G.R. No.

159694 January 27, 2006

COMMISSIONER OF INTERNAL REVENUE, Petitioner,

vs.
AZUCENA T. REYES, Respondent.

x -- -- -- -- -- -- -- -- -- -- -- -- -- x

G.R. No. 163581 January 27, 2006

AZUCENA T. REYES, Petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.

DECISION

PANGANIBAN, CJ.:

Under the present provisions of the Tax Code and pursuant to elementary due process, taxpayers
must be informed in writing of the law and the facts upon which a tax assessment is based; otherwise,
the assessment is void. Being invalid, the assessment cannot in turn be used as a basis for the
perfection of a tax compromise.

The Case

Before us are two consolidated1 Petitions for Review2 filed under Rule 45 of the Rules of Court,
assailing the August 8, 2003 Decision3 of the Court of Appeals (CA) in CA-GR SP No. 71392. The
dispositive portion of the assailed Decision reads as follows:

"WHEREFORE, the petition is GRANTED. The assailed decision of the Court of Tax Appeals is
ANNULLED and SET ASIDE without prejudice to the action of the National Evaluation Board on the
proposed compromise settlement of the Maria C. Tancinco estate’s tax liability."4

The Facts

The CA narrated the facts as follows:

"On July 8, 1993, Maria C. Tancinco (or ‘decedent’) died, leaving a 1,292 square-meter residential lot
and an old house thereon (or ‘subject property’) located at 4931 Pasay Road, Dasmariñas Village,
Makati City.

"On the basis of a sworn information-for-reward filed on February 17, 1997 by a certain Raymond
Abad (or ‘Abad’), Revenue District Office No. 50 (South Makati) investigated on the decedent’s estate
(or ‘estate’). Subsequently, it issued a Return Verification Order. But without the required preliminary
findings being submitted, it issued Letter of Authority No. 132963 for the regular investigation of the
estate tax case. Azucena T. Reyes (or ‘[Reyes]’), one of the decedent’s heirs, received the Letter of
Authority on March 14, 1997.

"On February 12, 1998, the Chief, Assessment Division, Bureau of Internal Revenue (or ‘BIR’), issued
a preliminary assessment notice against the estate in the amount of P14,580,618.67. On May 10,
1998, the heirs of the decedent (or ‘heirs’) received a final estate tax assessment notice and a demand
letter, both dated April 22, 1998, for the amount of P14,912,205.47, inclusive of surcharge and interest.

"On June 1, 1998, a certain Felix M. Sumbillo (or ‘Sumbillo’) protested the assessment [o]n behalf of
the heirs on the ground that the subject property had already been sold by the decedent sometime in
1990.

"On November 12, 1998, the Commissioner of Internal Revenue (or ‘[CIR]’) issued a preliminary
collection letter to [Reyes], followed by a Final Notice Before Seizure dated December 4, 1998.

"On January 5, 1999, a Warrant of Distraint and/or Levy was served upon the estate, followed on
February 11, 1999 by Notices of Levy on Real Property and Tax Lien against it.

"On March 2, 1999, [Reyes] protested the notice of levy. However, on March 11, 1999, the heirs
proposed a compromise settlement of P1,000,000.00.

"In a letter to [the CIR] dated January 27, 2000, [Reyes] proposed to pay 50% of the basic tax due,
citing the heirs’ inability to pay the tax assessment. On March 20, 2000, [the CIR] rejected [Reyes’s]
offer, pointing out that since the estate tax is a charge on the estate and not on the heirs, the latter’s
financial incapacity is immaterial as, in fact, the gross value of the estate amounting to P32,420,360.00
is more than sufficient to settle the tax liability. Thus, [the CIR] demanded payment of the amount
of P18,034,382.13 on or before April 15, 2000[;] otherwise, the notice of sale of the subject property
would be published.

"On April 11, 2000, [Reyes] again wrote to [the CIR], this time proposing to pay 100% of the basic tax
due in the amount of P5,313,891.00. She reiterated the proposal in a letter dated May 18, 2000.

"As the estate failed to pay its tax liability within the April 15, 2000 deadline, the Chief, Collection
Enforcement Division, BIR, notified [Reyes] on June 6, 2000 that the subject property would be sold
at public auction on August 8, 2000.

