Bonifacio Montilla, Cezar Azurin,
Weitong Lim, Ma. Teresa Trinidad and Ma. Carmelita Florentino refused to comply with the directive. First, they alleged that there had
been no prior consultation with horse owners. Second, they claimed that neither official guidelines nor regulations had been issued
relative to the taking of blood samples. And third, they asserted that no documented case of EIA had been presented to justify the
undertaking.[8]
Despite resistance from petitioners, the blood testing proceeded. The horses, whose owners refused to comply were banned
from the races, were removed from the actual day of race, prohibited from renewing their licenses or evicted from their stables.

When their complaint went unheeded, the racehorse owners lodged a complaint before the Office of the President (OP) which in turn
issued a directive instructing Philracom to investigate the matter.
For failure of Philracom to act upon the directive of the OP, petitioners filed a petition for injunction with application for the issuance of
a temporary restraining order (TRO). In an order[9] dated 11 November 2004, the trial court issued a TRO.

Dagan refused to comply with the directives because, according to him, the same are unfair as there are no implementing rules on the
banning of sick horses from races. Consequently, his horses were evicted from the stables and transferred to an isolation area. He
also admitted that three of his horses had been found positive for EIA.[10]
Confronted with two issues, namely: whether there were valid grounds for the issuance of a writ of injunction and whether respondents
had acted with whim and caprice in the implementation of the contested guideline, the trial court resolved both queries in the negative.
The trial court found that most racehorse owners, except for Dagan, had already subjected their racehorses to EIA testing. Their act
constituted demonstrated compliance with the contested guidelines, according to the trial court. Hence, the acts sought to be enjoined
had been rendered moot and academic.
With respect to the subject guidelines, the trial court upheld their validity as an exercise of police power, thus:
The Petitioners submission that the subject guidelines are oppressive and hence confiscatory of proprietary
rights is likewise viewed by this Court to be barren of factual and legal support. The horseracing industry, needless
to state, is imbued with public interest deserving of utmost concern if not constant vigilance. The Petitioners do not
dispute this. It is because of this basic fact that respondents are expected to police the concerned individuals and
adopt measures that will promote and protect the interests of all the stakeholders starting from the moneyed horseowners, gawking bettors down to the lowly maintainers of the stables. This is a clear and valid exercise of police
power with the respondents acting for the State. Participation in the business of horseracing is but a privilege; it is
not a right. And no clear acquiescence to this postulation can there be than the Petitioners' own undertaking to
abide by the rules and conditions issued and imposed by the respondents as specifically shown by their contracts of
lease with MCJI.[11]
Petitioners appealed to the Court of Appeals. In its Decision dated 27 October 2006, the appellate court affirmed in toto the
decision of the trial court.
The appellate court upheld the authority of Philracom to formulate guidelines since it is vested with exclusive jurisdiction over
and control of the horse-racing industry per Section 8 of Presidential Decree (P.D.) No. 8. The appellate court further pointed out that
P.D. No. 420 also endows Philracom with the power to prescribe additional rules and regulations not otherwise inconsistent with the
said presidential decree[12] and to perform such duties and exercise all powers incidental or necessary to the accomplishment of its
aims and objectives.[13] It similarly concluded that the petition for prohibition should be dismissed on the ground of mootness in light of
evidence indicating that petitioners had already reconsidered their refusal to have their horses tested and had, in fact, subsequently
requested the administration of the test to the horses.[14]
Aggrieved by the appellate courts decision, petitioners filed the instant certiorari petition [15] imputing grave abuse of discretion
on the part of respondents in compelling petitioners to subject their racehorses to blood testing.
In their amended petition, [16] petitioners allege that Philracoms unsigned and undated implementing guidelines suffer from
several infirmities. They maintain that the assailed guidelines do not comply with due process requirements. Petitioners insist that
racehorses already in the MJCI stables were allowed to be so quartered because the individual horse owners had already complied
with the Philracom regulation that horses should not bear any disease. There was neither a directive nor a rule that racehorses
already lodged in the stables of the racing clubs should again be subjected to the collection of blood samples preparatory to the
conduct of the EIA tests,[17] petitioners note. Thus, it came as a surprise to horse owners when told about the administration of a
new Coggins Tests on old horses since the matter had not been taken up with them. [18] No investigation or at least a summary
proceeding was conducted affording petitioners an opportunity to be heard.[19] Petitioners also aver that the assailed guidelines
are ultra vires in that the sanctions imposed for refusing to submit to medical examination are summary eviction from the stables or
arbitrary banning of participation in the races, notwithstanding the penalties prescribed in the contract of lease.[20]
In its Comment,[21] the PRCI emphasizes that it merely obeyed the terms of its franchise and abided by the rules enacted by
Philracom.[22] For its part, Philracom, through the Office of the Solicitor-General (OSG), stresses that the case has become moot and
academic since most of petitioners had complied with the guidelines by subjecting their race horses to EIA testing. The horses found
unafflicted with the disease were eventually allowed to join the races.[23] Philracom also justified its right under the law to regulate
horse racing.[24] MJCI adds that Philracom need
not delegate its rule-making power to the former since MJCIs right to formulate its internal rules is subsumed under the franchise
granted to it by Congress.[25]

In their Reply,[26] petitioners raise for the first time the issue that Philracom had unconstitutionally delegated its rule-making power to
PRCI and MJCI in issuing the directive for them to come up with club rules. In response to the claim that respondents had merely
complied with their duties under their franchises, petitioners counter that the power granted to PRCI and MJCI under their respective
franchises is limited to: (1) the construction, operation and maintenance of racetracks; (2) the establishment of branches for booking
purposes; and (3) the conduct of horse races.
It appears on record that only Dagan had refused to comply with the orders of respondents. Therefore, the case subsists as
regards Dagan.
Petitioners essentially assail two issuances of Philracom; namely: the Philracom directive [27] and the subsequent guidelines
addressed to MJCI and PRCI.
The validity of an administrative issuance, such as the assailed guidelines, hinges on compliance with the following
requisites:
1.
2.
3.
4.

