f.

Cardinal Primary Requirements of Due Process

1. G.R. No. 110379. November 28, 1997.*

HON. ARMAND FABELLA, in his capacity as SECRETARY OF THE DEPARTMENT OF EDUCATION, CULTURE AND SPORTS; DR.
NILO ROSAS, in his capacity as REGIONAL DIRECTOR, DECS-NCR; DR. BIENVENIDO ICASIANO, in his capacity as the
SUPERINTENDENT OF THE QUEZON CITY SCHOOLS DIVISION; ALMA BELLA O. BAUTISTA, AURORA C. VALENZUELA and
TERESITA V. DIMAGMALIW, petitioners, vs. THE COURT OF APPEALS, ROSARITO A. SEPTIMO, ERLINDA B. DE LEON,
CLARISSA T. DIMAANO, WILFREDO N. BACANI, MARINA R. VIVAR, VICTORIA S. UBALDO, JENNIE L. DOGWE, NORMA L.
RONGCALES, EDITA C. SEPTIMO, TERESITA E. EVANGELISTA, CATALINA R. FRAGANTE, REBECCA D. BAGDOG, MARILYNNA
C. KU, MARISSA M. SAMSON, HENEDINA B. CARILLO, NICASIO C. BRAVO, RUTH F. LACANILAO, MIRASOL C. BALIGOD,
FELISA S. VILLACRUEL, MA. VIOLETA ELIZABETH Y. HERNANDEZ, ANTONIO C. OCAMPO, ADRIANO S. VALENCIA and
ELEUTERIO S. VARGAS, respondents.
Constitutional Law; Due Process; The resolution of this case revolves around the question of due process of law, not on
the right of government workers to strike.—In the present case, however, the issue is not whether the private
respondents engaged in any prohibited activity which may warrant the imposition of disciplinary sanctions against them
as a result of administrative proceedings. As already observed, the resolution of this case revolves around the question of
due process of law, not on the right of government workers to strike. The issue is not whether private respondents may
be punished for engaging in a prohibited action but whether, in the course of the investigation of the alleged proscribed
activity, their right to due process has been violated. In short, before they can be investigated and meted out any penalty,
due process must first be observed.
Same; Same; What due process in administrative proceedings include.—In administrative proceedings, due process has
been recognized to include the following: (1) the right to actual or constructive notice of the institution of proceedings
which may affect a respondent’s legal rights; (2) a real opportunity to be heard personally or with the assistance of
counsel, to present witnesses and evidence in one’s favor, and to defend one’s rights; (3) a tribunal vested with
competent jurisdiction and so constituted as to afford a person charged administratively a reasonable guarantee of
honesty as well as impartiality; and (4) a finding by said tribunal which is supported by substantial evidence submitted
for consideration during the hearing or contained in the records or made known to the parties affected.
Same; Same; Republic Act 4670 known as the Magna Carta for Public School Teachers specifically covers administrative
proceedings involving public school teachers.—The legislature enacted a special law, RA 4670 known as the Magna Carta
for Public School Teachers, which specifically covers administrative proceedings involving public schoolteachers. Section 9
of said law expressly provides that the committee to hear public schoolteachers’ administrative cases should be
composed of the school superintendent of the division as chairman, a representative of the local or any existing
provincial or national teachers’ organization and a supervisor of the division.
Same; Same; In any proceeding, the essence of procedural due process is embodied in the basic requirement of notice
and a real opportunity to be heard.—In the present case, the various committees formed by DECS to hear the
administrative charges against private respondents did not include “a representative of the local or, in its absence, any
existing provincial or national teacher’s organization” as required by Section 9 of RA 4670. Accordingly, these committees
were deemed to have no competent jurisdiction. Thus, all proceedings undertaken by them were necessarily void. They
could not provide any basis for the suspension or dismissal of private respondents. The inclusion of a representative of a
teachers’ organization in these committees was indispensable to ensure an impartial tribunal. It was this requirement
that would have given substance and meaning to the right to be heard. Indeed, in any proceeding, the essence of
procedural due process is embodied in the basic requirement of notice and a real opportunity to be heard.
Same; Same; There is no dispute that none of the teachers appointed by the DECS as members of its investigating
committee was ever designated or authorized by a teachers’ organization as its representative in the committee.—Mere
membership of said teachers in their respective teachers’ organizations does not ipso facto make them authorized
representatives of such organizations as contemplated by Section 9 of RA 4670. Under this section, the teachers’
organization possesses the right to indicate its choice of representative to be included by the DECS in the investigating
committee. Such right to designate cannot be usurped by the secretary of education or the director of public schools or
their underlings. In the instant case, there is no dispute that none of the teachers appointed by the DECS as members of
its investigating committee was ever designated or authorized by a teachers’ organization as its representative in said
committee.
Same; Same; Court will never countenance a denial of the fundamental right to due process which is a cornerstone of
our legal system.—Contrary to petitioners’ asseverations, RA 4670 is applicable to this case. It has not been expressly
repealed by the general law PD 807, which was enacted later, nor has it been shown to be inconsistent with the latter. It
is a fundamental rule of statutory construction that “repeals by implication are not favored. An implied repeal will not be
allowed unless it is convincingly and unambiguously demonstrated that the two laws are so clearly repugnant and
patently inconsistent that they cannot co-exist. This is based on the rationale that the will of the legislature cannot be
overturned by the judicial function of construction and interpretation. Courts cannot take the place of Congress in
repealing statutes. Their function is to try to harmonize, as much as possible, seeming conflicts in the laws and resolve
doubts in favor of their validity and co-existence.” Thus, a subsequent general law does not repeal a prior special law,
“unless the intent to repeal or alter is manifest, although the terms of the general law are broad enough to include the
cases embraced in the special law.”
Statutory Construction; Republic Act 4670 has not been expressly repealed by Presidential Decree 807.—Because the
administrative proceedings involved in this case are void, no delinquency or misconduct may be imputed to private
respondents. Moreover, the suspension or dismissal meted on them is baseless. Private respondents should, as a
consequence, be reinstated and awarded all monetary benefits that may have accrued to them during the period of their
unjustified suspension or dismissal. This Court will never countenance a denial of the fundamental right to due process,
which is a cornerstone of our legal system.

PANGANIBAN, J.:
Due process of law requires notice and hearing. Hearing, on the other hand, presupposes a competent and impartial
tribunal. The right to be heard and, ultimately, the right to due process of law lose meaning in the absence of an
independent, competent and impartial tribunal.
Statement of the Case
This principium is explained by this Court as it resolves this petition for review on certiorari assailing the May 21, 1993
Decision 1 of the Court of Appeals 2 in CA-G.R.. SP No. 29107 which affirmed the trial court's decision, 3 as follows:
WHEREFORE, the decision appealed from is AFFIRMED and the appeal is DISMISSED.
The Hon. Armand Fabella is hereby ORDERED substituted as respondent-appellant in place of former
Secretary Isidro Cariño and henceforth this fact should be reflected in the title of this case.
SO ORDERED. 4
The Antecedent Facts
The facts, as found by Respondent Court, are as follows:
On September 17, 1990, then DECS Secretary Cariño issued a return-to-work order to all public school
teachers who had participated in walk-outs and strikes on various dates during the period September 26,
1990 to October 18, 1990. The mass action had been staged to demand payment of 13th month
differentials, clothing allowances and passage of a debt-cap bill in Congress, among other things.
On October 18, 1990, Secretary Cariño filed administrative cases against herein petitioner-appellees, who
are teachers of the Mandaluyong High School. The charge sheets required petitioner-appellees to explain
in writing why they should not be punished for having taken part in the mass action in violation of civil
service laws and regulations, to wit:
1. grave misconduct;
2. gross neglect of duty;
3. gross violation of Civil Service Law and rules on reasonable office
regulations;
4. refusal to perform official duty;
5. conduct prejudicial to the best interest of the service.
6. absence without leave (AWOL)
At the same time, Secretary Cariño ordered petitioner-appellee to be placed under preventive
suspension.
The charges were subsequently amended by John Doe (not his real name)on November 7, 1990 to
include the specific dates when petitioner-appellees allegedly took part in the strike.
Administrative hearings started on December 20, 1990. Petitioner-appellees' counsel objected to the
procedure adopted by the committee and demanded that he be furnished a copy of the guidelines
adopted by the committee for the investigation and imposition of penalties. As he received no response
from the committee, counsel walked out. Later, however, counsel, was able to obtain a copy of the
guidelines.
On April 10, 1991, the teachers filed a an injunctive suit (Civil Case No. 60675) with the Regional Trial
Court in Quezon City, charging the committee appointed by Secretary Cariño with fraud and deceit and
praying that it be stopped from further investigating them and from rendering any decision in the
administrative case. However, the trial court denied them a restraining order.
They then amended their complaint and made it one for certiorari and mandamus. They alleged that the
investigating committee was acting with grave abuse of discretion because its guidelines for investigation
place the burden of proof on them by requiring them to prove their innocence instead of requiring
Secretary Cariño and his staff to adduce evidence to prove the charges against the teachers.
On May 30, 1991, petitioner-appellee Adriano S. Valencia of the Ramon Magsaysay High School filed a
motion to intervene, alleging that he was in the same situation as petitioners since he had likewise been
charged and preventively suspended by respondent-appellant Cariño for the same grounds as the other
petitioner-appellees and made to shoulder the burden of proving his innocence under the committee's
guidelines. The trial court granted his motion on June 3, 1991 and allowed him to intervene.
On June 11, 1991, the Solicitor General answered the petitioner for certiorari and mandamus in behalf of
respondent DECS Secretary. In the main he contended that, in accordance with the doctrine of primary
resort, the trial court should not interfere in the administrative proceedings.
The Solicitor General also asked the trial court to reconsider its order of June 3, 1991, allowing
petitioner-appellee Adriano S. Valencia to intervene in the case.
Meanwhile, the DECS investigating committee rendered a decision on August 6, 1991, finding the
petitioner-appellees guilty, as charged and ordering their immediate dismissal.
On August 15, 1991, the trial court dismissed the petition for certiorari and mandamus for lack of merit.
Petitioner-appellees moved for a reconsideration, but their motion was denied on September 11, 1991.
The teachers then filed a petition for certiorari with the Supreme Court which, on February 18, 1992,
issued a resolution en banc declaring void the trial court's order of dismissal and reinstating petitioner-
appellees' action, even as it ordered the latter's reinstatement pending decision of their case.
Accordingly, on March 25, 1992, the trial court set the case for hearing. June 8, 1992, it issued a pre-trial
order which reads:
As prayed for by Solicitor Bernard Hernandez, let this case be set for pre-trial conference
on June 17, 1992 at 1:30 p.m., so as to expedite the proceedings hereof. In which case,
DECS Secretary Isidro Cariño, as the principal respondent, is hereby ordered to
PERSONALLY APPEAR before this Court on said date and time, with a warning that should
he fail to show up on said date, the Court will declare him as IN DEFAULT. Stated
otherwise, for the said Pre-Trial Conference, the Court will not recognize any
representative of his.
By agreement of the parties, the trial conference was reset on June 26, 1992. However, Secretary Cariño
failed to appear in court on the date set. It was explained that he had to attend a conference in
Maragondon, Cavite. Instead, he was represented by Atty. Reno Capinpin, while the other respondents
were represented by Atty. Jocelyn Pili. But the court just the same declared them as in default. The
Solicitor General moved for a reconsideration, reiterating that Cariño could not personally come on June
26, 1992 because of prior commitment in Cavite. It was pointed out that Cariño was represented by Atty.
Reno Capinpin, while the other respondents were represented by Atty. Jocelyn Pili, both of the DECS-NCR
and that both had special powers of attorney. But the Solicitor General's motion for reconsideration was
denied by the trial court. In its order of July 15, 1992, the court stated:
The "Motion For Reconsideration" dated July 3, 1992 filed by the respondents thru
counsel, is hereby DENIED for lack of merit. It appears too obvious that respondents
simply did not want to comply with the lawful orders of the Court.
The respondents having lost their standing in Court, the "Manifestation and Motion,"
dated July 3, 1992 filed by the Office of the Solicitor General is hereby DENIED due
course.
SO ORDERED.
On July 3, 1992, the Solicitor General informed the trial court that Cariño had ceased to be DECS
Secretary and asked for his substitution. But the court failed to act on his motion.
The hearing of the case was thereafter conducted ex parte with only the teachers allowed to present
their evidence.
On August 10, 1992, the trial court rendered a decision, in which it stated:
The Court is in full accord with petitioners' contention that Rep. Act No. 4670 otherwise known as the
"Magna Carta for Public School Teachers" is the primary law that governs the conduct of investigation in
administrative cases filed against public school teachers, with Pres. Decree No. 807 as its supplemental
law. Respondents erred in believing and contending that Rep. Act No. 4670 has already been superseded
by the applicable provisions of Pres. Decree No. 807 and Exec. Order No. 292. Under the Rules of
Statutory Construction, a special law, Rep. Act. No. 4670 in the case at bar, is not regarded as having been
replaced by a general law, Pres. Decree No. 807, unless the intent to repeal or alter the same is manifest.
A perusal of Pres. Decree No. 807 reveals no such intention exists, hence, Rep. Act No. 4670 stands. In
the event that there is conflict between a special and a general law, the former shall prevail since it
evidences the legislator's intent more clearly than that of the general statute and must be taken as an
exception to the General Act. The provision of Rep. Act No. 4670 therefore prevails over Pres. Decree No.
807 in the composition and selection of the members of the investigating committee. Consequently, the
committee tasked to investigate the charges filed against petitioners was illegally constituted, their
composition and appointment being violative of Sec. 9 of Rep. Act No. 4670 hence all acts done by said
body possess no legal color whatsoever.
Anent petitioners' claim that their dismissal was effected without any formal investigation, the Court,
after consideration of the circumstances surrounding the case, finds such claim meritorious. Although it
cannot be gain said that respondents have a cause of action against the petitioner, the same is not
sufficient reason to detract from the necessity of basic fair play. The manner of dismissal of the teachers
is tainted with illegality. It is a dismissal without due process. While there was a semblance of
investigation conducted by the respondents their intention to dismiss petitioners was already manifest
when it adopted a procedure provided for by law, by shifting the burden of proof to the petitioners,
knowing fully well that the teachers would boycott the proceedings thereby giving them cause to render
judgment ex-parte.
The DISMISSAL therefore of the teachers is not justified, it being arbitrary and violative of the teacher's
right to due process. Due process must be observed in dismissing the teachers because it affects not only
their position but also their means of livelihood.
WHEREFORE, premises considered, the present petition is hereby GRANTED and all the questioned
orders/decisions of the respondents are hereby declared NULL and VOID and are hereby SET ASIDE.
The reinstatement of the petitioners to their former positions without loss of seniority and promotional
rights is hereby ORDERED.
The payment, if any, of all the petitioners' back salaries, allowances, bonuses, and other benefits and
emoluments which may have accrued to them during the entire period of their preventive suspension
and/or dismissal from the service is hereby likewise ORDERED.
 SO ORDERED. 5
From this adverse decision of the trial court; former DECS Secretary Isidro Cariño filed an appeal with the Court of
Appeals raising the following grounds:
I. The trial court seriously erred in declaring appellants as in default.
II. The trial court seriously erred in not ordering the proper substitution
of parties.
III. The trial court seriously erred in holding that R.A. No. 4670, otherwise
known as "Magna Carta for Public School Teachers", should govern the
conduct of the investigation conducted.
IV. The trial court seriously erred in ruling that the dismissal of the
teachers are without due process. 6
As mentioned earlier, the Court of Appeals affirmed the RTC decision, holding in the main that private respondents were
denied due process in the administrative proceedings instituted against them.
Hence, this petition for review. 7
The Issues
Before us, petitioners raise the following issues:
I
Whether or not Respondent Court of Appeals committed grave abuse of discretion in holding in effect
that private respondents were denied due process of law.
II
Whether or not Respondent Court of Appeals seriously erred and committed grave abuse of discretion in
applying strictly the provision of R.A. No. 4670 in the composition of the investigating committee.
III
Whether or not Respondent Court of Appeals committed grave abuse of discretion in dismissing the
appeal and in affirming the trial court's decision. 8
These issues, all closely related, boil down to a single question: whether private respondents were denied due process of
law.
The Court's Ruling
The petition is bereft of merit. We agree with the Court of Appeals that private respondents were denied due process of
law.
Denial of Due Process
At the outset, we must stress that we are tasked only to determine whether or not due process of law was observed in
the administrative proceedings against herein private respondents. We note the Solicitor General's extensive disquisition
that government employees do not have the right to strike. 9 On this point, the Court, in the case of Bangalisan vs. Court
of Appeals, 10 has recently pronounced, through Mr. Justice Florenz D. Regalado:
It is the settled rule in this jurisdiction that employees in the public service may not engage in strikes.
While the Constitution recognizes the right of government employees to organize, they are prohibited
from staging strikes, demonstrations mass leaves, walk-outs and other forms of mass action which will
result in temporary stoppage or disruption of public services. The right of government employees to
organize is limited only to the formation of unions or associations, without including the right to strike.
More recently, in Jacinto vs. Court of Appeals, 11 the Court explained the schoolteachers' right to peaceful assemblyvis-a-
vis their right to mass protest:
 Moreover, the petitioners here, except Merlinda Jacinto, were not penalized for the exercise of their right
to assemble peacefully and to petition the government for a redress of grievances. Rather, the Civil
Service Commission found them guilty of conduct prejudicial to the best interest of the service for having
absented themselves without proper authority, from their schools during regular school days, in order to
participate in the mass protest, their absence ineluctably resulting in the non-holding of classes and in
the deprivation of students of education, for which they were responsible. Had petitioners availed
themselves of their free time — recess, after classes, weekends or holidays — to dramatize their
grievances and to dialogue with the proper authorities within the bounds of law, no one — not the DECS,
the CSC or even this Court — could have held them liable for the valid exercise of their constitutionally
guaranteed rights. As it was, the temporary stoppage of classes resulting from their activity necessarily
disrupted public services, the very evil sought to be forestalled by the prohibition against strikes by
government workers. Their act by its nature was enjoined by the Civil Service
law, rules and regulations, for which they must, therefore, be made answerable. 12
In the present case, however, the issue is not whether the private respondents engaged in any prohibited activity which
may warrant the imposition of disciplinary sanctions against them as a result of administrative proceedings. As already
observed, the resolution of this case revolves around the question of due process of law, not on the right of government
workers to strike. The issue is not whether private respondents may be punished for engaging in a prohibited action but
whether, in the course of the investigation of the alleged proscribed activity, their right to due process has been violated.
In short, before they can be investigated and meted out any penalty, due process must first be observed.
In administrative proceedings, due process has been recognized to include the following: (1) the right to actual or
constructive notice of the institution of proceedings which may affect a respondent's legal rights; (2) a real opportunity
to be heard personally or with the assistance of counsel, to present witnesses and evidence in one's favor, and to defend
one's rights; (3) a tribunal vested with competent jurisdiction and so constituted as to afford a person charged
administratively a reasonable guarantee of honesty as well as impartiality; and (4) a finding by said tribunal which is
supported by substantial evidence submitted for consideration during the hearing or contained in the records or made
known to the parties affected. 13
The legislature enacted a special law, RA 4670 known as the Magna Carta for Public School Teachers, which specifically
covers administrative proceedings involving public schoolteachers. Section 9 of said law expressly provides that the
committee to hear public schoolteachers' administrative cases should be composed of the school superintendent of the
division as chairman, a representative of the local or any existing provincial or national teachers' organization and a
supervisor of the division. The pertinent provisions of RA 4670 read:
Sec. 8. Safeguards in Disciplinary Procedure. — Every teacher shall enjoy equitable safeguards at each
stage of any disciplinary procedure and shall have:
a: the right to be informed, in writing, of the charges;
b. the right to full access to the evidence in the case;
c. the right to defend himself and to be defended by a representative of his choice and/or
by his organization, adequate time being given to the teacher for the preparation of his
defense; and
d. the right to appeal to clearly designated authorities. No publicity shall be given to any
disciplinary action being taken against a teacher during the pendency of his case.
Sec. 9. Administrative Charges. — Administrative charges against teacher shall be heard initially by a
committee composed of the corresponding School Superintendent of the Division or a duly authorized
representative who would at least have the rank of a division supervisor, where the teacher belongs, as
chairman, a representative of the local or, in its absence, any existing provincial or national teacher's
organization and a supervisor of the Division, the last two to be designated by the Director of Public
Schools. The committee shall submit its findings, and recommendations to the Director of Public Schools
within thirty days from the termination of the hearings: Provided, however, That where the school
superintended is the complainant or an interested party, all the members of the committee shall be
appointed by the Secretary of Education.
The foregoing provisions implement the Declaration of Policy of the statute; that is, to promote the "terms of
employment and career prospects" of schoolteachers.
In the present case, the various committees formed by DECS to hear the administrative charges against private
respondents did not include "a representative of the local or, in its absence, any existing provincial or national teacher's
organization" as required by Section 9 of RA 4670. Accordingly, these committees were deemed to have no competent
jurisdiction. Thus, all proceedings undertaken by them were necessarily void. They could not provide any basis for the
suspension or dismissal of private respondents. The inclusion of a representative of a teachers' organization in these
committees was indispensable to ensure an impartial tribunal. It was this requirement that would have given substance
and meaning to the right to be heard. Indeed, in any proceeding, the essence of procedural due process is embodied in
the basic requirement of notice and a real opportunity to be heard. 14
Petitioners argue that the DECS complied with Section 9 of RA 4670, because "all the teachers who were members of the
various committees are members of either the Quezon City Secondary Teachers Federation or the Quezon City
Elementary Teachers Federation" 15 and are deemed to be the representatives of a teachers' organization as required by
Section 9 of RA 4670.
We disagree. Mere membership of said teachers in their respective teachers' organizations does not ipso factomake
them authorized representatives of such organizations as contemplated by Section 9 of RA 4670. Under this section, the
teachers' organization possesses the right to indicate its choice of representative to be included by the DECS in the
investigating committee. Such right to designate cannot be usurped by the secretary of education or the director of
public schools or their underlings. In the instant case, there is no dispute that none of the teachers appointed by the
DECS as members of its investigating committee was ever designated or authorized by a teachers' organization as its
representative in said committee.
Contrary to petitioners' asseverations, 16 RA 4670 is applicable to this case. It has not been expressly repealed by the
general law PD 807, which was enacted later, nor has it been shown to be inconsistent with the latter. It is a fundamental
rule of statutory construction that "repeals by implication are not favor. An implied repeal will not be allowed unless it is
convincingly and unambiguously demonstrated that the two laws are so clearly repugnant and patently inconsistent that
they cannot co-exist. This is based on the rationale that the will of the legislature cannot be overturned by the judicial
function of construction and interpretation. Courts cannot take the place of Congress in repealing statutes. Their function
is to try to harmonize, as much as possible, seeming conflicts in the laws and resolve doubts in favor of their validity and
co-existence." 17 Thus, a subsequent general law does not repeal a prior special law, "unless the intent to repeal or alter
is manifest, although the terms of the general law are broad enough to include the cases embraced in the special
law." 18
The aforementioned Section 9 of RA 4670, therefore, reflects the legislative intent to impose a standard and a separate
set of procedural requirements in connection with administrative proceedings involving public schoolteachers. Clearly,
private respondents' right to due process of law requires compliance with these requirements laid down by RA
4670. Verba legis non est recedendum.
Hence, Respondent Court of Appeals, through Mr. Justice Vicente V. Mendoza who is now a member of this Court,
perceptively and correctly stated:
Respondent-appellants argue that the Magna Carta has been superseded by the Civil Service Decree (P.D.
No. 807) and that pursuant to the latter law the head of a department, like the DECS secretary, or a
regional director, like the respondent-appellant John Doe (not his real name), can file administrative
charges against a subordinate, investigate him and take disciplinary action against him if warranted by his
findings. Respondent-appellants cite in support of their argument the following provisions of the Civil
Service Decree (P.D. No. 807).
Sec. 37. Disciplinary Jurisdiction. —
xxx xxx xxx
b) The heads of departments, agencies and instrumentalities. . . shall have jurisdiction to
investigate and decide matters involving disciplinary action against officers and
employees under their jurisdiction. . . .
 Sec. 38. Procedure in Administrative Cases Against Non-Presidential Appointees. —
a) Administrative Proceedings may be commenced against a subordinate officer or the
employee by the head of department or officer of equivalent rank, or head of local
government, or chiefs of agencies, or regional directors, or upon sworn, written
complaint of any other persons.
There is really no repugnance between the Civil Service Decree and the Magna Carta for Public School
Teachers. Although the Civil Service Decree gives the head of department or the regional director
jurisdiction to investigate and decide disciplinary matters, the fact is that such power is exercised through
committees. In cases involving public school teachers, the Magna Carta provides that the committee be
constituted as follows:
Sec. 9. Administrative Charges. — Administrative charges against a teacher shall be heard
initially by a committee composed of the corresponding School Superintendent of the
Division or a duly authorized representative who would at least have the rank of a
division supervisor, where the teacher belongs, as chairman, a representative of the local
or, in its absence, any existing provincial or national teacher's organization and a
supervisor of the Division, the last two to be designated by the Director of Public Schools.
The committee shall submit its findings, and recommendations to the Director of Public
Schools within thirty days from the termination of the hearings: Provided, however, that
where the school superintendent is the complainant or an interested party, all the
members of the committee shall be appointed by the Secretary of Education.
Indeed, in the case at bar, neither the DECS [s]ecretary nor the DECS-NCR regional director personally
conducted the investigation but entrusted it to a committee composed of a division supervisor, secondly
and elementary school teachers, and consultants. But there was no representative of a teachers
organization. This is a serious flaw in the composition of the committee because the provision for the
representation of a teachers organization is intended by law for the protection of the rights of teachers
facing administrative charges.
There is thus nothing in the Magna Carta that is in any way inconsistent with the Civil Service Decree
insofar as procedures for investigation is concerned. To the contrary, the Civil Service Decree, [S]ec. 38(b)
affirms the Magna Carta by providing that the respondent in an administrative case may ask for a "formal
investigation," which was what the teachers did in this case by questioning the absence of a
representative of a teachers organization in the investigating committee.
The administrative committee considered the teachers to have waived their right to a hearing after the
latter's counsel walked out of the preliminary hearing. The committee should not have made such a
ruling because the walk out was staged in protest against the procedures of the committee and its refusal
to give the teachers' counsel a copy of the guidelines. The committee concluded its investigation and
ordered the dismissal of the teachers without giving the teachers the right to full access of the evidence
against them and the opportunity to defend themselves. Its predisposition to find petitioner-appellees
guilty of the charges was in fact noted by the Supreme Court when in its resolution in G.R. No. 101943
(Rosario Septimo v. Judge Martin Villarama, Jr.) it stated:
The facts and issues in this case are similar to the facts and issues in Hon. Isidro Cariño, et
al. v. Hon. Carlos C. Ofilada, et al. G.R. No. 100206, August 22, 1961.
As in the Cariño v. Ofilada case, the officials of the Department of Culture and Education
are predisposed to summarily hold the petitioners guilty of the charges against them. In
fact, in this case Secretary Cariño, without awaiting formal administrative procedures and
on the basis of reports and "implied admissions" found the petitioners guilty as charged
and dismissed them from the service in separate decisions dated May 16, 1997 and
August 6, 1991. The teachers went to court. The Court dismissed the case. 19
Furthermore, this Court sees no valid reason to disregard the factual findings and conclusions of the Court of Appeals. It
is not our function "to assess and evaluate all over again the evidence, testimonial and documentary, adduced by the
parties particularly where, such as here, the findings of both the trial court and the appellate court coincide." 20
It is as clear as day to us that the Court of Appeals committed to reversible error in affirming the trial court's decision
setting aside the questioned orders of petitioners; and ordering the unqualified reinstatement of private respondents
and the payment of them of salaries, allowances, bonuses and other benefits
that accrued to their benefit during the entire duration of their suspension or dismissal. 21 Because the administrative
proceedings involved in this case are void, no delinquency or misconduct may be imputed to private respondents.
Moreover, the suspension or dismissal meted on them is baseless. Private respondents should, as a consequence, be
reinstated 22 and awarded all monetary benefits that may have accrued to them during the period of their unjustified
suspension or dismissal. 23 This Court will never countenance a denial of the fundamental right to due process, which is
a cornerstone of our legal system.
WHEREFORE, premises considered, the petition is hereby DENIED for its utter failure to show any reversible error on the
part of the Court of Appeals. The assailed Decision is thus AFFIRMED.
SO ORDERED.

2. G.R. No. 89687. September 26, 1990.*

MARIA B. LUPO, petitioner, vs. ADMINISTRATIVE ACTION BOARD (AAB) (Department of Transportation &
Communications Republic of the Philippines) and JUSTICE ONOFRE A. VILLALUZ, respondents.
Administrative Law; Civil Service; Decisions of heads of departments in all administrative disciplinary cases involving the
imposition of a penalty of suspension for more than 30 days, or fine in an amount exceeding 30 days' salary are subject
to appeal to the Civil Service Commission.—It should be noted that under Section 37 (b) as aforequoted, the decisions of
heads of departments become final only in cases where the penalty imposed is suspension for not more than thirty (30)
days or fine in an amount not exceeding thirty (30) days' salary. In the case, therefore, of petitioner who had been made
to suffer the penalty of suspension for one (1) year, such penalty should not have been implemented without the appeal
to the Civil Service Commission for proper review. Notably, paragraph (a) of the above Section explicitly provides that the
Commission shall decide upon appeal all administrative disciplinary cases involving the imposition of a penalty of
suspension for more than 30 days, or fine in an amount exceeding 30 days' salary. Clearly, the enforcement of the
penalty imposed upon petitioner under the resolution of the Secretary of the Department of Transportation and
Communications was premature.
Same; Due Process; Cardinal primary requirements of due process in administrative proceedings.—Thus, in the case of
Jose Rizal College v. National Labor Relations Commission (G.R. No. 65482, December 1, 1987) this Court reiterated the
"cardinal primary" requirements of due process in administrative proceedings and these are: (1) the right to a hearing
which includes, the right to present one's case and submit evidence in support thereof; (2) the tribunal must consider
the evidence presented; (3) the decision must have something to support itself; (4) the evidence must be substantial,
and substantial evidence means such evidence as a reasonable mind must accept as adequate to support a conclusion;
(5) the decision must be based on the evidence presented at the hearing, or at least contained in the record and
disclosed to the parties affected; (6) the tribunal or body or any of its judges must act on its or his own independent
consideration of the law and facts of the controversy, and not simply accept the views of a subordinate; (7) the board or
body should in all controversial questions, render its decision in such manner that the parties to the proceeding can
know the various issues involved, and the reason for the decision rendered. (Italics supplied)

