G.R. No.

103982 December 11, 1992

ANTONIO A. MECANO, petitioner,
vs.
COMMISSION ON AUDIT, respondent.

CAMPOS, JR., J.:

Antonio A. Mecano, through a petition for certiorari, seeks to nullify the decision of the Commission on Audit (COA, for brevity) embodied in its 7th Indorsement,
dated January 16, 1992, denying his claim for reimbursement under Section 699 of the Revised Administrative Code (RAC), as amended, in the total amount of
P40,831.00.
Petitioner is a Director II of the National Bureau of Investigation (NBI). He was hospitalized for cholecystitis from March 26, 1990 to April 7, 1990, on account of
which he incurred medical and hospitalization expenses, the total amount of which he is claiming from the COA.
On May 11, 1990, in a memorandum to the NBI Director, Alfredo S. Lim (Director Lim, for brevity), he requested reimbursement for his expenses on the ground that he
is entitled to the benefits under Section 699 1 of the RAC, the pertinent provisions of which read:
Sec. 699. Allowances in case of injury, death, or sickness incurred in performance of duty. When a person in the service of the national
government of a province, city, municipality or municipal district is so injured in the performance of duty as thereby to receive some actual
physical hurt or wound, the proper Head of Department may direct that absence during any period of disability thereby occasioned shall be on full
pay, though not more than six months, and in such case he may in his discretion also authorize the payment of the medical attendance, necessary
transportation, subsistence and hospital fees of the injured person. Absence in the case contemplated shall be charged first against vacation leave,
if any there be.
xxx xxx xxx
In case of sickness caused by or connected directly with the performance of some act in the line of duty, the Department head may in his
discretion authorize the payment of the necessary hospital fees.
Director Lim then forwarded petitioner's claim, in a 1st Indorsement dated June 22, 1990, to the Secretary of Justice, along with the comment, bearing the same date, of
Gerarda Galang, Chief, LED of the NBI, "recommending favorable action thereof". Finding petitioner's illness to be service-connected, the Committee on Physical
Examination of the Department of Justice favorably recommended the payment of petitioner's claim.
However, then Undersecretary of Justice Silvestre H. Bello III, in a 4th Indorsement dated November 21, 1990, returned petitioner's claim to Director Lim, having
considered the statements of the Chairman of the COA in its 5th Indorsement dated 19 September 1990, to the effect that the RAC being relied upon was repealed by
the Administrative Code of 1987.
Petitioner then re-submitted his claim to Director Lim, with a copy of Opinion No. 73, S. 1991 2 dated April 26, 1991 of then Secretary of Justice Franklin M. Drilon
(Secretary Drilon, for brevity) stating that "the issuance of the Administrative Code did not operate to repeal or abregate in its entirety the Revised Administrative Code,
including the particular Section 699 of the latter".
On May 10, 1991, Director Lim, under a 5th Indorsement transmitted anew Mecano's claim to then Undersecretary Bello for favorable consideration. Under a 6th
Indorsement, dated July 2, 1991, Secretary Drilon forwarded petitioner's claim to the COA Chairman, recommending payment of the same. COA Chairman Eufemio C.
Domingo, in his 7th Indorsement of January 16, 1992, however, denied petitioner's claim on the ground that Section 699 of the RAC had been repealed by the
Administrative Code of 1987, solely for the reason that the same section was not restated nor re-enacted in the Administrative Code of 1987. He commented, however,
that the claim may be filed with the Employees' Compensation Commission, considering that the illness of Director Mecano occurred after the effectivity of the
Administrative Code of 1987.
Eventually, petitioner's claim was returned by Undersecretary of Justice Eduardo Montenegro to Director Lim under a 9th Indorsement dated February 7, 1992, with the
advice that petitioner "elevate the matter to the Supreme Court if he so desires".
On the sole issue of whether or not the Administrative Code of 1987 repealed or abrogated Section 699 of the RAC, this petition was brought for the consideration of
this Court.
Petitioner anchors his claim on Section 699 of the RAC, as amended, and on the aforementioned Opinion No. 73, S. 1991 of Secretary Drilon. He further maintains that
in the event that a claim is filed with the Employees' Compensation Commission, as suggested by respondent, he would still not be barred from filing a claim under the
subject section. Thus, the resolution of whether or not there was a repeal of the Revised Administrative Code of 1917 would decide the fate of petitioner's claim for
reimbursement.
The COA, on the other hand, strongly maintains that the enactment of the Administrative Code of 1987 (Exec. Order No. 292) operated to revoke or supplant in its
entirety the Revised Administrative Code of 1917. The COA claims that from the "whereas" clauses of the new Administrative Code, it can be gleaned that it was the
intent of the legislature to repeal the old Code. Moreover, the COA questions the applicability of the aforesaid opinion of the Secretary of Justice in deciding the matter.
Lastly, the COA contends that employment-related sickness, injury or death is adequately covered by the Employees' Compensation Program under P.D. 626, such that
to allow simultaneous recovery of benefits under both laws on account of the same contingency would be unfair and unjust to the Government.
The question of whether a particular law has been repealed or not by a subsequent law is a matter of legislative intent. The lawmakers may expressly repeal a law by
incorporating therein a repealing provision which expressly and specifically cites the particular law or laws, and portions thereof, that are intended to be repealed. 3 A
declaration in a statute, usually in its repealing clause, that a particular and specific law, identified by its number or title, is repealed is an express repeal; all others are
implied repeals. 4
In the case of the two Administrative Codes in question, the ascertainment of whether or not it was the intent of the legislature to supplant the old Code with the new
Code partly depends on the scrutiny of the repealing clause of the new Code. This provision is found in Section 27, Book VII (Final Provisions) of the Administrative
Code of 1987 which reads:
Sec. 27. Repealing Clause. All laws, decrees, orders, rules and regulations, or portions thereof, inconsistent with this Code are hereby repealed
or modified accordingly.
The question that should be asked is: What is the nature of this repealing clause? It is certainly not an express repealing clause because it fails to identify or designate
the act or acts that are intended to be repealed. 5 Rather, it is an example of a general repealing provision, as stated in Opinion No. 73, S. 1991. It is a clause which
predicates the intended repeal under the condition that substantial conflict must be found in existing and prior acts. The failure to add a specific repealing clause
indicates that the intent was not to repeal any existing law, unless an irreconcilable inconcistency and repugnancy exist in the terms of the new and old laws. 6 This latter
situation falls under the category of an implied repeal.
Repeal by implication proceeds on the premise that where a statute of later date clearly reveals an intention on the part of the legislature to abrogate a prior act on the
subject, that intention must be given effect. 7 Hence, before there can be a repeal, there must be a clear showing on the part of the lawmaker that the intent in enacting
the new law was to abrogate the old one. The intention to repeal must be clear and manifest; 8 otherwise, at least, as a general rule, the later act is to be construed as a
continuation of, and not a substitute for, the first act and will continue so far as the two acts are the same from the time of the first enactment. 9
There are two categories of repeal by implication. The first is where provisions in the two acts on the same subject matter are in an irreconcilable conflict, the later act
to the extent of the conflict constitutes an implied repeal of the earlier one. The second is if the later act covers the whole subject of the earlier one and is clearly
intended as a substitute, it will operate to repeal the earlier law. 10
Implied repeal by irreconcilable inconsistency takes place when the two statutes cover the same subject matter; they are so clearly inconsistent and incompatible with
each other that they cannot be reconciled or harmonized; and both cannot be given effect, that is, that one law cannot be enforced without nullifying the other. 11

1
Comparing the two Codes, it is apparent that the new Code does not cover nor attempt to cover the entire subject matter of the old Code. There are several matters
treated in the old Code which are not found in the new Code, such as the provisions on notaries public, the leave law, the public bonding law, military reservations,
claims for sickness benefits under Section 699, and still others.
Moreover, the COA failed to demonstrate that the provisions of the two Codes on the matter of the subject claim are in an irreconcilable conflict. In fact, there can be no
such conflict because the provision on sickness benefits of the nature being claimed by petitioner has not been restated in the Administrative Code of 1987. However,
the COA would have Us consider that the fact that Section 699 was not restated in the Administrative Code of 1987 meant that the same section had been repealed. It
further maintained that to allow the particular provisions not restated in the new Code to continue in force argues against the Code itself. The COA anchored this
argument on the whereas clause of the 1987 Code, which states:
WHEREAS, the effectiveness of the Government will be enhanced by a new Administrative Code which incorporate in a unified document the
major structural, functional and procedural principles and rules of governance; and
xxx xxx xxx
It argues, in effect, that what is contemplated is only one Code the Administrative Code of 1987. This contention is untenable.
The fact that a later enactment may relate to the same subject matter as that of an earlier statute is not of itself sufficient to cause an implied repeal of the prior act, since
the new statute may merely be cumulative or a continuation of the old one. 12 What is necessary is a manifest indication of legislative purpose to repeal. 13
We come now to the second category of repeal the enactment of a statute revising or codifying the former laws on the whole subject matter. This is only possible if
the revised statute or code was intended to cover the whole subject to be a complete and perfect system in itself. It is the rule that a subsequent statute is deemed to
repeal a prior law if the former revises the whole subject matter of the former statute. 14 When both intent and scope clearly evidence the idea of a repeal, then all parts
and provisions of the prior act that are omitted from the revised act are deemed repealed. 15 Furthermore, before there can be an implied repeal under this category, it
must be the clear intent of the legislature that the later act be the substitute to the prior act. 16
According to Opinion No. 73, S. 1991 of the Secretary of Justice, what appears clear is the intent to cover only those aspects of government that pertain to
administration, organization and procedure, understandably because of the many changes that transpired in the government structure since the enactment of the RAC
decades of years ago. The COA challenges the weight that this opinion carries in the determination of this controversy inasmuch as the body which had been entrusted
with the implementation of this particular provision has already rendered its decision. The COA relied on the rule in administrative law enunciated in the case of Sison
vs. Pangramuyen 17 that in the absence of palpable error or grave abuse of discretion, the Court would be loathe to substitute its own judgment for that of the
administrative agency entrusted with the enforcement and implementation of the law. This will not hold water. This principle is subject to limitations. Administrative
decisions may be reviewed by the courts upon a showing that the decision is vitiated by fraud, imposition or mistake. 18 It has been held that Opinions of the Secretary
and Undersecretary of Justice are material in the construction of statutes in pari materia. 19
Lastly, it is a well-settled rule of statutory construction that repeals of statutes by implication are not favored. 20 The presumption is against inconsistency and
repugnancy for the legislature is presumed to know the existing laws on the subject and not to have enacted inconsistent or conflicting statutes. 21
This Court, in a case, explains the principle in detail as follows: "Repeals by implication are not favored, and will not be decreed unless it is manifest that the legislature
so intended. As laws are presumed to be passed with deliberation with full knowledge of all existing ones on the subject, it is but reasonable to conclude that in passing
a statute it was not intended to interfere with or abrogate any former law relating to some matter, unless the repugnancy between the two is not only irreconcilable, but
also clear and convincing, and flowing necessarily from the language used, unless the later act fully embraces the subject matter of the earlier, or unless the reason for
the earlier act is beyond peradventure renewed. Hence, every effort must be used to make all acts stand and if, by any reasonable construction, they can be reconciled,
the later act will not operate as a repeal of the earlier. 22
Regarding respondent's contention that recovery under this subject section shall bar the recovery of benefits under the Employees' Compensation Program, the same
cannot be upheld. The second sentence of Article 173, Chapter II, Title II (dealing on Employees' Compensation and State Insurance Fund), Book IV of the Labor Code,
as amended by P.D. 1921, expressly provides that "the payment of compensation under this Title shall not bar the recovery of benefits as provided for in Section 699 of
the Revised Administrative Code . . . whose benefits are administered by the system (meaning SSS or GSIS) or by other agencies of the government."
WHEREFORE, premises considered, the Court resolves to GRANT the petition; respondent is hereby ordered to give due course to petitioner's claim for benefits. No
costs.
SO ORDERED.