Its promulgation must be authorized by the legislature;


It must be promulgated in accordance with the prescribed procedure;
It must be within the scope of the authority given by the legislature;
It must be reasonable.[28]

All the prescribed requisites are met as regards the questioned issuances. Philracoms authority is drawn from P.D. No.
420. The delegation made in the presidential decree is valid. Philracom did not exceed its authority. And the issuances are fair and
reasonable.
The rule is that what has been delegated cannot be delegated, or as expressed in the Latin maxim: potestas delegate non
delegare potest. This rule is based upon the ethical principle that such delegated power constitutes not only a right but a duty to be
performed by the delegate by the instrumentality of his own judgment acting immediately upon the matter of legislation and not
through the intervening mind of another.[29] This rule however admits of recognized exceptions[30] such as the grant of rule-making
power to administrative agencies. They have been granted by Congress with the authority to issue rules to regulate the
implementation of a law entrusted to them. Delegated rule-making has become a practical necessity in modern governance due to
the increasing complexity and variety of public functions.[31]
However, in every case of permissible delegation, there must be a showing that the delegation itself is valid. It is valid only if
the law (a) is complete in itself, setting forth therein the policy to be executed, carried out, or implemented by the delegate; and (b)
fixes a standardthe limits of which are sufficiently determinate and determinableto which the delegate must conform in the
performance of his functions. A sufficient standard is one which defines legislative policy, marks its limits, maps out its boundaries and
specifies the public agency to apply it. It indicates the circumstances under which the legislative command is to be effected.[32]
P.D. No. 420 hurdles the tests of completeness and standards sufficiency.
Philracom was created for the purpose of carrying out the declared policy in Section 1 which is to promote and direct the
accelerated development and continued growth of horse racing not only in pursuance of the sports development program but also in
order to insure the full exploitation of the sport as a source of revenue and employment. Furthermore, Philracom was granted
exclusive jurisdiction and control over every aspect of the conduct of horse racing, including the framing and scheduling of races, the
construction and safety of race tracks, and the security of racing. P.D. No. 420 is already complete in itself.
Section 9 of the law fixes the standards and limitations to which Philracom must conform in the performance of its functions,
to wit:
Section 9. Specific Powers. Specifically, the Commission shall have the power:
a.

b.
c.
d.
e.

To enforce all laws, decrees and executive orders relating to horse-racing that are not expressly or
implied repealed or modified by this Decree, including all such existing rules and regulations until
otherwise modified or amended by the Commission;
To prescribe additional rules and regulations not otherwise inconsistent with this Decree;
To register race horses, horse owners or associations or federations thereof, and to regulate the
construction of race tracks and to grant permit for the holding of races;
To issue, suspend or revoke permits and licenses and to impose or collect fees for the issuance of
such licenses and permits to persons required to obtain the same;
To review, modify, approve or disapprove the rules and regulations issued by any person or entity
concerning the conduct of horse races held by them;

f.
g.
h.
i.
j.

To supervise all such race meeting to assure integrity at all times. It can order the suspension of any
racing event in case of violation of any law, ordinance or rules and regulations;
To prohibit the use of improper devices, drugs, stimulants or other means to enhance or
diminish the speed of horse or materially harm their condition;
To approve the annual budget of the omission and such supplemental budgets as may be necessary;
To appoint all personnel, including an Executive Director of the Commission, as it may be deem
necessary in the exercise and performance of its powers and duties; and
To enter into contracts involving obligations chargeable to or against the funds of the Commission.
(Emphasis supplied)

Clearly, there is a proper legislative delegation of rule-making power to Philracom. Clearly too, for its part Philracom has
exercised its rule-making power in a proper and reasonable manner. More specifically, its discretion to rid the facilities of MJCI and
PRCI of horses afflicted with EIA is aimed at preserving the security and integrity of horse races.
Petitioners also question the supposed delegation by Philracom of its rule-making powers to MJCI and PRCI.
There is no delegation of power to speak of between Philracom, as the delegator and MJCI and PRCI as delegates. The
Philracom directive is merely instructive in character. Philracom had instructed PRCI and MJCI to immediately come up with Clubs
House Rule to address the problem and rid their facilities of horses infected with EIA. PRCI and MJCI followed-up when they ordered
the racehorse owners to submit blood samples and subject their race horses to blood testing. Compliance with the Philracoms
directive is part of the mandate of PRCI and MJCI under Sections 1[33] of R.A. No. 7953[34] and Sections 1[35] and 2[36] of 8407.[37]