PARAS, J.:
In this petition for prohibition, petitioner seeks the issuance of an order or writ of prohibition which would direct public
respondents Administrative Action Board and Chairman Onofre A. Villaluz to permanently desist from assuming
jurisdiction over Adm. Case No. AAB-034-88 until the same is finally disposed of by the Telecoms Office, Region V at
Legaspi City and to refrain from issuing orders setting the aforecited case for hearing.
Petitioner substantially assails the Resolution dated September 30, 1988 of then Secretary Rainerio O. Reyes of the
Department of Transportation and Communications which suspended her for one year and disqualified her for
promotion for a period of one year and also, the Order of July 5, 1989 of Chairman Onofre A. Villaluz of the
Administrative Action Board of said department which set Adm. Case No. AAB-034-88 for trial.
The prefatory facts are:
On November 5, 1987, Fructuoso B. Arroyo, OIC/CDO, Message Center and then CDO of Telecom Office stationed at Buhi,
Camarines Sur, filed a complaint for Dishonesty Thru Falsification (Multiple) of Official Documents against Maria B. Lupo,
herein petitioner, as Chief of Personnel Section, Telecom Office, Region V at Legaspi City. The complaint was based on the
alleged exclusion of several names from the Certification (on the list of employees) submitted by petitioner in
compliance with a Confidential Memorandum of Director Claro Morante.
The aforesaid complaint was actually triggered off by the inquiry of Ignacio B. Arroyo, brother of complainant Fructuoso
B. Arroyo, into the alleged illegal termination of the former's niece, Nenita Arroyo Noceda, as a daily wage clerk at Buhi
Telecom Exchange in Camarines Sur, in violation of a contract previously entered into between a certain Gloria D.
Palermo, lot donor and former Bureau Director Ceferino S. Carreon, donee of the lot. The lot is located at Sta. Clara, Buhi
on which the Telecom Office was to be constructed. This inquiry of Ignacio B. Arroyo was dismissed for lack of merit on
September 16, 1987.
It appears that the basis for the complaint of Fructuoso Arroyo from whom Ignacio sought assistance was petitioner's
exclusion of certain names of newly hired employees in Region V who appeared related to certain ranking officials of the
region, for the purpose of keeping under wraps the appointment of said employees from Ignacio Arroyo who had
previously complained of the alleged illegal termination of his niece Nenita A. Noceda. Petitioner had to falsify the list
which she submitted in compliance with Regional Director Morante's Confidential Memorandum to the alleged prejudice
of Noceda and for the purpose of protecting her future interest in the sense that those excluded (who should have been
included) were close relatives of ranking officials of the Telecommunications Office of Region V. Telecom Investigator
Florencio Calapano, acting on the unverified complaint of Fructuoso Arroyo, conducted an informal fact-finding inquiry
and came out with a Memorandum recommending that petitioner be sternly warned that a repetition of a similar
offense in the future would be dealt with more drastically and that the case should be considered closed.
Based solely on the aforesaid Memorandum, the Secretary of the Department of Transportation and Communications
handed down a Resolution on September 30, 1988 finding petitioner "guilty as charged" and suspending her for one year
and disqualify her for promotion for a period of one year. Petitioner moved for reconsideration of the resolution but the
same was denied. She thus appealed the resolution and order of denial of the motion for reconsideration to the Civil
Service Commission for review, anchoring her appeal on lack of due process in the proceedings.
On March 2, 1989 the Civil Service Commission, thru its Merit Systems Board, issued the Order setting aside the
resolution of the Department of Transportation and Communications and remanding the case to the Telecom Office of
Region V for further investigation to conform with the procedural requirements of due process.
Instead of complying with the above order, respondent Chairman Villaluz of the AAB issued the Order of July 5, 1989
setting the case for trial on August 3, 1989.
On August 2, 1989, petitioner filed a Manifestation and Motion informing respondent Villaluz that no formal charge had
been instituted by the Telecommunications Office against her and respondents, therefore, had no jurisdiction over the
case. Respondents denied said manifestation and motion for lack of merit in the Order of August 7, 1989 and again set
the case for hearing on August 23, 1989.
Hence, this petition.
Petitioner avers that respondent AAB never acquired jurisdiction over Adm. Case No. AAB-034-88 because of the
absence of a formal charge against her and that the proceedings conducted by Regional Investigator Florencio Calapano
was a mere fact-finding inquiry.
Respondent Chairman of the AAB however, contends that the Order of the Merit Systems Board of the Civil Service
Commission was rendered without lawful authority since petitioner's appeal to said Board was filed when the assailed
resolution had already become final and executory; that the Board, not having acquired jurisdiction to entertain the
appeal for having been filed beyond the reglementary period could not have legally rendered its decision in the said
administrative case. Likewise, respondents claim that Regional Office No. V could no longer take cognizance of the case
as per order of the Merit Systems Board for the reason that the decision had already become final and executory.
Complaints against employees, like petitioner herein, who belong to the Civil Service Career System are still governed by
P.D. No. 807. This mandate of P.D. No. 807 has been recognized and implemented by respondent Administrative Action
Board when it declared in Office Order No. 88-318 dated July 1, 1988 that the Board shall observe the pertinent civil
service rules and policies designed to expedite action on cases referred to it. (Emphasis supplied)
The pertinent provisions of the aforecited Civil Service Law read as follows:
SECTION 37. Disciplinary Jurisdiction. — (a) The Commission shall decide upon appeal all administrative
disciplinary cases involving the imposition of a penalty of suspension for more than thirty days, or fine in
an amount, exceeding thirty days' salary, demotion in rank or salary or transfer, removal or dismissal
from office. A complaint may be filed directly with the Commission by a private citizen against a
government official or employee in which case it may hear any department or agency or and decide the
case or it may deputize official or group of officials to conduct the investigation. The results of the
investigation shall be submitted to the Commission with recommendation as to the penalty to be
imposed or other action to be taken.
(b) The heads of departments, agencies and instrumentalities, provinces, cities and municipalities shall
have jurisdiction to investigate and decide matters involving disciplinary action against officers and
employees under their jurisdiction. Their decisions shall be final in case the penalty imposed is
suspension for not more than thirty days or fine in an amount not exceeding thirty days' salary. In case
the decision rendered by a bureau or office head is appealable to the Commission, the same may be
initially appealed to the department and finally to the Commission and pending appeal, the same shall
be executory except when the penalty is removal, in which case the same shall be executory only after
confirmation by the department head.
(c) An investigation may be entrusted to regional director or similar officials who shall make the
necessary report and recommendation to the chief of bureau or office or department within the period
specified in Paragraph (d) of the following Section.
(d) An appeal shall not stop the decision from being executory, and in case the penalty is suspension or
removal, the respondent shall be considered as having been under preventive suspension during the
pendency of the appeal in the event he wins an appeal.
SEC. 38. Procedure in Administrative Cases Against Non-Presidential Appointees. — a) Administrative
proceedings may be commenced against a subordinate officer or employee by the head of department
or office of equivalent rank, or head of local government, or chiefs of agencies, or regional directors, or
upon sworn, written complaint of any other persons.
(b) In the case of a complaint filed by any other persons, the complainant shall submit sworn statements
covering his testimony and those of his witnesses together with his documentary evidence. If on the
basis of such papers a prima facie case is found not to exist, the disciplining authority shall dismiss the
case. If a prima facie case exist, he shall notify the respondent in writing, of the charges against the latter,
to which shall be attached copies of the complaint, sworn statements and other documents submitted,
and the respondent shall be allowed not less than seventy-two hours after receipt of the complaint to
answer the charges in writing under oath, together with supporting sworn statements and documents, in
which he shall indicate whether or not he elects a formal investigation if his answer is not considered
satisfactory. If the answer is found satisfactory, the disciplining authority shall dismiss the case.
(c) Although a respondent does not request a formal investigation, one shall nevertheless be conducted
when from the allegations of the complaint and the answer of the respondent, including the supporting
documents, the merits of the case cannot be decided judiciously without conducting such an
investigation. . . .
Petitioner's contentions appear meritorious.
It should be noted that under Section 37 (b) as aforequoted, the decisions of heads of departments become final only in
cases where the penalty imposed is suspension for not more than thirty (30) days or fine in an amount not exceeding
thirty (30) days' salary. In the case, therefore, of petitioner who had been made to suffer the penalty of suspension for
one (1) year, such penalty should not have been implemented without the appeal to the Civil Service Commission for
proper review.
Notably, paragraph (a) of the above Section explicitly provides that the Commission shall decide upon appeal all
administrative disciplinary cases involving the imposition of a penalty of suspension for more than 30 days, or fine in an
amount exceeding 30 days' salary. Clearly, the enforcement of the penalty imposed upon petitioner under the resolution
of the Secretary of the Department of Transportation and Communications was premature.
From the very start, the basis upon which this case was investigated had been defective and irregular. For, the letter-
complaint of Fructuoso Arroyo was not verified and yet, the same was haphazardly made the basis of the informal
inquiry. It should be stressed that par. (a) of Sec. 38 mandates that administrative proceedings may be commenced
against an employee by the head of the department or office of equivalent rank or upon sworn written complaint of any
other person. It should also be noted that under paragraph (b) of said Section, a respondent is given the option to elect a
formal investigation of the charge against him if his answer is not found satisfactory. In the case of petitioner, it appears
that when her answer to the unverified complaint was found unsatisfactory, she was never given a chance to decide
whether or not to submit herself to a formal investigation.
The Memorandum of Telecom Investigator Calapano to the Regional Director is merely recommendatory since it was
only the outcome of a fact finding investigation based on the unverified complaint. Note that the informal investigation
was only an inquiry into the alleged dishonest acts of petitioner in which case, the Memorandum could not be made as
the basis for any final resolution of the case. The legal and proper procedure should have been for the Regional Director
of Region V, the alter ego of the department secretary to initiate the formal complaint on the basis of the results of the
inquiry of the Telecom Investigator. Instead of observing the mandatory rules on formal investigations as prescibed by PD
No. 807, the DOTC Secretary cut corners and apparently railroaded this case by rendering the assailed resolution.
Even the Telecom Investigator did not know what he was doing. He exceeded his authority by imposing in the
Memorandum a penalty in the form of a warning to petitioner. His job was limited to an inquiry into the facts and a
determination on whether or not a prima facie case existed. His findings were merely preparatory to the filing of the
necessary formal administrative case by the Regional Director.
It should be noted with alarm that the Telecom Director who was supposed to review the findings of the Telecom
Investigator merely affixed his approval within the Memorandum (p. 7 of Memorandum), thus obviously indicating that
he never reviewed the merits of the case.
It appears highly irregular that Asst. Secretary Sibal of the DOTC, in his letter dated August 2, 1989 to Chairman Villaluz of
the Administrative Action Board, informed the latter that his Office did not file any administrative complaint against
petitioner nor had it filed a formal charge against her for whatever administrative offense. Note that even with this letter,
Chairman Villaluz proceeded to order the hearing of this case. This is a clear indication that for lack of coordination
among the DOTC authorities and the Regional Office, the mandatory requirements of due process to which petitioner
was entitled were irreverently ignored.
Thus, in the case of Jose Rizal College v. National Labor Relations Commission (G.R. No. 65482, December 1, 1987) this
Court reiterated the "cardinal primary" requirements of due process in administrative proceedings and these are: (1) the
right to a hearing which includes, the right to present one's case and submit evidence in support thereof; (2) the tribunal
must consider the evidence presented; (3) the decision must have something to support itself, (4) the evidence must be
substantial, and substantial evidence means such evidence as a reasonable mind must accept as adequate to support a
conclusion; (5) the decision must be based on the evidence presented at the hearing, or at least contained in the record
and disclosed to the parties affected; (6) the tribunal or body or any of its judges must act on its or his own independent
consideration of the law and facts of the controversy, and not simply accept the views of a subordinate; (7) the board or
body should in all controversial questions, render its decision in such manner that the parties to the proceeding can
know the various issues involved, and the reason for the decision rendered. (Emphasis supplied)
Evidently, respondents denied petitioner her right to a formal and full-blown administrative proceedings which she never
had.
WHEREFORE, the Resolution dated September 30, 1988 of the Secretary of the Department of Transportation and
Communications and the proceedings before the Administrative Action Board are hereby declared NULL and VOID. The
Secretary of the DOTC is hereby directed to restore to petitioner's record of service the period which she served under
suspension and to delete from her personnel file the period within which she was disqualified for promotion.
SO ORDERED.

3. G.R. No. 93868. February 19, 1991.*

ARDELIZA MEDENILLA, petitioner, vs. CIVIL SERVICE COMMISSION, AMPARO DELLOSA, ROSALINDA JURIA and MARITA
BURDEOS, respondents.
Administrative Law; Procedural due process; The opportunity to be heard is the essence of procedural due process.—The
essence of due process is the opportunity to be heard. The presence of a party is not always the cornerstone of due
process. (Asprec v. Itchon, 16 SCRA 921 [1966]; Auyong Hian v. Court of Tax Appeals, 59 SCRA 110 [1974]; Assistant
Executive Secretary for Legal Affairs of the Office of the President of the Philippines v. Court of Appeals, G.R. No. 76761,
January 9, 1989). What the law prohibits is not the absence of previous notice but the absolute absence thereof and lack
of opportunity to be heard. (Tajonero v. Lamarosa, 110 SCRA 438 [1981])
Same; Same; Same; Same; Case at bar.—Any defect was cured by the filing of a motion for reconsideration.
Same; Appointment; Qualification; Experience Requirements; Case at bar.—It can be readily seen that the petitioner
possesses superior qualifications. As earlier stated, she is a cum laude graduate of the University of the Philippines. She
was ranked No. 1 in the department wide training program handled by a private firm. Two of the respondents were
ranked way below while a third did not even participate. She was commended for exemplary performance as facilitator
during the Second Congress of Women in Government. She received the highest grades from De la Salle University in her
MBA studies. She helped draft the human resource program for the entire DPWH. Inspite of her being a new employee,
she was assigned to conduct seminars on Performance Appraisal Systems and on Management by Objectives and Results
for the DPWH. She was precisely drafted from a private firm to assist in human resource planning for the DPWH. Her
work is apparently highly satisfactory as the top administrators of the DPWH not only appointed her but have asked the
respondent Commission to validate the appointment.
Same; Appointment; Reorganization; Under Sec. 4 of R.A. 6656; Preference is given to permanent employees for
appointment to new position in the reorganized office, but this does not preclude the infusion of new blood, younger
dynamism, or necessary talents into the government service.—The preference given to permanent employees assumes
that employees working in a Department for longer periods have gained not only superior skills but also greater
dedication to the public service. This is not always true and the law, moreover, does not preclude the infusion of new
blood, younger dynamism, or necessary talents into the government service. If, after considering all the current
employees, the Department Secretary cannot find among them the person he needs to revive a moribund office or to
upgrade second rate performance, there is nothing in the Civil Service Law to prevent him from reaching out to other
Departments or to the private sector provided all his acts are bona fide for the best interest of the public service and the
person chosen has the needed qualifications. In the present case, there is no indication that the petitioner was chosen
for any other reason except to bring in a talented person with the necessary eligibilities and qualifications for important
assignments in the Department.
Same; Promotion; Next-in-rank; The rule in the Millares v. Subido [20 SCRA 954 (1967)] that vacant position shall be filled
by the next-in-rank officer or employee is superseded; The law now is that the appointing authority is given wide
discretion to fill the vacancy from among the several alternatives provided for by law provided the appointee is qualified
and eligible.—The ruling in Millares has already been superseded by later decisions. We have already held in cases
subsequent to Millares that the next-in-rank rule is not absolute; it only applies in cases of promotion (see Pineda v.
Claudio, 28 SCRA 34 [1969]). And even in promotions, it can be disregarded for sound reasons made known to the next-
in-rank. The appointing authority, under the Civil Service Law, is allowed to fill vacancies by promotion, transfer of
present employees, reinstatement, reemployment, and appointment of outsiders who have appropriate civil service
eligibility, not necessarily in that order, (see Pineda v. Claudio, supra; Luego v. Civil Service Commission, 143 SCRA 327
[1986]) There is no legal fiat that a vacancy must be filled only by promotion; the appointing authority is given wide
discretion to fill a vacancy from among the several alternatives provided for by law. x x x It is just necessary, in order for
public administration to be dynamic and responsive to the needs of the times, that the local executive be allowed the
choice of men of its confidence, provided they are qualified and eligible, who in his best estimation are possessed of the
requisite reputation, integrity, knowledgeability, energy and judgment.” (Emphasis Supplied, p. 121)
Same; Civil Service Law; Scope of its power; When the appointee is qualified, the Civil Service Commission has no choice
but to attest to the appointment.—We have already ruled on several occasions that when the appointee is qualified, the
Civil Service Commission has no choice but to attest to the appointment. It is not within its prerogative to revoke an
appointee on the ground that substituting its judgment for that of the appointing power, another person has better
qualifications for the job. Once the function is discharged, the participation of the Civil Service Commission in the
appointment process ceases. The only purpose of attestation is to determine whether the appointee possesses the
requisite civil service eligibility, no more than that is left for the Civil Service Commission to do. (see Luego v. CSC, 143
SCRA 327 [1986]; Central Bank of the Philippines v. CSC, 171 SCRA 744 [1989]; Secretary Oscar Orbos v. CSC, G.R. No.
92561, September 12, 1990; Gaspar v. CSC, G.R. No. 90799, October 18, 1990).
Same; Same; Same; Same; Rationale of the doctrine.—The rationale of this doctrine is that the power of appointment is
essentially discretionary. The discretion to be granted to the appointing authority, if not plenary, must at least be
sufficient. After all, not only is the appointing authority the officer primarily responsible for the administration of the
office but he is also in the best position to determine who among the prospective appointees can efficiently discharge
the functions of the position (see Villegas v. Subido, 30 SCRA 498 [1969]).
Same; Same; Same; Same; Same; Case at bar.—As between the Commission which only looks into paper qualifications
and the appointing authority who views not only the listed qualifications but also the prospective appointees
themselves, the work to be accomplished, the objectives of the Department, etc., the Court sustains the Department
Head.

GUTIERREZ, JR., J.:

This is a petition seeking the annulment of the resolutions issued by the Civil Service Commission which disapproved the
appointment of the petitioner to the position of Supervising Human Manpower Development Officer.
Petitioner Ardeliza Medenilla was a contractual employee of the Department of Public Works and Highways (DPWH)
occupying the position of Public Relations Officer II.
In 1987, Medenilla was detailed as Technical Assistant in the Office of the Assistant Secretary for Administration and
Manpower Management.
Pursuant to Executive Order No. 124 dated January 30, 1987, a reorganization ensued within the DPWH and all the
positions therein were abolished. A revised staffing pattern together with the guidelines on the selection and placement
of personnel was issued.
Included in the revised staffing pattern is the contested position of Supervising Human Resource Development Officer.
On January 2, 1989, the petitioner was appointed to the disputed position.
On January 27, 1989, respondents Amparo Dellosa, Rosalinda Juria and Marita Burdeos together with Matilde Angeles,
Catalina Espinas, Alicia Nercelles and Ramon Racela, all of whom are employees in the Human Resource Training and
Material Development Division, Administrative and Manpower Management Service of the DPWH, jointly lodged a
protest before the DPWH task force on reorganization contesting the appointment of the petitioner to the position.
The protestants alleged that since they are next-in-rank employees, one of them should have been appointed to the said
position.
On August 2, 1989, the task force on reorganization dismissed the protest. The dispositive portion of its decision reads as
follows:
Premises considered, the Task Force on Reorganization Appeals finds the instant protest of Matilde Angeles, et al.
without merit and hereby recommends to the Honorable Secretary that the appointment of Ardeliza Medenilla
to the contested position of Supervising Human Resource Development Officer be upheld. (Rollo, p. 26)
Not satisfied, the private respondents appealed the decision to the Civil Service Commission. The Commission found:
On the onset, it appears that protestee Medenilla does not possess the required qualifications for the position. . .
. Moreover, her eligibility is PD 907, being a cum laude graduate. Let it be considered appropriate only for
appointment to "second level positions" which require the application of knowledge and skills within the
appointee's field of study. (Rollo, p. 28-29)
xxx xxx xxx
 Further, it also appears that Medenilla is a contractual employee assigned or detailed with the Office of the
Assistant Secretary for Administrations and Manpower Management (the appointing authority) as Public
Relations Officer II, while protestants are all permanent employee of the Division (Human Resources Planning)
where the vancancy exist.
Indeed, RA 6656 does not preclude the appointment of contractuals to a new staffing pattern, however, in the
presence and availability of qualified permanent next-in-rank employees in the organization, the latter has to be
preferred, unless a contractual employee possesses superior qualifications that could justify her appointment.
However, in this case, we see no superior qualifications or any special reasons for preferring Medenilla over the
protestants. (Rollo, p. 29)
We find merit in the protest. While as earlier mentioned, the appointing authority is given the wide latitude of
discretion, to sustain the appointment of Medenilla may give the appointing power unnecessary opportunities to
act capriciously and thus thwart the natural and reasonable expectation of the officer next-in-rank to any vacant
position, to be promoted to it As held in Millares v. Subido, G.R. No. L-23281, promulgated August 10, 1967, the
Supreme Court held:
We, therefore, hold that in the event of there occurring a vacancy, the officer next-in-rank must, as far as
practicable and as the appointing authority sees it in his best judgment and estimation, be promoted . . . and that
it is only in cases of promotion, where an employee other than the ranking one is promoted, is the appointing
power under duty to give "special reason or reasons" for his action . . . .
Again, the special reasons advanced by the appointing authority in this case is (sic) not enough. Considering
further that appointee is not meeting the minimum qualification standards set by his own office, she could not
be said to possess far superior qualification than those permanent next-in-rank employees of the Department.
(Rollo, pp. 30-31)
Thus, on February 28, 1990, the Commission promulgated the assailed resolution, the dispositive portion of which reads:
WHEREFORE, foregoing premises considered, the Commission resolved to disapprove the promotional
appointment of Ardeliza Medenilla to the position of Supervising Human Manpower Development Officer.
Accordingly, the appointing authority may choose from among protestants Amparo Dellosa, Marita Burdeos and
Rosalinda Juria who to promote to the said position. The Civil Service Field Office is directed to implement this
resolution accordingly." (Rollo, p. 31)
The petitioner on March 23, 1990 filed a motion for reconsideration of the resolution. On May 30, 1990 a supplement to
the Motion for Reconsideration was also filed. However, prior thereto, the Commission on May 23, 1990 denied the
petitioner's motion for reconsideration. The pertinent portions of the denial are:
xxx xxx xxx
2. Experience of Medenilla
Medenilla alleges that the Commission failed to appreciate her 3 years and 8 months of experience directly
relevant to Human Resource Development. Looking more deeply into her experience as reflected in her CS Form
212, we could not distinguish her experience directly relevant to the field of Human Resource Development. The
certification of a certain Elvira H. Villania stated her duties in the Guthrie-Jensen Consultants, Inc. in her one (1)
year and (7) months as Research and Publication Officer of working included "providing research assistance to
our Management Consultants in drawing up performance appraisal system, merit promotion system and
conducting development for our client-companies." Notwithstanding, assuming that her 1 year and 7 months
experience in the company is relevant, yet, compared to the experience of the protestants in the field of Human
Resource Development, said experience is obviously outweighed. There is no dispute that Medenilla has
experience as a Researcher but said experience is basically on the field of journalism and information. (Rollo, p.
35)
xxx xxx xxx
4. Education background and eligibility of Medenilla.
 . . . Notwithstanding, we are inclined to reconsider our position that the educational background is not relevant.
AB may therefore be taken as a relevant degree for purposes of qualifying to the position. As such, her PD 907
eligibility may be considered appropriate." (Rollo, p. 37)
xxx xxx xxx
Granting for the sake of argument that the DPWH adhered to its rules relative to reorganization, is at this point,
no longer material and controlling. What is now the issue is whether Medenilla indeed possesses superior
qualifications over any of the protestants. (Rollo, p. 38)
xxx xxx xxx
The edge of 1.30% of Medenilla over Dellosa cannot be considered by this Commission significant enough to
presume and declare that Medenilla possesses far superior qualifications over the protestant and to warrant the
appointment of a contractual employee over a permanent employee of the Department. (Rollo, p. 39)
Hence, this petition.
The petitioner interposes the following grounds:
I
The resolutions were issued by the Respondent Commission, without giving notice to the petitioner of the
existence of an appeal filed before the CSC, thereby denying the petitioner due process of law.
II
The Civil Service Commission committed grave abuse of discretion amounting to lack of jurisdiction in
disapproving the appointment of the petitioner. Its function, is limited only to determine whether the appointee
possesses the appropriate civil service eligibility and not whether another is more qualified than the petitioner.
Without giving due course to the petition, the Court on July 10, 1990, issued a temporary restraining order enjoining the
Commission from implementing the assailed resolutions.
Anent the first ground, the petitioner contends that she was not notified by the Civil Service Commission of the existence
of the appeal before it. The resolutions, therefore, were allegedly issued in violation of the petitioner's constitutionally
guaranteed due process of law.
The public respondent, on the other hand, advances the argument that what due process abhors is not lack of previous
notice but the absolute lack of opportunity to be heard. Since the petitioner filed a motion for reconsideration, she
cannot now complain that she was deprived of due process.
The petitioner's first contention is without merit.
"Due process of law implies the right of the person affected thereby to be present before the tribunal which pronounces
judgment upon the question of life, liberty, and property in its most comprehensive sense; to be heard, by testimony or
otherwise, and to have the right of controverting, by proof, every material fact which bears on the question of the light in
the matter involved." (Black's Law Dictionary, 4th Edition, p. 590)
The essence of due process is the opportunity to be heard. The presence of a party is not always the cornerstone of due
process. (Asprec v. Itchon, 16 SCRA 921 [1966]; Auyong Hian v. Court of Tax Appeals, 59 SCRA 110 [1974]; Assistant
Executive Secretary for Legal Affairs of the Office of the President of the Philippines v. Court of Appeals, G.R. No. 76761,
January 9, 1989). What the law prohibits is not the absence of previous notice but the absolute absence thereof and lack
of opportunity to be heard. (Tajonero v. Lamarosa, 110 SCRA 438 [1981])
In the case at bar, any defect was cured by the filing of a motion for reconsideration. (see De Leon v. Comelec, 129 SCRA
117 [1984])
The second contention of the petitioner alleges that the Commission acted with grave abuse of discretion in disapproving
her appointment.
The public respondent views it otherwise. The Civil Service Commission asserts that being the Central Personnel Agency
of the Government, it is the final arbiter on civil service matters.
The Commission alleges, that, pursuant to RA 6656, the Commission is authorized to act on appeals by aggrieved
employees in the course of reorganization and, therefore, it has the power to reverse or modify any decision brought
before it on appeal.
The petitioner's second contention is impressed with merit.
The qualification standards for the contested position are as follows:
EDUCATION EXPERIENCE CIVIL SERVICE
REQUIREMENT REQUIREMENT ELIGIBILITY
Bachelor's degree 2 years of Manpower-Youth
relevant to the job experience in Development
with at least human resource Officer
9 units in post development Manpower
Development
Officer
Relevant RA
1080
Relevant
Second Level
Eligibility
Career Service
(Professional)
First Grade
Supervisor
It is not disputed that the petitioner possesses the appropriate civil service eligibility and requisite educational
background. The public respondent itself, in its resolution dated May 23, 1990, considered the petitioner's PD No. 907
eligibility appropriate for the position. (Rollo, p. 37)
The controversy then centers on the experience of the petitioner.
The Commission contends that the experience of Medenilla is basically in the field of journalism and not in Human
Resource Development. The Commission also alleges that since the petitioner is merely a contractual employee, in the
absence of superior qualifications, the private respondents must be preferred not only for the reason that they are
permanent career service employees but most especially because they are next-in-rank to the disputed position.
In support of its argument, the Commission cited in the disputed resolution, the case of Millares v. Subido, 20 SCRA 954
where this Court held:
. . . A vacant position shall be filled by promotion of the ranking officer or employee. And only where, for special
reason or reasons of which the affected officer or employee will be notified, this mode of recruitment on
selection cannot be observed, that the position may be filled by transfer, or re-employment, or by getting from
the certified list of appropriate eligibles, in that order.
Finally, the public respondent advances the view that, since the Revised Administrative Code of 1987 now provides that
the Commission shall "take appropriate action on all appointment" its authority, therefore, is no longer limited to the
mere approval or disapproval of appointments submitted to it.
A careful review of the records of the case, will reveal that the petitioner possesses the requisite experience for the
contested position.
The petitioner, not only was a cum laude graduate from the University of the Philippines, she has also acquired plenty of
experience in the field of Human Resource Development, to wit:
She was rated and ranked number one in the Trainor's Training Program (120 hours) conducted for the DPWH by
the Phil-Tao, Inc., a private firm. Ms. Dellosa was ranked number 7, Mrs. Juria was ranked number 10; Mrs.
Burdeos did not attend the seminar. This training program was undertaken to strengthen the capabilities of HRD
personnel, and to make them more effective in the discharge of their functions.
She is a recipient of a special commendation, given by Executive Director Remedios I. Rikken of the National
Commission in the Role of Filipino Woman, for her efficiency and exemplary performance as a facilitator in the
conduct of the workshops during the Second Congress of Women in Government. (Letter of Ms. Rikken
addressed to Sec. Estuar attached as ANNEX "B".).
She obtained in her on-going MBA studies at the De La Salle University, which she pursued as an entrance
scholar, the highest grade of 4.0, equivalent to "Excellent" in 2 HRD related subjects –– Organizational
Management –– which call for the integration of concepts with concrete experience.
She participated in the preparation and dissemination of the corporate planning processes installed and
institutionalized in the DPWH. Corporate Planning was introduced by Secretary Fiorello R. Estuar and is now
being implemented in all government offices as instructed by the President.
She conducted orientation/reorientation courses in DPWH Regional Offices on (a) Management By Objectives
and Results Evaluation, the Performance Appraisal System, and (b) a specifically designed Performance Appraisal
System for DPWH District Engineers and Division Chiefs, being officially used by the DPWH.
She participated in the conceptualizing and drafting of the Department Order on the DPWH Incentives and
Awards System, set up in compliance with RA No. 6713." (Rollo, p. 63)
The public respondent failed to consider that the petitioner, in her one year and seven months experience with Guthrie-
Jensen was engaged in research relating to performance appraisal systems and merit promotion systems which duties
are all related to Human Resource Development.
Precisely, it was because of her experience with Guthrie-Jensen that the petitioner was detailed from January 1987 until
December 1988 in the Office of the Assistant Secretary for Administration and Manpower Management, where she was
asked to assist in human resource planning.
The rejoinder filed during the proceedings before the Commission, by the Assistant Secretary for Administrative and
Manpower Management, Carolina Mangawang, is very revealing. The disputed position requires of the holder of the
office, skills in human resource developmental planning, research and statistics. The petitioner possesses these skills in
more than appropriate quantities.
The argument of the public respondent that the petitioner must possess superior qualifications in order to be preferred
over the private respondents deserves no credit.
It can be readily seen that the petitioner possesses superior qualifications. As earlier stated, she is a cum laude graduate
of the University of the Philippines. She was ranked No. 1 in the department wide training program handled by a private
firm. Two of the respondents were ranked way below while a third did not even participate. She was commended for
exemplary performance as facilitator during the Second Congress of Women in Government. She received the highest
grades from De la Salle University in her MBA studies. She helped draft the human resource program for the entire
DPWH. Inspire of her being a new employee, she was assigned to conduct seminars on Performance Appraisal Systems
and on Management by Objectives and Results for the DPWH. She was precisely drafted from a private firm to assist in
human resource planning for the DPWH. Her work is apparently highly satisfactory as the top administrators of the
DPWH not only appointed her but have asked the respondent Commission to validate the appointment.
The respondents rely on Section 4 of R.A. 6656, which reads:
xxx xxx xxx
Sec. 4. Officers and employees holding permanent appointments shall be given preference for appointment to
new positions in the approved staffing pattern comparable to their former positions or if there are not enough
comparable positions, to position next lower in rank.
Undoubtedly, old employees should be considered first. But it does not necessarily follow that they should then
automatically be appointed.
The preference given to permanent employees assumes that employees working in a Department for longer periods
have gained not only superior skills but also greater dedication to the public service. This is not always true and the law,
moreover, does not preclude the infusion of new blood, younger dynamism, or necessary talents into the government
service. If, after considering all the current employees, the Department Secretary cannot find among them the person he
needs to revive a moribund office or to upgrade second rate performance, there is nothing in the Civil Service Law to
prevent him from reaching out to other Departments or to the private sector provided all his acts are bona fide for the
best interest of the public service and the person chosen has the needed qualifications. In the present case, there is no
indication that the petitioner was chosen for any other reason except to bring in a talented person with the necessary
eligibilities and qualifications for important assignments in the Department.
The reason behind P.D. No. 907 (which grants civil service eligibility to college graduates with at least cum laudehonors)
of attracting honor graduates into the public service would be negated if they always have to start as Clerk I and wait for
hundreds of deadwood above them to first go into retirement before they can hope for significant and fulfilling
assignments.
The Commission's reliance on the dictum in Millares v. Subido, 20 SCRA 954 [19671 is misplaced. The ruling
inMillares has already been superseded by later decisions. We have already held in cases subsequent to Millares that the
next-in-rank rule is not absolute; it only applies in cases of promotion (see Pineda v. Claudio, 28 SCRA 34 [19691). And
even in promotions, it can be disregarded for sound reasons made known to the next-in-rank. The appointing authority,
under the Civil Service Law, is allowed to fill vacancies by promotion, transfer of present employees, reinstatement,
reemployment, and appointment of outsiders who have appropriate civil service eligibility, not necessarily in that order.
(see Pineda v. Claudio, supra; Luego v. Civil Service Commission, 143 SCRA 327 [1986]) There is no legal fiat that a
vacancy must be filled only by promotion; the appointing authority is given wide discretion to fill a vacancy from among
the several alternatives provided for by law.
In this case, the contested position was created in the course of reorganization.1âwphi1 The position appears to be a
new one. The applicability, therefore, of the next-in-rank rule does not come in clearly. Besides, as earlier stated, said rule
is not absolute. There are valid exceptions.
Granting for the sake of argument that the case involves a promotional appointment, the next-in-rank rule must give way
to the exigencies of the public service. The intent of the Civil Service Laws not merely to bestow upon permanent
employees the advantage arising from their long employment but most specially, it is to foster a more efficient public
service. Any other factor must, therefore, yield to the demand for an effective government, which necessarily entails the
appointment of competent, qualified and proficient personnel. The deliberation of this Court in the case of Aguilar v.
Nieva, Jr., 40 SCRA 113 [19711 is illuminating, to wit:
xxx xxx xxx
. . . It is not enough that an aspirant is qualified and eligible or that he is next-in-rank or in line for promotion,
albeit by passive prescription. It is just necessary, in order for public administration to be dynamic and responsive
to the needs of the times, that the local executive be allowed the choice of men of its confidence, provided they
are qualified and eligible, who in his best estimation are possessed of the requisite reputation, integrity,
knowledgeability, energy and judgment. (Emphasis supplied, p. 121)
The point raised by the public respondent that, pursuant to the Revised Administrative Code of 1987, it is authorized to
revoke appointments, must necessarily fail.
We have already ruled on several occasions that when the appointee is qualified, the Civil Service Commission has no
choice but to attest to the appointment. It is not within its prerogative to revoke an appointee on the ground that
substituting its judgment for that of the appointing power, another person has better qualifications for the job.
Once the function is discharged, the participation of the Civil Service Commission in the appointment process ceases. The
only purpose of attestation is to determine whether the appointee possesses the requisite civil service eligibility, no
more than that is left for the Civil Service Commission to do. (see Luego v. CSC, 143 SCRA 327 [1986]; Central Bank of the
Philippines v. CSC, 171 SCRA 744 [1989]; Secretary Oscar Orbos v. CSC, G.R. No. 92561, September 12, 1990; Gaspar v.
CSC, G.R. No. 90799, October 18, 1990).
The rationale of this doctrine is that the power of appointment is essentially discretionary. The discretion to be granted
to the appointing authority, if not plenary must at least be sufficient.
After all, not only is the appointing authority the officer primarily responsible for the administration of the office but he
is also in the best position to determine who among the prospective appointees can efficiently discharge the functions of
the position (see Villegas v. Subido, 30 SCRA 498 [1969]). As between the Commission which only looks into paper
qualifications and the appointing authority who views not only the listed qualifications but also the prospective
appointees themselves, the work to be accomplished, the objectives of the Department, etc., the Court sustains the
Department Head.
WHEREFORE, the petition is hereby GRANTED. The resolutions issued by the Civil Service Commission dated February 28,
1990 and May 23, 1990 are SET ASIDE. The restraining order issued by this Court on July 10, 1990 is made permanent.
SO ORDERED.