Facts:
Petitioner Antonio Mecano, a Director II of the National Bureau of Investigation, filed a petitionfor certoriari to nullify the decision of
Commission of Audit (COA) in the 7
th
Indorsement denyinghim of reimbursement anchored on the provisions of Section 699 of the Revised AdministrativeCode (RAC) in the amount of Php
40,831.00.Earlier, the petitioner was hospitalized because of cholecystitis and incurred theabovementioned amount. Under Sec. 699 of RAC, he is
entitled to allowances in case of injury,sickness, death incurred in the performance of duty. Hence, the petitioner requestedreimbursement for his expenses to NBI Director
Alfredo Lim forwarding the request to theSecretary of Justice. The request was returned due to the comments of the COAChairmanstating that the RAC being relied
upon was already repealed by the Administrative Code of 1987. The petitioner resubmitted the request asserting that the Administrative Code did notoperate to repeal or
abrogate in its entirety the RAC, including Section 699. Director Limtransmitted the request to the Justice Secretary who recommended the payment to the
COAChairman. The COA Chairman again denied the request asserting the same reason andfurthered that Section 699 was not restated nor re-
enacted in the Administrative Code of 1987. According to the COA Chairman, the claim may be filed with the Employees'
CompensationCommission, considering that the illness of Director Mecano occurred after the effectivity of the Administrative Code of
1987. Eventually, the request was again returned to Director Lim with anadvice of elevating the matter in the Supreme Court if he so desires.
Issue:
Whether or not the Administrative Code of 1987 repealed or abrogated the Revised Administrative Code including Section 699
Decision:
In determining whether a particular law has been repealed or not by a subsequent law is amatter of legislative intent which is manifested in the incorporation of a repealing
provisionwhich expressly and specifically cites the particular law or laws, and portions that are intendedto be repealed. Scrutinizing the repealing
clause will determine if the new law really supplantsthe old law. The repealing clause of the Administrative Code of 1987 states:
Sec. 27. Repealing Clause. All laws, decrees, orders, rules and regulations, or portionsthereof, inconsistent with this Code are hereby
repealed or modified accordingly.
The repealing clause of the Administrative Code of 1987 is repeal by implication because itfailed to identify which specific laws shall be repealed. The
failure to indicate specific lawsreveal that the intent was not to repeal any existing law, unless an irreconcilable inconsistencyand repugnancy exist in the terms of

2
the new and old laws.The two categories of repeal by implication are as follows: a) where provisions in the two actson the same subject
matter are in an irreconcilable conflict, the later act to the extent of theconflict constitutes an implied repeal of the earlier one; and b) if
the later act covers the wholesubject of the earlier one and is clearly intended as a substitute, it will operate to repeal theearlier law.

FACTS:Mecano, an NBI Director, was hospitalized for cholecystitis, for which he incurred medical and hospitalization expenses, the total amount of which he is
claiming from the COA, based on sec. 699 of the RAC. COA contended that the RAC has been repealed by the Administrative Code of 1987, specifically sec. 699 was
not restated nor re-enacted in the Code.

ISSUE:W/N the Administrative Code of 1987 repealed or abrogated sec. 699 of the RAC

HELD:The question of whether or not a particular law has been repealed or not by a subsequent law is a matter of legislative intent. The lawmakers may expressly
repeal a law by incorporating therein a repealing provision which expressly and specifically cites the particular law or laws, and portions thereof, that are intended to be
repealed. A declaration in a statute, usually in its repealing clause, that a particular and specific law, identified by its number or title, is repealed is an express repeal; all
others are implied repeals.Under sec. 27, Bk. VII (Final Provisions) of the Administrative Code of 1987, the repealing clause states that all laws, decrees, orders, rules
and regulations, or portions thereof, inconsistent with this Code are hereby repealed or modified accordingly.The question that should be asked is: What is the nature of
this repealing clause? It is certainly not an express repealing clause because it fails to identify or designate the act or acts that are intended to be repealed. Rather, it is an
example of a general repealing provision. It is a clause which predicates the intended repeal under the condition that a substantial conflict must be found in existing and
prior acts. The failure to add a specific repealing clause indicates the intent was not to repeal any existing law, unless an irreconcilable inconsistency and repugnancy
exist in the terms of the new and old laws. The latter situation falls under the category of an implied repeal.
(NOTA BENE: This means that the RAC, despite the passage of the Administrative Code of 1987, may still be a source of administrative law)