As correctly proferred by MJCI, its duty is not derived from the delegated authority of Philracom but arises from the franchise
granted to them by Congress allowing MJCI to do and carry out all such acts, deeds and things as may be necessary to give effect to
the foregoing.[38] As justified by PRCI, obeying the terms of the franchise and abiding by whatever rules enacted by Philracom is its
duty.[39]
More on the second, third and fourth requisites.
As to the second requisite, petitioners raise some infirmities relating to Philracoms guidelines. They question the supposed
belated issuance of the guidelines, that is, only after the collection of blood samples for the Coggins Test was ordered.While it is
conceded that the guidelines were issued a month after Philracoms directive, this circumstance does not render the directive nor the
guidelines void. The directives validity and effectivity are not dependent on any supplemental guidelines.Philracom has every right to
issue directives to MJCI and PRCI with respect to the conduct of horse racing, with or without implementing guidelines.
Petitioners also argue that Philracoms guidelines have no force and effect for lack of publication and failure to file copies with
the University of the Philippines (UP) Law Center as required by law.
As a rule, the issuance of rules and regulations in the exercise of an administrative agency of its quasi-legislative power does
not require notice 7and hearing.[40] In Abella, Jr. v. Civil Service Commission,[41] this Court had the occasion to rule that prior notice and
hearing are not essential to the validity of rules or regulations issued in the exercise of quasi-legislative powers since there is no
determination of past events or facts that have to be established or ascertained.[42]
The third requisite for the validity of an administrative issuance is that it must be within the limits of the powers granted to
it. The administrative body may not make rules and regulations which are inconsistent with the provisions of the Constitution or a
statute, particularly the statute it is administering or which created it, or which are in derogation of, or defeat, the purpose of a statute.
[43]

The assailed guidelines prescribe the procedure for monitoring and eradicating EIA. These guidelines are in accord with
Philracoms mandate under the law to regulate the conduct of horse racing in the country.
Anent the fourth requisite, the assailed guidelines do not appear to be unreasonable or discriminatory. In fact, all horses
stabled at the MJCI and PRCIs premises underwent the same procedure. The guidelines implemented were undoubtedly reasonable
as they bear a reasonable relation to the purpose sought to be accomplished, i.e., the complete riddance of horses infected with EIA.
It also appears from the records that MJCI properly notified the racehorse owners before the test was conducted. [44] Those
who failed to comply were repeatedly warned of certain consequences and sanctions.
Furthermore, extant from the records are circumstances which allow respondents to determine from time to time the eligibility
of horses as race entries. The lease contract executed between petitioner and MJC contains a proviso reserving the right of the lessor,

MJCI in this case, the right to determine whether a particular horse is a qualified horse. In addition, Philracoms rules and regulations
on horse racing provide that horses must be free from any contagious disease or illness in order to be eligible as race entries.
All told, we find no grave abuse of discretion on the part of Philracom in issuing the contested guidelines and on the part
MJCI and PRCI in complying with Philracoms directive.
WHEREFORE, the petition is DISMISSED. Costs against petitioner William Dagan.
SO ORDERED.

DANTE O. TINGA
Associate Justice

WE CONCUR:
REYNATO S. PUNO
Chief Justice

LEONARDO A. QUISUMBING
Associate Justice

CONSUELO YNARES-SANTIAGO
Associate Justice

ANTONIO T. CARPIO
Associate Justice

MA. ALICIA AUSTRIA-MARTINEZ


Associate Justice

O C. CORONA
Associate Justice

ADOLFO S. AZCUNA
Associate Justice

TERO J. VELASCO, JR.


Associate Justice

CONCHITA CARPIO MORALES


Associate Justice

MINITA V. CHICO-NAZARIO
Associate Justice

ANTONIO EDUARDO B. NACHURA


Associate Justice

TERESITA LEONARDO DE CASTRO


Associate Justice

ARTURO D. BRION
Associate Justice

DIOSDADO M. PERALTA
Associate Justice

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in
consultation before the case was assigned to the writer of the opinion of the Court.
REYNATO S. PUNO
Chief Justice

[1]

Rollo, pp. 46-62; penned by Associate Justice Rebecca De Guia-Salvador, concurred in by Associate Justices Magdangal
M.De Leon and Ramon R. Garcia.
[2]

Records (Vol. II), pp. 482-487; presided by Zenaida T. Galapate-Laguilles.

[3]

Records (Vol. 1), p. 32.

[4]
Rollo, p. 18. Equine Infectious Anemia (EIA) is an infectious and potentially fatal viral disease of members of the horse
family. The equine infectious anemia virus (EIAV) is categorized as a lentivirus: it contains genetic RNA material, which it uses to
produce DNA. This DNA is then incorporated into the genetic makeup of infected cells. Identified in France in 1843 and first tentatively
diagnosed in the United States in 1888, EIA has commanded a great deal of attention over the years. No vaccine or treatment exists
for
the
disease. EIAV
is
the
first
lentivirus-induced
disease
proven
to
be
transmitted
by
insects.
(http://www.aphis.usda.gov/lpa/pubs/fsheet_faq_notice/fs_aheia.html)

[5]

Id. at 33.

[6]

Id. at 19.

[7]

Records (Vol. 1), pp. 178-181.

[8]

See petitioners letter dated 8 October 2004; rollo, pp. 33-35.

[9]

Records (Vol. 1), pp. 210-214; presided by Pairing Judge Oscar B. Pimentel.

[10]

[11]

Records (Vol. 2), p. 484.