g. Administrative Appeal and Review

Administrative procedure
 Generally

1. G.R. No. 126625. September 18, 1997.*

KANLAON CONSTRUCTION ENTERPRISES CO., INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, 5TH
DIVISION, and BENJAMIN RELUYA, JR., EDGARDO GENAYAS, ERNESTO CANETE, PROTACIO ROSALES, NESTOR BENOYA,
RODOLFO GONGOB, DARIO BINOYA, BENJAMIN BASMAYOR, ABELARDO SACURA, FLORENCIO SACURA, ISABELO MIRA,
NEMESIO LACAR, JOSEPH CABIGKIS, RODRIGO CILLON, VIRGILIO QUIZON, GUARINO EVANGELISTA, ALEJANDRO GATA,
BENEDICTO CALAGO, NILO GATA, DIONISIO PERMACIO, JUANITO SALUD, ADOR RIMPO, FELIPE ORAEZ, JULIETO TEJADA,
TEOTIMO LACIO, ONOFRE QUIZON, RUDY ALVAREZ, CRESENCIO FLORES, ALFREDO PERMACIO, CRESENCIO ALVIAR,
HERNANI SURILA, DIOSDADO SOLON, CENON ALBURO, ZACARIAS ORTIZ, EUSEBIO BUSTILLO, GREGORIO BAGO, JERRY
VARGAS, EDAURDO BUENO, PASCUAL HUDAYA, ROGELIO NIETES, and REYNALDO NIETES, respondents.
Labor Law; Pleadings and Practice; Summons; Under the NLRC Rules of Procedure, summons on the respondent shall be
served personally or by registered mail on the party himself.—Under the NLRC Rules of Procedure, summons on the
respondent shall be served personally or by registered mail on the party himself. If the party is represented by counsel or
any other authorized representative or agent, summons shall be served on such person.
Same; Same; Same; Words and Phrases; To determine the scope or meaning of the term “authorized representative” or
“agent” of parties on whom summons may be served, the provisions of the Revised Rules of Court may be resorted to.—
To determine the scope or meaning of the term “authorized representative” or “agent” of parties on whom summons
may be served, the provisions of the Revised Rules of Court may be resorted to. Under the Revised Rules of Court, service
upon a private domestic corporation or partnership must be made upon its officers, such as the president, manager,
secretary, cashier, agent, or any of its directors. These persons are deemed so integrated with the corporation that they
know their responsibilities and immediately discern what to do with any legal papers served on them.
Same; Same; Same; Summons served on a construction project manager is valid since such person has sufficient
responsibility and discretion to realize the importance of the legal papers served on him and to relay the same to the
president or other responsible officer of the company.—In the case at bar, Engineer Estacio, assisted by Engineer Dulatre,
managed and supervised the construction project. According to the Solicitor General and private respondents, Engineer
Estacio attended to the project in Iligan City and supervised the work of the employees thereat. As manager, he had
sufficient responsibility and discretion to realize the importance of the legal papers served on him and to relay the same
to the president or other responsible officer of petitioner. Summons for petitioner was therefore validly served on him.
Same; Same; Attorneys; The general rule is that only lawyers are allowed to appear before the labor arbiter and the
NLRC.—Engineer Estacio’s appearance before the labor arbiters and his promise to settle the claims of private
respondents is another matter. The general rule is that only lawyers are allowed to appear before the labor arbiter and
respondent Commission in cases before them. x x x A non-lawyer may appear before the labor arbiters and the NLRC
only if: (a) he represents himself as a party to the case; (b) he represents an organization or its members, with written
authorization from them; or (c) he is a duly-accredited member of any legal aid office duly recognized by the Department
of Justice or the Integrated Bar of the Philippines in cases referred to by the latter.
Same; Same; Absent a written proof of authorization for non-lawyers to appear for their employer before labor arbiters,
whatever statements and declarations they make could not bind the employer.—Engineers Estacio and Dulatre were not
lawyers. Neither were they duly-accredited members of a legal aid office. Their appearance before the labor arbiters in
their capacity as parties to the cases was authorized under the first exception to the rule. However, their appearance on
behalf of petitioner required written proof of authorization. It was incumbent upon the arbiters to ascertain this
authority especially since both engineers were named co-respondents in the cases before the arbiters. Absent this
authority, whatever statements and declarations Engineer Estacio made before the arbiters could not bind petitioner.
Same; Same; Compromise Agreements; Agency; Special Powers of Attorney; A promise to pay amounts to an offer to
compromise and requires a special power of attorney or the express consent of the principal.—Nevertheless, even
assuming that Engineer Estacio and Atty. Abundiente were authorized to appear as representatives of petitioner, they
could bind the latter only in procedural matters before the arbiters and respondent Commission. Petitioner’s liability
arose from Engineer Estacio’s alleged promise to pay. A promise to pay amounts to an offer to compromise and requires
a special power of attorney or the express consent of petitioner. The authority to compromise cannot be lightly
presumed and should be duly established by evidence. This is explicit from Section 7 of Rule III of the NLRC Rules of
Procedure.
Same; Same; Same; A defendant’s promise to pay and settle the plaintiff’s claims ordinarily requires a reciprocal
obligation from the plaintiff to withdraw the complaint and discharge the defendant from liability.—The promise to pay
allegedly made by Engineer Estacio was made at the preliminary conference and constituted an offer to settle the case
amicably. The promise to pay could not be presumed to be a single unilateral act, contrary to the claim of the Solicitor
General. A defendant’s promise to pay and settle the plaintiff’s claims ordinarily requires a reciprocal obligation from the
plaintiff to withdraw the complaint and discharge the defendant from liability. In effect, the offer to pay was an offer to
compromise the cases.
Same; Same; Same; Settlement of disputes by way of compromise is an accepted and desirable practice in courts of law
and administrative tribunals.—In civil cases, an offer to compromise is not an admission of any liability, and is not
admissible in evidence against the offeror. If this rule were otherwise, no attempt to settle litigation could safely be
made. Settlement of disputes by way of compromise is an accepted and desirable practice in courts of law and
administrative tribunals. In fact, the Labor Code mandates the labor arbiter to exert all efforts to enable the parties to
arrive at an amicable settlement of the dispute within his jurisdiction on or before the first hearing.
Same; Same; Same; Due Process; The NLRC gravely abuses its discretion when it affirms decisions of labor arbiters which
are not only based on unauthorized representations but also made in violation of a party’s right to due process.—Clearly,
respondent Commission gravely abused its discretion in affirming the decisions of the labor arbiters which were not only
based on unauthorized representations, but were also made in violation of petitioner’s right to due process.
Same; Same; Due Process; Administrative Law; The rule that the NLRC and the Labor Arbiters are not bound by technical
rules of evidence and procedure should not be interpreted so as to dispense with the fundamental and essential right of
due process.—Article 221 of the Labor Code mandates that in cases before labor arbiters and respondent Commission,
they “shall use every and all reasonable means to ascertain the facts in each case speedily and objectively and without
regard to technicalities of law or procedure, all in the interest of due process.” The rule that respondent Commission and
the Labor Arbiters are not bound by technical rules of evidence and procedure should not be interpreted so as to
dispense with the fundamental and essential right of due process. And this right is satisfied, at the very least, when the
parties are given the opportunity to submit position papers. Labor Arbiters Siao and Palangan erred in dispensing with
this requirement.
Same; Same; Same; The labor arbiters and the NLRC must not, at the expense of due process, be the first to arbitrarily
disregard specific provisions of the Rules.—Indeed, the labor arbiters and the NLRC must not, at the expense of due
process, be the first to arbitrarily disregard specific provisions of the Rules which are precisely intended to assist the
parties in obtaining the just, expeditious and inexpensive settlement of labor disputes.

PUNO, J.:
In this petition for certiorari, petitioner Kanlaon Construction Enterprises Co., Inc. seeks to annul the decision of
respondent National Labor Relations Commission, Fifth Division and remand the cases to the Arbitration Branch for a
retrial on the merits.
Petitioner is a domestic corporation engaged in the construction business nationwide with principal office at No. 11
Yakan St., La Vista Subdivision, Quezon City. In 1988, petitioner was contracted by the National Steel Corporation to
construct residential houses for its plant employees in Steeltown, Sta. Elena, Iligan City. Private respondents were hired
by petitioner as laborers in the project and worked under the supervision of Engineers Paulino Estacio and Mario
Dulatre. In 1989, the project neared its completion and petitioner started terminating the services of private respondents
and its other employees.
In 1990, private respondents filed separate complaints against petitioner before Sub-Regional Arbitration Branch XII,
Iligan City. Numbering forty-one (41) in all, they claimed that petitioner paid them wages below the minimum and sought
payment of their salary differentials and thirteenth-month pay. Engineers Estacio and Dulatre were named co-
respondents.
Some of the cases were assigned to Labor Arbiter Guardson A. Siao while the others were assigned to Labor Arbiter
Nicodemus G. Palangan. Summonses and notices of preliminary conference were issued and served on the two engineers
and petitioner through Engineer Estacio. The preliminary conferences before the labor arbiters were attended by
Engineers Estacio and Dulatre and private respondents. At the conference of June 11, 1990 before Arbiter Siao, Engineer
Estacio admitted petitioner's liability to private respondents and agreed to pay their wage differentials and thirteenth-
month pay on June 19, 1990. As a result of this agreement, Engineer Estacio allegedly waived petitioner's right to file its
position paper. 1 Private respondents declared that they, too, were dispensing with their position papers and were
adopting their complaints as their position paper. 2
On June 19, 1990, Engineer Estacio appeared but requested for another week to settle the claims. Labor Arbiter Siao
denied this request. On June 21, 1990, Arbiter Siao issued an order granting the complaint and directing petitioner to pay
private respondents' claims. Arbiter Siao held:
xxx xxx xxx
Considering the length of time that has elapsed since these cases were filed, and what the complainants might
think as to how this branch operates and/or conducts its proceedings as they are now restless, this Arbiter has no
other alternative or recourse but to order the respondent to pay the claims of the complainants, subject of
course to the computation of the Fiscal Examiner II of this Branch pursuant to the oral manifestation of
respondent. The Supreme Court ruled: "Contracts though orally made are binding on the parties." (Lao Sok v.
Sabaysabay, 138 SCRA 134).
Similarly, this Branch would present in passing that "a court cannot decide a case without facts either admitted
or agreed upon by the parties or proved by evidence." (Yu Chin Piao v. Lim Tuaco, 33 Phil. 92; Benedicto v. Yulo,
26 Phil. 160)
WHEREFORE, premises considered, the respondent is hereby ordered to pay the individual claims of the above-
named complainants representing their wage differentials within ten (10) days from receipt of this order.
The Fiscal Examiner II of this Branch is likewise hereby ordered to compute the individual claims of the herein
complainants.
SO ORDERED. 3
On June 29, 1990, Arbiter Palangan issued a similar order, thus:
When the above-entitled cases were called for hearing on June 19, 1990 at 10:00 a.m. respondent thru their
representative manifested that they were willing to pay the claims of the complainants and promised to pay the
same on June 28, 1990 at 10:30 a.m.
However, when these cases were called purposely to materialize the promise of the respondent, the latter failed
to appear without any valid reason.
Considering therefore that the respondent has already admitted the claims of the complainants, we believe that
the issues raised herein have become moot and academic.
WHEREFORE premises considered, the above-entitled cases are hereby ordered Closed and Terminated, however,
the respondent is hereby ordered to pay the complainants their differential pay and 13th-month pay within a
period of ten (10) days from receipt hereof based on the employment record on file with the respondent.
 SO ORDERED. 4
Petitioner appealed to respondent National Labor Relations Commission. It alleged that it was denied due process and
that Engineers Estacio and Dulatre had no authority to represent and bind petitioner. Petitioner's appeal was filed by one
Atty. Arthur Abundiente.
In a decision dated April 27, 1992, respondent Commission affirmed the orders of the Arbiters.
Petitioner interposed this petition alleging that the decision of respondent Commission was rendered without
jurisdiction and in grave abuse of discretion. Petitioner claims that:
I
THE QUESTIONED DECISION RENDERED BY THE HONORABLE COMMISSION IS A NULLITY, IT HAVING BEEN ISSUED
WITHOUT JURISDICTION;
II
PUBLIC RESPONDENT NATIONAL LABOR RELATIONS COMMISSION GRAVELY ABUSED ITS DISCRETION IN
ARBITRARILY, CAPRICIOUSLY AND WHIMSICALLY MAKING THE FOLLOWING CONCLUSIONS BASED NOT ON FACTS
AND BUT ON SPECULATION, SURMISE AND EVIDENCE CONJECTURE:
A. Petitioner was deprived of the constitutional right to due process of law when it was adjudged
by the NLRC liable without trial on the merits and without its knowledge;
B. The NLRC erroneously, patently and unreasonably interpreted the principle that the NLRC and
its Arbitration Branch are not strictly bound by the rules of evidence;
C. There is no legal nor actual basis in the NLRC's ruling that petitioner is already in estoppel to
disclaim the authority of its alleged representatives.
D. The NLRC committed manifest error in relying merely on private, respondents'
unsubstantiated complaints to hold petitioner liable for damages. 5
In brief, petitioner alleges that the decisions of the labor arbiters and respondent Commission are void for the following
reasons: (1) there was no valid service of summons; (2) Engineers Estacio and Dulatre and Atty. Abundiente had no
authority to appear and represent petitioner at the hearings before the arbiters and on appeal to respondent
Commission; (3) the decisions of the arbiters and respondent Commission are based on unsubstantiated and self-serving
evidence and were rendered in violation of petitioner's right to due process.
Service of summons in cases filed before the labor arbiters is governed by Sections 4 and 5 of Rule IV of the New Rules of
Procedure of the NLRC. They provide:
Sec. 4. Service of Notices and Resolutions. — (a) Notices or summons and copies of orders, resolutions or
decisions shall be served on the parties to the case personally by the bailiff or duly authorized public officer
within three (3) days from receipt thereof or by registered mail; Provided that where a party is represented by
counsel or authorized representative, service shall be made on such counsel or authorized
representative; provided further that in cases of decision and final awards, copies thereof shall be served on both
the parties and their counsel; provided finally, that in case where the parties are so numerous, service shall be
made on counsel and upon such number of complainants as may be practicable, which shall be considered
substantial compliance with Article 224 (a) of the Labor Code, as amended.
xxx xxx xxx
Sec. 5. Proof and completeness of service. — The return is prima facie proof of the facts indicated therein.Service
by registered mail is complete upon receipt by the addressee or his agent. . . .
Under the NLRC Rules of Procedure, summons on the respondent shall be served personally or by registered mail on the
party himself. If the party is represented by counsel or any other authorized representative or agent, summons shall be
served on such person.
It has been established that petitioner is a private domestic corporation with principal address in Quezon City. The
complaints against petitioner were filed in Iligan City and summonses therefor served on Engineer Estacio in Iligan City.
The question now is whether Engineer Estacio was an agent and authorized representative of petitioner.
To determine the scope or meaning of the term "authorized representative" or "agent" of parties on whom summons
may be served, the provisions of the Revised Rules of Court may be resorted to. 6
Under the Revised Rules of Court, 7 service upon a private domestic corporation or partnership must be made upon its
officers, such as the president, manager, secretary, cashier, agent, or any of its directors. These persons are deemed so
integrated with the corporation that they know their responsibilities and immediately discern what to do with any legal
papers served on them. 8
In the case at bar, Engineer Estacio, assisted by Engineer Dulatre, managed and supervised the construction
project. 9 According to the Solicitor General and private respondents, Engineer Estacio attended to the project in Iligan
City and supervised the work of the employees thereat. As manager, he had sufficient responsibility and discretion to
realize the importance of the legal papers served on him and to relay the same to the president or other responsible
officer of petitioner. Summons for petitioner was therefore validly served on him.
Engineer Estacio's appearance before the labor arbiters and his promise to settle the claims of private respondents is
another matter.
The general rule is that only lawyers are allowed to appear before the labor arbiter and respondent Commission in cases
before them. The Labor Code and the New Rules of Procedure of the NLRC, nonetheless, lists three (3) exceptions to the
rule, viz:
Sec. 6. Appearances. — . . . .
A non-lawyer may appear before the Commission or any Labor Arbiter only if:
(a) he represents himself as party to the case;
(b) he represents the organization or its members, provided that he shall be made to present written proof that
he is properly authorized; or
(c) he is a duly-accredited member of any legal aid office duly recognized by the Department of Justice or the
Integrated Bar of the Philippines in cases referred thereto by the latter. . . . 10
A non-lawyer may appear before the labor arbiters and the NLRC only if: (a) he represents himself as a party to the case;
(b) he represents an organization or its members, with written authorization from them: or (c) he is a duly-accredited
member of any legal aid office duly recognized by the Department of Justice or the Integrated Bar of the Philippines in
cases referred to by the latter. 11
Engineers Estacio and Dulatre were not lawyers. Neither were they duly-accredited members of a legal aid office. Their
appearance before the labor arbiters in their capacity as parties to the cases was authorized under the first exception to
the rule. However, their appearance on behalf of petitioner required written proof of authorization. It was incumbent
upon the arbiters to ascertain this authority especially since both engineers were named co-respondents in the cases
before the arbiters. Absent this authority, whatever statements and declarations Engineer Estacio made before the
arbiters could not bind petitioner.
The appearance of Atty. Arthur Abundiente in the cases appealed to respondent Commission did not cure Engineer
Estacio's representation. Atty. Abundiente, in the first place, had no authority to appear before the respondent
Commission. The appellants' brief he filed was verified by him, not by petitioner. 12 Moreover, respondent Commission
did not delve into the merits of Atty. Abundiente's appeal and determine whether Engineer Estacio was duly authorized
to make such promise. It dismissed the appeal on the ground that notices were served on petitioner and that the latter
was estopped from denying its promise to pay.
Nevertheless, even assuming that Engineer Estacio and Atty. Abundiente were authorized to appear as representatives of
petitioner, they could bind the latter only in procedural matters before the arbiters and respondent Commission.
Petitioner's liability arose from Engineer Estacio's alleged promise to pay. A promise to pay amounts to an offer to
compromise and requires a special power of attorney or the express consent of petitioner. The authority to compromise
cannot be lightly presumed and should be duly established by evidence.13 This is explicit from Section 7 of Rule III of the
NLRC Rules of Procedure, viz:
Sec. 7. Authority to bind party. — Attorneys and other representatives of parties shall have authority to bind their
clients in all matters of procedure; but they cannot, without a special power of attorney or express consent,
enter into a compromise agreement with the opposing party in full or partial discharge of a client's claim.
The promise to pay allegedly made by Engineer Estacio was made at the preliminary conference and constituted an offer
to settle the case amicably. The promise to pay could not be presumed to be a single unilateral act, contrary to the claim
of the Solicitor General. 14 A defendant's promise to pay and settle the plaintiff's claims ordinarily requires a reciprocal
obligation from the plaintiff to withdraw the complaint and discharge the defendant from liability. 15 In effect, the offer
to pay was an offer to compromise the cases.
In civil cases, an offer to compromise is not an admission of any liability, and is not admissible in evidence against the
offeror. 16 If this rule were otherwise, no attempt to settle litigation could safely be made. 17 Settlement of disputes by
way of compromise is an accepted and desirable practice in courts of law and administrative tribunals. 18 In fact, the
Labor Code mandates the labor arbiter to exert all efforts to enable the parties to arrive at an amicable settlement of the
dispute within his jurisdiction on or before the first hearing. 19
Clearly, respondent Commission gravely abused its discretion in affirming the decisions of the labor arbiters which were
not only based on unauthorized representations, but were also made in violation of petitioner's right to due process.
Section 3 of Rule V of the NLRC Rules of Procedure provides:
Sec. 3. Submission of Position Papers/Memorandum. — Should the parties fail to agree upon an amicable
settlement, in whole or in part, during the conferences, the Labor Arbiter shall issue an order stating therein the
matters taken up and agreed upon during the conferences and directing the parties to simultaneously file their
respective verified position papers
xxx xxx xxx
After petitioner's alleged representative failed to pay the workers' claims as promised, Labor Arbiters Siao and Palangan
did not order the parties to file their respective position papers. The arbiters forthwith rendered a decision on the merits
without at least requiring private respondents to substantiate their complaints. The parties may have earlier waived their
right to file position papers but petitioner's waiver was made by Engineer Estacio on the premise that petitioner shall
have paid and settled the claims of private respondents at the scheduled conference. Since petitioner reneged on its
"promise," there was a failure to settle the case amicably. This should have prompted the arbiters to order the parties to
file their position papers.
Article 221 of the Labor Code mandates that in cases before labor arbiters and respondent Commission, they "shall use
every and all reasonable means to ascertain the facts in each case speedily and objectively and without regard to
technicalities of law or procedure, all in the interest of due process." The rule that respondent Commission and the Labor
Arbiters are not bound by technical rules of evidence and procedure should not be interpreted so as to dispense with the
fundamental and essential right of due process. 20 And this right is satisfied, at the very least, 'when the parties are given
the opportunity to submit position papers. 21 Labor Arbiters Siao and Palangan erred in dispensing with this
requirement.
Indeed, the labor arbiters and the NLRC must not, at the expense of due process, be the first to arbitrarily disregard
specific provisions of the Rules which are precisely intended to assist the parties in obtaining the just, expeditious and
inexpensive settlement of labor disputes. 22
IN VIEW WHEREOF, the petition for certiorari is granted. The decision of the National Labor Relations Commission, Fifth
Division, is annulled and set aside and the case is remanded to the Regional Arbitration Branch, Iligan City for further
proceedings.
SO ORDERED.

 Rules subject to Supreme Court modification

1. G.R. No. 110571. March 10, 1994.*
FIRST LEPANTO CERAMICS, INC., petitioner, vs. THE COURT OF APPEALS and MARIWASA MANUFACTURING, INC.,
respondents.
Appeals; B.P. 129 has the laudable objective of providing a uniform procedure of appeal from decisions of all quasi-
judicial agencies.—Clearly evident in the aforequoted provision of B.P. 129 is the laudable objective of providing a
uniform procedure of appeal from decisions of all quasi-judicial agencies for the benefit of the bench and the bar. Equally
laudable is the twin objective of B.P. 129 of unclogging the docket of this Court to enable it to attend to more important
tasks, which in the words of Dean Vicente G. Sinco, as quoted in our decision in Conde v. Intermediate Appellate Court is
“less concerned with the decisions of cases that begin and end with the transient rights and obligations of particular
individuals but is more intertwined with the direction of national policies, momentous economic and social problems,
the delimitation of governmental authority and it impact upon fundamental rights.”
Same; Statutes; It cannot be denied that the lawmaking system of the country is far from perfect and the obvious lack of
deliberation in the drafting of our laws could perhaps explain the deviation of some of our laws from the goal of uniform
procedure which B.P. 129 sought to promote.—However, it cannot be denied that the lawmaking system of the country is
far from perfect. During the transitional period after the country emerged from the Marcos regime, the lawmaking
power was lodged on the Executive Department. The obvious lack of deliberation in the drafting of our laws could
perhaps explain the deviation of some of our laws from the goal of uniform procedure which B.P. 129 sought to promote.
In exempli gratia, Executive Order No. 226 or the Omnibus Investments Code of 1987 provides that all appeals shall be
filed directly with the Supreme Court within thirty (30) days from receipt of the order or decision.
Same; Same; Supreme Court; Presently, the Supreme Court entertains ordinary appeals only from decisions of the
Regional Trial Court in criminal cases where the penalty imposed is reclusion perpetua or higher.—Noteworthy is the fact
that presently, the Supreme Court entertains ordinary appeals only from decision of the Regional Trial Courts in criminal
cases where the penalty imposed is reclusion perpetua or higher. Judgments of regional trial courts may be appealed to
the Supreme Court only by petition for review on certiorari within fifteen (15) days from notice of judgment in
accordance with Rule 45 of the Rules of Court in relation to Section 17 of the Judiciary Act of 1948, as amended, this
being the clear intendment of the provision of the Interim Rules that “(a)ppeals to the Supreme Court shall be taken by
petition for certiorari which shall be governed by Rule 45 of the Rules of Court”. Thus, the right of appeal provided in E.O.
226 within thirty (30) days from receipt of the order or decision is clearly not in consonance with the present procedure
before this Court. Only decisions, orders or rulings of a Constitutional Commission (Civil Service Commission,
Commission on Elections or Commission on Audit), may be brought to the Supreme Court on original petitions for
certiorari under Rule 65 by the aggrieved party within thirty (30) days from receipt of a copy thereof.
Same; Same; Same; The Supreme Court issued Circular 1-91 prescribing rules governing appeals to the Court of Appeals
from final orders or decisions of the Court of Tax Appeals and quasi-judicial agencies to eliminate unnecessary
contradictions and confusing rules of procedure.—Under this contextual backdrop, this Court, pursuant to its
Constitutional power under Section 5(5), Article VIII of the 1987 Constitution to promulgate rules concerning pleading,
practice and procedure in all courts, and by way of implementation of B.P. 129, issued Circular 1-91 prescribing the rules
governing appeals to the Court of Appeals from final orders or decisions of the Court of Tax Appeals and quasi-judicial
agencies to eliminate unnecessary contradictions and confusing rules of procedure.
Same; Same; Same; Although the Supreme Court circular is not strictly a statute or law, it has, however, the force and
effect of law.—Contrary to petitioner’s contention, although a circular is not strictly a statute or law, it has, however, the
force and effect of law according to settled jurisprudence. In Inciong v. de Guia, a circular of this Court was treated as law
In adopting the recommendation of the Investigating Judge to impose a sanction on a judge who violated Circular No. 7
of this Court dated September 23, 1974, as amended by Circular No. 3 dated April 24, 1975 and Circular No. 20 dated
October 4, 1979, requiring raffling of cases, this Court quoted the ratiocination of the Investigating Judge, brushing aside
the contention of respondent judge that assigning cases instead of raffling is a common practice and holding that
respondent could not go against the circular of this Court until its repealed or otherwise modified, as "(L)aws are
repealed only by subsequent ones, and their violation or non-observance shall not be excused by disuse, or customs or
practice to the contrary.”
Same; Same; Same; The Supreme Court has the power to regulate, by virtue of its constitutional rule-making powers,
procedural aspects such as the court and the manner an appeal can be brought.—The argument that Article 82 of E.O.
226 cannot be validly repealed by Circular 1-91 because the former grants a substantive right which, under the
Constitution cannot be modified, diminished or increased by this Court in the exercise of its rule-making powers is not
entirely defensible as it seems. Respondent correctly argued that Article 82 of E.O. 226 grants the right of appeal from
decisions or final orders of the BOI and in granting such right, it also provided where and in what manner such appeal
can be brought. These latter portions simply deal with procedural aspects which this Court has the power to regulate by
virtue of its constitutional rule-making powers. Indeed, the question of where and in what manner appeals from
decisions of the BOI should be brought pertains only to procedure or the method of enforcing the substantive right to
appeal granted by E.O. 226. In other words, the right to appeal from decisions or final orders of the BOI under E.O. 226
remains and continues to be respected. Circular 1-91 simply transferred the venue of appeals from decisions of this
agency to respondent Court of Appeals and provided a different period of appeal, i.e., fifteen (15) days from notice.
Same; Same; Same; Circular 1-91 effectively repealed or superseded Article 82 of E.O. 226.—Clearly, Circular 1-91
effectively repealed or superseded Article 82 of E.O. 226 insofar as the manner and method of enforcing the right to
appeal from decisions of the BOI are concerned. Appeals from decisions of the BOI, which by statute was previously
allowed to be filed directly with the Supreme Court, should now be brought to the Court of Appeals.
Same; Same; Substantive law and procedural law, distinguished.—The case of Bustos v. Lucero distinguished between
rights created by a substantive law and those arising from procedural law: “Substantive law creates substantive rights x x
x. Substantive rights is a term which includes those rights which one enjoys under the legal system prior to the
disturbance of normal relations (60 C.J., 980). Substantive law is that part of the law which creates, defines and regulates
rights, or which regulates rights and duties which give rise to a cause of action, as opposed to adjective or remedial law,
which prescribes the method of enforcing rights or obtains a redress for their invasion.

NOCON, J.:
Brought to fore in this petition for certiorari and prohibition with application for preliminary injunction is the novel
question of where and in what manner appeals from decisions of the Board of Investments (BOI) should be filed. A
thorough scrutiny of the conflicting provisions of Batas Pambansa Bilang 129, otherwise known as the "Judiciary
Reorganization Act of 1980," Executive Order No. 226, also known as the Omnibus Investments Code of 1987 and
Supreme Court Circular No. 1-91 is, thus, called for.
Briefly, this question of law arose when BOI, in its decision dated December 10, 1992 in BOI Case No. 92-005 granted
petitioner First Lepanto Ceramics, Inc.'s application to amend its BOI certificate of registration by changing the scope of
its registered product from "glazed floor tiles" to "ceramic tiles." Eventually, oppositor Mariwasa filed a motion for
reconsideration of the said BOI decision while oppositor Fil-Hispano Ceramics, Inc. did not move to reconsider the same
nor appeal therefrom. Soon rebuffed in its bid for reconsideration, Mariwasa filed a petition for review with respondent
Court of Appeals pursuant to Circular 1-91.
Acting on the petition, respondent court required the BOI and petitioner to comment on Mariwasa's petition and to
show cause why no injunction should issue. On February 17, 1993, respondent court temporarily restrained the BOI from
implementing its decision. This temporary restraining order lapsed by its own terms on March 9, 1993, twenty (20) days
after its issuance, without respondent court issuing any preliminary injunction.
On February 24, 1993, petitioner filed a "Motion to Dismiss Petition and to Lift Restraining Order" on the ground that
respondent court has no appellate jurisdiction over BOI Case No. 92-005, the same being exclusively vested with the
Supreme Court pursuant to Article 82 of the Omnibus Investments Code of 1987.
On May 25, 1993, respondent court denied petitioner's motion to dismiss, the dispositive portion of which reads as
follows:
WHEREFORE, private respondent's motion to dismiss the petition is hereby DENIED, for lack of merit.
Private respondent is hereby given an inextendible period of ten (10) days from receipt hereof within
which to file its comment to the petition. 1
Upon receipt of a copy of the above resolution on June 4, 1993, petitioner decided not to file any motion for
reconsideration as the question involved is essentially legal in nature and immediately filed a petition for certiorariand
prohibition before this Court.
Petitioner posits the view that respondent court acted without or in excess of its jurisdiction in issuing the questioned
resolution of May 25, 1993, for the following reasons:
 I. Respondent court has no jurisdiction to entertain Mariwasa's appeal from the BOI's decision in BOI
Case No. 92-005, which has become final.
II. The appellate jurisdiction conferred by statute upon this Honorable Court cannot be amended or
superseded by Circular No. 1-91. 2
Petitioner then concludes that:
III. Mariwasa has lost it right to appeal . . . in this case. 3
Petitioner argues that the Judiciary Reorganization Act of 1980 or Batas Pambansa Bilang 129 and Circular 1-91,
"Prescribing the Rules Governing Appeals to the Court of Appeals from a Final Order or Decision of the Court of Tax
Appeals and Quasi-Judicial Agencies" cannot be the basis of Mariwasa's appeal to respondent court because the
procedure for appeal laid down therein runs contrary to Article 82 of E.O. 226, which provides that appeals from
decisions or orders of the BOI shall be filed directly with this Court, to wit:
Judicial relief. — All orders or decisions of the Board
(of Investments) in cases involving the provisions of this Code shall immediately be executory. No appeal
from the order or decision of the Board by the party adversely affected shall stay such an order or
decision; Provided, that all appeals shall be filed directly with the Supreme Court within thirty (30) days
from receipt of the order or decision.
On the other hand, Mariwasa maintains that whatever "obvious inconsistency" or "irreconcilable repugnancy" there may
have been between B.P. 129 and Article 82 of E.O. 226 on the question of venue for appeal has already been resolved by
Circular 1-91 of the Supreme Court, which was promulgated on February 27, 1991 or four (4) years after E.O. 226 was
enacted.
Sections 1, 2 and 3 of Circular 1-91, is herein quoted below:
1. Scope. — These rules shall apply to appeals from final orders or decisions of the Court of Tax Appeals.
They shall also apply to appeals from final orders or decisions of any quasi-judicial agency from which an
appeal is now allowed by statute to the Court of Appeals or the Supreme Court. Among these agencies
are the Securities and Exchange Commission, Land Registration Authority, Social Security Commission,
Civil Aeronautics Board, Bureau of Patents, Trademarks and Technology Transfer, National Electrification
Administration, Energy Regulatory Board, National Telecommunications Commission, Secretary of
Agrarian Reform and Special Agrarian Courts under RA 6657, Government Service Insurance System,
Employees Compensation Commission, Agricultural Inventions Board, Insurance Commission and
Philippine Atomic Energy Commission.
2. Cases not covered. — These rules shall not apply to decisions and interlocutory orders of the National
Labor Relations Commission or the Secretary of Labor and Employment under the Labor Code of the
Philippines, the Central Board of Assessment Appeals, and other quasi-judicial agencies from which no
appeal to the courts is prescribed or allowed by statute.
3. Who may appeal and where to appeal. — The appeal of a party affected by a final order, decision, or
judgment of the Court of Tax Appeals or of a quasi-judicial agency shall be taken to the Court of Appeals
within the period and in the manner herein provided, whether the appeal involves questions of fact or of
law or mixed questions of fact and law. From final judgments or decisions of the Court of Appeals, the
aggrieved party may appeal by certiorari to the Supreme Court as provided in Rule 45 of the Rules of
Court.
It may be called that Section 9(3) of B.P. 129 vests appellate jurisdiction over all final judgments, decisions, resolutions,
orders or awards of quasi-judicial agencies on the Court of Appeals, to wit:
(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders, awards of
Regional Trial Courts and
quasi-judicial agencies, instrumentalities, boards or commissions, except those falling within the
appellate jurisdiction of the Supreme Court in accordance with the Constitution, 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 Intermediate Appellate Court shall have the power to try cases and conduct hearings, receive
evidence and perform any and all acts necessary to resolve factual issues raised in cases falling within its
original and appellate jurisdiction, including the power to grant and conduct new trials or further
proceedings.
These provisions shall not apply to decisions and interlocutory orders issued under the Labor Code of the
Philippines and by the Central Board of Assessment Appeals.
Clearly evident in the aforequoted provision of B.P. 129 is the laudable objective of providing a uniform procedure of
appeal from decisions of all quasi-judicial agencies for the benefit of the bench and the bar. Equally laudable is the twin
objective of B.P. 129 of unclogging the docket of this Court to enable it to attend to more important tasks, which in the
words of Dean Vicente G. Sinco, as quoted in our decision in Conde v. Intermediate Appellate Court 4is "less concerned
with the decisions of cases that begin and end with the transient rights and obligations of particular individuals but is
more intertwined with the direction of national policies, momentous economic and social problems, the delimitation of
governmental authority and its impact upon fundamental rights.
In Development Bank of the Philippines vs. Court of Appeals, 5 this Court noted that B.P. 129 did not deal only with
"changes in the rules on procedures" and that not only was the Court of Appeals reorganized, but its jurisdiction and
powers were also broadened by Section 9 thereof. Explaining the changes, this Court said:
. . . Its original jurisdiction to issue writs of mandamus, prohibition, certiorari and habeas corpus, which
theretofore could be exercised only in aid of its appellate jurisdiction, was expanded by (1) extending it
so as to include the writ of quo warranto, and also (2) empowering it to issue all said extraordinary writs
"whether or not in aid of its appellate jurisdiction." Its appellate jurisdiction was also extended to cover
not only final judgments of Regional Trial Courts, but also "all final judgments, decisions, resolutions,
orders or awards of . . . quasi-judicial agencies, instrumentalities, boards or commissions, except those
falling within the appellate jurisdiction of the Supreme Court in accordance with the Constitution, the
provisions of this Act, and of sub-paragraph (1) of the third paragraph and subparagraph (4) of the fourth
paragraph of Section 17 of the Judiciary Act of 1948," it being noteworthy in this connection that the text
of the law is broad and comprehensive, and the explicitly stated exceptions have no reference whatever
to the Court of Tax Appeals. Indeed, the intention to expand the original and appellate jurisdiction of the
Court of Appeals over quasi-judicial agencies, instrumentalities, boards, or commissions, is further
stressed by the last paragraph of Section 9 which excludes from its provisions, only the "decisions and
interlocutory orders issued under the Labor Code of the Philippines and by the Central Board of
Assessment Appeals." 6
However, it cannot be denied that the lawmaking system of the country is far from perfect. During the transitional period
after the country emerged from the Marcos regime, the lawmaking power was lodged on the Executive Department. The
obvious lack of deliberation in the drafting of our laws could perhaps explain the deviation of some of our laws from the
goal of uniform procedure which B.P. 129 sought to promote.
In exempli gratia, Executive Order No. 226 or the Omnibus Investments Code of 1987 provides that all appeals shall be
filed directly with the Supreme Court within thirty (30) days from receipt of the order or decision.
Noteworthy is the fact that presently, the Supreme Court entertains ordinary appeals only from decisions of the Regional
Trial Courts in criminal cases where the penalty imposed is reclusion perpetua or higher. Judgments of regional trial
courts may be appealed to the Supreme Court only by petition for review on certiorari within fifteen (15) days from
notice of judgment in accordance with Rule 45 of the Rules of Court in relation to Section 17 of the Judiciary Act of 1948,
as amended, this being the clear intendment of the provision of the Interim Rules that "(a)ppeals to the Supreme Court
shall be taken by petition for certiorari which shall be governed by Rule 45 of the Rules of Court." Thus, the right of
appeal provided in E.O. 226 within thirty (30) days from receipt of the order or decision is clearly not in consonance with
the present procedure before this Court. Only decisions, orders or rulings of a Constitutional Commission (Civil Service
Commission, Commission on Elections or Commission on Audit), may be brought to the Supreme Court on original
petitions for certiorari under Rule 65 by the aggrieved party within thirty (30) days form receipt of a copy thereof. 7
Under this contextual backdrop, this Court, pursuant to its Constitutional power under Section 5(5), Article VIII of the
1987 Constitution to promulgate rules concerning pleading, practice and procedure in all courts, and by way of
implementation of B.P. 129, issued Circular 1-91 prescribing the rules governing appeals to the Court of Appeals from
final orders or decisions of the Court of Tax Appeals and quasi-judicial agencies to eliminate unnecessary contradictions
and confusing rules of procedure.
Contrary to petitioner's contention, although a circular is not strictly a statute or law, it has, however, the force and effect
of law according to settled jurisprudence. 8 In Inciong v. de Guia, 9 a circular of this Court was treated as law. In adopting
the recommendation of the Investigating Judge to impose a sanction on a judge who violated Circular No. 7 of this Court
dated
September 23, 1974, as amended by Circular No. 3 dated April 24, 1975 and Circular No. 20 dated October 4, 1979,
requiring raffling of cases, this Court quoted the ratiocination of the Investigating Judge, brushing aside the contention of
respondent judge that assigning cases instead of raffling is a common practice and holding that respondent could not go
against the circular of this Court until it is repealed or otherwise modified, as "(L)aws are repealed only by subsequent
ones, and their violation or non-observance shall not be excused by disuse, or customs or practice to the contrary." 10
The argument that Article 82 of E.O. 226 cannot be validly repealed by Circular 1-91 because the former grants a
substantive right which, under the Constitution cannot be modified, diminished or increased by this Court in the exercise
of its rule-making powers is not entirely defensible as it seems. Respondent correctly argued that Article 82 of E.O. 226
grants the right of appeal from decisions or final orders of the BOI and in granting such right, it also provided where and
in what manner such appeal can be brought. These latter portions simply deal with procedural aspects which this Court
has the power to regulate by virtue of its constitutional rule-making powers.
The case of Bustos v. Lucero 11 distinguished between rights created by a substantive law and those arising from
procedural law:
Substantive law creates substantive rights . . . . Substantive rights is a term which includes those rights
which one enjoys under the legal system prior to the disturbance of normal relations (60 C.J., 980).
Substantive law is that part of the law which creates, defines and regulates rights, or which regulates
rights and duties which give rise to a cause of action, as oppossed to adjective or remedial law, which
prescribes the method of enforcing rights or obtains a redress for their invasion. 12
Indeed, the question of where and in what manner appeals from decisions of the BOI should be brought pertains only to
procedure or the method of enforcing the substantive right to appeal granted by E.O. 226. In other words, the right to
appeal from decisions or final orders of the BOI under E.O. 226 remains and continues to be respected. Circular 1-91
simply transferred the venue of appeals from decisions of this agency to respondent Court of Appeals and provided a
different period of appeal, i.e., fifteen (15) days from notice. It did not make an incursion into the substantive right to
appeal.
The fact that BOI is not expressly included in the list of quasi-judicial agencies found in the third sentence of Section 1 of
Circular 1-91 does not mean that said circular does not apply to appeals from final orders or decision of the BOI. The
second sentence of Section 1 thereof expressly states that "(T)hey shall also apply to appeals from final orders or
decisions of any quasi-judicial agency from which an appeal is now allowed by statute to the Court of Appeals or the
Supreme Court." E.O. 266 is one such statute. Besides, the enumeration is preceded by the words "(A)mong these
agencies are . . . ," strongly implying that there are other quasi-judicial agencies which are covered by the Circular but
which have not been expressly listed therein. More importantly, BOI does not fall within the purview of the exclusions
listed in Section 2 of the circular. Only the following final decisions and interlocutory orders are expressly excluded from
the circular, namely, those of: (1) the National Labor Relations Commission; (2) the Secretary of Labor and Employment;
(3) the Central Board of Assessment Appeals and (4) other quasi-judicial agencies from which no appeal to the courts is
prescribed or allowed by statute. Since in DBP v. CA 13 we upheld the appellate jurisdiction of the Court of Appeals over
the Court of Tax Appeals despite the fact that the same is not among the agencies reorganized by B.P. 129, on the ground
that B.P. 129 is broad and comprehensive, there is no reason why BOI should be excluded from
Circular 1-91, which is but implementary of said law.
Clearly, Circular 1-91 effectively repealed or superseded Article 82 of E.O. 226 insofar as the manner and method of
enforcing the right to appeal from decisions of the BOI are concerned. Appeals from decisions of the BOI, which by
statute was previously allowed to be filed directly with the Supreme Court, should now be brought to the Court of
Appeals.
WHEREFORE, in view of the foregoing reasons, the instant petition for certiorari and prohibition with application for
temporary restraining order and preliminary injunction is hereby DISMISSED for lack of merit. The Temporary Restraining
Order issued on July 19, 1993 is hereby LIFTED.
SO ORDERED.