G.R. No. L-66614 January 25, 1988

PRIMITIVO LEVERIZA, FE LEVERIZA, PARUNGAO & ANTONIO C. VASCO, petitioners,
vs.
INTERMEDIATE APPELLATE COURT, MOBIL OIL PHILIPPINES & CIVIL AERONAUTICS ADMINISTRATION, respondents.
BIDIN, J.:
This is a Petition for Review on certiorari seeking the reversal of the decision of the Intermediate Appellate Court, Third Division * dated February 29, 1984 in AC-G.R.
No. CV No. 61705 entitled Mobil Oil Philippines, Inc., plaintiff-appellee vs. Primitivo Leveriza Parungao, Antonio C. Vasco and Civil Aeronautics Administration,
defendants-appellants; Primitive Leveriza, Fe Leveriza Parungao and Antonio C. Leveriza, cross-defendant, affirming in toto the decision of the trial court dated April 6,
1976.
As found by the trial court and adopted by the Intermediate Appellate Court, the facts of this case are as follows:
Around three contracts of lease resolve the basic issues in the instant case. These three contracts are as follows:
First Contract. For purposes of easy reference and brevity, this contract shall be referred to hereinafter as Contract A. This is a "CONTRACT
OF LEASE", executed between the REPUBLIC OF THE PHILIPPINES, represented by Defendant CIVIL AERONAUTICS
ADMINISTRATION, as lessor, and ROSARIO C. LEVERIZA, as lessee, on April 2, 1965, over a certain parcel of land at the MIA area,
consisting of approximately 4,502 square meters, at a monthly rental of P450.20, for a period of 25 years, (Exhibit "A", Exhibit "I-Leverizas",
Exhibit "I-CAA").
Second Contracts. For purposes of easy references and brevity, this contract shall be referred to hereinafter as Contract B. This is a "LEASE
AGREEMENT", executed between ROSARIO C. LEVERIZA, as lessor, and Plaintiff MOBIL OIL PHILIPPINES, INC., as lessee on May 21,
1965, over 3,000 square meters of that SAME Parcel of land subject of Contract A above mentioned, at a monthly rental of P1,500.00, for a
period of 25 years (Exhibit 'B', Exhibit 4-Leverizas' ).
Third Contract. For purposes of easy reference and brevity, this contract shall be referred to hereinafter as Contract C. This is a "LEASE
AGREEMENT", executed between Defendant CIVIL AERONAUTICS ADMINISTRATION, as lessor, and plaintiff MOBIL OIL PHILIPPINES,
INC., as lessee, on June 1, 1968 over that SAME parcel of land (Lot A, on plan being a portion of Parcel, Psu 2031), containing an area of 3,000
square meters more or less, at a monthly rental of P.25 per square meter for the second 200 square meters, and P.20 per square meter for the rest,
for a period of 29 (sic) years. (Exhibit "C").
There is no dispute among the parties that the subject matter of the three contracts of lease above mentioned, Contract A, Contract B, and
Contract C, is the same parcel of land, with the noted difference that while in Contract A, the area leased is 4,502 square meters, in Contract B
and Contract C, the area has been reduced to 3,000 square meters. To summarize:
Contract A a lease contract of April 2, 1965 between the Republic of the Philippines, represented by Defendant Civil
Aeronautics Administration and Rosario C. Leveriza over a parcel of land containing an area of 4,502 square meters, for 25
years.
Contract B a lease contract (in effect a sublease) of May 21, 1965 between defendant Rosario C. Leveriza and plaintiff
Mobil Oil Philippines, Inc. over the same parcel of land, but reduced to 3,000 square meters for 25 years; and
Contract C a lease contract of June 1, 1968 between defendant Civil Aeronautics Administration and plaintiff Mobil Oil
Philippines, Inc., over the same parcel of land, but reduced to 3,000 square meters, for 25 years.
It is important to note, for a clear understanding of the issues involved, that it appears that defendant Civil Aeronautics Administration as
LESSOR, leased the same parcel of land, for durations of time that overlapped to two lessees, to wit: (1) Defendant Rosario C. Leveriza, and that
plaintiff Mobil Oil Philippines, Inc., as LESSEE, leased the same parcel of land from two lessors, to wit: (1) defendant Rosario C. Leveriza and
(2) defendant Civil Aeronautics Administration, Inc., for durations of time that also overlapped.
For purposes of brevity defendant Civil Aeronautics Administration shall be referred to hereinafter as defendant CAA.
Rosario C. Leveriza, the lessee in Contract A and the lessor in Contract B, is now deceased. This is the reason why her successor-in-interest, her
heirs, are sued, namely: Defendants Primitive Leveriza, her second husband, (now also deceased), Fe Leveriza Parungao, her daughter by her
second husband, and Antonio C. Vasco, her son by her first husband. For purposes of brevity, these defendants shall be referred to hereinafter as
Defendants Leveriza.
Plaintiff Mobil Oil Philippines, Inc., shall be referred to hereinafter simply as the Plaintiff. (pp. 95-99, Record on Appeal).
Plaintiff in this case seeks the rescission or cancellation of Contract A and Contract B on the ground that Contract A from which Contract B is
derived and depends has already been cancelled by the defendant Civil Aeronautics Administration and maintains that Contract C with the
defendant CAA is the only valid and subsisting contract insofar as the parcel of land, subject to the present litigation is concerned. On the other
hand, defendants Leverizas' claim that Contract A which is their contract with CAA has never been legally cancelled and still valid and subsisting;
that it is Contract C between plaintiff and defendant CAA which should be declared void.
Defendant CAA asserts that Exhibit "A" is still valid and subsisting because its cancellation by Guillermo Jurado was ineffective and asks the
court to annul Contract A because of the violation committed by defendant Leveriza in leasing the parcel of land to plaintiff by virtue of Contract
3
 B without the consent of defendant CAA. Defendant CAA further asserts that Contract C not having been approved by the Director of Public
Works and Communications is not valid. ...
After trial, the lower court render judgment on April 6, 1976 the dispositive part of which reads:
WHEREFORE, after having thus considered the evidence of all the parties, testimonial and documentary, and their memoranda and reply-
memoranda, this Court hereby renders judgment:
1. Declaring Contract A as having been validly cancelled on June 28, 1966, and has therefore ceased to have any effect as
of that date;
2. Declaring that Contract B has likewise ceased to have any effect as of June 28, 1966 because of the cancellation of
Contract A;
3. Declaring that Contract C was validly entered into on June 1, 1968, and that it is still valid and subsisting;
4. Ordering defendant CAA to refund to defendants Leverizas the amount of P32,189.30 with 6% per annum until fully
paid;
5. Ordering defendants Leverizas to refund to plaintiff the amount of P48,000.00 with 6% interest per annum until fully
paid;
6. Dismissing defendants Leverizas' four counterclaims against plaintiff;
7. Dismissing defendants Leverizas' cross-claim against defendant CAA;
8. Dismissing defendant CAA's counterclaim against plaintiff;
9. Dismissing defendant CAA's counterclaim against defendant Leverizas.
No pronouncements as to costs.
On June 2, 1976, defendant Leveriza filed a motion for new trial on the ground of newly discovered evidence, lack of jurisdiction of the court over the case and lack of
evidentiary support of the decision which was denied in the order of November 12,1976 (Rollo, p. 17).
On July 27, 1976, the CAA filed a Motion for Reconsideration, averring that because the lot lease was properly registered in the name of the Republic of the
Philippines, it was only the President of the Philippines or an officer duly designated by him who could execute the lease contract pursuant to Sec. 567 of the Revised
Administrative Code; that the Airport General Manager has no authority to cancel Contract A, the contract entered into between the CAA and Leveriza, and that
Contract C between the CAA and Mobil was void for not having been approved by the Secretary of Public Works and Communications. Said motion was however
denied on November 12, 1976 (Rollo, p. 18).
On appeal, the Intermediate Appellate Court, being in full accord with the trial court, rendered a decision on February 29, 1984, the dispositive part of which reads:
WHEREFORE, finding no reversible error in the decision of the lower court dated April 6, 1976, the same is hereby affirmed in toto.
Hence, this petition.
The petitioners raised the following assignment of errors:
I
THE INTERMEDIATE APPELLATE COURT ERRED IN HOLDING THAT THE ADMINISTRATOR OF THE CIVIL AERONAUTICS
ADMINISTRATION (CAA) HAD THE STATUTORY AUTHORITY TO LEASE, EVEN WITHOUT APPROVAL OF THE THEN
SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS, REAL PROPERTY BELONGING TO THE REPUBLIC OF THE
PHILIPPINES.
II
THE INTERMEDIATE APPELLATE COURT ERRED IN HOLDING THAT THE ADMINISTRATOR OF THE CIVIL AERONAUTICS
ADMINISTRATION HAD STATUTORY AUTHORITY, WITHOUT THE APPROVAL OF THE THEN SECRETARY OF PUBLIC WORKS
AND COMMUNICATIONS, TO CANCEL A LEASE CONTRACT OVER REAL PROPERTY OWNED BY THE REPUBLIC OF THE
PHILIPPINES, WHICH CONTRACT WAS APPROVED, AS REQUIRED BY LAW, BY THE SECRETARY.
III
THE INTERMEDIATE APPELLATE COURT ERRED WHEN IT RULED THAT THE CONTRACT OF SUBLEASE (CONTRACT B)
ENTERED INTO BETWEEN PETITIONERS' PREDECESSOR-IN-INTEREST AND RESPONDENT MOBIL OIL PHILIPPINES, INC. WAS
WITHOUT THE CONSENT OF THE ADMINISTRATOR OF THE CIVIL AERONAUTICS ADMINISTRATION.
The petition is devoid of merit.
There is no dispute that Contract "A" at the time of its execution was a valid contract. The issue therefore is whether or not said contract is still subsisting after its
cancellation by CAA on the ground of a sublease executed by petitioners with Mobil Oil Philippines without the consent of CAA and the execution of another contract
of lease between CAA and Mobil Oil Philippines (Contract "C").
Petitioners contend that Contract "A" is still subsisting because Contract "B" is a valid sublease and does not constitute a ground for the cancellation of Contract "A",
while Contract "C", a subsequent lease agreement between CAA and Mobil Oil Philippines is null and void, for lack of approval by the Department Secretary.
Petitioners anchor their position on Sections 567 and 568 of the Revised Administrative Code which require among others, that subject contracts should be executed by
the President of the Philippines or by an officer duly designated by him, unless authority to execute the same is by law vested in some other officer (Petition, Rollo, pp.
15-16).
At the other extreme, respondent Mobil Oil Philippines asserts that Contract "A" was validly cancelled on June 28, 1966 and so was Contract "B" which was derived
therefrom. Accordingly, it maintains that Contract "C" is the only valid contract insofar as the parcel of land in question is concerned and that approval of the
Department Head is not necessary under Section 32 (par. 24) of the Republic Act 776 which expressly vested authority to enter into such contracts in the Administrator
of CAA (Comment; Rollo, p. 83).
On its part, respondent Civil Aeronautics Administration took the middle ground with its view that Contract "A" is still subsisting as its cancellation is ineffective
without the approval of the Department Head but said contract is not enforceable because of petitioners' violation of its terms and conditions by entering into Contract
"B" of sublease without the consent of CAA. The CAA further asserts that Contract "C" not having been approved by the Secretary of Public Works and
Communications, is not valid (Rollo, p. 43). However, in its comment filed with the Supreme Court, the CAA made a complete turnabout adopting the interpretation
and ruling made by the trial court which was affirmed by the Intermediate Appellate Court (Court of Appeals), that the CAA Administrator has the power to execute the
deed or contract of lease involving real properties under its administration belonging to the Republic of the Philippines without the approval of the Department Head as
clearly provided in Section 32, paragraph (24) of Republic Act 776.
The issue narrows down to whether or not there is a valid ground for the cancellation of Contract "A."
Contract "A" was entered into by CAA as the lessor and the Leverizas as the lessee specifically "for the purpose of operating and managing a gasoline station by the
latter, to serve vehicles going in and out of the airport."
As regards prior consent of the lessor to the transfer of rights to the leased premises, the provision of paragraph 7 of said Contract reads in full:
7. The Party of the Second part may transfer her rights to the leased premises but in such eventuality, the consent of the Party of the First Part
shall first be secured. In any event, such transfer of rights shall have to respect the terms and conditions of this agreement.
Paragraph 8 provides the sanction for the violation of the above-mentioned terms and conditions of the contract. Said paragraph reads:
8. Failure on the part of the Party of the Second Part to comply with the terms and conditions herein agreed upon shall be sufficient for revocation
of this contract by the Party of the First Part without need of judicial demand.

4
It is not disputed that the Leverizas (lessees) entered into a contract of sublease (Contract "B") with Mobil Oil Philippines without the consent of CAA (lessor). The
cancellation of the contract was made in a letter dated June 28, 1966 of Guillermo P. Jurado, Airport General Manager of CAA addressed to Rosario Leveriza, as
follows:
(Letterhead)
June 28, 1966
Mrs. Rosario Leveriza
Manila International Airport
Madam:
It has been found out by the undersigned that you have sublet the property of the CAA leased to you and by virtue of this,
your lease contract is hereby cancelled because of the violation of the stipulations of the contract. I would like to inform
you that even without having sublet the said property the said contract would have been cancelled as per attached
communication.
Very truly yours,
For the Director:
(Sgd.) Illegible
(Typed)
GUILLERMO P. JURADO
Airport General Manager
Respondent Leverizas and the CAA assailed the validity of such cancellation, claiming that the Airport General Manager had no legal authority to make the
cancellation. They maintain that it is only the Secretary of Public Works and Communications, acting for the President, or by delegation of power, the Director of Civil
Aeronautics Administration who could validly cancel the contract. They do admit, however, and it is evident from the records that the Airport General Manager signed
"For the Director." Under the circumstances, there is no question that such act enjoys the presumption of regularity, not to mention the unassailable fact that such act
was subsequently affirmed or ratified by the Director of the CAA himself (Record on Appeal, pp. 108-110).
Petitioners argue that cancelling or setting aside a contract approved by the Secretary is, in effect, repealing an act of the Secretary which is beyond the authority of the
Administrator. Such argument is untenable. The terms and conditions under which such revocation or cancellation may be made, have already been specifically
provided for in Contract "A" which has already been approved by the Department Head, It is evident that in the implementation of aforesaid contract, the approval of
said Department Head is no longer necessary if not redundant.
It is further contended that even granting that such cancellation was effective, a subsequent billing by the Accounting Department of the CAA has in effect waived or
nullified the rescission of Contract "A."It will be recalled that the questioned cancellation of Contract "A" was among others, mainly based on the violation of its terms
and conditions, specifically, the sublease of the property by the lessee without the consent of the lessor.
The billing of the petitioners by the Accounting Department of the CAA if indeed it transpired, after the cancellation of Contract "A" is obviously an error. However,
this Court has already ruled that the mistakes of government personnel should not affect public interest. In San Mauricio Mining Company v. Ancheta (105 SCRA 391,
422), it has been held that as a matter of law rooted in the protection of public interest, and also as a general policy to protect the government and the people, errors of
government personnel in the performance of their duties should never deprive the people of the right to rectify such error and recover what might be lost or be bartered
away in any actuation, deal or transaction concerned. In the case at bar, the lower court in its decision which has been affirmed by the Court of Appeals, ordered the
CAA to refund to the petitioners the amount of rentals which was not due from them with 6% interest per annum until fully paid.
Petitioners further assail the interpretation of Contract "A", claiming that Contract "B" was a mere sublease to respondent Mobil Oil Philippines, Inc. and requires no
prior consent of CAA to perfect the same. Citing Article 1650 of the Civil Code, they assert that the prohibition to sublease must be expressed and cannot be merely
implied or inferred (Rollo, p. 151).
As correctly found by the Court of Appeals, petitioners in asserting the non- necessity for a prior consent interprets the first sentence of paragraph 7 of Contract "A" to
refer to an assignment of lease under Article 1649 of the Civil Code and not to a mere sublease. A careful scrutiny of said paragraph of Contract "A" clearly shows that
it speaks of transfer of rights of Rosario Leveriza to the leased premises and not to assignment of the lease (Rollo, pp. 48-49).
Petitioners likewise argued that it was contemplated by the parties to Contract "A" that Mobil Oil Philippines would be the owner of the gasoline station it would
construct on the leased premises during the period of the lease, hence, it is understood that it must be given a right to use and occupy the lot in question in the form of a
sub-lease (Rollo, p. 152). In Contract "A", it was categorically stated that it is the lessee (petitioner) who will manage and operate the gasoline station. The fact that
Mobil Oil was mentioned in that contract was clearly not intended to give approval to a sublease between petitioners and said company but rather to insure that in the
arrangements to be made between them, it must be understood that after the expiration of the lease contract, whatever improvements have been constructed in the leased
premises shall be relinquished to CAA. Thus, this Court held that "the primary and elementary rule of construction of documents is that when the words or language
thereof is clear and plain or readily understandable by any ordinary reader thereof, there is absolutely no room for interpretation or construction anymore." (San
Mauricio Mining Company v. Ancheta, supra). Finally, petitioners contend that the administrator of CAA cannot execute without approval of the Department Secretary,
a valid contract of lease over real property owned by the Republic of the Philippines, citing Sections 567 and 568 of the Revised Administrative Code, which provide as
follows:
SEC. 567. Authority of the President of the Philippines to execute contracts relative to real property. When the Republic of the Philippines is
party to a deed conveying the title to real property or is party to any lease or other contract relating to real property belonging to said
government, said deed or contract shall be executed on behalf of said government by the President of the Philippines or by an officer duly
designated by him, unless authority to execute the same is by law expressly vested in some other officer. (Emphasis supplied)
SEC. 568. Authority of national officials to make contract. Written contracts not within the purview of the preceding section shall, in the
absence of special provision, be executed, with the approval of the proper Department Head, by the Chief of the Bureau or Office having control
of the appropriation against which the contract would create a charge; or if there is no such chief, by the proper Department Head himself or the
President of the Philippines as the case may require.
On the other hand, respondent CAA avers that the CAA Administrator has the authority to lease real property belonging to the Republic of the Philippines under its
administration even without the approval of the Secretary of Public Works and Communications, which authority is expressly vested in it by law, more particularly
Section 32 (24) of Republic Act 776, which reads:
Sec. 32. Powers and Duties of the Administrator. Subject to the general control and supervision of the Department Head, the Administrator shall have, among others,
the following powers and duties:
xxx xxx xxx
(24) To administer, operate, manage, control, maintain and develop the Manila International Airport and all government aerodromes except those controlled or operated
by the Armed Forces of the Philippines including such power and duties as: ... (b) to enter into, make and execute contracts of any kind with any person, firm, or public
or private corporation or entity; (c) to acquire, hold, purchase, or lease any personal or real property; right of ways, and easements which may be proper or necessary:
Provided, that no real property thus acquired and any other real property of the Civil Aeronautics Administration shall be sold without the approval of the President of
the Philippines. ...
There is no dispute that the Revised Administrative Code is a general law while Republic Act 776 is a special law nor in the fact that the real
property subject of the lease in Contract "C" is real property belonging to the Republic of the Philippines.