Id. at 486.

[12]

Presidential Decree No. 420 (1974), Sec. 9(b).

[13]

Presidential Decree No. 420 (1974), Sec. 10(e).

[14]

Rollo, pp. 55 and 60.

[15]

Id. at 3-17.

[16]

Id. at 78-131.

[17]

Id. at 95.

[18]

Id. at 97.

[19]

Id. at 109.

[20]

Id. at 111. Under the Contract of Lease, failing or refusing to submit to medical examination or drug testing is considered a
minor offense punishable by reprimand for the first offense, fine and/or suspension for the second offense and expulsion for the third
offense. Id. at 30.
[21]
[22]

Id. at 285-293.
Id. at 290.

[23]

Id. at 332-333.

[24]

Id. at 334.

[25]

Id. at 350-351.

[26]

Id. at 361-400.

[27]

Id. at 18.

[28]

Hon. Executive Secretary, et. al. v. Southwing Heavy Industries, Inc., G.R. No. 164171. 20 February 2006, 482 SCRA 673,

686.
[29]
Abakada Guro Party-list v.Ermita, G.R. No. 168056, 1 September 2005, 469 SCRA 115-116; Sandoval v. Pagcor, 400 Phil.
307 (2000).

[30]

The other exceptions are:

a. Delegation of tariff powers to the President under Section 28(2) of Article VI of the Constitution;
b. Delegation of emergency powers to the President under Section 23(2) of Article VI of the Constitution;
c. Delegation to the people at large;
d. Delegation to local governments. See Santiago v. Comelec, 336 Phil. 848, 898 (1998), citing People v. Vera, 65 Phil. 56
(1937).
[31]

Department of Agrarian Reform v. Sutton, G.R. No. 162070, 19 October 2005, 473 SCRA 392.

[32]

Supra note 23.

[33]
Sec. 1. The Philippine Racing Club, Inc., a corporation duly organized and registered under the laws of the Republic of the
Philippines, hereinafter called the grantee or its successors is hereby granted the right, notwithstanding any provision of law to the
contrary, privilege and authority to construct, operate and maintain, one race track in the Municipality of Makati, Metro Manila, or
anywhere within the provinces of Rizal, Laguna and Cavite, establish such branches thereof for booking purposes anywhere in the
country, and hold or conduct horse races therein with bettings whether on the results of the races or other forms of gaming derived
therefrom, and either directly or by means of mechanical, electric and/or computerized totalizator and to do and carry out all such acts,
deeds and things as may be necessary to give effect to the foregoing: provided, that in case of transfer of the race track from Makati,
Metro Manila, such shall be subject to the approval of the host province or city/municipality to where it would transfer , through a public
hearing to be conducted by the local government unit concerned.

The races to be conducted by the grantee shall be under the supervision and regulation of the Philippine Racing
Commission, which shall enforce the laws, rules and regulations governing horse racing, including the framing and scheduling
of races, the construction and safety of the race track, the allocation of prizes of winning horses, and the security of racing as provided
in Presidential Decree No. 420, as amended: Provided, That the Games and Amusement Board shall continue to supervise and
regulate betting in horse races as provided in Section 6, 8, 11, 15 and 24 of Republic Act Numbered Three hundred and nine, as
amended, and all the racing officials and personnel to be employed by the grantee shall be duly licensed as such by the said Games
and Amusements Board in accordance with Section 5 of the same Act. (Emphasis supplied)
[34]
ENTITLED AN ACT AMENDING R.A. NO. 6632 ENTITLED AN ACT GRANTING THE PHILIPPINE RACING CLUB, INC. A
FRANCHISE TO OPERATE AND MAINTAIN A RACE TRACK FOR HORSE RACING IN THE PROVINCE OF RIZAL AND
EXTENDING THE SAID FRANCHISE BY TWENTY-FIVE (25) YEARS FROM THE EXPIRATION OF THE TERM THEREOF.

[35]

Section 1. Nature and Scope of Franchise.Any provision of law to the contrary notwithstanding, there is hereby granted to
Manila Jockey Club, Inc., a corporation duly organized and registered under the laws of the Philippines, hereinafter called the grantee
or its assigns or its successors, for a period of twenty-five (25) years from the approval of this Act, the right, privilege and authority to
construct, operate and maintain one racetrack in any place within the City of Manila or any place within the provinces of Bulacan,
Cavite or Rizal, establish such branches thereof for booking purposes anywhere in the country, and hold or conduct horse races
therein with bettings either directly or indirectly by means of mechanical, electric and/or computerized totalizator and to do and carry
out all such acts, deeds and things as may be necessary to give effect to the foregoing: provided, that in case of transfer of the
racetrack from the City of Manila, such transfer shall be subject to the approval of the host province or city/municipality to where it
would transfer, through a public hearing to be conducted by the local government unit concerned.
[36]

Section 2. Authority of the Philippine Racing Commission and the Games and Amusement Board.The races to be
conducted by the grantee shall be under the supervision and regulation of the Philippine Racing Commission, which shall
enforce the laws, rules and regulations governing horse racing, including the framing and scheduling of races, the construction
and safety of the racetrack, the allocation of prizes of winning horses, and the security of racing as provided in Presidential Decree
No. 420, as amended: Provided, That the Games and Amusement Board shall continue to supervise and regulate betting in horse
races as provided in Sections 6, 8, 11, 15 and 24 of Republic Act No. 309, as amended. (Emphasis supplied)
[37]

ENTITLED AN ACT AMENDING R.A. NO. 6631 ENTITLED AN ACT GRANTING MANILA JOCKEY CLUB, INC. A
FRANCHISE TO CONSTRUCT, OPERATE AND MAINTAIN A RACETRACK FOR HORSE RACING IN THE CITY OF MANILA OR
ANY PLACE WITHIN THE PROVINCES OF BULACAN, CAVITE OR RIZAL AND EXTENDING THE SAID FRANCHISE BY TWENTYFIVE (25) YEARS FROM THE EXPIRATION OF THE TERM THEREOF.
[38]

Rollo, p. 350.