h. Administrative Res Judicata

 Definition
 Exceptions

1. A.M. No. MTJ-02-1404. December 14, 2004.*

(Formerly IPI No. 01-989-MTJ)
EXEC. JUDGE HENRY B. BASILLA, complainant, vs. JUDGE AMADO L. BECAMON, Clerk of Court LOLITA DELOS REYES and
Junior Process Server EDDIE DELOS REYES, MCTC, Placer-Esperanza-Cawayan, Masbate, respondents.
Remedial Law; Judgment; Res Judicata; Under the doctrine of res judicata, a matter that has been adjudicated by a court
of competent jurisdiction must be deemed to have been finally and conclusively settled if it arises in any subsequent
litigation between the same parties and for the same cause.—Under the said doctrine, a matter that has been
adjudicated by a court of competent jurisdiction must be deemed to have been finally and conclusively settled if it arises
in any subsequent litigation between the same parties and for the same cause. It provides that [a] final judgment on the
merits rendered by a court of competent jurisdiction is conclusive as to the rights of the parties and their privies; and
constitutes an absolute bar to subsequent actions involving the same claim, demand, or cause of action. Res judicata is
based on the ground that the party to be affected, or some other with whom he is in privity, has litigated the same
matter in the former action in a court of competent jurisdiction, and should not be permitted to litigate it again.
Same; Same; Same; Res judicata stabilizes rights and promotes the rule of law.—This principle frees the parties from
undergoing all over again the rigors of unnecessary suits and repetitious trials. At the same time, it prevents the clogging
of court dockets. Equally important, res judicata stabilizes rights and promotes the rule of law.

GARCIA, J.:
Under consideration is the sworn letter-complaint[1] (with enclosures) dated December 6, 2000 filed with the Office of
the Court Administrator by herein complainant, Executive Judge Henry B. Basilla, of the Regional Trial Court, Branch 49,
Cataingan, Masbate against herein respondents, namely: Judge Amado L. Becamon of the Municipal Circuit Trial Court
(MCTC) of Placer-Esperanza-Cawayan, Masbate; his clerk of court Lolita delos Reyes; and process server Eddie delos
Reyes, charging them with gross neglect of duty and/or grave misconduct, gross ignorance of the law and violation of
Canon 3 of the Code of Judicial Conduct on the part of respondent judge, relative to Civil Case No. 288 (MCTC Case No.
263-C), entitled Visitacion Mahusay vda. de Du vs. Benjamin Du, et al., an action for recovery of possession and
ownership of land.
In an earlier administrative case filed by the same complainant against the three (3) herein respondents, priorly docketed
as A.M. No. MTJ-02-1438, entitled Exec. Judge Henry B. Basilia[2] vs. Judge Amado L. Becamon, Clerk of Court Lolita
delos Reyes and Process Server Eddie delos Reyes, this Court, in an en banc Resolution promulgated on January 22, 2004
(420 SCRA 608), found respondent Judge Amado L. Becamon liable for gross ignorance of the law and procedure and
imposed upon him a fine in the amount of P21,000, while his co-respondents therein, Lolita delos Reyes and Eddie delos
Reyes, were found guilty of simple neglect of duty and were each fined in the amount equivalent to one month and one
day of their respective salaries.
A close examination of A.M. No. MTJ-02-1438 and the present case, A.M. No. MTJ-02-1404, reveals that the latter case
presents the same matter and raises the same issues as that of the earlier administrative case. Hereunder is our
comparative study anent the complaint in both cases:
A.M. No. MTJ-02- 1438 arose from an Order dated April 5, 2000 issued by Executive Judge Henry B. Basilla dismissing the
appeal in Civil Case No. 288 (MCTC Case No. 263-C) for being frivolous and filed out of time. In that same Order, Judge
Basilla likewise required herein respondents to explain in writing why they should not be dealt with administratively. In
full, said Order reads:
ORDER
After considering the following facts in the record:
1. Judgment of the court a quo dated January 15, 1999 (mailed to counsels only on March 2, 1999) was
received by defendants-appellants thru counsel on March 12, 1999 (p. 369, rec.);
2. Motion for reconsideration of the decision by defendants-appellants thru counsel was filed with the
court a quo on March 15, 1999 by registered mail (p. 371, registry receipt, rec.);
3. Order of the court a quo dated May 7, 1999 denying the motion for reconsideration (p. 381, rec.);
4. Motion for execution of judgment dated September 9, 1999 filed with the court a quo onSeptember
14, 1999 (rec.);
5. Order dated February 14, 2000 of the court a quo denying motion for execution of judgment
andgranting defendants fifteen (15) days to appeal (p. 400, rec.);
6. Notice of appeal filed with the court a quo on November 3, 1999 (p. 412, rec.);
7. Appeal fee paid after four (4) months on March 14, 2000 (p. 427, rec.); and
8. Order of the court a quo dated March 14, 2000 approving the appeal. (p. 429, rec.)
the court hereby resolved to dismiss the appeal for being filed out of time and frivolous.
The court has observed that:
1. Judge Amado L. Becamon, Mrs. Lolita delos Reyes and Mr. Eddie delos Reyes released the decision only
after one month and a half (1 1/2) (p. 365, registry receipt, rec.) and the order dated May 7, 1999 denying
the motion for reconsideration only after five (5) months (p. 381, registry receipt, rec.);
2. Judge Amado L. Becamon extended the period of appeal fixed by the Rules (p. 400, rec.);
3. The court still received the appeal fee on March 14, 2000 despite the lapse of the period of appeal (p.
427, rec.); and
4. Judge Amado L. Becamon still approved the appeal despite the lapse of the period of appeal (p. 429,
rec.).
And, considering the gross irregularity in the record, Judge Amado L. Becamon, Mrs. Lolita delos Reyes, Clerk of
Court II, and Eddie delos Reyes, Process Server, of the 4th MCTC of Placer-Cawayan-Esperanza, Masbate are
hereby ordered to explain in writing within ten (10) days from notice why they should not be dealt with
administratively for grave misconduct, ignorance of law and dishonesty.
Furnish a copy of this order to Honorable Court Administrator for his information.
So ordered.
On the other hand, the present case - A.M. No. MTJ-02-1404 - stemmed from a sworn letter-complaint of the same
complainant against the very same respondents addressed to then Court Administrator Alfredo L. Benipayo. In said
sworn letter-complaint, Judge Henry B. Basilla averred:
In compliance with your letter dated October 25, 2000, I, in my capacity as Executive Judge, after a careful study
of the record in Civil Case No. 288 (MCTC Case No. 263-C) entitled "Visitacion Mahusay vda. de Du, Plaintiff vs.
Benjamin Du, et al., Defendants for Recovery of Possession and Ownership of Land", hereby formally charge
administratively Judge Amado L. Becamon, Mrs. Lolita delos Reyes, Clerk of Court II and Mr. Eddie delos Reyes,
Junior Process Server, of MCTC of Placer-Cawayan-Esperanza, Masbate, for Gross Neglect of Duty and/or Grave
Misconduct, for Ignorance of Law and for violation of Canon 3 of the Code of Judicial Conduct of 1989 (specially
for Judge Amado L. Becamon) --- committed by freezing and delaying the release of the decision and the order
denying to reconsider it, for one and a half months and five months, respectively, and extending the period of
 appeal fixed by the rules, and for receiving the appeal fee and after which approving the appeal despite the time
to do so had long elapsed.
Attached herewith are the following documents:
1.) Annex "A" – Order dated April 5, 2000;
2.) Annex "B" – Judgment of the court a quo dated January 15, 1999 (mailed to counsel only on March 2,
1999, p. 365, registry receipt, rec.) was received by defendants-appellants thru counsel on March 12,
1999 (p. 369, rec.);
3.) Annex "C" – Motion for Reconsideration of the decision by defendants-appellants thru counsel was
filed with the court a quo on March 15, 1999 by registered mail (p. 371, registry receipt, rec.);
4.) Annex "D" – Order of the court a quo dated May 7, 1999 denying the motion for reconsideration (p.
381, registry receipt, rec.);
5.) Annex "E" – Motion for execution of judgment dated September 9, 1999 filed with the court a quoon
September 14, 1999 (rec.);
6.) Annex "F" – Order dated February 14, 2000 of the court a quo denying motion for execution of
judgment and granting defendants fifteen (15) days to appeal (p. 400, rec.);
6.) Annex "G" – Notice of appeal filed with the court a quo on November 3, 1999 (p. 412, rec.);
8.) Annex "H" – Appeal fee paid after four (4) months on March 14, 2000 (p. 427, rec.);
9.) Annex "I" – Order of the court a quo dated March 14, 2000 approving the appeal (p. 429, rec.).
Clear it is from the above that both A.M. No. MTJ-02-1438 and the instant administrative case - A.M. No. MTJ-02-1404 -
refer to the same subject matter, raise the same issues and involve the same parties.
Applying the principle of res judicata or bar by prior judgment, the present administrative case becomes dismissible.
Section 47, Rule 39 of the Rules of Court enunciates the rule of res judicata or bar by prior judgment, thus:
SEC. 47. Effect of judgments or final orders. - The effect of a judgment or final order rendered by a court of the
Philippines, having jurisdiction to pronounce the judgment or final order, may be as follows:
xxx xxx xxx
(b) In other cases, the judgment or final order is, with respect to the matter directly adjudged or as to any other
matter that could have been raised in relation thereto, conclusive between the parties and their successors-in-
interest by title subsequent to the commencement of the action or special proceeding, litigating for the same
thing and under the same title and in the same capacity;
Under the said doctrine, a matter that has been adjudicated by a court of competent jurisdiction must be deemed to
have been finally and conclusively settled if it arises in any subsequent litigation between the same parties and for the
same cause.3 It provides that [a] final judgment on the merits rendered by a court of competent jurisdiction is conclusive
as to the rights of the parties and their privies; and constitutes an absolute bar to subsequent actions involving the same
claim, demand, or cause of action.4 Res judicata is based on the ground that the party to be affected, or some other with
whom he is in privity, has litigated the same matter in the former action in a court of competent jurisdiction, and should
not be permitted to litigate it again.5
This principle frees the parties from undergoing all over again the rigors of unnecessary suits and repetitious trials. At the
same time, it prevents the clogging of court dockets. Equally important, res judicata stabilizes rights and promotes the
rule of law.6
The records reveal that the two (2) administrative cases stemmed from the same factual circumstances between the
same parties. The earlier administrative case (A.M. No. MTJ-02-1438) which was already terminated in our en
banc Resolution of January 22, 2004, arose when the OCA was furnished with a copy of the order dated April 5, 2000
issued by complainant Judge Henry B. Basilla. Complete record of MCTC Case No. 263-C was also transmitted to the said
office, and, after evaluating the matter, Deputy Court Administrator Jose P. Perez, in his Report dated April 19, 2002,
recommended that the same be re-docketed as a regular administrative matter, which recommendation was adopted by
this Court in its Resolution of July 10, 2002, and accordingly had the matter docketed as A.M. No. MTJ-02-1438.
Meanwhile, on December 6, 2000, Executive Judge Henry B. Basilla, in compliance with then Court Administrator Alfredo
L. Benipayo’s letter dated October 25, 2000, filed his sworn letter-complaint formally charging herein respondents for the
same irregularities committed by them relative to the same MCTC Case No. 263-C. Later, in his January 16, 2002 Report,
the incumbent Court Administrator, Presbitero J. Velasco, Jr., recommended the re-docketing of the present complaint as
a regular administrative matter. And, in our Resolution dated February 27, 2002, we adopted said recommendation and
thus docketed that very same letter-complaint as A.M. No. MTJ-02-1404. This explain why two (2) administrative cases,
having identical subject matter, cause of action and involving the same parties existed.
WHEREFORE, the instant administrative complaint is DISMISSED for being a mere duplication of the complaint in A.M.
No. MTJ-02-1438 which, to stress, was already resolved by this Court in its en banc Resolution promulgated on January
22, 2004 (420 SCRA 608).
SO ORDERED.

2. G.R. No. 162784. June 22, 2007.*

NATIONAL HOUSING AUTHORITY, petitioner, vs. SEGUNDA ALMEIDA, COURT OF APPEALS, and RTC of SAN PEDRO,
LAGUNA, BR. 31, respondents.
Administrative Law; Judgments; Administrative Res Judicata; Jurisprudence has recognized the rule of administrative res
judicata—the rule which forbids the reopening of a matter once judicially determined by competent authority applies as
well to the judicial and quasi-judicial facts of public, executive or administrative officers and boards acting within their
jurisdiction as to the judgments of courts having general judicial powers.—Res judicata is a concept applied in review of
lower court decisions in accordance with the hierarchy of courts. But jurisprudence has also recognized the rule of
administrative res judicata: “the rule which forbids the reopening of a matter once judicially determined by competent
authority applies as well to the judicial and quasi-judicial facts of public, executive or administrative officers and boards
acting within their jurisdiction as to the judgments of courts having general judicial powers . . . It has been declared that
whenever final adjudication of persons invested with power to decide on the property and rights of the citizen is
examinable by the Supreme Court, upon a writ of error or a certiorari, such final adjudication may be pleaded as res
judicata.” To be sure, early jurisprudence were already mindful that the doctrine of res judicata cannot be said to apply
exclusively to decisions rendered by what are usually understood as courts without unreasonably circumscribing the
scope thereof and that the more equitable attitude is to allow extension of the defense to decisions of bodies upon
whom judicial powers have been conferred.
Same; Same; Quasi-Judicial Power; Words and Phrases; Quasi-judicial power is defined as that power of adjudication of
an administrative agency for the “formulation of a final order”—this function applies to the actions, discretion and
similar acts of public administrative officers or bodies who are required to investigate facts, or ascertain the existence of
facts, hold hearings, and draw conclusions from them, as a basis for their official action and to exercise discretion of a
judicial nature.—It should be remembered that quasijudicial powers will always be subject to true judicial power—that
which is held by the courts. Quasi-judicial power is defined as that power of adjudication of an administrative agency for
the “formulation of a final order.” This function applies to the actions, discretion and similar acts of public administrative
officers or bodies who are required to investigate facts, or ascertain the existence of facts, hold hearings, and draw
conclusions from them, as a basis for their official action and to exercise discretion of a judicial nature. However,
administrative agencies are not considered courts, in their strict sense. The doctrine of separation of powers reposes the
three great powers into its three (3) branches—the legislative, the executive, and the judiciary. Each department is co-
equal and coordinate, and supreme in its own sphere. Accordingly, the executive department may not, by its own fiat,
impose the judgment of one of its agencies, upon the judiciary. Indeed, under the expanded jurisdiction of the Supreme
Court, it is empowered to “determine whether or not there has been grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or instrumentality of the Government.” Courts have an expanded role
under the 1987 Constitution in the resolution of societal conflicts under the grave abuse clause of Article VIII which
includes that duty to check whether the other branches of government committed an act that falls under the category of
grave abuse of discretion amounting to lack or excess of jurisdiction.
Same; Same; The system of judicial review should not be misused and abused to evade the operation of a final and
executory judgment.—Well-within its jurisdiction, the Court of Appeals, in its decision of August 28, 2003, already ruled
that the issue of the trial court’s authority to hear and decide the instant case has already been settled in the decision of
the Court of Appeals dated June 26, 1989 (which has become final and executory on August 20, 1989 as per entry of
judgment dated October 10, 1989). We find no reason to disturb this ruling. Courts are duty-bound to put an end to
controversies. The system of judicial review should not be misused and abused to evade the operation of a final and
executory judgment. The appellate court’s decision becomes the law of the case which must be adhered to by the parties
by reason of policy.
Same; Succession; The initial applicant’s death would transfer all her property, rights and obligations to the estate
including whatever interest she has or may have had over the disputed properties over which she had been granted the
right to buy—to the extent of the interest that the original owner had over the property, the same should go to her
estate.—By considering the document, petitioner NHA should have noted that the original applicant has already passed
away. Margarita Herrera passed away on October 27, 1971. The NHA issued its resolution on February 5, 1986. The NHA
gave due course to the application made by Francisca Herrera without considering that the initial applicant’s death
would transfer all her property, rights and obligations to the estate including whatever interest she has or may have had
over the disputed properties. To the extent of the interest that the original owner had over the property, the same
should go to her estate. Margarita Herrera had an interest in the property and that interest should go to her estate upon
her demise so as to be able to properly distribute them later to her heirs—in accordance with a will or by operation of
law. The death of Margarita Herrera does not extinguish her interest over the property. Margarita Herrera had an existing
Contract to Sell with NHA as the seller. Upon Margarita Herrera’s demise, this Contract to Sell was neither nullified nor
revoked. This Contract to Sell was an obligation on both parties—Margarita Herrera and NHA. Obligations are
transmissible. Margarita Herrera’s obligation to pay became transmissible at the time of her death either by will or by
operation of law.
Same; Same; The National Housing Authority cannot make another contract to sell to other parties of a property already
initially paid for by the decedent—such would be an act contrary to the law on succession and the law on sales and
obligations; When the original buyer died, the National Housing Authority (NHA) should have considered the estate as
the next “person.”—If we sustain the position of the NHA that this document is not a will, then the interests of the
decedent should transfer by virtue of an operation of law and not by virtue of a resolution by the NHA. For as it stands,
NHA cannot make another contract to sell to other parties of a property already initially paid for by the decedent. Such
would be an act contrary to the law on succession and the law on sales and obligations. When the original buyer died,
the NHA should have considered the estate of the decedent as the next “person” likely to stand in to fulfill the obligation
to pay the rest of the purchase price. The opposition of other heirs to the repurchase by Francisca Herrera should have
put the NHA on guard as to the award of the lots. Further, the Decision in the said Civil Case No. B-1263 (questioning the
Deed of SelfAdjudication) which rendered the deed therein null and void should have alerted the NHA that there are
other heirs to the interests and properties of the decedent who may claim the property after a testate or intestate
proceeding is concluded. The NHA therefore acted arbitrarily in the award of the lots.
Same; Same; Elements of Testamentary Succession.—We need not delve into the validity of the will. The issue is for the
probate court to determine. We affirm the Court of Appeals and the Regional Trial Court which noted that it has an
element of testamentary disposition where (1) it devolved and transferred property; (2) the effect of which shall
transpire upon the death of the instrument maker.

PUNO, C.J.:
This is a Petition for Review on Certiorari under Rule 45 filed by the National Housing Authority (NHA) against the Court
of Appeals, the Regional Trial Court of San Pedro Laguna, Branch 31, and private respondent Segunda Almeida.
On June 28, 1959, the Land Tenure Administration (LTA) awarded to Margarita Herrera several portions of land which are
part of the Tunasan Estate in San Pedro, Laguna. The award is evidenced by an Agreement to Sell No. 3787.1 By virtue of
Republic Act No. 3488, the LTA was succeeded by the Department of Agrarian Reform (DAR). On July 31, 1975, the DAR
was succeeded by the NHA by virtue of Presidential Decree No. 757.2 NHA as the successor agency of LTA is the
petitioner in this case.
The records show that Margarita Herrera had two children: Beatriz Herrera-Mercado (the mother of private respondent)
and Francisca Herrera. Beatriz Herrera-Mercado predeceased her mother and left heirs.
Margarita Herrera passed away on October 27, 1971.3
On August 22, 1974, Francisca Herrera, the remaining child of the late Margarita Herrera executed a Deed of Self-
Adjudication claiming that she is the only remaining relative, being the sole surviving daughter of the deceased. She also
claimed to be the exclusive legal heir of the late Margarita Herrera.
The Deed of Self-Adjudication was based on a Sinumpaang Salaysay dated October 7, 1960, allegedly executed by
Margarita Herrera. The pertinent portions of which are as follows:
SINUMPAANG SALAYSAY
SA SINO MAN KINAUUKULAN;
Akong si MARGARITA HERRERA, Filipina, may 83 taong gulang, balo, kasalukuyang naninirahan at tumatanggap
ng sulat sa Nayon ng San Vicente, San Pedro Laguna, sa ilalim ng panunumpa ay malaya at kusang loob kong
isinasaysay at pinagtitibay itong mga sumusunod:
1. Na ako ay may tinatangkilik na isang lagay na lupang tirikan (SOLAR), tumatayo sa Nayon ng San Vicente, San
Pedro, Laguna, mayroong PITONG DAAN AT PITUMPU'T ISANG (771) METRONG PARISUKAT ang laki, humigit
kumulang, at makikilala sa tawag na Lote 17, Bloke 55, at pag-aari ng Land Tenure Administration;
2. Na ang nasabing lote ay aking binibile, sa pamamagitan ng paghuhulog sa Land Tenure Administration, at
noong ika 30 ng Julio, 1959, ang Kasunduang sa Pagbibile (AGREEMENT TO SELL No. 3787) ay ginawa at
pinagtibay sa Lungsod ng Maynila, sa harap ng Notario Publico na si G. Jose C. Tolosa, at lumalabas sa kaniyang
Libro Notarial bilang Documento No. 13, Pagina No. 4; Libro No. IV, Serie ng 1959;
3. Na dahilan sa ako'y matanda na at walang ano mang hanap buhay, ako ay nakatira at pinagsisilbihan nang
aking anak na si Francisca Herrera, at ang tinitirikan o solar na nasasabi sa unahan ay binabayaran ng kaniyang
sariling cuarta sa Land Tenure Administration;
4. Na alang-alang sa nasasaysay sa unahan nito, sakaling ako'y bawian na ng Dios ng aking buhay, ang lupang
nasasabi sa unahan ay aking ipinagkakaloob sa nasabi kong anak na FRANCISCA HERRERA, Filipina, nasa
katamtamang gulang, kasal kay Macario Berroya, kasalukuyang naninirahan at tumatanggap ng sulat sa Nayong
ng San Vicente, San Pedro Laguna, o sa kaniyang mga tagapagmana at;
5. Na HINIHILING KO sa sino man kinauukulan, na sakaling ako nga ay bawian na ng Dios ng aking buhay ay
KILALANIN, IGALANG at PAGTIBAYIN ang nilalaman sa pangalan ng aking anak na si Francisca Herrera ang loteng
nasasabi sa unahan.
SA KATUNAYAN NG LAHAT, ako ay nag-didiit ng hinlalaki ng kanan kong kamay sa ibaba nito at sa kaliwang gilid ng
unang dahon, dito sa Lungsod ng Maynila, ngayong ika 7 ng Octubre, 1960.4
The said document was signed by two witnesses and notarized. The witnesses signed at the left-hand side of both pages
of the document with the said document having 2 pages in total. Margarita Herrera placed her thumbmark5 above her
name in the second page and at the left-hand margin of the first page of the document.
The surviving heirs of Beatriz Herrera-Mercado filed a case for annulment of the Deed of Self-Adjudication before the
then Court of First Instance of Laguna, Branch 1 in Binan, Laguna (now, Regional Trial Court Branch 25). The case for
annulment was docketed as Civil Case No. B-1263.6
On December 29, 1980, a Decision in Civil Case No. B-1263 (questioning the Deed of Self-Adjudication) was rendered and
the deed was declared null and void.7
During trial on the merits of the case assailing the Deed of Self-Adjudication, Francisca Herrera filed an application with
the NHA to purchase the same lots submitting therewith a copy of the "Sinumpaang Salaysay" executed by her mother.
Private respondent Almeida, as heir of Beatriz Herrera-Mercado, protested the application.
In a Resolution8 dated February 5, 1986, the NHA granted the application made by Francisca Herrera, holding that:
From the evidence of the parties and the records of the lots in question, we gathered the following facts: the lots
in question are portions of the lot awarded and sold to the late Margarita Herrera on July 28, 1959 by the
defunct Land Tenure Administration; protestant is the daughter of the late Beatriz Herrera Mercado who was the
sister of the protestee; protestee and Beatriz are children of the late Margarita Herrera; Beatriz was the
transferee from Margarita of Lot Nos. 45, 46, 47, 48 and 49, Block 50; one of the lots transferred to Beatriz, e.g.
 Lot 47, with an area of 148 square meters is in the name of the protestant; protestant occupied the lots in
question with the permission of the protestee; protestee is a resident of the Tunasan Homesite since birth;
protestee was born on the lots in question; protestee left the place only after marriage but resided in a lot
situated in the same Tunasan Homesite; her (protestee) son Roberto Herrera has been occupying the lots in
question; he has been there even before the death of the late Margarita Herrera; on October 7, 1960, Margarita
Herrera executed a "Sinumpaang Salaysay" whereby she waived or transferred all her rights and interest over
the lots in question in favor of the protestee; and protestee had paid the lots in question in full on March 8, 1966
with the defunct Land Tenure Administration.
This Office finds that protestee has a better preferential right to purchase the lots in question.9
Private respondent Almeida appealed to the Office of the President.10 The NHA Resolution was affirmed by the Office of
the President in a Decision dated January 23, 1987.11
On February 1, 1987, Francisca Herrera died. Her heirs executed an extrajudicial settlement of her estate which they
submitted to the NHA. Said transfer of rights was approved by the NHA.12 The NHA executed several deeds of sale in
favor of the heirs of Francisca Herrera and titles were issued in their favor.13 Thereafter, the heirs of Francisca Herrera
directed Segunda Mercado-Almeida to leave the premises that she was occupying.
Feeling aggrieved by the decision of the Office of the President and the resolution of the NHA, private respondent
Segunda Mercado-Almeida sought the cancellation of the titles issued in favor of the heirs of Francisca. She filed a
Complaint on February 8, 1988, for "Nullification of Government Lot's Award," with the Regional Trial Court of San
Pedro, Laguna, Branch 31.
In her complaint, private respondent Almeida invoked her forty-year occupation of the disputed properties, and re-raised
the fact that Francisca Herrera's declaration of self-adjudication has been adjudged as a nullity because the other heirs
were disregarded. The defendant heirs of Francisca Herrera alleged that the complaint was barred by laches and that the
decision of the Office of the President was already final and executory.14 They also contended that the transfer of
purchase of the subject lots is perfectly valid as the same was supported by a consideration and that Francisca Herrera
paid for the property with the use of her own money.15 Further, they argued that plaintiff's occupation of the property
was by mere tolerance and that they had been paying taxes thereon.16
The Regional Trial Court issued an Order dated June 14, 1988 dismissing the case for lack of jurisdiction.17 The Court of
Appeals in a Decision dated June 26, 1989 reversed and held that the Regional Trial Court had jurisdiction to hear and
decide the case involving "title and possession to real property within its jurisdiction."18The case was then remanded for
further proceedings on the merits.
A pre-trial was set after which trial ensued.
On March 9, 1998, the Regional Trial Court rendered a Decision setting aside the resolution of the NHA and the decision
of the Office of the President awarding the subject lots in favor of Francisca Herrera. It declared the deeds of sale
executed by NHA in favor of Herrera's heirs null and void. The Register of Deeds of Laguna, Calamba Branch was ordered
to cancel the Transfer Certificate of Title issued. Attorney's fees were also awarded to private respondent.
The Regional Trial Court ruled that the "Sinumpaang Salaysay" was not an assignment of rights but a disposition of
property which shall take effect upon death. It then held that the said document must first be submitted to probate
before it can transfer property.
Both the NHA and the heirs of Francisca Herrera filed their respective motions for reconsideration which were both
denied on July 21, 1998 for lack of merit. They both appealed to the Court of Appeals. The brief for the heirs of Francisca
Herrera was denied admission by the appellate court in a Resolution dated June 14, 2002 for being a "carbon copy" of
the brief submitted by the NHA and for being filed seventy-nine (79) days late.
On August 28, 2003, the Court of Appeals affirmed the decision of the Regional Trial Court, viz:
There is no dispute that the right to repurchase the subject lots was awarded to Margarita Herrera in 1959. There
is also no dispute that Margarita executed a "Sinumpaang Salaysay" on October 7, 1960. Defendant NHA claims
that the "Sinumpaang Salaysay" is, in effect, a waiver or transfer of rights and interest over the subject lots in
favor of Francisca Herrera. This Court is disposed to believe otherwise. After a perusal of the "Sinumpaang
Salaysay" of Margarita Herrera, it can be ascertained from its wordings taken in their ordinary and grammatical
 sense that the document is a simple disposition of her estate to take effect after her death. Clearly the Court
finds that the "Sinumpaang Salaysay" is a will of Margarita Herrera. Evidently, if the intention of Margarita
Herrera was to merely assign her right over the lots to her daughter Francisca Herrera, she should have given her
"Sinumpaang Salaysay" to the defendant NHA or to Francisca Herrera for submission to the defendant NHA after
the full payment of the purchase price of the lots or even prior thereto but she did not. Hence it is apparent that
she intended the "Sinumpaang Salaysay" to be her last will and not an assignment of rights as what the NHA in its
resolution would want to make it appear. The intention of Margarita Herrera was shared no less by Francisca
Herrera who after the former's demise executed on August 22, 1974 a Deed of Self-Adjudication claiming that
she is her sole and legal heir. It was only when said deed was questioned in court by the surviving heirs of
Margarita Herrera's other daughter, Beatriz Mercado, that Francisca Herrera filed an application to purchase the
subject lots and presented the "Sinumpaang Salaysay" stating that it is a deed of assignment of rights.19
The Court of Appeals ruled that the NHA acted arbitrarily in awarding the lots to the heirs of Francisca Herrera. It upheld
the trial court ruling that the "Sinumpaang Salaysay" was not an assignment of rights but one that involved disposition of
property which shall take effect upon death. The issue of whether it was a valid will must first be determined by probate.
Petitioner NHA elevated the case to this Court.
Petitioner NHA raised the following issues:
A. WHETHER OR NOT THE RESOLUTION OF THE NHA AND THE DECISION OF THE OFFICE OF THE PRESIDENT HAVE
ATTAINED FINALITY, AND IF SO, WHETHER OR NOT THE PRINCIPLE OF ADMINISTRATIVE RES JUDICATA BARS THE
COURT FROM FURTHER DETERMINING WHO BETWEEN THE PARTIES HAS PREFERENTIAL RIGHTS FOR AWARD
OVER THE SUBJECT LOTS;
B. WHETHER OR NOT THE COURT HAS JURISDICTION TO MAKE THE AWARD ON THE SUBJECT LOTS; AND
C. WHETHER OR NOT THE AWARD OF THE SUBJECT LOTS BY THE NHA IS ARBITRARY.
We rule for the respondents.
Res judicata is a concept applied in review of lower court decisions in accordance with the hierarchy of courts. But
jurisprudence has also recognized the rule of administrative res judicata: "the rule which forbids the reopening of a
matter once judicially determined by competent authority applies as well to the judicial and quasi-judicial facts of public,
executive or administrative officers and boards acting within their jurisdiction as to the judgments of courts having
general judicial powers . . . It has been declared that whenever final adjudication of persons invested with power to
decide on the property and rights of the citizen is examinable by the Supreme Court, upon a writ of error or a certiorari,
such final adjudication may be pleaded as res judicata."20 To be sure, early jurisprudence were already mindful that the
doctrine of res judicata cannot be said to apply exclusively to decisions rendered by what are usually understood as
courts without unreasonably circumscribing the scope thereof and that the more equitable attitude is to allow extension
of the defense to decisions of bodies upon whom judicial powers have been conferred.
In Ipekdjian Merchandising Co., Inc. v. Court of Tax Appeals,21 the Court held that the rule prescribing that
"administrative orders cannot be enforced in the courts in the absence of an express statutory provision for that
purpose" was relaxed in favor of quasi-judicial agencies.
In fine, it should be remembered that quasi-judicial powers will always be subject to true judicial power—that which is
held by the courts. Quasi-judicial power is defined as that power of adjudication of an administrative agency for the
"formulation of a final order."22 This function applies to the actions, discretion and similar acts of public administrative
officers or bodies who are required to investigate facts, or ascertain the existence of facts, hold hearings, and draw
conclusions from them, as a basis for their official action and to exercise discretion of a judicial nature.23 However,
administrative agencies are not considered courts, in their strict sense. The doctrine of separation of powers reposes the
three great powers into its three (3) branches—the legislative, the executive, and the judiciary. Each department is co-
equal and coordinate, and supreme in its own sphere. Accordingly, the executive department may not, by its own fiat,
impose the judgment of one of its agencies, upon the judiciary. Indeed, under the expanded jurisdiction of the Supreme
Court, it is empowered to "determine whether or not there has been grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or instrumentality of the Government."24 Courts have an expanded role
under the 1987 Constitution in the resolution of societal conflicts under the grave abuse clause of Article VIII which
includes that duty to check whether the other branches of government committed an act that falls under the category of
grave abuse of discretion amounting to lack or excess of jurisdiction.25
Next, petitioner cites Batas Pambansa Blg. 129 or the Judiciary Reorganization Act of 198026 where it is therein provided
that the Intermediate Appellate Court (now, Court of Appeals) shall exercise the "exclusive appellate jurisdiction over all
final judgments, decisions, resolutions, orders or awards, of the Regional Trial Courts and Quasi-Judicial agencies,
instrumentalities, boards or commissions, except those falling within the jurisdiction of the Supreme Court in accordance
with the Constitution…"27 and contends that the Regional Trial Court has no jurisdiction to rule over awards made by the
NHA.
Well-within its jurisdiction, the Court of Appeals, in its decision of August 28, 2003, already ruled that the issue of the
trial court's authority to hear and decide the instant case has already been settled in the decision of the Court of Appeals
dated June 26, 1989 (which has become final and executory on August 20, 1989 as per entry of judgment dated October
10, 1989).28 We find no reason to disturb this ruling. Courts are duty-bound to put an end to controversies. The system
of judicial review should not be misused and abused to evade the operation of a final and executory judgment.29 The
appellate court's decision becomes the law of the case which must be adhered to by the parties by reason of policy.30
Next, petitioner NHA contends that its resolution was grounded on meritorious grounds when it considered the
application for the purchase of lots. Petitioner argues that it was the daughter Francisca Herrera who filed her
application on the subject lot; that it considered the respective application and inquired whether she had all the
qualifications and none of the disqualifications of a possible awardee. It is the position of the petitioner that private
respondent possessed all the qualifications and none of the disqualifications for lot award and hence the award was not
done arbitrarily.
The petitioner further argues that assuming that the "Sinumpaang Salaysay" was a will, it could not bind the
NHA.31 That, "insofar as [the] NHA is concerned, it is an evidence that the subject lots were indeed transferred by
Margarita Herrera, the original awardee, to Francisca Herrera was then applying to purchase the same before it."32
We are not impressed. When the petitioner received the "Sinumpaang Salaysay," it should have noted that the effectivity
of the said document commences at the time of death of the author of the instrument; in her words "sakaling ako'y
bawian na ng Dios ng aking buhay…" Hence, in such period, all the interests of the person should cease to be hers and
shall be in the possession of her estate until they are transferred to her heirs by virtue of Article 774 of the Civil Code
which provides that:
Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and obligations to the extent
of the value of the inheritance, of a person are transmitted through his death to another or others either by his
will or by operation of law.33
By considering the document, petitioner NHA should have noted that the original applicant has already passed away.
Margarita Herrera passed away on October 27, 1971.34 The NHA issued its resolution35 on February 5, 1986. The NHA
gave due course to the application made by Francisca Herrera without considering that the initial applicant's death
would transfer all her property, rights and obligations to the estate including whatever interest she has or may have had
over the disputed properties. To the extent of the interest that the original owner had over the property, the same
should go to her estate. Margarita Herrera had an interest in the property and that interest should go to her estate upon
her demise so as to be able to properly distribute them later to her heirs—in accordance with a will or by operation of
law.
The death of Margarita Herrera does not extinguish her interest over the property. Margarita Herrera had an existing
Contract to Sell36 with NHA as the seller. Upon Margarita Herrera's demise, this Contract to Sell was neither nullified nor
revoked. This Contract to Sell was an obligation on both parties—Margarita Herrera and NHA. Obligations are
transmissible.37 Margarita Herrera's obligation to pay became transmissible at the time of her death either by will or by
operation of law.
If we sustain the position of the NHA that this document is not a will, then the interests of the decedent should transfer
by virtue of an operation of law and not by virtue of a resolution by the NHA. For as it stands, NHA cannot make another
contract to sell to other parties of a property already initially paid for by the decedent. Such would be an act contrary to
the law on succession and the law on sales and obligations.38
When the original buyer died, the NHA should have considered the estate of the decedent as the next "person"39likely
to stand in to fulfill the obligation to pay the rest of the purchase price. The opposition of other heirs to the repurchase
by Francisca Herrera should have put the NHA on guard as to the award of the lots. Further, the Decision in the said Civil
Case No. B-1263 (questioning the Deed of Self-Adjudication) which rendered the deed therein null and void40 should
have alerted the NHA that there are other heirs to the interests and properties of the decedent who may claim the
property after a testate or intestate proceeding is concluded. The NHA therefore acted arbitrarily in the award of the lots.
We need not delve into the validity of the will. The issue is for the probate court to determine. We affirm the Court of
Appeals and the Regional Trial Court which noted that it has an element of testamentary disposition where (1) it
devolved and transferred property; (2) the effect of which shall transpire upon the death of the instrument maker.41
IN VIEW WHEREOF, the petition of the National Housing Authority is DENIED. The decision of the Court of Appeals in CA-
G.R. No. 68370 dated August 28, 2003, affirming the decision of the Regional Trial Court of San Pedro, Laguna in Civil
Case No. B-2780 dated March 9, 1998, is hereby AFFIRMED.
No cost.
SO ORDERED.