5
Under 567 of the Revised Administrative Code, such contract of lease must be executed: (1) by the President of the Philippines, or (2) by an officer duly designated by
him or (3) by an officer expressly vested by law. It is readily apparent that in the case at bar, the Civil Aeronautics Administration has the authority to enter into
Contracts of Lease for the government under the third category. Thus, as correctly ruled by the Court of Appeals, the Civil Aeronautics Administration has the power to
execute the deed or contract involving leases of real properties belonging to the Republic of the Philippines, not because it is an entity duly designated by the President
but because the said authority to execute the same is, by law expressly vested in it. Under the above-cited Section 32 (par. 24) of Republic Act 776, the Administrator
(Director) of the Civil Aeronautics Administration by reason of its creation and existence, administers properties belonging to the Republic of the Philippines and it is
on these properties that the Administrator must exercise his vast power and discharge his duty to enter into, make and execute contract of any kind with any person,
firm, or public or private corporation or entity and to acquire, hold, purchase, or lease any personal or real property, right of ways and easements which may be proper
or necessary. The exception, however, is the sale of properties acquired by CAA or any other real properties of the same which must have the approval of the President
of the Philippines. The Court of appeals took cognizance of the striking absence of such proviso in the other transactions contemplated in paragraph (24) and is
convinced as we are, that the Director of the Civil Aeronautics Administration does not need the prior approval of the President or the Secretary of Public Works and
Communications in the execution of Contract "C." In this regard, this Court, ruled that another basic principle of statutory construction mandates that general legislation
must give way to special legislation on the same subject, and generally be so interpreted as to embrace only cases in which the special provisions are not applicable
(Sto. Domingo v. De los Angeles, 96 SCRA 139),. that specific statute prevails over a general statute (De Jesus v. People, 120 SCRA 760) and that where two statutes
are of equal theoretical application to a particular case, the one designed therefor specially should prevail (Wil Wilhensen, Inc. v. Baluyot, 83 SCRA 38)
WHEREFORE, the petition is DISMISSED for lack of merit and the decision of the Court of Appeals appealed from is AFFIRMED in toto. SO ORDERED.
FACTS:This case involves three contracts of lease:
1) Contract A: executed between Civil Aeronautics Administration (lessor) and Rosario Leveriza (lessee)
2) Contract B: executed between Leveriza (lessor) and Mobil Oil (lessee)
3) Contract C: executed between CAA (lessor) and Mobil Oil (lessee)
When Leveriza subleased the property to Mobil Oil (Contract B) without permission from the lessor, CAA cancelled Contract A and executed Contract C with Mobil
Oil. Leveriza contended that Contract C was invalid not only because it was entered into by CAA without approval by the Department Secretary but also because it was
not executed by the President of the Philippines or officer duly designated. According to Leveriza, the officer duly designated to cancel the contract is not the Airport
General Manager but the Secretary of Public Works and Communication or the Director of the CAA.

ISSUE:W/N Contract C was validly entered into

HELD:SC held that the Airport General Manager had authority to enter into contracts of lease. In executing Contract C, the Airport General Manager signed for the
Director of the CAA, who subsequently ratified the same.

Under sec. 567 of the RAC, a contract of lease may be executed by: (1) President; (2) officer duly designated by him; and (3) officer expressly vested by law. Under
sec. 32 (24) of RA 776, the Director of the CAA is one such officer vested by law.

Meaning of Administration

AS AN INSTITUTION: aggregate of individuals running the government for the period of their term of office

AS A FUNCTION: actual running of the government

**Q: Is administration and government the same?

A: No. While the two concepts are intricately related, there are fundamental differences between them. Government is that institution or aggregate of institutions by
which an independent society makes or carries out those rules of actions which are necessary to enable men to live in a social state or which are imposed upon the
people forming that society by those who possess the power or authority of prescribing them. Administration, on the other hand, refers to that aggregate of individuals
holding the reins of government for the time being. Thus, compared to administration, government has a more permanent character.

TWO KINDS OF ADMINISTRATION:

Internal Administration rules within the particular agency

External Administration rules governing the relationship between the agency and the public

NOTA BENE: Administrative Law deals with both although its central focus is External Administration.
FACTS: RA 776 empowers the general manager of the Civil Aeronautics Administration to lease real property under its administration.
Administrative Code authorizes the President to execute a lease contract relating to real property belonging to the republic
RULING: In this case, the prior law should prevail. The special law is considered an exception to the general law (as long as same subject)
Reference statutes
A statute which refers to other statutes and makes them applicable to the subject of legislation
Used to avoid encumbering the statute books of unnecessary repetition
Supplemental statutes
Intended to supply deficiencies in existing statutes
Reenacted statutes
Statute which reenacts a previous statute or provision.

G.R. No. 120319 October 6, 1995

LUZON DEVELOPMENT BANK, petitioner,
vs.
ASSOCIATION OF LUZON DEVELOPMENT BANK EMPLOYEES and ATTY. ESTER S. GARCIA in her capacity as VOLUNTARY ARBITRATOR,
respondents.