[39]

Id. at 230.

[40]

AGPALO, RUBEN E., PHILIPPINE ADMINISTRATIVE LAW, 2004 Edition, p. 156.

[41]

G.R. No. 152574, 17 November 2004, 442 SCRA 507.

[42]

Id. at 530.

[43]

Smart Communications, Inc. v. National Telecommunications Commission, 456 Phil. 145 (2003).

[44]

Rollo, p. 230.

FIRST DIVISION
[G.R. No. 151908. August 12, 2003]
SMART COMMUNICATIONS, INC. (SMART) and PILIPINO TELEPHONE CORPORATION (PILTEL), petitioners,
vs. NATIONAL TELECOMMUNICATIONS COMMISSION (NTC), respondent.
[G.R. No. 152063. August 12, 2003]
GLOBE TELECOM, INC. (GLOBE) and ISLA COMMUNICATIONS CO., INC. (ISLACOM), petitioners, vs. COURT OF
APPEALS (The Former 6th Division) and the NATIONAL TELECOMMUNICATIONS COMMISSION,respondents.
DECISION
YNARES-SANTIAGO, J.:
Pursuant to its rule-making and regulatory powers, the National Telecommunications Commission (NTC) issued on June 16,
2000 Memorandum Circular No. 13-6-2000, promulgating rules and regulations on the billing of telecommunications services. Among
its pertinent provisions are the following:
(1) The billing statements shall be received by the subscriber of the telephone service not later than 30 days from the end of
each billing cycle. In case the statement is received beyond this period, the subscriber shall have a specified grace period within which
to pay the bill and the public telecommunications entity (PTEs) shall not be allowed to disconnect the service within the grace period.
(2) There shall be no charge for calls that are diverted to a voice mailbox, voice prompt, recorded message or similar facility
excluding the customers own equipment.
(3) PTEs shall verify the identification and address of each purchaser of prepaid SIM cards. Prepaid call cards and SIM cards
shall be valid for at least 2 years from the date of first use. Holders of prepaid SIM cards shall be given 45 days from the date the
prepaid SIM card is fully consumed but not beyond 2 years and 45 days from date of first use to replenish the SIM card, otherwise the
SIM card shall be rendered invalid. The validity of an invalid SIM card, however, shall be installed upon request of the customer at no
additional charge except the presentation of a valid prepaid call card.
(4) Subscribers shall be updated of the remaining value of their cards before the start of every call using the cards.
(5) The unit of billing for the cellular mobile telephone service whether postpaid or prepaid shall be reduced from 1 minute per
pulse to 6 seconds per pulse. The authorized rates per minute shall thus be divided by 10.[1]
The Memorandum Circular provided that it shall take effect 15 days after its publication in a newspaper of general circulation
and three certified true copies thereof furnished the UP Law Center. It was published in the newspaper, The Philippine Star, on June
22, 2000.[2] Meanwhile, the provisions of the Memorandum Circular pertaining to the sale and use of prepaid cards and the unit of
billing for cellular mobile telephone service took effect 90 days from the effectivity of the Memorandum Circular.
On August 30, 2000, the NTC issued a Memorandum to all cellular mobile telephone service (CMTS) operators which
contained measures to minimize if not totally eliminate the incidence of stealing of cellular phone units. The Memorandum directed
CMTS operators to:
a. strictly comply with Section B(1) of MC 13-6-2000 requiring the presentation and verification of the identity and addresses
of prepaid SIM card customers;
b. require all your respective prepaid SIM cards dealers to comply with Section B(1) of MC 13-6-2000;
c. deny acceptance to your respective networks prepaid and/or postpaid customers using stolen cellphone units or cellphone
units registered to somebody other than the applicant when properly informed of all information relative to the stolen cellphone units;
d. share all necessary information of stolen cellphone units to all other CMTS operators in order to prevent the use of stolen
cellphone units; and
e. require all your existing prepaid SIM card customers to register and present valid identification cards.[3]
This was followed by another Memorandum dated October 6, 2000 addressed to all public telecommunications entities,
which reads:
This is to remind you that the validity of all prepaid cards sold on 07 October 2000 and beyond shall be valid for at least two
(2) years from date of first use pursuant to MC 13-6-2000.
In addition, all CMTS operators are reminded that all SIM packs used by subscribers of prepaid cards sold on 07 October
2000 and beyond shall be valid for at least two (2) years from date of first use. Also, the billing unit shall be on a six (6) seconds pulse
effective 07 October 2000.
For strict compliance.[4]
On October 20, 2000, petitioners Isla Communications Co., Inc. and Pilipino Telephone Corporation filed against the National
Telecommunications Commission, Commissioner Joseph A. Santiago, Deputy Commissioner Aurelio M. Umali and Deputy
Commissioner Nestor C. Dacanay, an action for declaration of nullity of NTC Memorandum Circular No. 13-6-2000 (the Billing
Circular) and the NTC Memorandum dated October 6, 2000, with prayer for the issuance of a writ of preliminary injunction and
temporary restraining order. The complaint was docketed as Civil Case No. Q-00-42221 at the Regional Trial Court of Quezon City,
Branch 77.[5]
Petitioners Islacom and Piltel alleged, inter alia, that the NTC has no jurisdiction to regulate the sale of consumer goods such
as the prepaid call cards since such jurisdiction belongs to the Department of Trade and Industry under the Consumer Act of the
Philippines; that the Billing Circular is oppressive, confiscatory and violative of the constitutional prohibition against deprivation of
property without due process of law; that the Circular will result in the impairment of the viability of the prepaid cellular service by