3. G.R. No. 170672. August 14, 2009.*

JUDGE FELIMON ABELITA III, petitioner, vs. P/SUPT. GERMAN B. DORIA and SPO3 CESAR RAMIREZ, respondents.
Searches and Seizures; Warrantless Arrests; Hot Pursuit; Requisites; Personal knowledge of facts must be based on
probable cause, which means an actual belief or reasonable grounds of suspicion; A reasonable suspicion, therefore,
must be founded on probable cause, coupled with good faith on the part of the peace officers making the arrest.—For
the warrantless arrest under this Rule to be valid, two requisites must concur: (1) the offender has just committed an
offense; and (2) the arresting peace officer or private person has personal knowledge of facts indicating that the person
to be arrested has committed it. Personal knowledge of facts must be based on probable cause, which means an actual
belief or reasonable grounds of suspicion. The grounds of suspicion are reasonable when, in the absence of actual belief
of the arresting officers, the suspicion that the person to be arrested is probably guilty of committing the offense is based
on actual facts, i.e., supported by circumstances sufficiently strong in themselves to create the probable cause of guilt of
the person to be arrested. A reasonable suspicion, therefore, must be founded on probable cause, coupled with good
faith on the part of the peace officers making the arrest.
Same; Same; Same; The act of the person to be arrested of trying to get away, coupled with the incident report which the
policemen investigated, is enough to raise a reasonable suspicion on the part of the police authorities as to the existence
of probable cause.—Section 5, Rule 113 of the 1985 Rules on Criminal Procedure does not require the arresting officers
to personally witness the commission of the offense with their own eyes. In this case, P/Supt. Doria received a report
about the alleged shooting incident. SPO3 Ramirez investigated the report and learned from witnesses that petitioner
was involved in the incident. They were able to track down petitioner, but when invited to the police headquarters to
shed light on the incident, petitioner initially agreed then sped up his vehicle, prompting the police authorities to give
chase. Petitioner’s act of trying to get away, coupled with the incident report which they investigated, is enough to raise a
reasonable suspicion on the part of the police authorities as to the existence of probable cause.
Same; Warrantless Searches; Plain View Doctrine; Requisites.
—Under the plain view doctrine, objects falling in the plain view of an officer who has a right to be in the position to
have that view are subject to seizure and may be presented as evidence. The plain view doctrine applies when the
following requisites concur: (1) the law enforcement officer in search of the evidence has a prior justification for an
intrusion or is in a position from which he can view a particular area; (2) the discovery of the evidence in plain view is
inadvertent; and (3) it is immediately apparent to the officer that the item he observes may be evidence of a crime,
contraband or otherwise subject to seizure.
Actions; Judgments; Res Judicata; Words and Phrases; “Bar by Prior Judgment” and “Conclusiveness of Judgment,”
Distinguished.
—Bar by prior judgment and conclusiveness of judgment differ as follows: There is “bar by prior judgment” when, as
between the first case where the judgment was rendered and the second case that is sought to be barred, there is
identity of parties, subject matter, and causes of action. In this instance, the judgment in the first case constitutes an
absolute bar to the second action. Otherwise put, the judgment or decree of the court of competent jurisdiction on the
merits concludes the litigation between the parties, as well as their privies, and constitutes a bar to a new action or suit
involving the same cause of action before the same or other tribunal. But where there is identity of parties in the first
and second cases, but no identity of causes of action, the first judgment is conclusive only as to those matters actually
and directly controverted and determined and not as to matters merely involved therein. This is the concept of res
judicata known as “conclusiveness of judgment.” Stated differently, any right, fact or matter in issue directly adjudicated
or necessarily involved in the determination of an action before a competent court in which judgment is rendered on the
merits is conclusively settled by the judgment therein and cannot again be litigated between the parties and their privies
whether or not the claim, demand, purpose, or subject matter of the two actions is the same.
Same; Same; Same; Requisites.—For res judicata to apply, the following requisites must be present: (a) the former
judgment or order must be final; (b) it must be a judgment or order on the merits, that is, it was rendered after a
consideration of the evidence or stipulations submitted by the parties at the trial of the case; (c) it must have been
rendered by a court having jurisdiction over the subject matter and the parties; and (d) there must be, between the first
and second actions, identity of parties, of subject matter, and of cause of action; this requisite is satisfied if the two
actions are substantially between the same parties.
Same; Same; Same; There is no identity of causes of action where one is an administrative case dealing with the
administrative liability of the respondent judge for the commission of certain acts complained of while the present case
deals with the civil liability for damages of the police authorities who arrested him.—While the present case and the
administrative case are based on the same essential facts and circumstances, the doctrine of res judicata will not apply.
An administrative case deals with the administrative liability which may be incurred by the respondent for the
commission of the acts complained of. The case before us deals with the civil liability for damages of the police
authorities. There is no identity of causes of action in the cases. While identity of causes of action is not required in the
application of res judicata in the concept of conclusiveness of judgment, it is required that there must always be identity
of parties in the first and second cases. There is no identity of parties between the present case and the administrative
case. The administrative case was filed by Benjamin Sia Lao (Sia Lao) against petitioner. Sia Lao is not a party to this case.
Respondents in the present case were not parties to the administrative case between Sia Lao and petitioner. In the
present case, petitioner is the complainant against respondents. Hence, while res judicata is not a defense to petitioner’s
complaint for damages, respondents nevertheless cannot be held liable for damages as discussed above.

CARPIO, J.:

The Case

Before the Court is a petition for review[1] assailing the 10 July 2004 Decision[2] and 18 October 2004 Order[3] of the
Regional Trial Court of Quezon City, Branch 217 (trial court), in Civil Case No. Q-98-33442 for Damages.

The Antecedent Facts

Judge Felimon Abelita III (petitioner) filed a complaint for Damages under Articles 32(4) and (9) of the Civil Code against
P/Supt. German B. Doria (P/Supt. Doria) and SPO3 Cesar Ramirez (SPO3 Ramirez). Petitioner alleged in his complaint that
on 24 March 1996, at around 12 noon, he and his wife were on their way to their house in Bagumbayan, Masbate,
Masbate when P/Supt. Doria and SPO3 Ramirez (respondents), accompanied by 10 unidentified police officers, requested
them to proceed to the Provincial PNP Headquarters at Camp Boni Serrano, Masbate, Masbate. Petitioner was suspicious
of the request and told respondents that he would proceed to the PNP Headquarters after he had brought his wife
home. Petitioner alleged that when he parked his car in front of their house, SPO3 Ramirez grabbed him, forcibly took
the key to his Totoya Lite Ace van, barged into the vehicle, and conducted a search without a warrant. The search
resulted to the seizure of a licensed shotgun. Petitioner presented the shotguns license to respondents. Thereafter, SPO3
Ramirez continued his search and then produced a .45 caliber pistol which he allegedly found inside the
vehicle. Respondents arrested petitioner and detained him, without any appropriate charge, at the PNP special detention
cell.

P/Supt. Doria alleged that his office received a telephone call from a relative of Rosa Sia about a shooting incident in
Barangay Nursery. He dispatched a team headed by SPO3 Ramirez to investigate the incident. SPO3 Ramirez later
reported that a certain William Sia was wounded while petitioner, who was implicated in the incident, and his wife just
left the place of the incident. P/Supt. Doria looked for petitioner and when he found him, he informed him of the
incident report. P/Supt. Doria requested petitioner to go with him to the police headquarters as he was reported to be
involved in the incident. Petitioner agreed but suddenly sped up his vehicle and proceeded to his residence. P/Supt.
Doria and his companions chased petitioner.Upon reaching petitioners residence, they caught up with petitioner as he
was about to run towards his house. The police officers saw a gun in the front seat of the vehicle beside the drivers seat
as petitioner opened the door. They also saw a shotgun at the back of the drivers seat. The police officers confiscated the
firearms and arrested petitioner. P/Supt. Doria alleged that his men also arrested other persons who were identified to
be with petitioner during the shooting incident. Petitioner was charged with illegal possession of firearms and frustrated
murder. An administrative case was also filed against petitioner before this Court.[4]

The Decision of the Trial Court

In its 10 July 2004 Decision, the trial court dismissed petitioners complaint.

The trial court found that petitioner was at the scene of the shooting incident in Barangay Nursery. The trial court ruled
that the police officers who conducted the search were of the belief, based on reasonable grounds, that petitioner was
involved in the incident and that the firearm used in the commission of the offense was in his possession. The trial court
ruled that petitioners warrantless arrest and the warrantless seizure of the firearms were valid and legal. The trial court
gave more credence to the testimonies of respondents who were presumed to have performed their duties in
accordance with law. The trial court rejected petitioners claim of frame-up as weak and insufficient to overthrow the
positive testimonies of the police officers who conducted the arrest and the incidental search. The trial court

concluded that petitioners claim for damages under Article 32 of the Civil Code is not warranted under the
circumstances.

Petitioner filed a motion for reconsideration.

In its 18 October 2004 Order, the trial court denied the motion.

Hence, the petition before this Court.

The Issues

The issues in this case are the following:

 1. Whether the warrantless arrest and warrantless search and seizure were illegal
under Section 5, Rule 113 of the 1985 Rules on Criminal Procedure;

2. Whether respondents are civilly liable for damages under Articles 32(4) and (9)
of the Civil Code; and

3. Whether the findings in the administrative case against petitioner are conclusive
in this case.

The Ruling of this Court

The petition has no merit.

Application of Section 5, Rule 113 of the

1985 Rules on Criminal Procedure

Petitioner alleges that his arrest and the search were unlawful under Section 5, Rule 113 of the 1985 Rules on Criminal
Procedure. Petitioner alleges that for the warrantless arrest to be lawful, the arresting officer must have personal
knowledge of facts that the person to be arrested has committed, is actually committing, or is attempting to commit an
offense. Petitioner alleges that the alleged shooting incident was just relayed to the arresting officers, and thus they have
no personal knowledge of facts as required by the Rules.

We do not agree.

Section 5, Rule 113 of the 1985 Rules on Criminal Procedure states:

Sec. 5. Arrest without warrant; when lawful. A peace officer or a private person may, without a warrant,
arrest a person:
(a) When, in his presence, the person to be arrested has committed, is actually committing, or is
attempting to commit an offense;
(b) When an offense has in fact just been committed and he has personal knowledge of facts indicating that the person
to be arrested has committed it; and
(c) When the person to be arrested is a prisoner who has escaped from a penal establishment or place
where he is serving final judgment or temporarily confined while his case is pending, or has escaped
while being transferred from one confinement to another.

For the warrantless arrest under this Rule to be valid, two requisites must concur: (1) the offender has just committed an
offense; and (2) the arresting peace officer or private person has personal knowledge of facts indicating that the person
to be arrested has committed it.[5]
Personal knowledge of facts must be based on probable cause, which means an actual belief or reasonable grounds of
suspicion.[6] The grounds of suspicion are reasonable when, in the absence of actual belief of the arresting officers, the
suspicion that the person to be arrested is probably guilty of committing the offense is based on actual facts, i.e.,
supported by circumstances sufficiently strong in themselves to create the probable cause of guilt of the person to be
arrested.[7] A reasonable suspicion, therefore, must be founded on probable cause, coupled with good faith on the part
of the peace officers making the arrest.[8]

Section 5, Rule 113 of the 1985 Rules on Criminal Procedure does not require the arresting officers to personally witness
the commission of the offense with their own eyes. In this case, P/Supt. Doria received a report about the alleged
shooting incident. SPO3 Ramirez investigated the report and learned from witnesses that petitioner was involved in the
incident. They were able to track down petitioner, but when invited to the police headquarters to shed light on the
incident, petitioner initially agreed then sped up his vehicle, prompting the police authorities to give chase. Petitioners
act of trying to get away, coupled with the incident report which they investigated, is enough to raise a reasonable
suspicion on the part of the police authorities as to the existence of probable cause.

Plain View Doctrine

The seizure of the firearms was justified under the plain view doctrine.

Under the plain view doctrine, objects falling in the plain view of an officer who has a right to be in the position to have
that view are subject to seizure and may be presented as evidence.[9] The plain view doctrine applies when the
following requisites concur: (1) the law enforcement officer in search of the evidence has a prior justification for an
intrusion or is in a position from which he can view a particular area; (2) the discovery of the evidence in plain view is
inadvertent; and (3) it is immediately apparent to the officer that the item he observes may be evidence of a crime,
contraband or otherwise subject to seizure.[10]

In this case, the police authorities were in the area because that was where they caught up with petitioner after the
chase. They saw the firearms inside the vehicle when petitioner opened the door. Since a shooting incident just took
place and it was reported that petitioner was involved in the incident, it was apparent to the police officers that the
firearms may be evidence of a crime. Hence, they were justified in seizing the firearms.

Civil Liability Under Article 32 of the Civil Code

Petitioner alleges that respondents are civilly liable under paragraphs (4) and (9) of Article 32 of the Civil Code.

Paragraphs (4) and (9) of Article 32 of the Civil Code respectively state:

Art. 32. Any public officer or employee, or any private individual, who directly or indirectly obstructs,
defeats, violates or in any manner impedes or impairs any of the following rights and liberties of another
person shall be liable to the latter for damages:

xxxx

(4) Freedom from arbitrary or illegal detention;

xxxx

(9) The right to be secure in ones person, house, papers, and effects against unreasonable searches and seizures;

xxxx
In this case, it was established that petitioner was lawfully arrested without a warrant and that
firearms were validly seized from his possession. The trial court found that petitioner was
charged with illegal possession of firearms and frustrated murder. We agree with the trial court
in rejecting petitioners allegation that he was merely framed-up. We also agree with the trial
court that respondents were presumed to be performing their duties in accordance with
law.Hence, respondents should not be held civilly liable for their actions.

Res Judicata Does Not Apply

Respondents raise the defense of res judicata against petitioners claim for damages.

Res judicata has two aspects: bar by prior judgment and conclusiveness of judgment provided under Section 47(b) and
(c), Rule 39, respectively, of the 1997 Rules of Civil Procedure[11] which provide:

Sec. 47. Effect of judgments or final orders. The effect of a judgment or final order rendered by a court of
the Philippines, having jurisdiction to pronounce the judgment or final order, may be as follows:

xxx

(b) In other cases, the judgment or final order is, with respect to the matter directly adjudged or as to any other matter
that could have been raised in relation thereto, conclusive between the parties and their successors in interest by title
subsequent to the commencement of the action or special proceeding, litigating for the same thing and under the same
title and in the same capacity; and

(c) In any other litigation between the same parties or their successors in interest, that only is deemed to have been
adjudged in a former judgment or final order which appears upon its face to have been so adjudged, or which was
actually and necessarily included therein or necessary thereto.
Bar by prior judgment and conclusiveness of judgment differ as follows:

There is bar by prior judgment when, as between the first case where the judgment was rendered and
the second case that is sought to be barred, there is identity of parties, subject matter, and causes of
action. In this instance, the judgment in the first case constitutes an absolute bar to the second action.
Otherwise put, the judgment or decree of the court of competent jurisdiction on the merits concludes
the litigation between the parties, as well as their privies, and constitutes a bar to a new action or suit
involving the same cause of action before the same or other tribunal.

But where there is identity of parties in the first and second cases, but no identity of causes of action, the
first judgment is conclusive only as to those matters actually and directly controverted and determined
and not as to matters merely involved therein. This is the concept of res judicata known as
conclusiveness of judgment. Stated differently, any right, fact or matter in issue directly adjudicated or
necessarily involved in the determination of an action before a competent court in which judgment is
rendered on the merits is conclusively settled by the judgment therein and cannot again be litigated
between the parties and their privies whether or not the claim, demand, purpose, or subject matter of
the two actions is the same.[12]

For res judicata to apply, the following requisites must be present:

(a) the former judgment or order must be final;

(b) it must be a judgment or order on the merits, that is, it was rendered after a consideration of the evidence or
stipulations submitted by the parties at the trial of the case;
(c) it must have been rendered by a court having jurisdiction over the subject matter and the parties; and
(d) there must be, between the first and second actions, identity of parties, of subject matter, and of cause of action; this
requisite is satisfied if the two actions are substantially between the same parties.[13]

While the present case and the administrative case are based on the same essential facts and circumstances, the
doctrine of res judicata will not apply. An administrative case deals with the administrative liability which may be
incurred by the respondent for the commission of the acts complained of.[14] The case before us deals with the civil
liability for damages of the police authorities. There is no identity of causes of action in the cases. While identity of
causes of action is not required in the application of res judicata in the concept of conclusiveness of judgment,[15] it is
required that there must always be identity of parties in the first and second cases.

There is no identity of parties between the present case and the administrative case. The administrative case was filed by
Benjamin Sia Lao (Sia Lao) against petitioner. Sia Lao is not a party to this case. Respondents in the present case were not
parties to the administrative case between Sia Lao and petitioner. In the present case, petitioner is the complainant
against respondents. Hence, while res judicata is not a defense to petitioners complaint for damages, respondents
nevertheless cannot be held liable for damages as discussed above.

WHEREFORE, we DENY the petition. We AFFIRM the 10 July 2004 Decision and 18 October 2004 Order of the Regional
Trial Court of Quezon City, Branch 217, in Civil Case No. Q-98-33442.

SO ORDERED.