6
ROMERO, J.:
From a submission agreement of the Luzon Development Bank (LDB) and the Association of Luzon Development Bank Employees (ALDBE) arose an arbitration case
to resolve the following issue:
Whether or not the company has violated the Collective Bargaining Agreement provision and the Memorandum of Agreement dated April 1994,
on promotion.
At a conference, the parties agreed on the submission of their respective Position Papers on December 1-15, 1994. Atty. Ester S. Garcia, in her capacity as Voluntary
Arbitrator, received ALDBE's Position Paper on January 18, 1995. LDB, on the other hand, failed to submit its Position Paper despite a letter from the Voluntary
Arbitrator reminding them to do so. As of May 23, 1995 no Position Paper had been filed by LDB.
On May 24, 1995, without LDB's Position Paper, the Voluntary Arbitrator rendered a decision disposing as follows:
WHEREFORE, finding is hereby made that the Bank has not adhered to the Collective Bargaining Agreement provision nor the Memorandum of
Agreement on promotion.
Hence, this petition for certiorari and prohibition seeking to set aside the decision of the Voluntary Arbitrator and to prohibit her from enforcing the same.
In labor law context, arbitration is the reference of a labor dispute to an impartial third person for determination on the basis of evidence and arguments presented by
such parties who have bound themselves to accept the decision of the arbitrator as final and binding.
Arbitration may be classified, on the basis of the obligation on which it is based, as either compulsory or voluntary.
Compulsory arbitration is a system whereby the parties to a dispute are compelled by the government to forego their right to strike and are compelled to accept the
resolution of their dispute through arbitration by a third party. 1 The essence of arbitration remains since a resolution of a dispute is arrived at by resort to a disinterested
third party whose decision is final and binding on the parties, but in compulsory arbitration, such a third party is normally appointed by the government.
Under voluntary arbitration, on the other hand, referral of a dispute by the parties is made, pursuant to a voluntary arbitration clause in their collective agreement, to an
impartial third person for a final and binding resolution. 2 Ideally, arbitration awards are supposed to be complied with by both parties without delay, such that once an
award has been rendered by an arbitrator, nothing is left to be done by both parties but to comply with the same. After all, they are presumed to have freely chosen
arbitration as the mode of settlement for that particular dispute. Pursuant thereto, they have chosen a mutually acceptable arbitrator who shall hear and decide their case.
Above all, they have mutually agreed to de bound by said arbitrator's decision.
In the Philippine context, the parties to a Collective Bargaining Agreement (CBA) are required to include therein provisions for a machinery for the resolution of
grievances arising from the interpretation or implementation of the CBA or company personnel policies. 3 For this purpose, parties to a CBA shall name and designate
therein a voluntary arbitrator or a panel of arbitrators, or include a procedure for their selection, preferably from those accredited by the National Conciliation and
Mediation Board (NCMB). Article 261 of the Labor Code accordingly provides for exclusive original jurisdiction of such voluntary arbitrator or panel of arbitrators
over (1) the interpretation or implementation of the CBA and (2) the interpretation or enforcement of company personnel policies. Article 262 authorizes them, but only
upon agreement of the parties, to exercise jurisdiction over other labor disputes.
On the other hand, a labor arbiter under Article 217 of the Labor Code has jurisdiction over the following enumerated cases:
. . . (a) Except as otherwise provided under this Code the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within
thirty (30) calendar days after the submission of the case by the parties for decision without extension, even in the absence of stenographic notes,
the following cases involving all workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of pay, hours of work and other terms
and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including questions involving the legality of strikes and lockouts;
6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from employer-
employee relations, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00)
regardless of whether accompanied with a claim for reinstatement.
xxx xxx xxx
It will thus be noted that the jurisdiction conferred by law on a voluntary arbitrator or a panel of such arbitrators is quite limited compared to the original jurisdiction of
the labor arbiter and the appellate jurisdiction of the National Labor Relations Commission (NLRC) for that matter. 4 The state of our present law relating to voluntary
arbitration provides that "(t)he award or decision of the Voluntary Arbitrator . . . shall be final and executory after ten (10) calendar days from receipt of the copy of the
award or decision by the parties," 5 while the "(d)ecision, awards, or orders of the Labor Arbiter are final and executory unless appealed to the Commission by any or
both parties within ten (10) calendar days from receipt of such decisions, awards, or orders." 6 Hence, while there is an express mode of appeal from the decision of a
labor arbiter, Republic Act No. 6715 is silent with respect to an appeal from the decision of a voluntary arbitrator.
Yet, past practice shows that a decision or award of a voluntary arbitrator is, more often than not, elevated to the Supreme Court itself on a petition for certiorari, 7 in
effect equating the voluntary arbitrator with the NLRC or the Court of Appeals. In the view of the Court, this is illogical and imposes an unnecessary burden upon it.
In Volkschel Labor Union, et al. v. NLRC, et al., 8 on the settled premise that the judgments of courts and awards of quasi-judicial agencies must become final at some
definite time, this Court ruled that the awards of voluntary arbitrators determine the rights of parties; hence, their decisions have the same legal effect as judgments of a
court. In Oceanic Bic Division (FFW), et al. v. Romero, et al., 9 this Court ruled that "a voluntary arbitrator by the nature of her functions acts in a quasi-judicial
capacity." Under these rulings, it follows that the voluntary arbitrator, whether acting solely or in a panel, enjoys in law the status of a quasi-judicial agency but
independent of, and apart from, the NLRC since his decisions are not appealable to the latter. 10
Section 9 of B.P. Blg. 129, as amended by Republic Act No. 7902, provides that the Court of Appeals shall exercise:
xxx xxx xxx
(B) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of Regional Trial Courts and quasi-judicial
agencies, instrumentalities, boards or commissions, including the Securities and Exchange Commission, the Employees Compensation
Commission and the Civil Service Commission, except those falling within the appellate jurisdiction of the Supreme Court in accordance with the
Constitution, the Labor Code of the Philippines under Presidential Decree No. 442, as amended, the provisions of this Act, and of subparagraph
(1) of the third paragraph and subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948.
xxx xxx xxx
Assuming arguendo that the voluntary arbitrator or the panel of voluntary arbitrators may not strictly be considered as a quasi-judicial agency, board or commission,
still both he and the panel are comprehended within the concept of a "quasi-judicial instrumentality." It may even be stated that it was to meet the very situation
presented by the quasi-judicial functions of the voluntary arbitrators here, as well as the subsequent arbitrator/arbitral tribunal operating under the Construction Industry
Arbitration Commission, 11 that the broader term "instrumentalities" was purposely included in the above-quoted provision.
An "instrumentality" is anything used as a means or agency. 12 Thus, the terms governmental "agency" or "instrumentality" are synonymous in the sense that either of
them is a means by which a government acts, or by which a certain government act or function is performed. 13 The word "instrumentality," with respect to a state,
contemplates an authority to which the state delegates governmental power for the performance of a state function. 14 An individual person, like an administrator or
executor, is a judicial instrumentality in the settling of an estate, 15 in the same manner that a sub-agent appointed by a bankruptcy court is an instrumentality of the
court, 16 and a trustee in bankruptcy of a defunct corporation is an instrumentality of the state. 17

7
The voluntary arbitrator no less performs a state function pursuant to a governmental power delegated to him under the provisions therefor in the Labor Code and he
falls, therefore, within the contemplation of the term "instrumentality" in the aforequoted Sec. 9 of B.P. 129. The fact that his functions and powers are provided for in
the Labor Code does not place him within the exceptions to said Sec. 9 since he is a quasi-judicial instrumentality as contemplated therein. It will be noted that,
although the Employees Compensation Commission is also provided for in the Labor Code, Circular No. 1-91, which is the forerunner of the present Revised
Administrative Circular No. 1-95, laid down the procedure for the appealability of its decisions to the Court of Appeals under the foregoing rationalization, and this was
later adopted by Republic Act No. 7902 in amending Sec. 9 of B.P. 129.
A fortiori, the decision or award of the voluntary arbitrator or panel of arbitrators should likewise be appealable to the Court of Appeals, in line with the procedure
outlined in Revised Administrative Circular No. 1-95, just like those of the quasi-judicial agencies, boards and commissions enumerated therein.
This would be in furtherance of, and consistent with, the original purpose of Circular No. 1-91 to provide a uniform procedure for the appellate review of adjudications
of all quasi-judicial entities 18 not expressly excepted from the coverage of Sec. 9 of B.P. 129 by either the Constitution or another statute. Nor will it run counter to the
legislative intendment that decisions of the NLRC be reviewable directly by the Supreme Court since, precisely, the cases within the adjudicative competence of the
voluntary arbitrator are excluded from the jurisdiction of the NLRC or the labor arbiter.
In the same vein, it is worth mentioning that under Section 22 of Republic Act No. 876, also known as the Arbitration Law, arbitration is deemed a special proceeding of
which the court specified in the contract or submission, or if none be specified, the Regional Trial Court for the province or city in which one of the parties resides or is
doing business, or in which the arbitration is held, shall have jurisdiction. A party to the controversy may, at any time within one (1) month after an award is made,
apply to the court having jurisdiction for an order confirming the award and the court must grant such order unless the award is vacated, modified or corrected. 19
In effect, this equates the award or decision of the voluntary arbitrator with that of the regional trial court. Consequently, in a petition for certiorari from that award or
decision, the Court of Appeals must be deemed to have concurrent jurisdiction with the Supreme Court. As a matter of policy, this Court shall henceforth remand to the
Court of Appeals petitions of this nature for proper disposition.
ACCORDINGLY, the Court resolved to REFER this case to the Court of Appeals.
SO ORDERED.

Facts:
From a submission agreement of the LuzonDevelopment Bank (LDB) and the Association of Luzon Development Bank Employees (ALDBE)arose an arbitration case
to resolve the followingissue: whether or not the company has violatedthe Collective Bargaining Agreement provisionand the Memorandum of Agreement dated
April1994, on promotion. At a conference, the parties agreed on thesubmission of their respective Position Paperson December 1-15, 1994. Atty. Ester S. Garcia,in her
capacity as Voluntary Arbitrator, received ALDBE's Position Paper on January 18, 1995.LDB, on the other hand, failed to submit itsPosition Paper despite a letter from
theVoluntary Arbitrator reminding them to do so. Asof May 23, 1995 no Position Paper had beenfiled by LDB. On May 24, 1995, without LDB'sPosition Paper, the
Voluntary Arbitrator rendered a decision disposing as follows:WHEREFORE, finding is hereby made that theBank has not adhered to the CollectiveBargaining
Agreement provision nor theMemorandum of Agreement on promotion.Hence, this petition for certiorari and prohibitionseeking to set aside the decision of
theVoluntary Arbitrator and to prohibit her fromenforcing the same.
Issue:
Which court has the jurisdiction for the appellatereview of adjudications of all quasi-judicialentities
Held:
Section 9 of B.P. Blg. 129, as amended byRepublic Act No. 7902, provides that the Courtof Appeals shall exercise:
(B)
Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of Regional Trial Courts and quasi- judicial agencies,
instrumentalities, boards or commissions, including the Securities and Exchange Commission, the EmployeesCompensation Commission and the Civil Service
Commission, except those falling within the appellate jurisdiction of the Supreme Court in accordance with the Constitution, the Labor Code of the Philippines under
Presidential Decree No. 442, as amended, the provisions of this Act, and of subparagraph
( 1 )of the third paragraph and subparagraph
( 4 )of the fourth paragraph of Section 17 of the Judiciary Act of 1948.
The voluntary arbitrator no less performs a state function pursuant to a governmental power delegated to him under the provisions there for in the Labor Code and he
falls, therefore, within the contemplation of the term "instrumentality" in the aforequoted Sec. 9 of B.P. 129. The fact that his functions and powers are provided for in
the Labor Code does not place him within the exceptions to said Sec. 9 since he is a quasi- judicial instrumentality as contemplated therein A fortiori, the decision or
award of the voluntary arbitrator or panel of arbitrators should likewise be appealable to the Court of Appeals, in line with the procedure outlined in
Revised Administrative Circular No. 1-95, just like those of the quasi-judicial agencies, boards and commissions enumerated therein. This would be in furtherance of,
and consistent with, the original purpose of Circular No. 1-91 to provide a uniform procedure for the appellate review of adjudications of all quasi-judicial entities not
expressly excepted from the coverage of Sec. 9 of B.P. 129 by either the Constitution or another statute. In the same vein, it is worth mentioning that under Section 22
of
FACTS:
At a conference, the parties agreed on the submission of their respective Position Papers on December 1-15, 1994. Atty. Ester S. Garcia, in her capacity as Voluntary
Arbitrator, received ALDBEs Position Paper on January 18, 1995. LDB, on the other hand, failed to submit its Position Paper despite a letter from the Voluntary
Arbitrator reminding them to do so. As of May 23, 1995 no Position Paper had been filed by LDB.
On May 24, 1995, without LDBs Position Paper, the Voluntary Arbitrator rendered a decision disposing as follows:
WHEREFORE, finding is hereby made that the Bank has not adhered to the Collective Bargaining Agreement provision nor the Memorandum of Agreement on
promotion.
Hence, this petition for certiorari and prohibition seeking to set aside the decision of the Voluntary Arbitrator and to prohibit her from enforcing the same.
ISSUE:
Review of award by certiorari
HELD:
In Volkschel Labor Union, et al. v. NLRC, et al., on the settled premise that the judgments of courts and awards of quasi-judicial agencies must become final at some
definite time, this Court ruled that the awards of voluntary arbitrators determine the rights of parties; hence, their decisions have the same legal effect as judgments of a
court. In Oceanic Bic Division (FFW), et al. v. Romero, et al., this Court ruled that a voluntary arbitrator by the nature of her functions acts in a quasi-judicial
capacity. Under these rulings, it follows that the voluntary arbitrator, whether acting solely or in a panel, enjoys in law the status of a quasi-judicial agency but
independent of, and apart from, the NLRC since his decisions are not appealable to the latter.
Section 9 of B.P. Blg. 129, as amended by Republic Act No. 7902, provides that the Court of Appeals shall exercise:
(B) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of Regional Trial Courts and quasi-judicial agencies,
instrumentalities, boards or commissions, including the Securities and Exchange Commission, the Employees Compensation Commission and the Civil Service
Commission, except those falling within the appellate jurisdiction of the Supreme Court in accordance with the Constitution, the Labor Code of the Philippines under
Presidential Decree No. 442, as amended, the provisions of this Act, and of subparagraph (1) of the third paragraph and subparagraph (4) of the fourth paragraph of
Section 17 of the Judiciary Act of 1948.
Assuming arguendo that the voluntary arbitrator or the panel of voluntary arbitrators may not strictly be considered as a quasi-judicial agency, board or commission,
still both he and the panel are comprehended within the concept of a quasi-judicial instrumentality. It may even be stated that it was to meet the very situation
8
presented by the quasi-judicial functions of the voluntary arbitrators here, as well as the subsequent arbitrator/arbitral tribunal operating under the Construction Industry
Arbitration Commission, that the broader term instrumentalities was purposely included in the above-quoted provision.
The voluntary arbitrator no less performs a state function pursuant to a governmental power delegated to him under the provisions therefor in the Labor Code and he
falls, therefore, within the contemplation of the term instrumentality in the aforequoted Sec. 9 of B.P. 129. The fact that his functions and powers are provided for in
the Labor Code does not place him within the exceptions to said Sec. 9 since he is a quasi-judicial instrumentality as contemplated therein. It will be noted that,
although the Employees Compensation Commission is also provided for in the Labor Code, Circular No. 1-91, which is the forerunner of the present Revised
Administrative Circular No. 1-95, laid down the procedure for the appealability of its decisions to the Court of Appeals under the foregoing rationalization, and this was
later adopted by Republic Act No. 7902 in amending Sec. 9 of B.P. 129.
A fortiori, the decision or award of the voluntary arbitrator or panel of arbitrators should likewise be appealable to the Court of Appeals, in line with the procedure
outlined in Revised Administrative Circular No. 1-95, just like those of the quasi-judicial agencies, boards and commissions enumerated therein.
In effect, this equates the award or decision of the voluntary arbitrator with that of the regional trial court. Consequently, in a petition for certiorari from that award or
decision, the Court of Appeals must be deemed to have concurrent jurisdiction with the Supreme Court. As a matter of policy, this Court shall henceforth remand to the
Court of Appeals petitions of this nature for proper disposition.