unduly prolonging the validity and expiration of the prepaid SIM and call cards; and that the requirements of identification of prepaid
card buyers and call balance announcement are unreasonable. Hence, they prayed that the Billing Circular be declared null and
void ab initio.
Soon thereafter, petitioners Globe Telecom, Inc and Smart Communications, Inc. filed a joint Motion for Leave to Intervene
and to Admit Complaint-in-Intervention.[6] This was granted by the trial court.
On October 27, 2000, the trial court issued a temporary restraining order enjoining the NTC from implementing Memorandum
Circular No. 13-6-2000 and the Memorandum dated October 6, 2000.[7]
In the meantime, respondent NTC and its co-defendants filed a motion to dismiss the case on the ground of petitioners failure
to exhaust administrative remedies.
Subsequently, after hearing petitioners application for preliminary injunction as well as respondents motion to dismiss, the
trial court issued on November 20, 2000 an Order, the dispositive portion of which reads:
WHEREFORE, premises considered, the defendants motion to dismiss is hereby denied for lack of merit. The plaintiffs
application for the issuance of a writ of preliminary injunction is hereby granted. Accordingly, the defendants are hereby enjoined from
implementing NTC Memorandum Circular 13-6-2000 and the NTC Memorandum, dated October 6, 2000, pending the issuance and
finality of the decision in this case. The plaintiffs and intervenors are, however, required to file a bond in the sum of FIVE HUNDRED
THOUSAND PESOS (P500,000.00), Philippine currency.
SO ORDERED.[8]
Defendants filed a motion for reconsideration, which was denied in an Order dated February 1, 2001.[9]
Respondent NTC thus filed a special civil action for certiorari and prohibition with the Court of Appeals, which was docketed
as CA-G.R. SP. No. 64274. On October 9, 2001, a decision was rendered, the decretal portion of which reads:
WHEREFORE, premises considered, the instant petition for certiorari and prohibition is GRANTED, in that, the order of the
court a quo denying the petitioners motion to dismiss as well as the order of the court a quo granting the private respondents prayer
for a writ of preliminary injunction, and the writ of preliminary injunction issued thereby, are hereby ANNULLED and SET ASIDE. The
private respondents complaint and complaint-in-intervention below are hereby DISMISSED, without prejudice to the referral of the
private respondents grievances and disputes on the assailed issuances of the NTC with the said agency.
SO ORDERED.[10]
Petitioners motions for reconsideration were denied in a Resolution dated January 10, 2002 for lack of merit.[11]
Hence, the instant petition for review filed by Smart and Piltel, which was docketed as G.R. No. 151908, anchored on the
following grounds:
A.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE NATIONAL
TELECOMMUNICATIONS COMMISSION (NTC) AND NOT THE REGULAR COURTS HAS JURISDICTION OVER THE CASE.
B.
THE HONORABLE COURT OF APPEALS ALSO GRAVELY ERRED IN HOLDING THAT THE PRIVATE RESPONDENTS
FAILED TO EXHAUST AN AVAILABLE ADMINISTRATIVE REMEDY.
C.
THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE BILLING CIRCULAR ISSUED BY THE
RESPONDENT NTC IS UNCONSTITUTIONAL AND CONTRARY TO LAW AND PUBLIC POLICY.
D.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PRIVATE RESPONDENTS FAILED TO SHOW
THEIR CLEAR POSITIVE RIGHT TO WARRANT THE ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION. [12]
Likewise, Globe and Islacom filed a petition for review, docketed as G.R. No. 152063, assigning the following errors:
1. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE THE DOCTRINES OF PRIMARY
JURISDICTION AND EXHAUSTION OF ADMINISTRATIVE REMEDIES DO NOT APPLY SINCE THE INSTANT CASE IS FOR
LEGAL NULLIFICATION (BECAUSE OF LEGAL INFIRMITIES AND VIOLATIONS OF LAW) OF A PURELY ADMINISTRATIVE
REGULATION PROMULGATED BY AN AGENCY IN THE EXERCISE OF ITS RULE MAKING POWERS AND INVOLVES ONLY
QUESTIONS OF LAW.
2. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE THE DOCTRINE ON EXHAUSTION OF
ADMINISTRATIVE REMEDIES DOES NOT APPLY WHEN THE QUESTIONS RAISED ARE PURELY LEGAL QUESTIONS.
3. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE THE DOCTRINE OF EXHAUSTION OF
ADMINISTRATIVE REMEDIES DOES NOT APPLY WHERE THE ADMINISTRATIVE ACTION IS COMPLETE AND EFFECTIVE,
WHEN THERE IS NO OTHER REMEDY, AND THE PETITIONER STANDS TO SUFFER GRAVE AND IRREPARABLE INJURY.

4. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE PETITIONERS IN FACT EXHAUSTED ALL
ADMINISTRATIVE REMEDIES AVAILABLE TO THEM.
5. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED IN ISSUING ITS QUESTIONED RULINGS IN THIS
CASE BECAUSE GLOBE AND ISLA HAVE A CLEAR RIGHT TO AN INJUNCTION.[13]
The two petitions were consolidated in a Resolution dated February 17, 2003.[14]
On March 24, 2003, the petitions were given due course and the parties were required to submit their respective
memoranda.[15]
We find merit in the petitions.
Administrative agencies possess quasi-legislative or rule-making powers and quasi-judicial or administrative adjudicatory
powers. Quasi-legislative or rule-making power is the power to make rules and regulations which results in delegated legislation that is
within the confines of the granting statute and the doctrine of non-delegability and separability of powers.[16]
The rules and regulations that administrative agencies promulgate, which are the product of a delegated legislative power to
create new and additional legal provisions that have the effect of law, should be within the scope of the statutory authority granted by
the legislature to the administrative agency. It is required that the regulation be germane to the objects and purposes of the law, and
be not in contradiction to, but in conformity with, the standards prescribed by law.[17] They must conform to and be consistent with the
provisions of the enabling statute in order for such rule or regulation to be valid. Constitutional and statutory provisions control with
respect to what rules and regulations may be promulgated by an administrative body, as well as with respect to what fields are subject
to regulation by it. It may not make rules and regulations which are inconsistent with the provisions of the Constitution or a statute,
particularly the statute it is administering or which created it, or which are in derogation of, or defeat, the purpose of a statute. In case
of conflict between a statute and an administrative order, the former must prevail.[18]
Not to be confused with the quasi-legislative or rule-making power of an administrative agency is its quasi-judicial or
administrative adjudicatory power. This is the power to hear and determine questions of fact to which the legislative policy is to apply
and to decide in accordance with the standards laid down by the law itself in enforcing and administering the same law. The
administrative body exercises its quasi-judicial power when it performs in a judicial manner an act which is essentially of an executive
or administrative nature, where the power to act in such manner is incidental to or reasonably necessary for the performance of the
executive or administrative duty entrusted to it. In carrying out their quasi-judicial functions, the administrative officers or bodies are
required to investigate facts or ascertain the existence of facts, hold hearings, weigh evidence, and draw conclusions from them as
basis for their official action and exercise of discretion in a judicial nature.[19]
In questioning the validity or constitutionality of a rule or regulation issued by an administrative agency, a party need not
exhaust administrative remedies before going to court. This principle applies only where the act of the administrative agency
concerned was performed pursuant to its quasi-judicial function, and not when the assailed act pertained to its rule-making or quasilegislative power. In Association of Philippine Coconut Dessicators v. Philippine Coconut Authority,[20] it was held:
The rule of requiring exhaustion of administrative remedies before a party may seek judicial review, so strenuously urged by
the Solicitor General on behalf of respondent, has obviously no application here. The resolution in question was issued by the PCA in
the exercise of its rule- making or legislative power. However, only judicial review of decisions of administrative agencies made in the
exercise of their quasi-judicial function is subject to the exhaustion doctrine.
Even assuming arguendo that the principle of exhaustion of administrative remedies apply in this case, the records reveal
that petitioners sufficiently complied with this requirement. Even during the drafting and deliberation stages leading to the issuance of
Memorandum Circular No. 13-6-2000, petitioners were able to register their protests to the proposed billing guidelines. They submitted
their respective position papers setting forth their objections and submitting proposed schemes for the billing circular.[21] After the same
was issued, petitioners wrote successive letters dated July 3, 2000[22] and July 5, 2000,[23] asking for the suspension and
reconsideration of the so-called Billing Circular. These letters were not acted upon until October 6, 2000, when respondent NTC
issued the second assailed Memorandum implementing certain provisions of the Billing Circular. This was taken by petitioners as a
clear denial of the requests contained in their previous letters, thus prompting them to seek judicial relief.
In like manner, the doctrine of primary jurisdiction applies only where the administrative agency exercises its quasi-judicial or
adjudicatory function. Thus, in cases involving specialized disputes, the practice has been to refer the same to an administrative
agency of special competence pursuant to the doctrine of primary jurisdiction. The courts will not determine a controversy involving a
question which is within the jurisdiction of the administrative tribunal prior to the resolution of that question by the 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 premises of the regulatory statute administered. The objective of the doctrine of primary jurisdiction is to guide a court
in determining whether it should refrain from exercising its jurisdiction until after an administrative agency has determined some
question or some aspect of some question arising in the proceeding before the court. It applies where the claim is originally cognizable
in the courts and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory

scheme, has been placed within the special competence of an administrative body; in such case, the judicial process is suspended
pending referral of such issues to the administrative body for its view.[24]
However, where what is assailed is the validity or constitutionality of a rule or regulation issued by the administrative agency
in the performance of its quasi-legislative function, the regular courts have jurisdiction to pass upon the same. The determination of
whether a specific rule or set of rules issued by an administrative agency contravenes the law or the constitution is within the
jurisdiction of the regular courts. Indeed, the Constitution vests the power of judicial review or the power to declare a law, treaty,
international or executive agreement, presidential decree, order, instruction, ordinance, or regulation in the courts, including the
regional trial courts.[25] This is within the scope of judicial power, which includes the authority of the courts to determine in an
appropriate action the validity of the acts of the political departments.[26] Judicial power includes the duty of the courts of justice to
settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there has
been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the
Government.[27]
In the case at bar, the issuance by the NTC of Memorandum Circular No. 13-6-2000 and its Memorandum dated October 6,
2000 was pursuant to its quasi-legislative or rule-making power. As such, petitioners were justified in invoking the judicial power of the
Regional Trial Court to assail the constitutionality and validity of the said issuances. In Drilon v. Lim,[28] it was held:
We stress at the outset that the lower court had jurisdiction to consider the constitutionality of Section 187, this authority
being embraced in the general definition of the judicial power to determine what are the valid and binding laws by the criterion of their
conformity to the fundamental law.Specifically, B.P. 129 vests in the regional trial courts jurisdiction over all civil cases in which the
subject of the litigation is incapable of pecuniary estimation, even as the accused in a criminal action has the right to question in his
defense the constitutionality of a law he is charged with violating and of the proceedings taken against him, particularly as they
contravene the Bill of Rights. Moreover, Article X, Section 5(2), of the Constitution vests in the Supreme Court appellate jurisdiction
over final judgments and orders of lower courts in all cases in which the constitutionality or validity of any treaty, international or
executive agreement, law, presidential decree, proclamation, order, instruction, ordinance, or regulation is in question.[29]
In their complaint before the Regional Trial Court, petitioners averred that the Circular contravened Civil Code provisions on
sales and violated the constitutional prohibition against the deprivation of property without due process of law. These are within the
competence of the trial judge. Contrary to the finding of the Court of Appeals, the issues raised in the complaint do not entail highly
technical matters. Rather, what is required of the judge who will resolve this issue is a basic familiarity with the workings of the cellular
telephone service, including prepaid SIM and call cards and this is judicially known to be within the knowledge of a good percentage of
our population and expertise in fundamental principles of civil law and the Constitution.
Hence, the Regional Trial Court has jurisdiction to hear and decide Civil Case No. Q-00-42221. The Court of Appeals erred in
setting aside the orders of the trial court and in dismissing the case.
WHEREFORE, in view of the foregoing, the consolidated petitions are GRANTED. The decision of the Court of Appeals in
CA-G.R. SP No. 64274 dated October 9, 2001 and its Resolution dated January 10, 2002 are REVERSED and SET ASIDE. The
Order dated November 20, 2000 of the Regional Trial Court of Quezon City, Branch 77, in Civil Case No. Q-00-42221 is
REINSTATED. This case is REMANDED to the court a quo for continuation of the proceedings.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Vitug, and Carpio, JJ., concur.
Azcuna, J., took no part.

[1]

Rollo, G.R. No. 151908, pp. 225-228.


Rollo, G.R. No. 152063, p. 112.
[3]
Rollo, G.R. No. 151908, p. 229.
[4]
Id., p. 230.
[5]
Id., pp. 231-247.
[6]
Id., pp. 248-270.
[7]
Id., pp. 271-273, at 273; penned by Judge Vivencio S. Baclig.
[8]
Id., pp. 274-277.
[9]
Id., p. 278.
[10]
Id., pp. 123-132, at 131-132; penned by Associate Justice Rodrigo V. Cosico, concurred in by Associate Justices Ramon
A. Barcelona and Alicia L. Santos.
[11]
Id., pp. 134-136.
[12]
Id., pp. 23-24.
[13]
Rollo, G.R. No. 152063, pp. 14-15.
[14]
Id., pp. 389-390.
[2]

[15]

Id., pp. 391-392.


Bellosillo, J., Separate Opinion, Commissioner of Internal Revenue v. Court of Appeals, 329 Phil. 987, 1017 [1996].
[17]
Romulo, Mabanta, Buenaventura, Sayoc and De Los Angeles v. Home Development Mutual Fund, G.R. No. 131082, 19
June 2000, 333 SCRA 777, 785-786.
[18]
Conte, et al. v. Commission on Audit, 332 Phil. 20, 36 [1996].
[19]
Bellosillo, J., Separate Opinion, Commissioner of Internal Revenue, G.R. No. 119761, 29 August 1996, supra.
[20]
G.R. No. 110526, 10 February 1998, 286 SCRA 109, 117.
[21]
Rollo, G.R. No. 152063, pp. 57-78.
[22]
Id., pp. 79-86.
[23]
Id., pp. 87-89.
[24]
Fabia v. Court of Appeals, G.R. No. 132684, 11 September 2002.
[25]
Spouses Mirasol v. Court of Appeals, G.R. No. 128448, 1 February 2001, 351 SCRA 44, 51.
[26]
Santiago v. Guingona, Jr., G.R. No. 134577, 18 November 1998, 298 SCRA 756, 774.
[27]
CONSTITUTION, Art. VIII, Sec. 1, second paragraph.
[28]
G.R. No. 112497, 4 August 1994, 235 SCRA 135.
[29]
Id., at 139-140.
[16]