§ Fact-Finding, Investigative, Licensing, and Rate-Fixing

1. G.R. No. 135808. October 6, 2008.*

SECURITIES AND EXCHANGE COMMISSION, petitioner, vs. INTERPORT RESOURCES CORPORATION, MANUEL S. RECTO,
RENE S. VILLARICA, PELAGIO RICALDE, ANTONIO REINA, FRANCISCO ANONUEVO, JOSEPH SY and SANTIAGO TANCHAN,
JR., respondents.
Revised Securities Act; Administrative Law; Statutes; The mere absence of implementing rules cannot effectively
invalidate provisions of law, where a reasonable construction that will support the law may be given.—In the absence of
any constitutional or statutory infirmity, which may concern Sections 30 and 36 of the Revised Securities Act, this Court
upholds these provisions as legal and binding. It is well settled that every law has in its favor the presumption of validity.
Unless and until a specific provision of the law is declared invalid and unconstitutional, the same is valid and binding for
all intents and purposes. The mere absence of implementing rules cannot effectively invalidate provisions of law, where a
reasonable construction that will support the law may be given. In People v. Rosenthal, 68 Phil. 328 (1939), this Court
ruled that: In this connection we cannot pretermit reference to the rule that “legislation should not be held invalid on
the ground of uncertainty if susceptible of any reasonable construction that will support and give it effect. An Act will not
be declared inoperative and ineffectual on the ground that it furnishes no adequate means to secure the purpose for
which it is passed, if men of common sense and reason can devise and provide the means, and all the instrumentalities
necessary for its execution are within the reach of those intrusted therewith.” (25 R.C.L., pp. 810, 811)
Same; To rule that the absence of implementing rules can render ineffective an act of Congress, such as the Revised
Securities Act, would empower the administrative bodies to defeat the legislative will by delaying the implementing
rules; To assert that a law is less than a law, because it is made to depend on a future event or act, is to rob the
Legislature of the power to act wisely for the public welfare whenever a law is passed relating to a state of affairs not yet
developed, or to things future and impossible to fully know.—The necessity for vesting administrative authorities with
power to make rules and regulations is based on the impracticability of lawmakers’ providing general regulations for
various and varying details of management. To rule that the absence of implementing rules can render ineffective an act
of Congress, such as the Revised Securities Act, would empower the administrative bodies to defeat the legislative will by
delaying the implementing rules. To assert that a law is less than a law, because it is made to depend on a future event or
act, is to rob the Legislature of the power to act wisely for the public welfare whenever a law is passed relating to a state
of affairs not yet developed, or to things future and impossible to fully know. It is well established that administrative
authorities have the power to promulgate rules and regulations to implement a given statute and to effectuate its
policies, provided such rules and regulations conform to the terms and standards prescribed by the statute as well as
purport to carry into effect its general policies. Nevertheless, it is undisputable that the rules and regulations cannot
assert for themselves a more extensive prerogative or deviate from the mandate of the statute. Moreover, where the
statute contains sufficient standards and an unmistakable intent, as in the case of Sections 30 and 36 of the Revised
Securities Act, there should be no impediment to its implementation.
Same; Insider Trading; Section 30 of the Revised Securities Act explains in simple terms that the insider’s misuse of
nonpublic and undisclosed information is the gravamen of illegal conduct—the intent of the law is the protection of
investors against fraud, committed when an insider, using secret information, takes advantage of an uninformed
investor.—The provision explains in simple terms that the insider’s misuse of nonpublic and undisclosed information is
the gravamen of illegal conduct. The intent of the law is the protection of investors against fraud, committed when an
insider, using secret information, takes advantage of an uninformed investor. Insiders are obligated to disclose material
information to the other party or abstain from trading the shares of his corporation. This duty to disclose or abstain is
based on two factors: first, the existence of a relationship giving access, directly or indirectly, to information intended to
be available only for a corporate purpose and not for the personal benefit of anyone; and second, the inherent
unfairness involved when a party takes advantage of such information knowing it is unavailable to those with whom he is
dealing.
Same; Same; Words and Phrases; “Material Fact,” “Reasonable Person,” “Nature and Reliability,” and “Generally
Available,” Explained; Under the law, what is required to be disclosed is a fact of “special significance” which may be (a) a
material fact which would be likely, on being made generally available, to affect the market price of a security to a
significant extent, or (b) one which a reasonable person would consider especially important in determining his course of
action with regard to the shares of stock; In determining whether or not the terms “material fact,” “reasonable person,”
“nature and reliability,” and “generally available,” are vague, they must be evaluated in the context of Section 30 of the
Revised Securities Act.—Respondents further aver that under Section 30 of the Revised Securities Act, the SEC still
needed to define the following terms: “material fact,” “reasonable person,” “nature and reliability” and “generally
available.” In determining whether or not these terms are vague, these terms must be evaluated in the context of Section
30 of the Revised Securties Act. To fully understand how the terms were used in the aforementioned provision, a
discussion of what the law recognizes as a fact of special significance is required, since the duty to disclose such fact or to
abstain from any transaction is imposed on the insider only in connection with a fact of special significance. Under the
law, what is required to be disclosed is a fact of “special significance” which may be (a) a material fact which would be
likely, on being made generally available, to affect the market price of a security to a significant extent, or (b) one which a
reasonable person would consider especially important in determining his course of action with regard to the shares of
stock.
Same; Same; Same; A fact is material if it induces or tends to induce or otherwise affect the sale or purchase of its
securities.—Material Fact—The concept of a “material fact” is not a new one. As early as 1973, the Rules Requiring
Disclosure of Material Facts by Corporations Whose Securities Are Listed In Any Stock Exchange or Registered/Licensed
Under the Securities Act, issued by the SEC on 29 January 1973, explained that “*a+ fact is material if it induces or tends
to induce or otherwise affect the sale or purchase of its securities.” Thus, Section 30 of the Revised Securities Act
provides that if a fact affects the sale or purchase of securities, as well as its price, then the insider would be required to
disclose such information to the other party to the transaction involving the securities. This is the first definition given to
a “fact of special significance.”
Same; Same; Same; A “reasonable person” is not a problematic legal concept that needs to be clarified for the purpose
of giving effect to a statute; rather, it is the standard on which most of our legal doctrines stand.—Reasonable Person—
The second definition given to a fact of special significance involves the judgment of a “reasonable person.” Contrary to
the allegations of the respondents, a “reasonable person” is not a problematic legal concept that needs to be clarified for
the purpose of giving effect to a statute; rather, it is the standard on which most of our legal doctrines stand. The
doctrine on negligence uses the discretion of the “reasonable man” as the standard. A purchaser in good faith must also
take into account facts which put a “reasonable man” on his guard. In addition, it is the belief of the reasonable and
prudent man that an offense was committed that sets the criteria for probable cause for a warrant of arrest. This Court,
in such cases, differentiated the reasonable and prudent man from “a person with training in the law such as a
prosecutor or a judge,” and identified him as “the average man on the street,” who weighs facts and circumstances
without resorting to the calibrations of our technical rules of evidence of which his knowledge is nil. Rather, he relies on
the calculus of common sense of which all reasonable men have in abundance. In the same vein, the U.S. Supreme Court
similarly determined its standards by the actual significance in the deliberations of a “reasonable investor,” when it ruled
in TSC Industries, Inc. v. Northway, Inc., 48 L ed 2d 757, 766 (1976), that the determination of materiality “requires
delicate assessments of the inferences a ‘reasonable shareholder’ would draw from a given set of facts and the
significance of those inferences to him.”
Same; Same; Same; The “nature and reliability” of a significant fact in determining the course of action a reasonable
person takes regarding securities must be clearly viewed in connection with the particular circumstances of a case—to
enumerate all circumstances that would render the “nature and reliability” of a fact to be of special significance is close
to impossible.—Nature and Reliability—The factors affecting the second definition of a “fact of special significance,”
which is of such importance that it is expected to affect the judgment of a reasonable man, were substantially lifted from
a test of materiality pronounced in the case In the Matter of Investors Management Co., Inc.: Among the factors to be
considered in determining whether information is material under this test are the degree of its specificity, the extent to
which it differs from information previously publicly disseminated, and its reliability in light of its nature and source and
the circumstances under which it was received. It can be deduced from the foregoing that the “nature and reliability” of
a significant fact in determining the course of action a reasonable person takes regarding securities must be clearly
viewed in connection with the particular circumstances of a case. To enumerate all circumstances that would render the
“nature and reliability” of a fact to be of special significance is close to impossible. Nevertheless, the proper adjudicative
body would undoubtedly be able to determine if facts of a certain “nature and reliability” can influence a reasonable
person’s decision to retain, sell or buy securities, and thereafter explain and justify its factual findings in its decision.
Same; Same; Same; What is referred to in our laws as a fact of special significance is referred to in the U.S. as the
“materiality concept” and the latter is similarly not provided with a precise definition.—Materiality Concept—A
discussion of the “materiality concept” would be relevant to both a material fact which would affect the market price of
a security to a significant extent and/or a fact which a reasonable person would consider in determining his or her cause
of action with regard to the shares of stock. Significantly, what is referred to in our laws as a fact of special significance is
referred to in the U.S. as the “materiality concept” and the latter is similarly not provided with a precise definition. In
Basic v. Levinson, 99 L ed 2d 194, 211 (1988), the U.S. Supreme Court cautioned against confining materiality to a rigid
formula, stating thus: A bright-line rule indeed is easier to follow than a standard that requires the exercise of judgment
in the light of all the circumstances. But ease of application alone is not an excuse for ignoring the purposes of the
Securities Act and Congress’ policy decisions. Any approach that designates a single fact or occurrence as always
determinative of an inherently fact-specific finding such as materiality, must necessarily be overinclusive or
underinclusive. Moreover, materiality “will depend at any given time upon a balancing of both the indicated probability
that the event will occur and the anticipated magnitude of the event in light of the totality of the company activity.”
Same; Same; Same; Whether information found in a newspaper, a specialized magazine, or any cyberspace media be
sufficient for the term “generally available” is a matter which may be adjudged given the particular circumstances of the
case—the standards cannot remain at a standstill, as a medium, which is widely used today was, at some previous point
in time, inaccessible to most.—Generally Available—Section 30 of the Revised Securities Act allows the insider the
defense that in a transaction of securities, where the insider is in possession of facts of special significance, such
information is “generally available” to the public. Whether information found in a newspaper, a specialized magazine, or
any cyberspace media be sufficient for the term “generally available” is a matter which may be adjudged given the
particular circumstances of the case. The standards cannot remain at a standstill. A medium, which is widely used today
was, at some previous point in time, inaccessible to most. Furthermore, it would be difficult to approximate how the
rules may be applied to the instant case, where investigation has not even been started. Respondents failed to allege that
the negotiations of their agreement with GHB were made known to the public through any form of media for there to be
a proper appreciation of the issue presented.
Same; Same; Same; Beneficial Owner; Parties; Locus Standi; Beneficial owner has been defined, first, to indicate the
interest of a beneficiary in trust property (also called “equitable ownership”), and second, to refer to the power of a
corporate shareholder to buy or sell the shares, though the shareholder is not registered in the corporation’s book as the
owner; Usually, beneficial ownership is distinguished from naked ownership, which is the enjoyment of all the benefits
and privileges of ownership, as against possession of the bare title to property; The validity of a statute may be contested
only by one who will sustain a direct injury as a result of its enforcement.—Section 36(a) refers to the “beneficial owner.”
Beneficial owner has been defined in the following manner: [F]irst, to indicate the interest of a beneficiary in trust
property (also called “equitable ownership”); and second, to refer to the power of a corporate shareholder to buy or sell
the shares, though the shareholder is not registered in the corporation’s books as the owner. Usually, beneficial
ownership is distinguished from naked ownership, which is the enjoyment of all the benefits and privileges of ownership,
as against possession of the bare title to property. Even assuming that the term “beneficial ownership” was vague, it
would not affect respondents’ case, where the respondents are directors and/or officers of the corporation, who are
specifically required to comply with the reportorial requirements under Section 36(a) of the Revised Securities Act. The
validity of a statute may be contested only by one who will sustain a direct injury as a result of its enforcement.
Same; Same; Sections 30 and 36 of the Revised Securities Act were enacted to promote full disclosure in the securities
market and prevent unscrupulous individuals, who by their positions obtain non-public information, from taking
advantage of an uninformed public.—Sections 30 and 36 of the Revised Securities Act were enacted to promote full
disclosure in the securities market and prevent unscrupulous individuals, who by their positions obtain non-public
information, from taking advantage of an uninformed public. No individual would invest in a market which can be
manipulated by a limited number of corporate insiders. Such reaction would stifle, if not stunt, the growth of the
securities market. To avert the occurrence of such an event, Section 30 of the Revised Securities Act prevented the unfair
use of non-public information in securities transactions, while Section 36 allowed the SEC to monitor the transactions
entered into by corporate officers and directors as regards the securities of their companies.
Same; Same; Administrative Law; Statutes; The fact that the Full Disclosure Rules were promulgated by the Securities and
Exchange Commission (SEC) only on 24 July 1996, even as the Revised Securities Act was approved on 23 February 1982,
does not render ineffective in the meantime Section 36 of the Revised Securities Act; The effectivity of a statute which
imposes reportorial requirements cannot be suspended by the issuance of specified forms, especially where compliance
therewith may be made even without such forms.—The Revised Securities Act was approved on 23 February 1982. The
fact that the Full Disclosure Rules were promulgated by the SEC only on 24 July 1996 does not render ineffective in the
meantime Section 36 of the Revised Securities Act. It is already unequivocal that the Revised Securities Act requires full
disclosure and the Full Disclosure Rules were issued to make the enforcement of the law more consistent, efficient and
effective. It is equally reasonable to state that the disclosure forms later provided by the SEC, do not, in any way imply
that no compliance was required before the forms were provided. The effectivity of a statute which imposes reportorial
requirements cannot be suspended by the issuance of specified forms, especially where compliance therewith may be
made even without such forms. The forms merely made more efficient the processing of requirements already identified
by the statute.
Same; Same; Same; Administrative Code of 1987 (E.O. 282); Chapter 3, Book VII of the Administrative Code, entitled
“Adjudication,” does not affect the investigatory functions of the agencies—the Rules of Practice and Procedure of
Securities and Exchange Commission’s (SEC’s) Prosecution and Enforcement Department (PED) need not comply with the
provisions of the Administrative Code on adjudication, particularly Section 12(3), Chapter 3, Book VII.—It must be
pointed out that Chapter 3, Book VII of the Administrative Code, entitled “Adjudication,” does not affect the investigatory
functions of the agencies. The law creating the PED, Section 8 of Presidential Decree No. 902-A, as amended, defines the
authority granted to the PED, thus: SEC. 8. The Prosecution and Enforcement Department shall have, subject to the
Commission’s control and supervision, the exclusive authority to investigate, on complaint or motu proprio, any act or
omission of the Board of Directors/Trustees of corporations, or of partnerships, or of other associations, or of their
stockholders, officers or partners, including any fraudulent devices, schemes or representations, in violation of any law or
rules and regulations administered and enforced by the Commission; to file and prosecute in accordance with law and
rules and regulations issued by the Commission and in appropriate cases, the corresponding criminal or civil case before
the Commission or the proper court or body upon prima facie finding of violation of any laws or rules and regulations
administered and enforced by the Commission; and to perform such other powers and functions as may be provided by
law or duly delegated to it by the Commission. (Emphasis provided.) The law creating PED empowers it to investigate
violations of the rules and regulations promulgated by the SEC and to file and prosecute such cases. It fails to mention
any adjudicatory functions insofar as the PED is concerned. Thus, the PED Rules of Practice and Procedure need not
comply with the provisions of the Administrative Code on adjudication, particularly Section 12(3), Chapter 3, Book VII.
Same; Same; Same; “Investigative” and “Adjudicative” Functions, Distinguished; Words and Phrases.—In Cariño v.
Commission on Human Rights, 204 SCRA 483 (1991), this Court sets out the distinction between investigative and
adjudicative functions, thus: “Investigate,” commonly understood, means to examine, explore, inquire or delve or probe
into, research on, study. The dictionary definition of “investigate” is “to observe or study closely; inquire into
systematically: “to search or inquire into” xx to subject to an official probe xx: to conduct an official inquiry.” The purpose
of an investigation, of course is to discover, to find out, to learn, obtain information. Nowhere included or intimated is
the notion of settling, deciding or resolving a controversy involved in the facts inquired into by application of the law to
the facts established by the inquiry. The legal meaning of “investigate” is essentially the same: “(t)o follow up step by
step by patient inquiry or observation. To trace or track; to search into; to examine and inquire into with care and
accuracy; to find out by careful inquisition; examination; the taking of evidence; a legal inquiry;” “to inquire; to make an
investigation,” “investigation” being in turn described as “(a)n administrative function, the exercise of which ordinarily
does not require a hearing. 2 Am J2d Adm L Sec. 257; xx an inquiry, judicial or otherwise, for the discovery and collection
of facts concerning a certain matter or matters.” “Adjudicate,” commonly or popularly understood, means to adjudge,
arbitrate, judge, decide, determine, resolve, rule on, settle. The dictionary defines the term as “to settle finally (the rights
and duties of parties to a court case) on the merits of issues raised: xx to pass judgment on: settle judicially: xx act as
judge.” And “adjudge” means “to decide or rule upon as a judge or with judicial or quasi-judicial powers: xx to award or
grant judicially in a case of controversy x x x.” In a legal sense, “adjudicate” means: “To settle in the exercise of judicial
authority. To determine finally. Synonymous with adjudge in its strictest sense;” and “adjudge” means: “To pass on
judicially, to decide, settle, or decree, or to sentence or condemn. x x x Implies a judicial determination of a fact, and the
entry of a judgment.”
Same; Same; Same; Under Section 2.2 of Exceutive Order No. 26, issued on 7 October 1992, abbreviated proceedings are
prescribed in the administrative cases.—This is not to say that administrative bodies performing adjudicative functions
are required to strictly comply with the requirements of Chapter 3, Rule VII of the Administrative Code, particularly, the
right to cross-examination. It should be noted that under Section 2.2 of Executive Order No. 26, issued on 7 October
1992, abbreviated proceedings are prescribed in the disposition of administrative cases: 2. Abbreviation of Proceedings.
All administrative agencies are hereby directed to adopt and include in their respective Rules of Procedure the following
provisions: x x x x 2.2 Rules adopting, unless otherwise provided by special laws and without prejudice to Section 12,
Chapter 3, Book VII of the Administrative Code of 1987, the mandatory use of affidavits in lieu of direct testimonies and
the preferred use of depositions whenever practicable and convenient. As a consequence, in proceedings before
administrative or quasi-judicial bodies, such as the National Labor Relations Commission and the Philippine Overseas
Employment Agency, created under laws which authorize summary proceedings, decisions may be reached on the basis
of position papers or other documentary evidence only. They are not bound by technical rules of procedure and
evidence. In fact, the hearings before such agencies do not connote full adversarial proceedings. Thus, it is not necessary
for the rules to require affiants to appear and testify and to be cross-examined by the counsel of the adverse party. To
require otherwise would negate the summary nature of the administrative or quasi-judicial proceedings.
Same; Same; Securities Regulation Code; Statutes; Statutory Construction; While the absolute repeal of a law generally
deprives a court of its authority to penalize the person charged with the violation of the old law prior to its appeal, an
exception to this rule comes about when the repealing law punishes the act previously penalized under the old law.—The
Securities Regulations Code absolutely repealed the Revised Securities Act. While the absolute repeal of a law generally
deprives a court of its authority to penalize the person charged with the violation of the old law prior to its appeal, an
exception to this rule comes about when the repealing law punishes the act previously penalized under the old law. The
Court, in Benedicto v. Court of Appeals, 364 SCRA 334 (2001), sets down the rules in such instances: As a rule, an
absolute repeal of a penal law has the effect of depriving the court of its authority to punish a person charged with
violation of the old law prior to its repeal. This is because an unqualified repeal of a penal law constitutes a legislative act
of rendering legal what had been previously declared as illegal, such that the offense no longer exists and it is as if the
person who committed it never did so. There are, however, exceptions to the rule. One is the inclusion of a saving clause
in the repealing statute that provides that the repeal shall have no effect on pending actions. Another exception is where
the repealing act reenacts the former statute and punishes the act previously penalized under the old law. In such
instance, the act committed before the reenactment continues to be an offense in the statute books and pending cases
are not affected, regardless of whether the new penalty to be imposed is more favorable to the accused.
Same; Same; Prescription; Preliminary Investigation; It is an established doctrine that a preliminary investigation
interrupts the prescription period.—It is an established doctrine that a preliminary investigation interrupts the
prescription period. A preliminary investigation is essentially a determination whether an offense has been committed,
and whether there is probable cause for the accused to have committed an offense: A preliminary investigation is merely
inquisitorial, and it is often the only means of discovering the persons who may be reasonably charged with a crime, to
enable the fiscal to prepare the complaint or information. It is not a trial of the case on the merits and has no purpose
except that of determining whether a crime has been committed or whether there is probable cause to believe that the
accused is guilty thereof. Under Section 45 of the Revised Securities Act, which is entitled Investigations, Injunctions and
Prosecution of Offenses, the Securities Exchange Commission (SEC) has the authority to “make such investigations as it
deems necessary to determine whether any person has violated or is about to violate any provision of this Act XXX.” After
a finding that a person has violated the Revised Securities Act, the SEC may refer the case to the DOJ for preliminary
investigation and prosecution.
Same; Same; Same; Same; Doctrine of Primary Jurisdiction; A criminal complaint is first filed with the Securities and
Exchange Commission, which determines the existence of probable cause, before a preliminary investigation can be
commenced by the Department of Justice—a criminal complaint for violation of any law or rule administered by the
Securities and Exchange Commission (SEC) must first be filed with the latter. If the Commission finds that there is
probable cause, then it should refer the case to the Department of Justice (DOJ); A criminal charge for violation of the
Securities Regulation Code is a specialized dispute, hence it must first be referred to an administrative agency of special
competence, i.e., the Securities and Exchange Commission (SEC); Under the doctrine of primary jurisdiction, courts will
not determine a controversy involving a question within the jurisdiction of the administrative tribunal, where the
question demands the exercise of sound administrative discretion requiring the specialized knowledge and expertise of
said administrative tribunal to determine technical and intricate matters of fact.—While the SEC investigation serves the
same purpose and entails substantially similar duties as the preliminary investigation conducted by the DOJ, this process
cannot simply be disregarded. In Baviera v. Paglinawan, 515 SCRA 170 (2007), this Court enunciated that a criminal
complaint is first filed with the SEC, which determines the existence of probable cause, before a preliminary investigation
can be commenced by the DOJ. In the aforecited case, the complaint filed directly with the DOJ was dismissed on the
ground that it should have been filed first with the SEC. Similarly, the offense was a violation of the Securities Regulations
Code, wherein the procedure for criminal prosecution was reproduced from Section 45 of the Revised Securities Act. This
Court affirmed the dismissal, which it explained thus: The Court of Appeals held that under the above provision, a
criminal complaint for violation of any law or rule administered by the SEC must first be filed with the latter. If the
Commission finds that there is probable cause, then it should refer the case to the DOJ. Since petitioner failed to comply
with the foregoing procedural requirement, the DOJ did not gravely abuse its discretion in dismissing his complaint in I.S.
No. 2004-229. A criminal charge for violation of the Securities Regulation Code is a specialized dispute. Hence, it must
first be referred to an administrative agency of special competence, i.e., the SEC. Under the doctrine of primary
jurisdiction, courts will not determine a controversy involving a question within the jurisdiction of the administrative
tribunal, where the question demands the exercise of sound administrative discretion requiring the specialized
knowledge and expertise of said administrative tribunal to determine technical and intricate matters of fact. The
Securities Regulation Code is a special law. Its enforcement is particularly vested in the SEC. Hence, all complaints for any
violation of the Code and its implementing rules and regulations should be filed with the SEC. Where the complaint is
criminal in nature, the SEC shall indorse the complaint to the DOJ for preliminary investigation and prosecution as
provided in Section 53.1 earlier quoted.
Same; Same; Same; Same; The law on the prescription period was never intended to put the prosecuting bodies in an
impossible bind in which the prosecution of a case would be placed way beyond their control, for even if they avail
themselves of the proper remedy, they would still be barred from investigating and prosecuting the case.—To reiterate,
the SEC must first conduct its investigations and make a finding of probable cause in accordance with the doctrine
pronounced in Baviera v. Paglinawan, 515 SCRA 170 (2007). In this case, the DOJ was precluded from initiating a
preliminary investigation since the SEC was halted by the Court of Appeals from continuing with its investigation. Such a
situation leaves the prosecution of the case at a standstill, and neither the SEC nor the DOJ can conduct any investigation
against the respondents, who, in the first place, sought the injunction to prevent their prosecution. All that the SEC could
do in order to break the impasse was to have the Decision of the Court of Appeals overturned, as it had done at the
earliest opportunity in this case. Therefore, the period during which the SEC was prevented from continuing with its
investigation should not be counted against it. The law on the prescription period was never intended to put the
prosecuting bodies in an impossible bind in which the prosecution of a case would be placed way beyond their control;
for even if they avail themselves of the proper remedy, they would still be barred from investigating and prosecuting the
case.
Same; Same; Same; Same; Given the nature and purpose of the investigation conducted by the Securities and Exchange
Commission (SEC), which is equivalent to the preliminary investigation conducted by the Department of Justice (DOJ) in
criminal cases, such investigation would surely interrupt the prescription period.—Indubitably, the prescription period is
interrupted by commencing the proceedings for the prosecution of the accused. In criminal cases, this is accomplished by
initiating the preliminary investigation. The prosecution of offenses punishable under the Revised Securities Act and the
Securities Regulations Code is initiated by the filing of a complaint with the SEC or by an investigation conducted by the
SEC motu proprio. Only after a finding of probable cause is made by the SEC can the DOJ instigate a preliminary
investigation. Thus, the investigation that was commenced by the SEC in 1995, soon after it discovered the questionable
acts of the respondents, effectively interrupted the prescription period. Given the nature and purpose of the
investigation conducted by the SEC, which is equivalent to the preliminary investigation conducted by the DOJ in criminal
cases, such investigation would surely interrupt the prescription period.

CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the Decision,1 dated 20 August
1998, rendered by the Court of Appeals in C.A.-G.R. SP No. 37036, enjoining petitioner Securities and Exchange
Commission (SEC) from taking cognizance of or initiating any action against the respondent corporation Interport
Resources Corporation (IRC) and members of its board of directors, respondents Manuel S. Recto, Rene S. Villarica,
Pelagio Ricalde, Antonio Reina, Francisco Anonuevo, Joseph Sy and Santiago Tanchan, Jr., with respect to Sections 8, 30
and 36 of the Revised Securities Act. In the same Decision of the appellate court, all the proceedings taken against the
respondents, including the assailed SEC Omnibus Orders of 25 January 1995 and 30 March 1995, were declared void.
The antecedent facts of the present case are as follows.
On 6 August 1994, the Board of Directors of IRC approved a Memorandum of Agreement with Ganda Holdings Berhad
(GHB). Under the Memorandum of Agreement, IRC acquired 100% or the entire capital stock of Ganda Energy Holdings,
Inc. (GEHI),2 which would own and operate a 102 megawatt (MW) gas turbine power-generating barge. The agreement
also stipulates that GEHI would assume a five-year power purchase contract with National Power Corporation. At that
time, GEHI's power-generating barge was 97% complete and would go on-line by mid-September of 1994. In exchange,
IRC will issue to GHB 55% of the expanded capital stock of IRC amounting to 40.88 billion shares which had a total par
value of P488.44 million.3
On the side, IRC would acquire 67% of the entire capital stock of Philippine Racing Club, Inc. (PRCI). PRCI owns 25.724
hectares of real estate property in Makati. Under the Agreement, GHB, a member of the Westmont Group of Companies
in Malaysia, shall extend or arrange a loan required to pay for the proposed acquisition by IRC of PRCI.4
IRC alleged that on 8 August 1994, a press release announcing the approval of the agreement was sent through facsimile
transmission to the Philippine Stock Exchange and the SEC, but that the facsimile machine of the SEC could not receive it.
Upon the advice of the SEC, the IRC sent the press release on the morning of 9 August 1994.5
The SEC averred that it received reports that IRC failed to make timely public disclosures of its negotiations with GHB and
that some of its directors, respondents herein, heavily traded IRC shares utilizing this material insider information. On 16
August 1994, the SEC Chairman issued a directive requiring IRC to submit to the SEC a copy of its aforesaid Memorandum
of Agreement with GHB. The SEC Chairman further directed all principal officers of IRC to appear at a hearing before the
Brokers and Exchanges Department (BED) of the SEC to explain IRC's failure to immediately disclose the information as
required by the Rules on Disclosure of Material Facts.6
In compliance with the SEC Chairman's directive, the IRC sent a letter dated 16 August 1994 to the SEC, attaching thereto
copies of the Memorandum of Agreement. Its directors, Manuel Recto, Rene Villarica and Pelagio Ricalde, also appeared
before the SEC on 22 August 1994 to explain IRC's alleged failure to immediately disclose material information as
required under the Rules on Disclosure of Material Facts.7
On 19 September 1994, the SEC Chairman issued an Order finding that IRC violated the Rules on Disclosure of Material
Facts, in connection with the Old Securities Act of 1936, when it failed to make timely disclosure of its negotiations with
GHB. In addition, the SEC pronounced that some of the officers and directors of IRC entered into transactions involving
IRC shares in violation of Section 30, in relation to Section 36, of the Revised Securities Act.8
Respondents filed an Omnibus Motion, dated 21 September 1994, which was superseded by an Amended Omnibus
Motion, filed on 18 October 1994, alleging that the SEC had no authority to investigate the subject matter, since under
Section 8 of Presidential Decree No. 902-A,9 as amended by Presidential Decree No. 1758, jurisdiction was conferred
upon the Prosecution and Enforcement Department (PED) of the SEC. Respondents also claimed that the SEC violated
their right to due process when it ordered that the respondents appear before the SEC and "show cause why no
administrative, civil or criminal sanctions should be imposed on them," and, thus, shifted the burden of proof to the
respondents. Lastly, they sought to have their cases tried jointly given the identical factual situations surrounding the
alleged violation committed by the respondents.10
Respondents also filed a Motion for Continuance of Proceedings on 24 October 1994, wherein they moved for
discontinuance of the investigations and the proceedings before the SEC until the undue publicity had abated and the
investigating officials had become reasonably free from prejudice and public pressure.11
No formal hearings were conducted in connection with the aforementioned motions, but on 25 January 1995, the SEC
issued an Omnibus Order which thus disposed of the same in this wise:12
WHEREFORE, premised on the foregoing considerations, the Commission resolves and hereby rules:
1. To create a special investigating panel to hear and decide the instant case in accordance with the Rules of
Practice and Procedure Before the Prosecution and Enforcement Department (PED), Securities and Exchange
Commission, to be composed of Attys. James K. Abugan, Medardo Devera (Prosecution and Enforcement
Department), and Jose Aquino (Brokers and Exchanges Department), which is hereby directed to expeditiously
resolve the case by conducting continuous hearings, if possible.
2. To recall the show cause orders dated September 19, 1994 requiring the respondents to appear and show
cause why no administrative, civil or criminal sanctions should be imposed on them.
3. To deny the Motion for Continuance for lack of merit.
Respondents filed an Omnibus Motion for Partial Reconsideration,13 questioning the creation of the special investigating
panel to hear the case and the denial of the Motion for Continuance. The SEC denied reconsideration in its Omnibus
Order dated 30 March 1995.14
The respondents filed a petition before the Court of Appeals docketed as C.A.-G.R. SP No. 37036, questioning the
Omnibus Orders dated 25 January 1995 and 30 March 1995.15 During the proceedings before the Court of Appeals,
respondents filed a Supplemental Motion16 dated 16 May 1995, wherein they prayed for the issuance of a writ of
preliminary injunction enjoining the SEC and its agents from investigating and proceeding with the hearing of the case
against respondents herein. On 5 May 1995, the Court of Appeals granted their motion and issued a writ of preliminary
injunction, which effectively enjoined the SEC from filing any criminal, civil or administrative case against the
respondents herein.17
On 23 October 1995, the SEC filed a Motion for Leave to Quash SEC Omnibus Orders so that the case may be investigated
by the PED in accordance with the SEC Rules and Presidential Decree No. 902-A, and not by the special body whose
creation the SEC had earlier ordered.18
The Court of Appeals promulgated a Decision19 on 20 August 1998. It determined that there were no implementing rules
and regulations regarding disclosure, insider trading, or any of the provisions of the Revised Securities Acts which the
respondents allegedly violated. The Court of Appeals likewise noted that it found no statutory authority for the SEC to
initiate and file any suit for civil liability under Sections 8, 30 and 36 of the Revised Securities Act. Thus, it ruled that no
civil, criminal or administrative proceedings may possibly be held against the respondents without violating their rights
to due process and equal protection. It further resolved that absent any implementing rules, the SEC cannot be allowed
to quash the assailed Omnibus Orders for the sole purpose of re-filing the same case against the respondents.20
The Court of Appeals further decided that the Rules of Practice and Procedure Before the PED, which took effect on 14
April 1990, did not comply with the statutory requirements contained in the Administrative Code of 1997. Section 8, Rule
V of the Rules of Practice and Procedure Before the PED affords a party the right to be present but without the right to
cross-examine witnesses presented against him, in violation of Section 12(3), Chapter 3, Book VII of the Administrative
Code. 21
In the dispositive portion of its Decision, dated 20 August 1998, the Court of Appeals ruled that22:
WHEREFORE, [herein petitioner SEC's] Motion for Leave to Quash SEC Omnibus Orders is herebyDENIED. The
petition for certiorari, prohibition and mandamus is GRANTED. Consequently, all proceedings taken against
[herein respondents] in this case, including the Omnibus Orders of January 25, 1995 and March 30, 1995 are
declared null and void. The writ of preliminary injunction is hereby made permanent and, accordingly, [SEC] is
hereby prohibited from taking cognizance or initiating any action, be they civil, criminal, or administrative
against [respondents] with respect to Sections 8 (Procedure for Registration), 30 (Insider's duty to disclose when
trading) and 36 (Directors, Officers and Principal Stockholders) in relation to Sections 46 (Administrative
sanctions) 56 (Penalties) 44 (Liabilities of Controlling persons) and 45 (Investigations, injunctions and prosecution
of offenses) of the Revised Securities Act and Section 144 (Violations of the Code) of the Corporation Code.
(Emphasis provided.)
The SEC filed a Motion for Reconsideration, which the Court of Appeals denied in a Resolution23 issued on 30 September
1998.
Hence, the present petition, which relies on the following grounds24:
I
THE COURT OF APPEALS ERRED WHEN IT DENIED PETITIONER'S MOTION FOR LEAVE TO QUASH THE ASSAILED
SEC OMNIBUS ORDERS DATED JANUARY 25 AND MARCH 30, 1995.
II
THE COURT OF APPEALS ERRED WHEN IT RULED THAT THERE IS NO STATUTORY AUTHORITY WHATSOEVER FOR
PETITIONER SEC TO INITIATE AND FILE ANY SUIT BE THEY CIVIL, CRIMINAL OR ADMINISTRATIVE AGAINST
RESPONDENT CORPORATION AND ITS DIRECTORS WITH RESPECT TO SECTION 30 (INSIDER'S DUTY TO DISCOLSED
[sic] WHEN TRADING) AND 36 (DIRECTORS OFFICERS AND PRINCIPAL STOCKHOLDERS) OF THE REVISED
SECURITIES ACT; AND
III
THE COURT OF APPEALS ERRED WHEN IT RULED THAT RULES OF PRACTICE AND PROSECUTION BEFORE THE PED
AND THE SICD RULES OF PROCEDURE ON ADMINISTRATIVE ACTIONS/PROCEEDINGS25 ARE INVALID AS THEY FAIL
TO COMPLY WITH THE STATUTORY REQUIREMENTS CONTAINED IN THE ADMINISTRATIVE CODE OF 1987.
The petition is impressed with merit.
Before discussing the merits of this case, it should be noted that while this case was pending in this Court, Republic Act
No. 8799, otherwise known as the Securities Regulation Code, took effect on 8 August 2000. Section 8 of Presidential
Decree No. 902-A, as amended, which created the PED, was already repealed as provided for in Section 76 of the
Securities Regulation Code:
 SEC. 76. Repealing Clause. - The Revised Securities Act (Batas Pambansa Blg. 178), as amended, in its entirety, and
Sections 2, 4 and 8 of Presidential Decree 902-A, as amended, are hereby repealed. All other laws, orders, rules
and regulations, or parts thereof, inconsistent with any provision of this Code are hereby repealed or modified
accordingly.
Thus, under the new law, the PED has been abolished, and the Securities Regulation Code has taken the place of the
Revised Securities Act.
The Court now proceeds with a discussion of the present case.
I. Sctions 8, 30 and 36 of the Revised Securities Act do not require the enactment of implementing rules to make them
binding and effective.
The Court of Appeals ruled that absent any implementing rules for Sections 8, 30 and 36 of the Revised Securities Act, no
civil, criminal or administrative actions can possibly be had against the respondents without violating their right to due
process and equal protection, citing as its basis the case Yick Wo v. Hopkins.26 This is untenable.
In the absence of any constitutional or statutory infirmity, which may concern Sections 30 and 36 of the Revised
Securities Act, this Court upholds these provisions as legal and binding. It is well settled that every law has in its favor the
presumption of validity. Unless and until a specific provision of the law is declared invalid and unconstitutional, the same
is valid and binding for all intents and purposes.27 The mere absence of implementing rules cannot effectively invalidate
provisions of law, where a reasonable construction that will support the law may be given. In People v. Rosenthal,28 this
Court ruled that:
In this connection we cannot pretermit reference to the rule that "legislation should not be held invalid on the
ground of uncertainty if susceptible of any reasonable construction that will support and give it effect. An Act will
not be declared inoperative and ineffectual on the ground that it furnishes no adequate means to secure the
purpose for which it is passed, if men of common sense and reason can devise and provide the means, and all
the instrumentalities necessary for its execution are within the reach of those intrusted therewith." (25 R.C.L.,
pp. 810, 811)
In Garcia v. Executive Secretary,29 the Court underlined the importance of the presumption of validity of laws and the
careful consideration with which the judiciary strikes down as invalid acts of the legislature:
The policy of the courts is to avoid ruling on constitutional questions and to presume that the acts of the political
departments are valid in the absence of a clear and unmistakable showing to the contrary. To doubt is to sustain.
This presumption is based on the doctrine of separation of powers which enjoins upon each department a
becoming respect for the acts of the other departments. The theory is that as the joint act of Congress and the
President of the Philippines, a law has been carefully studied and determined to be in accordance with the
fundamental law before it was finally enacted.
The necessity for vesting administrative authorities with power to make rules and regulations is based on the
impracticability of lawmakers' providing general regulations for various and varying details of management.30 To rule
that the absence of implementing rules can render ineffective an act of Congress, such as the Revised Securities Act,
would empower the administrative bodies to defeat the legislative will by delaying the implementing rules. To assert that
a law is less than a law, because it is made to depend on a future event or act, is to rob the Legislature of the power to
act wisely for the public welfare whenever a law is passed relating to a state of affairs not yet developed, or to things
future and impossible to fully know.31 It is well established that administrative authorities have the power to promulgate
rules and regulations to implement a given statute and to effectuate its policies, provided such rules and regulations
conform to the terms and standards prescribed by the statute as well as purport to carry into effect its general policies.
Nevertheless, it is undisputable that the rules and regulations cannot assert for themselves a more extensive prerogative
or deviate from the mandate of the statute.32Moreover, where the statute contains sufficient standards and an
unmistakable intent, as in the case of Sections 30 and 36 of the Revised Securities Act, there should be no impediment to
its implementation.
The reliance placed by the Court of Appeals in Yick Wo v. Hopkins33 shows a glaring error. In the cited case, this Court
found unconstitutional an ordinance which gave the board of supervisors authority to refuse permission to carry on
laundries located in buildings that were not made of brick and stone, because it violated the equal protection clause and
was highly discriminatory and hostile to Chinese residents and not because the standards provided therein were vague
or ambiguous.
This Court does not discern any vagueness or ambiguity in Sections 30 and 36 of the Revised Securities Act, such that
the acts proscribed and/or required would not be understood by a person of ordinary intelligence.
Section 30 of the Revised Securities Act
Section 30 of the Revised Securities Act reads:
Sec. 30. Insider's duty to disclose when trading. - (a) It shall be unlawful for an insider to sell or buy a security of
the issuer, if he knows a fact of special significance with respect to the issuer or the security that is not generally
available, unless (1) the insider proves that the fact is generally available or (2) if the other party to the
transaction (or his agent) is identified, (a) the insider proves that the other party knows it, or (b) that other party
in fact knows it from the insider or otherwise.
(b) "Insider" means (1) the issuer, (2) a director or officer of, or a person controlling, controlled by, or under
common control with, the issuer, (3) a person whose relationship or former relationship to the issuer gives or
gave him access to a fact of special significance about the issuer or the security that is not generally available, or
(4) a person who learns such a fact from any of the foregoing insiders as defined in this subsection, with
knowledge that the person from whom he learns the fact is such an insider.
(c) A fact is "of special significance" if (a) in addition to being material it would be likely, on being made generally
available, to affect the market price of a security to a significant extent, or (b) a reasonable person would
consider it especially important under the circumstances in determining his course of action in the light of such
factors as the degree of its specificity, the extent of its difference from information generally available previously,
and its nature and reliability.
(d) This section shall apply to an insider as defined in subsection (b) (3) hereof only to the extent that he knows
of a fact of special significance by virtue of his being an insider.
The provision explains in simple terms that the insider's misuse of nonpublic and undisclosed information is the
gravamen of illegal conduct. The intent of the law is the protection of investors against fraud, committed when an insider,
using secret information, takes advantage of an uninformed investor. Insiders are obligated to disclose material
information to the other party or abstain from trading the shares of his corporation. This duty to disclose or abstain is
based on two factors: first, the existence of a relationship giving access, directly or indirectly, to information intended to
be available only for a corporate purpose and not for the personal benefit of anyone; and second, the inherent
unfairness involved when a party takes advantage of such information knowing it is unavailable to those with whom he is
dealing.34
In the United States (U.S.), the obligation to disclose or abstain has been traditionally imposed on corporate "insiders,"
particularly officers, directors, or controlling stockholders, but that definition has since been expanded.35 The term
"insiders" now includes persons whose relationship or former relationship to the issuer gives or gave them access to a
fact of special significance about the issuer or the security that is not generally available, and one who learns such a fact
from an insider knowing that the person from whom he learns the fact is such an insider. Insiders have the duty to
disclose material facts which are known to them by virtue of their position but which are not known to persons with
whom they deal and which, if known, would affect their investment judgment. In some cases, however, there may be
valid corporate reasons for the nondisclosure of material information. Where such reasons exist, an issuer's decision not
to make any public disclosures is not ordinarily considered as a violation of insider trading. At the same time, the
undisclosed information should not be improperly used for non-corporate purposes, particularly to disadvantage other
persons with whom an insider might transact, and therefore the insider must abstain from entering into transactions
involving such securities.36
Respondents further aver that under Section 30 of the Revised Securities Act, the SEC still needed to define the following
terms: "material fact," "reasonable person," "nature and reliability" and "generally available." 37In determining
whether or not these terms are vague, these terms must be evaluated in the context of Section 30 of the Revised
Securties Act. To fully understand how the terms were used in the aforementioned provision, a discussion of what the
law recognizes as a fact of special significance is required, since the duty to disclose such fact or to abstain from any
transaction is imposed on the insider only in connection with a fact of special significance.
Under the law, what is required to be disclosed is a fact of "special significance" which may be (a) a material fact which
would be likely, on being made generally available, to affect the market price of a security to a significant extent, or (b)
one which a reasonable person would consider especially important in determining his course of action with regard to
the shares of stock.
(a) Material Fact - The concept of a "material fact" is not a new one. As early as 1973, the Rules Requiring Disclosure of
Material Facts by Corporations Whose Securities Are Listed In Any Stock Exchange or Registered/Licensed Under the
Securities Act, issued by the SEC on 29 January 1973, explained that "[a] fact is material if it induces or tends to induce or
otherwise affect the sale or purchase of its securities." Thus, Section 30 of the Revised Securities Act provides that if a
fact affects the sale or purchase of securities, as well as its price, then the insider would be required to disclose such
information to the other party to the transaction involving the securities. This is the first definition given to a "fact of
special significance."
(b.1) Reasonable Person - The second definition given to a fact of special significance involves the judgment of a
"reasonable person." Contrary to the allegations of the respondents, a "reasonable person" is not a problematic legal
concept that needs to be clarified for the purpose of giving effect to a statute; rather, it is the standard on which most of
our legal doctrines stand. The doctrine on negligence uses the discretion of the "reasonable man" as the standard.38 A
purchaser in good faith must also take into account facts which put a "reasonable man" on his guard.39 In addition, it is
the belief of the reasonable and prudent man that an offense was committed that sets the criteria for probable cause for
a warrant of arrest.40 This Court, in such cases, differentiated the reasonable and prudent man from "a person with
training in the law such as a prosecutor or a judge," and identified him as "the average man on the street," who weighs
facts and circumstances without resorting to the calibrations of our technical rules of evidence of which his knowledge is
nil. Rather, he relies on the calculus of common sense of which all reasonable men have in abundance.41 In the same
vein, the U.S. Supreme Court similarly determined its standards by the actual significance in the deliberations of a
"reasonable investor," when it ruled in TSC Industries, Inc. v. Northway, Inc.,42 that the determination of materiality
"requires delicate assessments of the inferences a ‘reasonable shareholder' would draw from a given set of facts and the
significance of those inferences to him."
(b.2) Nature and Reliability - The factors affecting the second definition of a "fact of special significance," which is of
such importance that it is expected to affect the judgment of a reasonable man, were substantially lifted from a test of
materiality pronounced in the case In the Matter of Investors Management Co., Inc.43:
Among the factors to be considered in determining whether information is material under this test are the
degree of its specificity, the extent to which it differs from information previously publicly disseminated, and its
reliability in light of its nature and source and the circumstances under which it was received.
It can be deduced from the foregoing that the "nature and reliability" of a significant fact in determining the course of
action a reasonable person takes regarding securities must be clearly viewed in connection with the particular
circumstances of a case. To enumerate all circumstances that would render the "nature and reliability" of a fact to be of
special significance is close to impossible. Nevertheless, the proper adjudicative body would undoubtedly be able to
determine if facts of a certain "nature and reliability" can influence a reasonable person's decision to retain, sell or buy
securities, and thereafter explain and justify its factual findings in its decision.
(c) Materiality Concept - A discussion of the "materiality concept" would be relevant to both a material fact which would
affect the market price of a security to a significant extent and/or a fact which a reasonable person would consider in
determining his or her cause of action with regard to the shares of stock. Significantly, what is referred to in our laws as
a fact of special significance is referred to in the U.S. as the "materiality concept" and the latter is similarly not provided
with a precise definition. In Basic v. Levinson,44 the U.S. Supreme Court cautioned against confining materiality to a rigid
formula, stating thus:
A bright-line rule indeed is easier to follow than a standard that requires the exercise of judgment in the light of
all the circumstances. But ease of application alone is not an excuse for ignoring the purposes of the Securities
Act and Congress' policy decisions. Any approach that designates a single fact or occurrence as always
determinative of an inherently fact-specific finding such as materiality, must necessarily be overinclusive or
underinclusive.
Moreover, materiality "will depend at any given time upon a balancing of both the indicated probability that the event
will occur and the anticipated magnitude of the event in light of the totality of the company activity."45 In drafting the
Securities Act of 1934, the U.S. Congress put emphasis on the limitations to the definition of materiality:
Although the Committee believes that ideally it would be desirable to have absolute certainty in the application
of the materiality concept, it is its view that such a goal is illusory and unrealistic. The materiality concept is
judgmental in nature and it is not possible to translate this into a numerical formula. The Committee's advice
to the [SEC] is to avoid this quest for certainty and to continue consideration of materiality on a case-by-case
basis as disclosure problems are identified." House Committee on Interstate and Foreign Commerce, Report of
the Advisory Committee on Corporate Disclosure to the Securities and Exchange Commission, 95th Cong., 1st
Sess., 327 (Comm.Print 1977). (Emphasis provided.)46
(d) Generally Available - Section 30 of the Revised Securities Act allows the insider the defense that in a transaction of
securities, where the insider is in possession of facts of special significance, such information is "generally available" to
the public. Whether information found in a newspaper, a specialized magazine, or any cyberspace media be sufficient for
the term "generally available" is a matter which may be adjudged given the particular circumstances of the case. The
standards cannot remain at a standstill. A medium, which is widely used today was, at some previous point in time,
inaccessible to most. Furthermore, it would be difficult to approximate how the rules may be applied to the instant case,
where investigation has not even been started. Respondents failed to allege that the negotiations of their agreement
with GHB were made known to the public through any form of media for there to be a proper appreciation of the issue
presented.
Section 36(a) of the Revised Securities Act
As regards Section 36(a) of the Revised Securities Act, respondents claim that the term "beneficial ownership" is vague
and that it requires implementing rules to give effect to the law. Section 36(a) of the Revised Securities Act is a
straightforward provision that imposes upon (1) a beneficial owner of more than ten percent of any class of any equity
security or (2) a director or any officer of the issuer of such security, the obligation to submit a statement indicating his or
her ownership of the issuer's securities and such changes in his or her ownership thereof. The said provision reads:
Sec. 36. Directors, officers and principal stockholders. - (a) Every person who is directly or indirectly the
beneficial owner of more than ten per centum of any [class] of any equity security which is registered pursuant
to this Act, or who is [a] director or an officer of the issuer of such security, shall file, at the time of the
registration of such security on a securities exchange or by the effective date of a registration statement or within
ten days after he becomes such a beneficial owner, director or officer, a statement with the Commission and, if
such security is registered on a securities exchange, also with the exchange, of the amount of all equity securities
of such issuer of which he is the beneficial owner, and within ten days after the close of each calendar month
thereafter, if there has been a change in such ownership during such month, shall file with the Commission, and
if such security is registered on a securities exchange, shall also file with the exchange, a statement indicating his
ownership at the close of the calendar month and such changes in his ownership as have occurred during such
calendar month. (Emphasis provided.)
Section 36(a) refers to the "beneficial owner." Beneficial owner has been defined in the following manner:
[F]irst, to indicate the interest of a beneficiary in trust property (also called "equitable ownership"); and second,
to refer to the power of a corporate shareholder to buy or sell the shares, though the shareholder is not
registered in the corporation's books as the owner. Usually, beneficial ownership is distinguished from naked
ownership, which is the enjoyment of all the benefits and privileges of ownership, as against possession of the
bare title to property.47
Even assuming that the term "beneficial ownership" was vague, it would not affect respondents' case, where the
respondents are directors and/or officers of the corporation, who are specifically required to comply with the reportorial
requirements under Section 36(a) of the Revised Securities Act. The validity of a statute may be contested only by one
who will sustain a direct injury as a result of its enforcement.48
Sections 30 and 36 of the Revised Securities Act were enacted to promote full disclosure in the securities market and
prevent unscrupulous individuals, who by their positions obtain non-public information, from taking advantage of an
uninformed public. No individual would invest in a market which can be manipulated by a limited number of corporate
insiders. Such reaction would stifle, if not stunt, the growth of the securities market. To avert the occurrence of such an
event, Section 30 of the Revised Securities Act prevented the unfair use of non-public information in securities
transactions, while Section 36 allowed the SEC to monitor the transactions entered into by corporate officers and
directors as regards the securities of their companies.
In the case In the Matter of Investor's Management Co.,49 it was cautioned that "the broad language of the anti-fraud
provisions," which include the provisions on insider trading, should not be "circumscribed by fine distinctions and rigid
classifications." The ambit of anti-fraud provisions is necessarily broad so as to embrace the infinite variety of deceptive
conduct.50
In Tatad v. Secretary of Department of Energy,51 this Court brushed aside a contention, similar to that made by the
respondents in this case, that certain words or phrases used in a statute do not set determinate standards, declaring
that:
Petitioners contend that the words "as far as practicable," "declining" and "stable" should have been defined in
R.A. No. 8180 as they do not set determinate and determinable standards. This stubborn submission deserves
scant consideration. The dictionary meanings of these words are well settled and cannot confuse men of
reasonable intelligence. x x x. The fear of petitioners that these words will result in the exercise of executive
discretion that will run riot is thus groundless. To be sure, the Court has sustained the validity of similar, if not
more general standards in other cases.
Among the words or phrases that this Court upheld as valid standards were "simplicity and dignity,"52 "public
interest,"53 and "interests of law and order."54
The Revised Securities Act was approved on 23 February 1982. The fact that the Full Disclosure Rules were promulgated
by the SEC only on 24 July 1996 does not render ineffective in the meantime Section 36 of the Revised Securities Act. It is
already unequivocal that the Revised Securities Act requires full disclosure and the Full Disclosure Rules were issued to
make the enforcement of the law more consistent, efficient and effective. It is equally reasonable to state that the
disclosure forms later provided by the SEC, do not, in any way imply that no compliance was required before the forms
were provided. The effectivity of a statute which imposes reportorial requirements cannot be suspended by the issuance
of specified forms, especially where compliance therewith may be made even without such forms. The forms merely
made more efficient the processing of requirements already identified by the statute.
For the same reason, the Court of Appeals made an evident mistake when it ruled that no civil, criminal or administrative
actions can possibly be had against the respondents in connection with Sections 8, 30 and 36 of the Revised Securities
Act due to the absence of implementing rules. These provisions are sufficiently clear and complete by themselves. Their
requirements are specifically set out, and the acts which are enjoined are determinable. In particular, Section 855 of the
Revised Securities Act is a straightforward enumeration of the procedure for the registration of securities and the
particular matters which need to be reported in the registration statement thereof. The Decision, dated 20 August 1998,
provides no valid reason to exempt the respondent IRC from such requirements. The lack of implementing rules cannot
suspend the effectivity of these provisions. Thus, this Court cannot find any cogent reason to prevent the SEC from
exercising its authority to investigate respondents for violation of Section 8 of the Revised Securities Act.
II. The right to cross-examination is not absolute and cannot be demanded during investigative proceedings before the
PED.
In its assailed Decision dated 20 August 1998, the Court of Appeals pronounced that the PED Rules of Practice and
Procedure was invalid since Section 8, Rule V56 thereof failed to provide for the parties' right to cross-examination, in
violation of the Administrative Code of 1987 particularly Section 12(3), Chapter 3, Book VII thereof. This ruling is
incorrect.
Firstly, Section 4, Rule I of the PED Rules of Practice and Procedure, categorically stated that the proceedings before the
PED are summary in nature:
Section 4. Nature of Proceedings - Subject to the requirements of due process, proceedings before the "PED"
shall be summary in nature not necessarily adhering to or following the technical rules of evidence obtaining in
the courts of law. The Rules of Court may apply in said proceedings in suppletory character whenever practicable.
Rule V of the PED Rules of Practice and Procedure further specified that:
 Section 5. Submission of Documents - During the preliminary conference/hearing, or immediately thereafter, the
Hearing Officer may require the parties to simultaneously submit their respective verified position papers
accompanied by all supporting documents and the affidavits of their witnesses, if any which shall take the place
of their direct testimony. The parties shall furnish each other with copies of the position papers together with the
supporting affidavits and documents submitted by them.
Section 6. Determination of necessity of hearing. - Immediately after the submission by the parties of their
position papers and supporting documents, the Hearing Officer shall determine whether there is a need for a
formal hearing. At this stage, he may, in his discretion, and for the purpose of making such determination, elicit
pertinent facts or information, including documentary evidence, if any, from any party or witness to complete, as
far as possible, the facts of the case. Facts or information so elicited may serve as basis for his clarification or
simplifications of the issues in the case. Admissions and stipulation of facts to abbreviate the proceedings shall
be encouraged.
Section 7. Disposition of Case. If the Hearing Officer finds no necessity of further hearing after the parties have
submitted their position papers and supporting documents, he shall so inform the parties stating the reasons
therefor and shall ask them to acknowledge the fact that they were so informed by signing the minutes of the
hearing and the case shall be deemed submitted for resolution.
As such, the PED Rules provided that the Hearing Officer may require the parties to submit their respective verified
position papers, together with all supporting documents and affidavits of witnesses. A formal hearing was not
mandatory; it was within the discretion of the Hearing Officer to determine whether there was a need for a formal
hearing. Since, according to the foregoing rules, the holding of a hearing before the PED is discretionary, then the right to
cross-examination could not have been demanded by either party.
Secondly, it must be pointed out that Chapter 3, Book VII of the Administrative Code, entitled "Adjudication," does not
affect the investigatory functions of the agencies. The law creating the PED, Section 8 of Presidential Decree No. 902-A,
as amended, defines the authority granted to the PED, thus:
SEC. 8. The Prosecution and Enforcement Department shall have, subject to the Commission's control and
supervision, the exclusive authority to investigate, on complaint or motu proprio, any act or omission of the
Board of Directors/Trustees of corporations, or of partnerships, or of other associations, or of their stockholders,
officers or partners, including any fraudulent devices, schemes or representations, in violation of any law or rules
and regulations administered and enforced by the Commission; to file and prosecutein accordance with law and
rules and regulations issued by the Commission and in appropriate cases, the corresponding criminal or civil case
before the Commission or the proper court or body upon prima facie finding of violation of any laws or rules and
regulations administered and enforced by the Commission; and to perform such other powers and functions as
may be provided by law or duly delegated to it by the Commission. (Emphasis provided.)
The law creating PED empowers it to investigate violations of the rules and regulations promulgated by the SEC and to
file and prosecute such cases. It fails to mention any adjudicatory functions insofar as the PED is concerned. Thus, the
PED Rules of Practice and Procedure need not comply with the provisions of the Administrative Code on adjudication,
particularly Section 12(3), Chapter 3, Book VII.
In Cariño v. Commission on Human Rights,57 this Court sets out the distinction between investigative and adjudicative
functions, thus:
"Investigate," commonly understood, means to examine, explore, inquire or delve or probe into, research on,
study. The dictionary definition of "investigate" is "to observe or study closely; inquire into systematically: "to
search or inquire into" xx to subject to an official probe xx: to conduct an official inquiry." The purpose of an
investigation, of course is to discover, to find out, to learn, obtain information. Nowhere included or intimated is
the notion of settling, deciding or resolving a controversy involved in the facts inquired into by application of the
law to the facts established by the inquiry.
The legal meaning of "investigate" is essentially the same: "(t)o follow up step by step by patient inquiry or
observation. To trace or track; to search into; to examine and inquire into with care and accuracy; to find out by
careful inquisition; examination; the taking of evidence; a legal inquiry;" "to inquire; to make an investigation,"
"investigation" being in turn described as "(a)n administrative function, the exercise of which ordinarily does not
 require a hearing. 2 Am J2d Adm L Sec. 257; xx an inquiry, judicial or otherwise, for the discovery and collection
of facts concerning a certain matter or matters."
"Adjudicate," commonly or popularly understood, means to adjudge, arbitrate, judge, decide, determine,
resolve, rule on, settle. The dictionary defines the term as "to settle finally (the rights and duties of parties to a
court case) on the merits of issues raised: xx to pass judgment on: settle judicially: xx act as judge." And
"adjudge" means "to decide or rule upon as a judge or with judicial or quasi-judicial powers: xx to award or grant
judicially in a case of controversy x x x."
In a legal sense, "adjudicate" means: "To settle in the exercise of judicial authority. To determine finally. Synonymous
with adjudge in its strictest sense;" and "adjudge" means: "To pass on judicially, to decide, settle, or decree, or to
sentence or condemn. x x x Implies a judicial determination of a fact, and the entry of a judgment."
There is no merit to the respondent's averment that the sections under Chapter 3, Book VII of the Administrative Code,
do not distinguish between investigative and adjudicatory functions. Chapter 3, Book VII of the Administrative Code, is
unequivocally entitled "Adjudication."
Respondents insist that the PED performs adjudicative functions, as enumerated under Section 1(h) and (j), Rule II; and
Section 2(4), Rule VII of the PED Rules of Practice and Procedure:
Section 1. Authority of the Prosecution and Enforcement Department - Pursuant to Presidential Decree No. 902-
A, as amended by Presidential Decree No. 1758, the Prosecution and Enforcement Department is primarily
charged with the following:
xxxx
(h) Suspends or revokes, after proper notice and hearing in accordance with these Rules, the franchise or
certificate of registration of corporations, partnerships or associations, upon any of the following grounds:
1. Fraud in procuring its certificate of registration;
2. Serious misrepresentation as to what the corporation can do or is doing to the great prejudice of or damage to
the general public;
3. Refusal to comply or defiance of any lawful order of the Commission restraining commission of acts which
would amount to a grave violation of its franchise;
xxxx
(j) Imposes charges, fines and fees, which by law, it is authorized to collect;
xxxx
Section 2. Powers of the Hearing Officer. The Hearing Officer shall have the following powers:
xxxx
4. To cite and/or declare any person in direct or indirect contempt in accordance with pertinent provisions of the
Rules of Court.
Even assuming that these are adjudicative functions, the PED, in the instant case, exercised its investigative powers; thus,
respondents do not have the requisite standing to assail the validity of the rules on adjudication. A valid source of a
statute or a rule can only be contested by one who will sustain a direct injury as a result of its enforcement.58 In the
instant case, respondents are only being investigated by the PED for their alleged failure to disclose their negotiations
with GHB and the transactions entered into by its directors involving IRC shares. The respondents have not shown
themselves to be under any imminent danger of sustaining any personal injury attributable to the exercise of
adjudicative functions by the SEC. They are not being or about to be subjected by the PED to charges, fees or fines; to
citations for contempt; or to the cancellation of their certificate of registration under Section 1(h), Rule II of the PED
Rules of Practice and Procedure.
To repeat, the only powers which the PED was likely to exercise over the respondents were investigative in nature, to wit:
 Section 1. Authority of the Prosecution and Enforcement Department - Pursuant to Presidential Decree No. 902-
A, as amended by Presidential Decree No. 1758, the Prosecution and Enforcement Department is primarily
charged with the following:
xxxx
b. Initiates proper investigation of corporations and partnerships or persons, their books, records and other
properties and assets, involving their business transactions, in coordination with the operating department
involved;
xxxx
e. Files and prosecutes civil or criminal cases before the Commission and other courts of justice involving
violations of laws and decrees enforced by the Commission and the rules and regulations promulgated
thereunder;
f. Prosecutes erring directors, officers and stockholders of corporations and partnerships, commercial paper
issuers or persons in accordance with the pertinent rules on procedures;
The authority granted to the PED under Section 1(b), (e), and (f), Rule II of the PED Rules of Practice and Procedure, need
not comply with Section 12, Chapter 3, Rule VII of the Administrative Code, which affects only the adjudicatory functions
of administrative bodies. Thus, the PED would still be able to investigate the respondents under its rules for their alleged
failure to disclose their negotiations with GHB and the transactions entered into by its directors involving IRC shares.
This is not to say that administrative bodies performing adjudicative functions are required to strictly comply with the
requirements of Chapter 3, Rule VII of the Administrative Code, particularly, the right to cross-examination. It should be
noted that under Section 2.2 of Executive Order No. 26, issued on 7 October 1992, abbreviated proceedings are
prescribed in the disposition of administrative cases:
2. Abbreviation of Proceedings. All administrative agencies are hereby directed to adopt and include in their
respective Rules of Procedure the following provisions:
xxxx
2.2 Rules adopting, unless otherwise provided by special laws and without prejudice to Section 12, Chapter 3,
Book VII of the Administrative Code of 1987, the mandatory use of affidavits in lieu of direct testimonies and the
preferred use of depositions whenever practicable and convenient.
As a consequence, in proceedings before administrative or quasi-judicial bodies, such as the National Labor Relations
Commission and the Philippine Overseas Employment Agency, created under laws which authorize summary
proceedings, decisions may be reached on the basis of position papers or other documentary evidence only. They are not
bound by technical rules of procedure and evidence. 59 In fact, the hearings before such agencies do not connote full
adversarial proceedings.60 Thus, it is not necessary for the rules to require affiants to appear and testify and to be cross-
examined by the counsel of the adverse party. To require otherwise would negate the summary nature of the
administrative or quasi-judicial proceedings.61 In Atlas Consolidated Mining and Development Corporation v. Factoran,
Jr.,62 this Court stated that:
[I]t is sufficient that administrative findings of fact are supported by evidence, or negatively stated, it is sufficient
that findings of fact are not shown to be unsupported by evidence. Substantial evidence is all that is needed to
support an administrative finding of fact, and substantial evidence is "such relevant evidence as a reasonable
mind might accept as adequate to support a conclusion."
In order to comply with the requirements of due process, what is required, among other things, is that every litigant be
given reasonable opportunity to appear and defend his right and to introduce relevant evidence in his favor.63
III. The Securities Regulations Code did not repeal Sections 8, 30 and 36 of the Revised Securities Act since said
provisions were reenacted in the new law.
The Securities Regulations Code absolutely repealed the Revised Securities Act. While the absolute repeal of a law
generally deprives a court of its authority to penalize the person charged with the violation of the old law prior to its
appeal, an exception to this rule comes about when the repealing law punishes the act previously penalized under the
old law. The Court, in Benedicto v. Court of Appeals, sets down the rules in such instances:64
As a rule, an absolute repeal of a penal law has the effect of depriving the court of its authority to punish a
person charged with violation of the old law prior to its repeal. This is because an unqualified repeal of a penal
law constitutes a legislative act of rendering legal what had been previously declared as illegal, such that the
offense no longer exists and it is as if the person who committed it never did so. There are, however, exceptions
to the rule. One is the inclusion of a saving clause in the repealing statute that provides that the repeal shall have
no effect on pending actions. Another exception is where the repealing act reenacts the former statute and
punishes the act previously penalized under the old law. In such instance, the act committed before the
reenactment continues to be an offense in the statute books and pending cases are not affected, regardless of
whether the new penalty to be imposed is more favorable to the accused. (Emphasis provided.)
In the present case, a criminal case may still be filed against the respondents despite the repeal, since Sections
8,65 12,66 26,67 2768 and 2369 of the Securities Regulations Code impose duties that are substantially similar to
Sections 8, 30 and 36 of the repealed Revised Securities Act.
Section 8 of the Revised Securities Act, which previously provided for the registration of securities and the information
that needs to be included in the registration statements, was expanded under Section 12, in connection with Section 8 of
the Securities Regulations Code. Further details of the information required to be disclosed by the registrant are
explained in the Amended Implementing Rules and Regulations of the Securities Regulations Code, issued on 30
December 2003, particularly Sections 8 and 12 thereof.
Section 30 of the Revised Securities Act has been reenacted as Section 27 of the Securities Regulations Code, still
penalizing an insider's misuse of material and non-public information about the issuer, for the purpose of protecting
public investors. Section 26 of the Securities Regulations Code even widens the coverage of punishable acts, which
intend to defraud public investors through various devices, misinformation and omissions.
Section 23 of the Securities Regulations Code was practically lifted from Section 36(a) of the Revised Securities Act. Both
provisions impose upon (1) a beneficial owner of more than ten percent of any class of any equity security or (2) a
director or any officer of the issuer of such security, the obligation to submit a statement indicating his or her ownership
of the issuer's securities and such changes in his or her ownership thereof.
Clearly, the legislature had not intended to deprive the courts of their authority to punish a person charged with violation
of the old law that was repealed; in this case, the Revised Securities Act.
IV. The SEC retained the jurisdiction to investigate violations of the Revised Securities Act, reenacted in the Securities
Regulations Code, despite the abolition of the PED.
Section 53 of the Securities Regulations Code clearly provides that criminal complaints for violations of rules and
regulations enforced or administered by the SEC shall be referred to the Department of Justice (DOJ) for preliminary
investigation, while the SEC nevertheless retains limited investigatory powers.70 Additionally, the SEC may still impose
the appropriate administrative sanctions under Section 54 of the aforementioned law.71
In Morato v. Court of Appeals,72 the cases therein were still pending before the PED for investigation and the SEC for
resolution when the Securities Regulations Code was enacted. The case before the SEC involved an intra-corporate
dispute, while the subject matter of the other case investigated by the PED involved the schemes, devices, and violations
of pertinent rules and laws of the company's board of directors. The enactment of the Securities Regulations Code did
not result in the dismissal of the cases; rather, this Court ordered the transfer of one case to the proper regional trial
court and the SEC to continue with the investigation of the other case.
The case at bar is comparable to the aforecited case. In this case, the SEC already commenced the investigative
proceedings against respondents as early as 1994. Respondents were called to appear before the SEC and explain their
failure to disclose pertinent information on 14 August 1994. Thereafter, the SEC Chairman, having already made initial
findings that respondents failed to make timely disclosures of their negotiations with GHB, ordered a special investigating
panel to hear the case. The investigative proceedings were interrupted only by the writ of preliminary injunction issued
by the Court of Appeals, which became permanent by virtue of the Decision, dated 20 August 1998, in C.A.-G.R. SP No.
37036. During the pendency of this case, the Securities Regulations Code repealed the Revised Securities Act. As in
Morato v. Court of Appeals, the repeal cannot deprive SEC of its jurisdiction to continue investigating the case; or the
regional trial court, to hear any case which may later be filed against the respondents.
V. The instant case has not yet prescribed.
Respondents have taken the position that this case is moot and academic, since any criminal complaint that may be filed
against them resulting from the SEC's investigation of this case has already prescribed.73 They point out that the
prescription period applicable to offenses punished under special laws, such as violations of the Revised Securities Act, is
twelve years under Section 1 of Act No. 3326, as amended by Act No. 3585 and Act No. 3763, entitled "An Act to
Establish Periods of Prescription for Violations Penalized by Special Acts and Municipal Ordinances and to Provide When
Prescription Shall Begin to Act."74 Since the offense was committed in 1994, they reasoned that prescription set in as
early as 2006 and rendered this case moot. Such position, however, is incongruent with the factual circumstances of this
case, as well as the applicable laws and jurisprudence.
It is an established doctrine that a preliminary investigation interrupts the prescription period.75 A preliminary
investigation is essentially a determination whether an offense has been committed, and whether there is probable
cause for the accused to have committed an offense:
A preliminary investigation is merely inquisitorial, and it is often the only means of discovering the persons who
may be reasonably charged with a crime, to enable the fiscal to prepare the complaint or information. It is not a
trial of the case on the merits and has no purpose except that of determining whether a crime has been
committed or whether there is probable cause to believe that the accused is guilty thereof.76
Under Section 45 of the Revised Securities Act, which is entitled Investigations, Injunctions and Prosecution of Offenses,
the Securities Exchange Commission (SEC) has the authority to "make such investigations as it deems necessary to
determine whether any person has violated or is about to violate any provision of this Act XXX." After a finding that a
person has violated the Revised Securities Act, the SEC may refer the case to the DOJ for preliminary investigation and
prosecution.
While the SEC investigation serves the same purpose and entails substantially similar duties as the preliminary
investigation conducted by the DOJ, this process cannot simply be disregarded. In Baviera v. Paglinawan,77 this Court
enunciated that a criminal complaint is first filed with the SEC, which determines the existence of probable cause, before
a preliminary investigation can be commenced by the DOJ. In the aforecited case, the complaint filed directly with the
DOJ was dismissed on the ground that it should have been filed first with the SEC. Similarly, the offense was a violation of
the Securities Regulations Code, wherein the procedure for criminal prosecution was reproduced from Section 45 of the
Revised Securities Act. 78 This Court affirmed the dismissal, which it explained thus:
The Court of Appeals held that under the above provision, a criminal complaint for violation of any law or rule
administered by the SEC must first be filed with the latter. If the Commission finds that there is probable cause,
then it should refer the case to the DOJ. Since petitioner failed to comply with the foregoing procedural
requirement, the DOJ did not gravely abuse its discretion in dismissing his complaint in I.S. No. 2004-229.
A criminal charge for violation of the Securities Regulation Code is a specialized dispute. Hence, it must first be
referred to an administrative agency of special competence, i.e., the SEC. Under the doctrine of primary
jurisdiction, courts will not determine a controversy involving a question within the jurisdiction of the
administrative tribunal, where the question demands the exercise of sound administrative discretion requiring
the specialized knowledge and expertise of said administrative tribunal to determine technical and intricate
matters of fact. The Securities Regulation Code is a special law. Its enforcement is particularly vested in the SEC.
Hence, all complaints for any violation of the Code and its implementing rules and regulations should be filed
with the SEC. Where the complaint is criminal in nature, the SEC shall indorse the complaint to the DOJ for
preliminary investigation and prosecution as provided in Section 53.1 earlier quoted.
We thus agree with the Court of Appeals that petitioner committed a fatal procedural lapse when he filed his
criminal complaint directly with the DOJ. Verily, no grave abuse of discretion can be ascribed to the DOJ in
dismissing petitioner's complaint.
The said case puts in perspective the nature of the investigation undertaken by the SEC, which is a requisite before a
criminal case may be referred to the DOJ. The Court declared that it is imperative that the criminal prosecution be
initiated before the SEC, the administrative agency with the special competence.
It should be noted that the SEC started investigative proceedings against the respondents as early as 1994. This
investigation effectively interrupted the prescription period. However, said proceedings were disrupted by a preliminary
injunction issued by the Court of Appeals on 5 May 1995, which effectively enjoined the SEC from filing any criminal,
civil, or administrative case against the respondents herein.79 Thereafter, on 20 August 1998, the appellate court issued
the assailed Decision in C.A. G.R. SP. No. 37036 ordering that the writ of injunction be made permanent and prohibiting
the SEC from taking cognizance of and initiating any action against herein respondents. The SEC was bound to comply
with the aforementioned writ of preliminary injunction and writ of injunction issued by the Court of Appeals enjoining it
from continuing with the investigation of respondents for 12 years. Any deviation by the SEC from the injunctive writs
would be sufficient ground for contempt. Moreover, any step the SEC takes in defiance of such orders will be considered
void for having been taken against an order issued by a court of competent jurisdiction.
An investigation of the case by any other administrative or judicial body would likewise be impossible pending the
injunctive writs issued by the Court of Appeals. Given the ruling of this Court in Baviera v. Paglinawan,80 the DOJ itself
could not have taken cognizance of the case and conducted its preliminary investigation without a prior determination of
probable cause by the SEC. Thus, even presuming that the DOJ was not enjoined by the Court of Appeals from
conducting a preliminary investigation, any preliminary investigation conducted by the DOJ would have been a futile
effort since the SEC had only started with its investigation when respondents themselves applied for and were granted an
injunction by the Court of Appeals.
Moreover, the DOJ could not have conducted a preliminary investigation or filed a criminal case against the respondents
during the time that issues on the effectivity of Sections 8, 30 and 36 of the Revised Securities Act and the PED Rules of
Practice and Procedure were still pending before the Court of Appeals. After the Court of Appeals declared the
aforementioned statutory and regulatory provisions invalid and, thus, no civil, criminal or administrative case may be
filed against the respondents for violations thereof, the DOJ would have been at a loss, as there was no statutory
provision which respondents could be accused of violating.
Accordingly, it is only after this Court corrects the erroneous ruling of the Court of Appeals in its Decision dated 20
August 1998 that either the SEC or DOJ may properly conduct any kind of investigation against the respondents for
violations of Sections 8, 30 and 36 of the Revised Securities Act. Until then, the prescription period is deemed
interrupted.
To reiterate, the SEC must first conduct its investigations and make a finding of probable cause in accordance with the
doctrine pronounced in Baviera v. Paglinawan.81 In this case, the DOJ was precluded from initiating a preliminary
investigation since the SEC was halted by the Court of Appeals from continuing with its investigation. Such a situation
leaves the prosecution of the case at a standstill, and neither the SEC nor the DOJ can conduct any investigation against
the respondents, who, in the first place, sought the injunction to prevent their prosecution. All that the SEC could do in
order to break the impasse was to have the Decision of the Court of Appeals overturned, as it had done at the earliest
opportunity in this case. Therefore, the period during which the SEC was prevented from continuing with its investigation
should not be counted against it. The law on the prescription period was never intended to put the prosecuting bodies in
an impossible bind in which the prosecution of a case would be placed way beyond their control; for even if they avail
themselves of the proper remedy, they would still be barred from investigating and prosecuting the case.
Indubitably, the prescription period is interrupted by commencing the proceedings for the prosecution of the accused. In
criminal cases, this is accomplished by initiating the preliminary investigation. The prosecution of offenses punishable
under the Revised Securities Act and the Securities Regulations Code is initiated by the filing of a complaint with the SEC
or by an investigation conducted by the SEC motu proprio. Only after a finding of probable cause is made by the SEC can
the DOJ instigate a preliminary investigation. Thus, the investigation that was commenced by the SEC in 1995, soon after
it discovered the questionable acts of the respondents, effectively interrupted the prescription period. Given the nature
and purpose of the investigation conducted by the SEC, which is equivalent to the preliminary investigation conducted by
the DOJ in criminal cases, such investigation would surely interrupt the prescription period.
VI. The Court of Appeals was justified in denying SEC's Motion for Leave to Quash SEC Omnibus Orders dated 23
October 1995.
The SEC avers that the Court of Appeals erred when it denied its Motion for Leave to Quash SEC Omnibus Orders, dated
23 October 1995, in the light of its admission that the PED had the sole authority to investigate the present case. On this
matter, this Court cannot agree with the SEC.
In the assailed decision, the Court of Appeals denied the SEC's Motion for Leave to Quash SEC Omnibus Orders, since it
found other issues that were more important than whether or not the PED was the proper body to investigate the
matter. Its refusal was premised on its earlier finding that no criminal, civil, or administrative case may be filed against
the respondents under Sections 8, 30 and 36 of the Revised Securities Act, due to the absence of any implementing rules
and regulations. Moreover, the validity of the PED Rules on Practice and Procedure was also raised as an issue. The Court
of Appeals, thus, reasoned that if the quashal of the orders was granted, then it would be deprived of the opportunity to
determine the validity of the aforementioned rules and statutory provisions. In addition, the SEC would merely pursue
the same case without the Court of Appeals having determined whether or not it may do so in accordance with due
process requirements. Absent a determination of whether the SEC may file a case against the respondents based on the
assailed provisions of the Revised Securities Act, it would have been improper for the Court of Appeals to grant the SEC's
Motion for Leave to Quash SEC Omnibus Orders.
In all, this Court rules that no implementing rules were needed to render effective Sections 8, 30 and 36 of the Revised
Securities Act; nor was the PED Rules of Practice and Procedure invalid, prior to the enactment of the Securities
Regulations Code, for failure to provide parties with the right to cross-examine the witnesses presented against them.
Thus, the respondents may be investigated by the appropriate authority under the proper rules of procedure of the
Securities Regulations Code for violations of Sections 8, 30, and 36 of the Revised Securities Act.82
IN VIEW OF THE FOREGOING, the instant Petition is GRANTED. This Court hereby REVERSES the assailed Decision of the
Court of Appeals promulgated on 20 August 1998 in CA-G.R. SP No. 37036 and LIFTS the permanent injunction issued
pursuant thereto. This Court further DECLARES that the investigation of the respondents for violations of Sections 8, 30
and 36 of the Revised Securities Act may be undertaken by the proper authorities in accordance with the Securities
Regulations Code. No costs.
SO ORDERED.