Voluntary arbitration
Labor law; Labor relations; A mode of settling a labor dispute whereby, pursuant to a voluntary arbitration clause in their collective agreement, such dispute is referred
to an impartial third person for a final and binding resolution. Pursuant thereto, they have chosen a mutually acceptable arbitrator who shall hear and decide their case.
Above all, they have mutually agreed to de bound by said arbitrators decision. (Luzon Development Bank vs. Association of Luzon Development Bank Employees,
GR No. 120319, October 6, 1995)

G.R. No. 102976 October 25, 1995

IRON AND STEEL AUTHORITY, petitioner,
vs.
THE COURT OF APPEALS and MARIA CRISTINA FERTILIZER CORPORATION, respondents.

FELICIANO, J.:
Petitioner Iron and Steel Authority ("ISA") was created by Presidential Decree (P.D.) No. 272 dated 9 August 1973 in order, generally, to develop and promote the iron
and steel industry in the Philippines. The objectives of the ISA are spelled out in the following terms:
Sec. 2. Objectives The Authority shall have the following objectives:
(a) to strengthen the iron and steel industry of the Philippines and to expand the domestic and export markets for the products of the industry;
(b) to promote the consolidation, integration and rationalization of the industry in order to increase industry capability and viability to service the
domestic market and to compete in international markets;
(c) to rationalize the marketing and distribution of steel products in order to achieve a balance between demand and supply of iron and steel
products for the country and to ensure that industry prices and profits are at levels that provide a fair balance between the interests of investors,
consumers suppliers, and the public at large;
(d) to promote full utilization of the existing capacity of the industry, to discourage investment in excess capacity, and in coordination, with
appropriate government agencies to encourage capital investment in priority areas of the industry;
(e) to assist the industry in securing adequate and low-cost supplies of raw materials and to reduce the excessive dependence of the country on
imports of iron and steel.
The list of powers and functions of the ISA included the following:
Sec. 4. Powers and Functions. The authority shall have the following powers and functions:
xxx xxx xxx
(j) to initiate expropriation of land required for basic iron and steel facilities for subsequent resale and/or lease to the companies involved if it is
shown that such use of the State's power is necessary to implement the construction of capacity which is needed for the attainment of the
objectives of the Authority;
xxx xxx xxx
(Emphasis supplied)
P.D. No. 272 initially created petitioner ISA for a term of five (5) years counting from 9 August 1973. 1 When ISA's original term expired on 10 October 1978, its term
was extended for another ten (10) years by Executive Order No. 555 dated 31 August 1979.
The National Steel Corporation ("NSC") then a wholly owned subsidiary of the National Development Corporation which is itself an entity wholly owned by the
National Government, embarked on an expansion program embracing, among other things, the construction of an integrated steel mill in Iligan City. The construction of
such a steel mill was considered a priority and major industrial project of the Government. Pursuant to the expansion program of the NSC, Proclamation No. 2239 was
issued by the President of the Philippines on 16 November 1982 withdrawing from sale or settlement a large tract of public land (totalling about 30.25 hectares in area)
located in Iligan City, and reserving that land for the use and immediate occupancy of NSC.
Since certain portions of the public land subject matter Proclamation No. 2239 were occupied by a non-operational chemical fertilizer plant and related facilities owned
by private respondent Maria Cristina Fertilizer Corporation ("MCFC"), Letter of Instruction (LOI), No. 1277, also dated 16 November 1982, was issued directing the
NSC to "negotiate with the owners of MCFC, for and on behalf of the Government, for the compensation of MCFC's present occupancy rights on the subject land." LOI
No. 1277 also directed that should NSC and private respondent MCFC fail to reach an agreement within a period of sixty (60) days from the date of LOI No. 1277,
petitioner ISA was to exercise its power of eminent domain under P.D. No. 272 and to initiate expropriation proceedings in respect of occupancy rights of private
respondent MCFC relating to the subject public land as well as the plant itself and related facilities and to cede the same to the NSC. 2
Negotiations between NSC and private respondent MCFC did fail. Accordingly, on 18 August 1983, petitioner ISA commenced eminent domain proceedings against
private respondent MCFC in the Regional Trial Court, Branch 1, of Iligan City, praying that it (ISA) be places in possession of the property involved upon depositing in
court the amount of P1,760,789.69 representing ten percent (10%) of the declared market values of that property. The Philippine National Bank, as mortgagee of the
plant facilities and improvements involved in the expropriation proceedings, was also impleaded as party-defendant.
On 17 September 1983, a writ of possession was issued by the trial court in favor of ISA. ISA in turn placed NSC in possession and control of the land occupied by
MCFC's fertilizer plant installation.
The case proceeded to trial. While the trial was ongoing, however, the statutory existence of petitioner ISA expired on 11 August 1988. MCFC then filed a motion to
dismiss, contending that no valid judgment could be rendered against ISA which had ceased to be a juridical person. Petitioner ISA filed its opposition to this motion.
In an Order dated 9 November 1988, the trial court granted MCFC's motion to dismiss and did dismiss the case. The dismissal was anchored on the provision of the
Rules of Court stating that "only natural or juridical persons or entities authorized by law may be parties in a civil case." 3 The trial court also referred to non-compliance
by petitioner ISA with the requirements of Section 16, Rule 3 of the Rules of Court. 4
Petitioner ISA moved for reconsideration of the trial court's Order, contending that despite the expiration of its term, its juridical existence continued until the winding
up of its affairs could be completed. In the alternative, petitioner ISA urged that the Republic of the Philippines, being the real party-in-interest, should be allowed to be

9
substituted for petitioner ISA. In this connection, ISA referred to a letter from the Office of the President dated 28 September 1988 which especially directed the
Solicitor General to continue the expropriation case.
The trial court denied the motion for reconsideration, stating, among other things that:
The property to be expropriated is not for public use or benefit [__] but for the use and benefit [__] of NSC, a government controlled private
corporation engaged in private business and for profit, specially now that the government, according to newspaper reports, is offering for sale to
the public its [shares of stock] in the National Steel Corporation in line with the pronounced policy of the present administration to disengage the
government from its private business ventures. 5 (Brackets supplied)
Petitioner went on appeal to the Court of Appeals. In a Decision dated 8 October 1991, the Court of Appeals affirmed the order of dismissal of the trial court. The Court
of Appeals held that petitioner ISA, "a government regulatory agency exercising sovereign functions," did not have the same rights as an ordinary corporation and that
the ISA, unlike corporations organized under the Corporation Code, was not entitled to a period for winding up its affairs after expiration of its legally mandated term,
with the result that upon expiration of its term on 11 August 1987, ISA was "abolished and [had] no more legal authority to perform governmental functions." The Court
of Appeals went on to say that the action for expropriation could not prosper because the basis for the proceedings, the ISA's exercise of its delegated authority to
expropriate, had become ineffective as a result of the delegate's dissolution, and could not be continued in the name of Republic of the Philippines, represented by the
Solicitor General:
It is our considered opinion that under the law, the complaint cannot prosper, and therefore, has to be dismissed without prejudice to the refiling
of a new complaint for expropriation if the Congress sees it fit." (Emphases supplied)
At the same time, however, the Court of Appeals held that it was premature for the trial court to have ruled that the expropriation suit was not for a public
purpose, considering that the parties had not yet rested their respective cases.
In this Petition for Review, the Solicitor General argues that since ISA initiated and prosecuted the action for expropriation in its capacity as agent of the Republic of the
Philippines, the Republic, as principal of ISA, is entitled to be substituted and to be made a party-plaintiff after the agent ISA's term had expired.
Private respondent MCFC, upon the other hand, argues that the failure of Congress to enact a law further extending the term of ISA after 11 August 1988 evinced a
"clear legislative intent to terminate the juridical existence of ISA," and that the authorization issued by the Office of the President to the Solicitor General for continued
prosecution of the expropriation suit could not prevail over such negative intent. It is also contended that the exercise of the eminent domain by ISA or the Republic is
improper, since that power would be exercised "not on behalf of the National Government but for the benefit of NSC."
The principal issue which we must address in this case is whether or not the Republic of the Philippines is entitled to be substituted for ISA in view of the expiration of
ISA's term. As will be made clear below, this is really the only issue which we must resolve at this time.
Rule 3, Section 1 of the Rules of Court specifies who may be parties to a civil action:
Sec. 1. Who May Be Parties. Only natural or juridical persons or entities authorized by law may be parties in a civil action.
Under the above quoted provision, it will be seen that those who can be parties to a civil action may be broadly categorized into two (2) groups:
(a) those who are recognized as persons under the law whether natural, i.e., biological persons, on the one hand, or juridical person such as
corporations, on the other hand; and
(b) entities authorized by law to institute actions.
Examination of the statute which created petitioner ISA shows that ISA falls under category (b) above. P.D. No. 272, as already noted, contains express authorization to
ISA to commence expropriation proceedings like those here involved:
Sec. 4. Powers and Functions. The Authority shall have the following powers and functions:
xxx xxx xxx
(j) to initiate expropriation of land required for basic iron and steel facilities for subsequent resale and/or lease to the companies involved if it is
shown that such use of the State's power is necessary to implement the construction of capacity which is needed for the attainment of the
objectives of the Authority;
xxx xxx xxx
(Emphasis supplied)
It should also be noted that the enabling statute of ISA expressly authorized it to enter into certain kinds of contracts "for and in behalf of the Government" in
the following terms:
xxx xxx xxx
(i) to negotiate, and when necessary, to enter into contracts for and in behalf of the government, for the bulk purchase of materials, supplies or
services for any sectors in the industry, and to maintain inventories of such materials in order to insure a continuous and adequate supply thereof
and thereby reduce operating costs of such sector;
xxx xxx xxx
(Emphasis supplied)
Clearly, ISA was vested with some of the powers or attributes normally associated with juridical personality. There is, however, no provision in P.D. No. 272
recognizing ISA as possessing general or comprehensive juridical personality separate and distinct from that of the Government. The ISA in fact appears to the Court to
be a non-incorporated agency or instrumentality of the Republic of the Philippines, or more precisely of the Government of the Republic of the Philippines. It is
common knowledge that other agencies or instrumentalities of the Government of the Republic are cast in corporate form, that is to say, are incorporated agencies or
instrumentalities, sometimes with and at other times without capital stock, and accordingly vested with a juridical personality distinct from the personality of the
Republic. Among such incorporated agencies or instrumentalities are: National Power Corporation; 6 Philippine Ports Authority; 7 National Housing Authority; 8
Philippine National Oil Company; 9 Philippine National Railways; 10 Public Estates Authority; 11 Philippine Virginia Tobacco Administration, 12 and so forth. It is worth
noting that the term "Authority" has been used to designate both incorporated and non-incorporated agencies or instrumentalities of the Government.
We consider that the ISA is properly regarded as an agent or delegate of the Republic of the Philippines. The Republic itself is a body corporate and juridical person
vested with the full panoply of powers and attributes which are compendiously described as "legal personality." The relevant definitions are found in the Administrative
Code of 1987:
Sec. 2. General Terms Defined. Unless the specific words of the text, or the context as a whole, or a particular statute, require a different
meaning:
(1) Government of the Republic of the Philippines refers to the corporate governmental entity through which the functions of government are
exercised throughout the Philippines, including, save as the contrary appears from the context, the various arms through which political authority
is made effective in the Philippines, whether pertaining to the autonomous regions, the provincial, city, municipal or barangay subdivisions or
other forms of local government.
xxx xxx xxx
(4) Agency of the Government refers to any of the various units of the Government, including a department, bureau, office, instrumentality, or
government-owned or controlled corporation, or a local government or a distinct unit therein.
xxx xxx xxx
(10) Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special
functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy,
usually through a charter. This term includes regulatory agencies, chartered institutions and government-owned or controlled corporations.
xxx xxx xxx
10
 (Emphases supplied)
When the statutory term of a non-incorporated agency expires, the powers, duties and functions as well as the assets and liabilities of that agency revert back to, and are
re-assumed by, the Republic of the Philippines, in the absence of special provisions of law specifying some other disposition thereof such as, e.g., devolution or
transmission of such powers, duties, functions, etc. to some other identified successor agency or instrumentality of the Republic of the Philippines. When the expiring
agency is an incorporated one, the consequences of such expiry must be looked for, in the first instance, in the charter of that agency and, by way of supplementation, in
the provisions of the Corporation Code. Since, in the instant case, ISA is a non-incorporated agency or instrumentality of the Republic, its powers, duties, functions,
assets and liabilities are properly regarded as folded back into the Government of the Republic of the Philippines and hence assumed once again by the Republic, no
special statutory provision having been shown to have mandated succession thereto by some other entity or agency of the Republic.
The procedural implications of the relationship between an agent or delegate of the Republic of the Philippines and the Republic itself are, at least in part, spelled out in
the Rules of Court. The general rule is, of course, that an action must be prosecuted and defended in the name of the real party in interest. (Rule 3, Section 2) Petitioner
ISA was, at the commencement of the expropriation proceedings, a real party in interest, having been explicitly authorized by its enabling statute to institute
expropriation proceedings. The Rules of Court at the same time expressly recognize the role of representative parties:
Sec. 3. Representative Parties. A trustee of an expressed trust, a guardian, an executor or administrator, or a party authorized by statute may
sue or be sued without joining the party for whose benefit the action is presented or defended; but the court may, at any stage of the proceedings,
order such beneficiary to be made a party. . . . . (Emphasis supplied)
In the instant case, ISA instituted the expropriation proceedings in its capacity as an agent or delegate or representative of the Republic of the Philippines pursuant to its
authority under P.D. No. 272. The present expropriation suit was brought on behalf of and for the benefit of the Republic as the principal of ISA. Paragraph 7 of the
complaint stated:
7. The Government, thru the plaintiff ISA, urgently needs the subject parcels of land for the construction and installation of iron and steel
manufacturing facilities that are indispensable to the integration of the iron and steel making industry which is vital to the promotion of public
interest and welfare. (Emphasis supplied)
The principal or the real party in interest is thus the Republic of the Philippines and not the National Steel Corporation, even though the latter may be an
ultimate user of the properties involved should the condemnation suit be eventually successful.
From the foregoing premises, it follows that the Republic of the Philippines is entitled to be substituted in the expropriation proceedings as party-plaintiff in lieu of ISA,
the statutory term of ISA having expired. Put a little differently, the expiration of ISA's statutory term did not by itself require or justify the dismissal of the eminent
domain proceedings.
It is also relevant to note that the non-joinder of the Republic which occurred upon the expiration of ISA's statutory term, was not a ground for dismissal of such
proceedings since a party may be dropped or added by order of the court, on motion of any party or on the court's own initiative at any stage of the action and on such
terms as are just. 13 In the instant case, the Republic has precisely moved to take over the proceedings as party-plaintiff.
In E.B. Marcha Transport Company, Inc. v. Intermediate Appellate Court, 14 the Court recognized that the Republic may initiate or participate in actions involving its
agents. There the Republic of the Philippines was held to be a proper party to sue for recovery of possession of property although the "real" or registered owner of the
property was the Philippine Ports Authority, a government agency vested with a separate juridical personality. The Court said:
It can be said that in suing for the recovery of the rentals, the Republic of the Philippines acted as principal of the Philippine Ports Authority,
directly exercising the commission it had earlier conferred on the latter as its agent. . . . 15 (Emphasis supplied)
In E.B. Marcha, the Court also stressed that to require the Republic to commence all over again another proceeding, as the trial court and Court of Appeals
had required, was to generate unwarranted delay and create needless repetition of proceedings:
More importantly, as we see it, dismissing the complaint on the ground that the Republic of the Philippines is not the proper party would result in
needless delay in the settlement of this matter and also in derogation of the policy against multiplicity of suits. Such a decision would require the
Philippine Ports Authority to refile the very same complaint already proved by the Republic of the Philippines and bring back as it were to square
one. 16 (Emphasis supplied)
As noted earlier, the Court of Appeals declined to permit the substitution of the Republic of the Philippines for the ISA upon the ground that the action for expropriation
could not prosper because the basis for the proceedings, the ISA's exercise of its delegated authority to expropriate, had become legally ineffective by reason of the
expiration of the statutory term of the agent or delegated i.e., ISA. Since, as we have held above, the powers and functions of ISA have reverted to the Republic of the
Philippines upon the termination of the statutory term of ISA, the question should be addressed whether fresh legislative authority is necessary before the Republic of
the Philippines may continue the expropriation proceedings initiated by its own delegate or agent.
While the power of eminent domain is, in principle, vested primarily in the legislative department of the government, we believe and so hold that no new legislative act
is necessary should the Republic decide, upon being substituted for ISA, in fact to continue to prosecute the expropriation proceedings. For the legislative authority, a
long time ago, enacted a continuing or standing delegation of authority to the President of the Philippines to exercise, or cause the exercise of, the power of eminent
domain on behalf of the Government of the Republic of the Philippines. The 1917 Revised Administrative Code, which was in effect at the time of the commencement
of the present expropriation proceedings before the Iligan Regional Trial Court, provided that:
Sec. 64. Particular powers and duties of the President of the Philippines. In addition to his general supervisory authority, the President of the
Philippines shall have such other specific powers and duties as are expressly conferred or imposed on him by law, and also, in particular, the
powers and duties set forth in this Chapter.
Among such special powers and duties shall be:
xxx xxx xxx
(h) To determine when it is necessary or advantageous to exercise the right of eminent domain in behalf of the Government of the Philippines;
and to direct the Secretary of Justice, where such act is deemed advisable, to cause the condemnation proceedings to be begun in the court
having proper jurisdiction. (Emphasis supplied)
The Revised Administrative Code of 1987 currently in force has substantially reproduced the foregoing provision in the following terms:
Sec. 12. Power of eminent domain. The President shall determine when it is necessary or advantageous to exercise the power of eminent
domain in behalf of the National Government, and direct the Solicitor General, whenever he deems the action advisable, to institute expopriation
proceedings in the proper court. (Emphasis supplied)
In the present case, the President, exercising the power duly delegated under both the 1917 and 1987 Revised Administrative Codes in effect made a
determination that it was necessary and advantageous to exercise the power of eminent domain in behalf of the Government of the Republic and accordingly
directed the Solicitor General to proceed with the suit. 17
It is argued by private respondent MCFC that, because Congress after becoming once more the depository of primary legislative power, had not enacted a statute
extending the term of ISA, such non-enactment must be deemed a manifestation of a legislative design to discontinue or abort the present expropriation suit. We find
this argument much too speculative; it rests too much upon simple silence on the part of Congress and casually disregards the existence of Section 12 of the 1987
Administrative Code already quoted above.
Other contentions are made by private respondent MCFC, such as, that the constitutional requirement of "public use" or "public purpose" is not present in the instant
case, and that the indispensable element of just compensation is also absent. We agree with the Court of Appeals in this connection that these contentions, which were
adopted and set out by the Regional Trial Court in its order of dismissal, are premature and are appropriately addressed in the proceedings before the trial court. Those
proceedings have yet to produce a decision on the merits, since trial was still on going at the time the Regional Trial Court precipitously dismissed the expropriation
proceedings. Moreover, as a pragmatic matter, the Republic is, by such substitution as party-plaintiff, accorded an opportunity to determine whether or not, or to what
11
extent, the proceedings should be continued in view of all the subsequent developments in the iron and steel sector of the country including, though not limited to, the
partial privatization of the NSC.
WHEREFORE, for all the foregoing, the Decision of the Court of Appeals dated 8 October 1991 to the extent that it affirmed the trial court's order dismissing the
expropriation proceedings, is hereby REVERSED and SET ASIDE and the case is REMANDED to the court a quo which shall allow the substitution of the Republic of
the Philippines for petitioner Iron and Steel Authority and for further proceedings consistent with this Decision. No pronouncement as to costs.
SO ORDERED.