2. No. L-19850. January 30, 1964.

VIGAN ELECTRIC LIGHT COMPANY, INC., petitioner, vs. THE PUBLIC SERVICE COMMISSION, respondent.
Administrative law; Administrative agencies; Rule-making and rate-fixing powers; When legislative in character.—When
the rules and/or rates laid down by an administrative agency are meant to apply to all enterprises of a given kind
throughout the Philippines—they may partake of a legislative character.
Same; Same; Same; When quasi-judicial in character.—Where the rules and/or rates laid down by an administrative
agency applies exclusively to a particular party, predicated upon a finding of fact, based upon a report submitted by the
General Auditing Office, which fact is denied by said party, it is held that in making said finding of fact said agency
performed a function partaking of a quasi-judicial character, the valid exercise of which demands previous notice and
hearing.
Public Service Commission; Exercise of quasi-judicial functions require previous notice and hearing.—Where the
determination of the issue complained of partakes of the nature of a quasi-judicial function of the Public Service
Commission and its order was issued without previous notice and hearing of the party affected, it is held that said order
is null and void for violation of the due process clause.

CONCEPCION, J.:
This is an original action for certiorari to annul an order of respondent Public Service Commission. Upon the filing of the
petition and the submission and approval of the corresponding bond, we issued a writ of injunction restraining said
respondent from enforcing the order complained of Republic Act No. 316, approved on June 19, 1948, granted petitioner
Vigan Electric Light Company, Inc., a franchise to construct, maintain and operate an electric light, heat and/or power
plant for the purpose of generating and distributing light, heat and/or power, for sale within the limits of several
municipalities of the province of Ilocos Sur. Accordingly, petitioner secured from respondent on May 31, 1950, a
certificate of public convenience to render electric light, heat and/or power services in said municipalities and to charge
its customers and/or consumers the following rates:
FLAT RATE
 1 — 20 watt bulb per month ............................................................ P2.30
1 — 25 watt bulb per month ............................................................ 3.00
1 — 40 watt bulb per month ............................................................ 4.50
1 — 50 watt bulb per month ............................................................ 5.50
1 — 60 watt bulb per month ............................................................ 6.50
1 — 75 watt bulb per month ............................................................ 7.50
1 — 80 watt bulb per month ............................................................ 8.00
1 — 100 watt bulb per month ............................................................ 9.00
1 — 150 watt bulb per month ............................................................ 13.00
1 — 200 watt bulb per month ............................................................ 17.00
METER RATE

For the first 15

For the first 15 Kw. hrs. ............................................................ P0.40
For the next 35 Kw. hrs. ............................................................ .30
For the next 50 Kw. hrs. ............................................................ .25
For all over 100 Kw. hrs. ............................................................ .20
Minimum Charge: P6.00 per month for connection of 200 watts
or less; plus P0.01 per watt per month for connection in excess
of 200 watts.
TEMPORARY RATE
P0.01 per watt per night.
On May 22, 1957, petitioner, acting with respondent's approval, entered into a contract for the purchase of electric
power and energy from the National Power Corporation, for resale, in the course of the business of said petitioner, to its
customers, to whom, in fact, petitioner resold said electric power and energy, in accordance with the above schedule of
rates. About five (5) years later, or on January 16, 1962, respondent advised petitioner of a conference to be held on
February 12, 1962 for the purpose of revising its authorized rates. Soon thereafter, petitioner received a letter of
respondent informing the former of an alleged letter-petition of "Congressman Floro Crisologo and 107 alleged residents
of Vigan Ilocos Sur", charging the following:
We also denounce the sale of TWO THOUSAND (2,000) ELECTRIC METERS in blackmarket by the Vigan Electric
Light Company to Avegon Co., as anomalous and illegal. Said electric meters were imported from Japan by the
Vigan Electric Light Company in behalf of the consumers of electric current from said electric company. The
Vigan Electric Light Company has commercialized these privilege which property belong to the people.
We also report that the electric meters in Vigan used by the consumers had been installed in bad faith and they
register excessive rates much more than the actual consumption.1äwphï1.ñët
and directing the petitioner to comment on these charges. In reply to said communications, petitioner's counsel wrote to
respondent, on February 1, 1962, a letter asking that the conference scheduled for February 12 be postponed to March
12, and another letter stating inter alia:
In connection therewith, please be informed that my client, the Vigan Electric Light Co., Inc., has not had any
dealing with the Avegon Co., Inc., relative to the 2,000 electric meter mentioned in the petition. Attached hereto
as Annex "1" and made an integral part thereof is a certification to that effect by Avegon Co., Inc.
 Furthermore, as counsel for Vigan Electric Light Co., Inc., I wish to inform this Honorable Commission that the
charge that said company installed the electric meters in bad faith and that said meters registered excessive rates
could have no valid basis because all of these meters have been inspected checked, tested and sealed by your
office.
On March 15, 1962, petitioner received a communication form the General Auditing Office notifying him that one Mr.
Cesar A. Damole had "been instructed to make an audit and examination of the books and other records of account" of
said petitioner, "under the provisions of Commonwealth Act No. 325 and in accordance with the request of the Public
Service Commission contained in its letter dated March 12, 1962", and directing petitioner to cooperate with said Mr.
Damole "for the successful accomplishment of his work". Subsequently, respondent issued a subpoena duces
tecum requiring petitioner to produce before the former, during a conference scheduled for April 10, 1962, certain books
of account and financial statements specified in said process. On the date last mentioned petitioner moved to quash
the subpoena duces tecum. The motion was not acted upon in said conference of April 10, 1962. However, it was then
decided that the next conference be held on April 30, 1962, which was later postponed to May 21, 1962. When
petitioner's representatives appeared before respondent, on the date last mentioned, they were advised by the latter
that the scheduled conference had been cancelled, that the petition to quash the subpoena duces tecum had been
granted, and that, on May 17, 1962, respondent had issued an order, from which we quote:
We now have the audit report of the General Auditing Office dated May 4, 1962, covering the operation of the
Vigan Electric Light Co., Inc. in Vigan, Bantay and Cagayan, Ilocos Sur, for the period from January 1 to December
31, 1961. We find from the report that the total invested capital of the utility as of December 31, 1961, entitled
to return amounted to P118,132.55, and its net operating income for rate purposes of P53,692.34 represents
45.45% of its invested capital; that in order to earn 12% per annum, the utility should have a computed revenue
by rates of P182,012.78; and that since it realized an actual revenue by rates of P221,529.17, it had an excess
revenue by rates of P39,516.39, which is 17.84% of the actual revenue by rates and 33.45% of the invested
capital. In other words, the present rates of the Vigan Electric Light Co., Inc. may be reduced by 17.84%, or in
round figure, by 18%.
Upon consideration of the foregoing, and finding that the Vigan Electric Light Co., Inc. is making a net operating
profit in excess of the allowable return of 12% on its invested capital, we believe that it is in the public interest
and in consonance with Section 3 of Republic Act No. 3043 that reduction of its rates to the extent of its excess
revenue be put into effect immediately.
WHEREFORE, Vigan Electric Light Co., Inc. is hereby ordered to reduce the present meter rates for its electric
service effective upon the billing for the month of June, 1962, to wit:
METER RATE — 24-HOUR SERVICE
For the first 15 kwh per month at P0.328 per kwh
For the next 35 kwh per month at P0.246 per kwh
For the next 50 kwh per month at P0.205 per kwh
For all over 100 kwh per month at P0.164 per kwh
Minimum Charge: P4.90 per month for connection of 200 was or less plus P0.01 per watt per month for
connection in excess of 200 watts.
TEMPORARY LIGHTING
P0.01 per watt per night.
Minimum Charge: P1.00
Billings to customers shall be made to the nearest multiple of five centavos. The above rates may be revised, modified or
altered at anytime for any just cause and/or in the public service.
Soon later, or on June 25, 1962, petitioner herein instituted the present action for certiorari to annul said order of May
17, 1962, upon the ground that, since its Corporate inception in 1948, petitioner it "never was able to give and never
made a single dividend declaration in favor of its stockholders" because its operation from 1949 to 1961 had resulted in
an aggregate loss of P113,351.523; that in the conference above mentioned petitioner had called the attention of
respondent to the fact that the latter had not furnished the former a "copy of the alleged letter-petition of Congressman
Crisologo and others"; that respondent then expressed the view that there was no necessity of serving copy of said letter
to petitioner, because respondent was merely holding informal conferences to ascertain whether petitioner would
consent to the reduction of its rates; that petitioner objected to said reduction without a hearing, alleging that its rates
could be reduced only if proven by evidence validly adduced to be excessive; that petitioner offered to introduce
evidence to show the reasonableness of its aforementioned rates, and even the fairness of its increase; that petitioner
was then assured that it would be furnished a copy of the aforementioned letter-petition and that a hearing would be
held, if a reduction of its rates could not be agreed upon; that petitioner had not even been served a copy of the
auditor's report upon which the order complained of is based; that such order had been issued without notice and
hearing; and that, accordingly, petitioner had been denied due process.
In its answer respondent admitted some allegations of the complaint and denied other allegations thereof, particularly
the conclusions drawn by petitioner. Likewise, respondent alleged that it granted petitioner's motion to quash the
aforementioned subpoena duces tecum because the documents therein referred to had already been audited and
examined by the General Auditing Office, the report on which was on file with said respondent; that the latter had
directed that petitioner be served a copy of said report; and that, although this has not, as yet, been actually done,
petitioner could have seen and examined said report had it really wanted to do so. By way of special defenses,
respondent, moreover, alleged that the disputed order had been issued under its delegated legislative authority, the
exercise of which does not require previous notice and hearing; and that petitioner had not sought a reconsideration of
said order, and had, accordingly, failed to exhaust all administrative remedies.
In support of its first special defense respondent maintains that rate-fixing is a legislative function; that legislative or rule-
making powers may constitutionally be exercised without previous notice of hearing; and that the decision in Ang Tibay
vs. Court of Industrial Relations (69 Phil., 635) — in which we held that such notice and hearing are essential to the
validity of a decision of the Public Service Commission — is not in point because, unlike the order complained of —
which respondent claims to be legislative in nature — the Ang Tibay case referred to a proceeding involving the exercise
of judicial functions.
At the outset, it should be noted, however, that, consistently with the principle of separation of powers, which underlies
our constitutional system, legislative powers may not be delegated except to local governments, and only to matters
purely of local concern (Rubi vs. Provincia Board, 39 Phil., 660; U.S. vs. Heinszen, 206 U.S. 370). However, Congress may
delegate to administrative agencies of the government the power to supply the details in
the execution or enforcement of a policy laid down by a which is complete in itself (Calalang vs. Williams, 70 Phil. 726;
Pangasinan Trans. Co. vs. Public Service Commission, 70 Phil., 221; People vs. Rosenthal, 68 Phil., 328; People vs. Vera, 65
Phil., 56; Cruz vs. Youngberg, 56 Phil. 234; Alegre vs. Collector of Customs, 53 Phil., 394; U.S. vs. Ang Tang Ho 43 Phil., 1;
Schechter vs. U.S., 295 U.S., 495 Mulford vs. Smith, 307 U.S., 38; Bowles vs. Willingham, 321 U.S., 503). Such law is not
deemed complete unless it lays down a standard or pattern sufficiently fixed or determinate, or, at least, determinable
without requiring another legislation, to guide the administrative body concerned in the performance of its duty to
implement or enforce said Policy (People vs. Lim Ho, L-12091, January 28, 1960; Araneta vs. Gatmaitan, L-8895, April 30,
1957; Cervantes vs. Auditor General, L-4043, May 26, 1952; Philippine Association of Colleges vs. Secretary of Education,
51 Off. Gaz., 6230; People vs. Arnault, 48 Off. Gaz., 4805; Antamok Gold Fields vs. Court of Industrial Relations, 68 Phil.,
340; U.S. vs. Barrias, 11 Phil., 327; Yakus vs. White, 321 U.S., 414; Ammann vs. Mallonce, 332 U.S., 245; U.S. vs. Rock
Royal Corp. 307 U.S., 533; Mutual Film Corp. vs. Industrial Commission, 276 U.S., 230). Otherwise, there would be no
reasonable means to ascertain whether or not said body has acted within the scope of its authority, and, as a
consequence, the power of legislation would eventually be exercised by a branch of the Government other than that in
which it is lodged by the Constitution, in violation, not only of the allocation of powers therein made, but, also, of the
principle of separation of powers. Hence, Congress his not delegated, and cannot delegate legislative powers to the
Public Service Commission.
Moreover, although the rule-making power and even the power to fix rates — when such rules and/or rates are meant to
apply to all enterprises of a given kind throughout the Philippines — may partake of a legislative character, such is not
the nature of the order complained of. Indeed, the same applies exclusively to petitioner herein. What is more, it is
predicated upon the finding of fact — based upon a report submitted by the General Auditing Office — that petitioner is
making a profit of more than 12% of its invested capital, which is denied by petitioner. Obviously, the latter is entitled to
cross-examine the maker of said report, and to introduce evidence to disprove the contents thereof and/or explain or
complement the same, as well as to refute the conclusion drawn therefrom by the respondent. In other words, in making
said finding of fact, respondent performed a functionpartaking of a quasi-judicial character the valid exercise of which
demands previous notice and hearing.
Indeed, sections 16(c) and 20 (a) of Commonwealth Act No. 146, explicitly require notice Indeed hearing. The pertinent
parts thereof provide:
SEC. 16. The Commission shall have the power, upon proper notice and hearing in accordance with the rules and
provision of this Act, subject to the limitations and exception mentioned and saving provisions to the contrary:
xxx xxx xxx
(c) To fix and determine individual or joint rates, tolls charges, classifications, or schedules thereof, as well as
commutation, mileage kilometrage, and other special rates which shall be imposed, observed, and followed
thereafter by any public service: Provided, That the Commission may in its discretion approve rates proposed by
public services provisionally and without necessity of any hearing; but it shall call a hearing thereof within thirty
days thereafter, upon publication and notice to the concerns operating in the territory affected: Provided, further,
That in case the public service equipment of an operator is use principally or secondarily for the promotion of a
private business the net profits of said private business shall be considered in relation with the public service of
such operator for the purpose of fixing the rates.
SEC. 20. Acts requiring the approval of the Commission. — Subject to established limitations and exception and
saving provisions to the contrary, it shall be unlawful for any public service or for the owner, lessee or operator
thereof, without the approval and authorization of the Commission previously had —
(a) To adopt, establish, fix, impose, maintain, collect or carry into effect any individual or joint rates,
commutation mileage or other special rate, toll, fare, charge, classification or itinerary. The Commission shall
approve only those that are just and reasonable and not any that are unjustly discriminatory or unduly
preferential, only upon reasonable notice to the public services and other parties concerned, giving them
reasonable opportunity to be heard, ... . (Emphasis supplied.)
Since compliance with law must be presumed, it should be assumed that petitioner's current rates were fixed by
respondent after proper notice and hearing. Hence, modification of such rates cannot be made, over petitioner's
objection, without such notice and hearing, particularly considering that the factual basis of the action taken by
respondent is assailed by petitioner. The rule applicable is set forth in the American Jurisprudence the following
language:
Whether notice and a hearing in proceedings before a public service commission are necessary depends chiefly
upon statutory or constitutional provisions applicable to such proceedings, which make notice and hearing,
prerequisite to action by the commission, and upon the nature and object of such proceedings, that is, whether
the proceedings, are, on the one hand, legislative and rule-making in character, or are, on the other hand,
determinative and judicial or quasi-judicial, affecting the rights an property of private or specific persons. As a
general rule, a public utility must be afforded some opportunity to be heard as to the propriety and
reasonableness of rates fixed for its services by a public service commission.(43 Am. Jur. 716; Emphasis supplied.)
Wherefore, we hold that the determination of the issue involved in the order complained of partakes of the nature of a
quasi-judicial function and that having been issued without previous notice and hearing said order is clearly violative of
the due process clause, and, hence, null and void, so that a motion for reconsideration thereof is not an absolute
prerequisite to the institution of the present action for certiorari (Ayson vs. Republic. 50 Off. Gaz., 5810). For this reason
considering that said order was being made effective on June 1, 1962, or almost immediately after its issuance (on May
17, 1962), we find that petitioner was justified in commencing this proceedings without first filing said motion (Guerrero
vs. Carbonell, L-7180, March 15, 1955).
WHEREFORE, the writ prayed for is granted and the preliminary injunction issued by this Court hereby made permanent.
It is so ordered.

3. G.R. No. 164026. December 23, 2008.*

SECURITIES AND EXCHANGE COMMISSION, petitioner, vs. GMA NETWORK, INC., respondent.
Administrative Law; Securities and Exchange Commission (SEC); Filing Fees; The Securities and Exchange Commission
(SEC) is entitled to collect and receive the same fees it assesses and collects both for the filing of articles of incorporation
and the filing of an amended articles of incorporation for purposes of extending the term of corporate existence.—
Republic Act No. 3531 (R.A. No. 3531) provides that where the amendment consists in extending the term of corporate
existence, the SEC “shall be entitled to collect and receive for the filing of the amended articles of incorporation the
same fees collectible under existing law as the filing of articles of incorporation.” As is clearly the import of this law, the
SEC shall be entitled to collect and receive the same fees it assesses and collects both for the filing of articles of
incorporation and the filing of an amended articles of incorporation for purposes of extending the term of corporate
existence.
Same; Same; Same; Republic Act (R.A.) No. 3531 provides an unmistakable standard which should guide the Securities
and Exchange Commission (SEC) in fixing and imposing its rates and fees.—What this proposition fails to consider,
however, is the clear directive of R.A. No. 3531 to impose the same fees for the filing of articles of incorporation and the
filing of amended articles of incorporation to reflect an extension of corporate term. R.A. No. 3531 provides an
unmistakable standard which should guide the SEC in fixing and imposing its rates and fees. If such mandate were the
only consideration, the Court would have been inclined to rule that the SEC was correct in imposing the filing fees as
outlined in the questioned memorandum circular, GMA’s argument notwithstanding.
Same; Same; Publication Requirement; The questioned memorandum circular of the Securities and Exchange
Commission (SEC) is invalid as it does not appear from the records that it has been published in the Official Gazette or in
a newspaper of general circulation.—We agree with the Court of Appeals that the questioned memorandum circular is
invalid as it does not appear from the records that it has been published in the Official Gazette or in a newspaper of
general circulation. Executive Order No. 200, which repealed Art. 2 of the Civil Code, provides that “laws shall take effect
after fifteen days following the completion of their publication either in the Official Gazette or in a newspaper of general
circulation in the Philippines, unless it is otherwise provided.”
Same; Same; Office of the National Administrative Register (ONAR); The questioned Securities and Exchange Commission
(SEC) memorandum circular is likewise ineffective for not having been filed with the Office of the National Administrative
Register of the University of the Philippines Law Center as required in the Administrative Code of 1987.—The questioned
memorandum circular, furthermore, has not been filed with the Office of the National Administrative Register of the
University of the Philippines Law Center as required in the Administrative Code of 1987. In Philsa International Placement
and Services Corp. v. Secretary of Labor and Employment, 356 SCRA 174 (2001), Memorandum Circular No. 2, Series of
1983 of the Philippine Overseas Employment Administration, which provided for the schedule of placement and
documentation fees for private employment agencies or authority holders, was struck down as it was not published or
filed with the National Administrative Register.
Same; Same; Same; The questioned Securities and Exchange Commission (SEC) memorandum circular cannot be
construed as simply interpretative of Republic Act (R.A.) No. 3531 since it is an implementation of the mandate of
Republic Act (R.A.) No. 3531 and indubitably regulates and affects the public at large.—The questioned memorandum
circular, it should be emphasized, cannot be construed as simply interpretative of R.A. No. 3531. This administrative
issuance is an implementation of the mandate of R.A. No. 3531 and indubitably regulates and affects the public at large.
It cannot, therefore, be considered a mere internal rule or regulation, nor an interpretation of the law, but a rule which
must be declared ineffective as it was neither published nor filed with the Office of the National Administrative Register.
Same; Same; Due Process; Securities and Exchange Commission’s (SEC’s) assessment amounting to P1,212,200.00 for the
filing of an application for amendment of its articles of incorporation extending its corporate term is exceedingly
unreasonable and amounts to an imposition—a filing fee, by legal definition, is that charged by a public official to accept
a document for processing, and must be just, fair, and proportionate to the service for which the fee is being collected;
The due process clause, however, permits the courts to determine whether the regulation issued by the Securities and
Exchange Commission (SEC) is reasonable and within the bounds of its rate-fixing authority and to strike it down when it
arbitrarily infringes on a person’s right to property.—A related factor which precludes consideration of the questioned
issuance as interpretative in nature merely is the fact the SEC’s assessment amounting to P1,212,200.00 is exceedingly
unreasonable and amounts to an imposition. A filing fee, by legal definition, is that charged by a public official to accept a
document for processing. The fee should be just, fair, and proportionate to the service for which the fee is being
collected, in this case, the examination and verification of the documents submitted by GMA to warrant an extension of
its corporate term. Rate-fixing is a legislative function which concededly has been delegated to the SEC by R.A. No. 3531
and other pertinent laws. The due process clause, however, permits the courts to determine whether the regulation
issued by the SEC is reasonable and within the bounds of its rate-fixing authority and to strike it down when it arbitrarily
infringes on a person’s right to property.

TINGA, J.:
Petitioner Securities and Exchange Commission (SEC) assails the Decision1 dated February 20, 2004 of the Court of
Appeals in CA-G.R. SP No. 68163, which directed that SEC Memorandum Circular No. 1, Series of 1986 should be the
basis for computing the filing fee relative to GMA Network, Inc.’s (GMA’s) application for the amendment of its articles of
incorporation for purposes of extending its corporate term.
The undisputed facts as narrated by the appellate court are as follows:
On August 19, 1995, the petitioner, GMA NETWORK, INC., (GMA, for brevity), a domestic corporation, filed an
application for collective approval of various amendments to its Articles of Incorporation and By-Laws with the
respondent Securities and Exchange Commission, (SEC, for brevity). The amendments applied for include, among
others, the change in the corporate name of petitioner from "Republic Broadcasting System, Inc." to "GMA
Network, Inc." as well as the extension of the corporate term for another fifty (50) years from and after June 16,
2000.
Upon such filing, the petitioner had been assessed by the SEC’s Corporate and Legal Department a separate filing
fee for the application for extension of corporate term equivalent to 1/10 of 1% of its authorized capital stock plus
20% thereof or an amount of P1,212,200.00.
On September 26, 1995, the petitioner informed the SEC of its intention to contest the legality and propriety of
the said assessment. However, the petitioner requested the SEC to approve the other amendments being
requested by the petitioner without being deemed to have withdrawn its application for extension of corporate
term.
On October 20, 1995, the petitioner formally protested the assessment amounting to P1,212,200.00 for its
application for extension of corporate term.
On February 20, 1996, the SEC approved the other amendments to the petitioner’s Articles of Incorporation,
specifically Article 1 thereof referring to the corporate name of the petitioner as well as Article 2 thereof
referring to the principal purpose for which the petitioner was formed.
On March 19, 1996, the petitioner requested for an official opinion/ruling from the SEC on the validity and
propriety of the assessment for application for extension of its corporate term.
Consequently, the respondent SEC, through Associate Commissioner Fe Eloisa C. Gloria, on April 18, 1996, issued
its ruling upholding the validity of the questioned assessment, the dispositive portion of which states:
"In light of the foregoing, we believe that the questioned assessment is in accordance with law. Accordingly,
you are hereby required to comply with the required filing fee."
An appeal from the aforequoted ruling of the respondent SEC was subsequently taken by the petitioner on the
ground that the assessment of filing fees for the petitioner’s application for extension of corporate term
equivalent to 1/10 of 1% of the authorized capital stock plus 20% thereof is not in accordance with law.
On September 26, 2001, following three (3) motions for early resolution filed by the petitioner, the respondent
SEC En Banc issued the assailed order dismissing the petitioner’s appeal, the dispositive portion of which
provides as follows:
WHEREFORE, for lack of merit, the instant Appeal is hereby dismissed.
SO ORDERED.2
In its petition for review3 with the Court of Appeals, GMA argued that its application for the extension of its corporate
term is akin to an amendment and not to a filing of new articles of incorporation. It further averred that SEC
Memorandum Circular No. 2, Series of 1994, which the SEC used as basis for assessing P1,212,200.00 as filing fee for the
extension of GMA’s corporate term, is not valid.
The appellate court agreed with the SEC’s submission that an extension of the corporate term is a grant of a fresh license
for a corporation to act as a juridical being endowed with the powers expressly bestowed by the State. As such, it is not
an ordinary amendment but is analogous to the filing of new articles of incorporation.
However, the Court of Appeals ruled that Memorandum Circular No. 2, Series of 1994 is legally invalid and ineffective for
not having been published in accordance with law. The challenged memorandum circular, according to the appellate
court, is not merely an internal or interpretative rule, but affects the public in general. Hence, its publication is required
for its effectivity.
The appellate court denied reconsideration in a Resolution4 dated June 9, 2004.
In its Memorandum5 dated September 6, 2005, the SEC argues that it issued the questioned memorandum circular in the
exercise of its delegated legislative power to fix fees and charges. The filing fees required by it are allegedly uniformly
imposed on the transacting public and are essential to its supervisory and regulatory functions. The fees are not a form
of penalty or sanction and, therefore, require no publication.
For its part, GMA points out in its Memorandum,6 dated September 23, 2005, that SEC Memorandum Circular No. 1,
Series of 1986 refers to the filing fees for amended articles of incorporation where the amendment consists of extending
the term of corporate existence. The questioned circular, on the other hand, refers only to filing fees for articles of
incorporation. Thus, GMA argues that the former circular, being the one that specifically treats of applications for the
extension of corporate term, should apply to its case.
Assuming that Memorandum Circular No. 2, Series of 1994 is applicable, GMA avers that the latter did not take effect
and cannot be the basis for the imposition of the fees stated therein for the reasons that it was neither filed with the
University of the Philippines Law Center nor published either in the Official Gazette or in a newspaper of general
circulation as required under existing laws.
It should be mentioned at the outset that the authority of the SEC to collect and receive fees as authorized by law is not
in question.7 Its power to collect fees for examining and filing articles of incorporation and by-laws and amendments
thereto, certificates of increase or decrease of the capital stock, among others, is recognized. Likewise established is its
power under Sec. 7 of P.D. No. 902-A to recommend to the President the revision, alteration, amendment or adjustment
of the charges which it is authorized to collect.
The subject of the present inquiry is not the authority of the SEC to collect and receive fees and charges, but rather the
validity of its imposition on the basis of a memorandum circular which, the Court of Appeals held, is ineffective.
Republic Act No. 3531 (R.A. No. 3531) provides that where the amendment consists in extending the term of corporate
existence, the SEC "shall be entitled to collect and receive for the filing of the amended articles of incorporation the
same fees collectible under existing law as the filing of articles of incorporation."8 As is clearly the import of this law, the
SEC shall be entitled to collect and receive the same fees it assesses and collects both for the filing of articles of
incorporation and the filing of an amended articles of incorporation for purposes of extending the term of corporate
existence.
The SEC, effectuating its mandate under the aforequoted law and other pertinent laws,9 issued SEC Memorandum
Circular No. 1, Series of 1986, imposing the filing fee of 1/10 of 1% of the authorized capital stock but not less
than P300.00 nor more than P100,000.00 for stock corporations, and 1/10 of 1% of the authorized capital stock but not
less than P200.00 nor more than P100,000.00 for stock corporations without par value, for the filing of amended articles
of incorporation where the amendment consists of extending the term of corporate existence.
Several years after, the SEC issued Memorandum Circular No. 2, Series of 1994, imposing new fees and charges and
deleting the maximum filing fee set forth in SEC Circular No. 1, Series of 1986, such that the fee for the filing of articles of
incorporation became 1/10 of 1% of the authorized capital stock plus 20% thereof but not less thanP500.00.
A reading of the two circulars readily reveals that they indeed pertain to different matters, as GMA points out. SEC
Memorandum Circular No. 1, Series of 1986 refers to the filing fee for the amendment of articles of incorporation to
extend corporate life, while Memorandum Circular No. 2, Series of 1994 pertains to the filing fee for articles of
incorporation. Thus, as GMA argues, the former circular, being squarely applicable and, more importantly, being more
favorable to it, should be followed.
What this proposition fails to consider, however, is the clear directive of R.A. No. 3531 to impose the same fees for the
filing of articles of incorporation and the filing of amended articles of incorporation to reflect an extension of corporate
term. R.A. No. 3531 provides an unmistakable standard which should guide the SEC in fixing and imposing its rates and
fees. If such mandate were the only consideration, the Court would have been inclined to rule that the SEC was correct in
imposing the filing fees as outlined in the questioned memorandum circular, GMA’s argument notwithstanding.
However, we agree with the Court of Appeals that the questioned memorandum circular is invalid as it does not appear
from the records that it has been published in the Official Gazette or in a newspaper of general circulation. Executive
Order No. 200, which repealed Art. 2 of the Civil Code, provides that "laws shall take effect after fifteen days following
the completion of their publication either in the Official Gazette or in a newspaper of general circulation in the
Philippines, unless it is otherwise provided."
In Tañada v. Tuvera,10 the Court, expounding on the publication requirement, held:
We hold therefore that all statutes, including those of local application and private laws, shall be published as a
condition for their effectivity, which shall begin fifteen days after publication unless a different effectivity date is
fixed by the legislature.
Covered by this rule are presidential decrees and executive orders promulgated by the President in the exercise
of legislative powers whenever the same are validly delegated by the legislature, or, at present, directly conferred
by the Constitution. Administrative rules and regulations must also be published if their purpose is to enforce or
implement existing law pursuant also to a valid delegation.
Interpretative regulations and those merely internal in nature, that is, regulating only the personnel of the
administrative agency and not the public, need not be published. Neither is publication required of the so-called
letters of instructions issued by administrative superiors concerning the rules or guidelines to be followed by
their subordinates in the performance of their duties.11
The questioned memorandum circular, furthermore, has not been filed with the Office of the National Administrative
Register of the University of the Philippines Law Center as required in the Administrative Code of 1987.12
In Philsa International Placement and Services Corp. v. Secretary of Labor and Employment,13 Memorandum Circular No.
2, Series of 1983 of the Philippine Overseas Employment Administration, which provided for the schedule of placement
and documentation fees for private employment agencies or authority holders, was struck down as it was not published
or filed with the National Administrative Register.
The questioned memorandum circular, it should be emphasized, cannot be construed as simply interpretative of R.A. No.
3531. This administrative issuance is an implementation of the mandate of R.A.
No. 3531 and indubitably regulates and affects the public at large. It cannot, therefore, be considered a mere internal
rule or regulation, nor an interpretation of the law, but a rule which must be declared ineffective as it was neither
published nor filed with the Office of the National Administrative Register.
A related factor which precludes consideration of the questioned issuance as interpretative in nature merely is the fact
the SEC’s assessment amounting to P1,212,200.00 is exceedingly unreasonable and amounts to an imposition. A filing
fee, by legal definition, is that charged by a public official to accept a document for processing. The fee should be just,
fair, and proportionate to the service for which the fee is being collected, in this case, the examination and verification of
the documents submitted by GMA to warrant an extension of its corporate term.
Rate-fixing is a legislative function which concededly has been delegated to the SEC by R.A. No. 3531 and other pertinent
laws. The due process clause, however, permits the courts to determine whether the regulation issued by the SEC is
reasonable and within the bounds of its rate-fixing authority and to strike it down when it arbitrarily infringes on a
person’s right to property.
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 68163, dated February 20,
2004, and its Resolution, dated June 9, 2004, are AFFIRMED. No pronouncement as to costs.
SO ORDERED.