FACTS: Iron and Steel Authority (ISA) was created by P.D. No. 272 in order, generally, to develop and promote the iron and steel industry in the Philippines. The list
of powers and functions of the ISA included the following: xx
Sec. 4. Powers and Functions. The authority shall have the following powers and functions: xx
(j) to initiate expropriation of land required for basic iron and steel facilities for subsequent resale and/or lease to the companies involved if it is shown that such use of
the States power is necessary to implement the construction of capacity which is needed for the attainment of the objectives of the Authority; xx
The National Steel Corporation (NSC) then a wholly owned subsidiary of the National Development Corporation which is itself an entity wholly owned by the National
Government, embarked on an expansion program embracing, among other things, the construction of an integrated steel mill in Iligan City. Pursuant to the expansion
program of the NSC, Proc. No. 2239 was issued by the President of the Philippines withdrawing from sale or settlement a large tract of public located in Iligan City, and
reserving that land for the use and immediate occupancy of NSC.
Since certain portions of the public land subject matter Proclamation No. 2239 were occupied by a non-operational chemical fertilizer plant and related facilities owned
by Maria Cristina Fertilizer Corporation (MCFC), Letter of Instruction (LOI), No. 1277, was issued directing the NSC to negotiate with the owners of MCFC, for
and on behalf of the Government, for the compensation of MCFCs present occupancy rights on the subject land. LOI No. 1277 also directed that should NSC and
private respondent MCFC fail to reach an agreement within a period of sixty (60) days from the date of LOI No. 1277, petitioner ISA was to exercise its power of
eminent domain under P.D. No. 272 and to initiate expropriation proceedings in respect of occupancy rights of private respondent MCFC relating to the subject public
land as well as the plant itself and related facilities and to cede the same to the NSC.
Negotiations between NSC and private respondent MCFC did fail. Accordingly ISA commenced eminent domain proceedings against MCFC in the RTC of Iligan City,
praying that it be placed in possession of the property involved upon depositing in court representing ten percent (10%) of the declared market values of that property.
A writ of possession was issued by the trial court in favor of ISA. ISA in turn placed NSC in possession and control of the land occupied by MCFCs fertilizer plant
installation.
The case proceeded to trial. While the trial was ongoing, however, the statutory existence of petitioner ISA expired. MCFC then filed a motion to dismiss, contending
that no valid judgment could be rendered against ISA which had ceased to be a juridical person. Petitioner ISA filed its opposition to this motion.
The trial court granted MCFCs motion to dismiss and did dismiss the case. The dismissal was anchored on the provision of the Rules of Court stating that only natural
or juridical persons or entities authorized by law may be parties in a civil case.
Petitioner ISA moved for reconsideration which the trial court denied.
ISA went on appeal to the CA, which affirmed the order of dismissal of the trial court. At the same time, however, the Court of Appeals held that it was premature for
the trial court to have ruled that the expropriation suit was not for a public purpose, considering that the parties had not yet rested their respective cases.
Hence this Petition for Review.
ISSUE: WON the RP is entitled to be substituted for ISA in view of the expiration of ISAs term.
HELD: The Decision of the CA to the extent that it affirmed the trial courts order dismissing the expropriation proceedings, is hereby REVERSED and SET ASIDE
and the case is REMANDED to the court a quo which shall allow the substitution of the RPfor petitioner ISA
YES
Rule 3, Section 1 of the Rules of Court specifies who may be parties to a civil action:
Sec. 1. Who May Be Parties. Only natural or juridical persons or entities authorized by law may be parties in a civil action.
Examination of the statute which created petitioner ISA shows that ISA falls under category (b) above. P.D. No. 272, as already noted, contains express authorization to
ISA to commence expropriation proceedings like those here involved. It should also be noted that the enabling statute of ISA expressly authorized it to enter into certain
kinds of contracts for and in behalf of the Government in the following terms: xx
(i) to negotiate, and when necessary, to enter into contracts for and in behalf of the government, for the bulk purchase of materials, supplies or services for any sectors
in the industry, and to maintain inventories of such materials in order to insure a continuous and adequate supply thereof and thereby reduce operating costs of such
sector; xxx
Clearly, ISA was vested with some of the powers or attributes normally associated with juridical personality. There is, however, no provision in P.D. No. 272
recognizing ISA as possessing general or comprehensive juridical personality separate and distinct from that of the Government.
We consider that the ISA is properly regarded as an agent or delegate of the RP. The Republic itself is a body corporate and juridical person vested with the full panoply
of powers and attributes which are compendiously described as legal personality. The relevant definitions are found in the Administrative Code of 1987:
Sec. 2. General Terms Defined. Unless the specific words of the text, or the context as a whole, or a particular statute, require a different meaning:
(1) Government of the RPrefers to the corporate governmental entity through which the functions of government are exercised throughout the Philippines, including,
save as the contrary appears from the context, the various arms through which political authority is made effective in the Philippines, whether pertaining to the
autonomous regions, the provincial, city, municipal or barangay subdivisions or other forms of local government.
xxx xxx xxx
(4) Agency of the Government refers to any of the various units of the Government, including a department, bureau, office, instrumentality, or government-owned or
controlled corporation, or a local government or a distinct unit therein.
xxx xxx xxx
(10) Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by
law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. This term includes
regulatory agencies, chartered institutions and government-owned or controlled corporations.
xxx xxx xxx
When the statutory term of a non-incorporated agency expires, the powers, duties and functions as well as the assets and liabilities of that agency revert back to, and
are re-assumed by, the RP, in the absence of special provisions of law specifying some other disposition thereof such as, e.g., devolution or transmission of such powers,
duties, functions, etc. to some other identified successor agency or instrumentality of the RP.
When the expiring agency is an incorporated one, the consequences of such expiry must be looked for, in the first instance, in the charter of that agency and, by way of
supplementation, in the provisions of the Corporation Code.
Since, in the instant case, ISA is a non-incorporated agency or instrumentality of the Republic, its powers, duties, functions, assets and liabilities are properly regarded
as folded back into GRP and hence assumed once again by the Republic, no special statutory provision having been shown to have mandated succession thereto by
some other entity or agency of the Republic.
The principal or the real party in interest is thus the RP and not the NSC, even though the latter may be an ultimate user of the properties involved should the
condemnation suit be eventually successful.
From the foregoing premises, it follows that the RP is entitled to be substituted in the expropriation proceedings as party-plaintiff in lieu of ISA, the statutory term of
ISA having expired. Put a little differently, the expiration of ISAs statutory term did not by itself require or justify the dismissal of the eminent domain proceedings.
12
In E.B. Marcha, the Court also stressed that to require the Republic to commence all over again another proceeding, as the trial court and CA had required, was to
generate unwarranted delay and create needless repetition of proceedings:
NOTES:
1. Since, as we have held above, the powers and functions of ISA have reverted to the RP upon the termination of the statutory term of ISA, the question should be
addressed whether fresh legislative authority is necessary before the RP may continue the expropriation proceedings initiated by its own delegate or agent.
While the power of eminent domain is, in principle, vested primarily in the legislative department of the government, we believe and so hold that no new legislative act
is necessary should the Republic decide, upon being substituted for ISA, in fact to continue to prosecute the expropriation proceedings. For the legislative authority, a
long time ago, enacted a continuing or standing delegation of authority to the President of the Philippines to exercise, or cause the exercise of, the power of eminent
domain on behalf of the Government of the Republic of the Philippines. The 1917 Revised Administrative Code, which was in effect at the time of the commencement
of the present expropriation proceedings before the Iligan RTC , provided that:
Sec. 64. Particular powers and duties of the President of the Philippines. In addition to his general supervisory authority, the President of the Philippines shall have
such other specific powers and duties as are expressly conferred or imposed on him by law, and also, in particular, the powers and duties set forth in this Chapter.
Among such special powers and duties shall be: xx
(h) To determine when it is necessary or advantageous to exercise the right of eminent domain in behalf of the Government of the Philippines; and to direct the
Secretary of Justice, where such act is deemed advisable, to cause the condemnation proceedings to be begun in the court having proper jurisdiction. xx
The Revised Administrative Code of 1987 currently in force has substantially reproduced the foregoing provision in the following terms:
Sec. 12. Power of eminent domain. The President shall determine when it is necessary or advantageous to exercise the power of eminent domain in behalf of the
National Government, and direct the Solicitor General, whenever he deems the action advisable, to institute expopriation proceedings in the proper court. (Emphasis
supplied)
In the present case, the President, exercising the power duly delegated under both the 1917 and 1987 Revised Administrative Codes in effect made a determination that
it was necessary and advantageous to exercise the power of eminent domain in behalf of the Government of the Republic and accordingly directed the SG to proceed
with the suit. 17
2. It is argued by private respondent MCFC that, because Congress after becoming once more the depository of primary legislative power, had not enacted a statute
extending the term of ISA, such non-enactment must be deemed a manifestation of a legislative design to discontinue or abort the present expropriation suit. We find
this argument much too speculative; it rests too much upon simple silence on the part of Congress and casually disregards the existence of Section 12 of the 1987
Administrative Code already quoted above.
3. Other contentions are made by private respondent MCFC, such as, that the constitutional requirement of public use or public purpose is not present in the instant
case, and that the indispensable element of just compensation is also absent. We agree with the Court of Appeals in this connection that these contentions, which were
adopted and set out by the RTC in its order of dismissal, are premature and are appropriately addressed in the proceedings before the trial court. Those proceedings
have yet to produce a decision on the merits, since trial was still on going at the time the RTC precipitously dismissed the expropriation proceedings. Moreover, as a
pragmatic matter, the Republic is, by such substitution as party-plaintiff, accorded an opportunity to determine whether or not, or to what extent, the proceedings should
be continued in view of all the subsequent developments in the iron and steel sector of the country including, though not limited to, the partial privatization of the NSC

The foregoing provision does not require prior unsuccessful negotiation as a condition precedent for the exercise of eminent domain. In Iron and Steel Authority v.
Court of Appeals, the President chose to prescribe this condition as an additional requirement instead. In the instant case, however, no such voluntary restriction was
imposed.

13