"On June 13, 2000, [Reyes] filed a protest with the BIR Appellate Division. Assailing the scheduled
auction sale, she asserted that x x x the assessment, letter of demand[,] and the whole tax proceedings
against the estate are void ab initio. She offered to file the corresponding estate tax return and pay the
correct amount of tax without surcharge [or] interest.

"Without acting on [Reyes’s] protest and offer, [the CIR] instructed the Collection Enforcement Division
to proceed with the August 8, 2000 auction sale. Consequently, on June 28, 2000, [Reyes] filed a
[P]etition for [R]eview with the Court of Tax Appeals (or ‘CTA’), docketed as CTA Case No. 6124.

"On July 17, 2000, [Reyes] filed a Motion for the Issuance of a Writ of Preliminary Injunction or Status
Quo Order, which was granted by the CTA on July 26, 2000. Upon [Reyes’s] filing of a surety bond in
the amount of P27,000,000.00, the CTA issued a [R]esolution dated August 16, 2000 ordering [the
CIR] to desist and refrain from proceeding with the auction sale of the subject property or from issuing
a [W]arrant of [D]istraint or [G]arnishment of [B]ank [A]ccount[,] pending determination of the case
and/or unless a contrary order is issued.

"[The CIR] filed a [M]otion to [D]ismiss the petition on the grounds (i) that the CTA no longer has
jurisdiction over the case[,] because the assessment against the estate is already final and executory;
and (ii) that the petition was filed out of time. In a [R]esolution dated November 23, 2000, the CTA
denied [the CIR’s] motion.

"During the pendency of the [P]etition for [R]eview with the CTA, however, the BIR issued Revenue
Regulation (or ‘RR’) No. 6-2000 and Revenue Memorandum Order (or ‘RMO’) No. 42-2000 offering
certain taxpayers with delinquent accounts and disputed assessments an opportunity to compromise
their tax liability.

"On November 25, 2000, [Reyes] filed an application with the BIR for the compromise settlement (or
‘compromise’) of the assessment against the estate pursuant to Sec. 204(A) of the Tax Code, as
implemented by RR No. 6-2000 and RMO No. 42-2000.(However this compromise was still at issue
for not being a perfected compromise and so the tax liability was not settled.)

"On December 26, 2000, [Reyes] filed an Ex-Parte Motion for Postponement of the hearing before the
CTA scheduled on January 9, 2001, citing her pending application for compromise with the BIR. The
motion was granted and the hearing was reset to February 6, 2001.

"On January 29, 2001, [Reyes] moved for postponement of the hearing set on February 6, 2001, this
time on the ground that she had already paid the compromise amount of P1,062,778.20 but was still
awaiting approval of the National Evaluation Board (or ‘NEB’). The CTA granted the motion and reset
the hearing to February 27, 2001.

"On February 19, 2001, [Reyes] filed a Motion to Declare Application for the Settlement of Disputed
Assessment as a Perfected Compromise. In said motion, she alleged that [the CIR] had not yet signed
the compromise[,] because of procedural red tape requiring the initials of four Deputy Commissioners
on relevant documents before the compromise is signed by the [CIR]. [Reyes] posited that the absence
of the requisite initials and signature[s] on said documents does not vitiate the perfected compromise.

"Commenting on the motion, [the CIR] countered that[,] without the approval of the NEB, [Reyes’s]
application for compromise with the BIR cannot be considered a perfected or consummated
compromise.

"On March 9, 2001, the CTA denied [Reyes’s] motion, prompting her to file a Motion for
Reconsideration Ad Cautelam. In a [R]esolution dated April 10, 2001, the CTA denied the [M]otion for
[R]econsideration with the suggestion that[,] for an orderly presentation of her case and to prevent
piecemeal resolutions of different issues, [Reyes] should file a [S]upplemental [P]etition for [R]eview[,]
setting forth the new issue of whether there was already a perfected compromise.
"On May 2, 2001, [Reyes] filed a Supplemental Petition for Review with the CTA, followed on June 4,
2001 by its Amplificatory Arguments (for the Supplemental Petition for Review), raising the following
issues:

‘1. Whether or not an offer to compromise by the [CIR], with the acquiescence by the Secretary of
Finance, of a tax liability pending in court, that was accepted and paid by the taxpayer, is a perfected
and consummated compromise.

‘2. Whether this compromise is covered by the provisions of Section 204 of the Tax Code (CTRP) that
requires approval by the BIR [NEB].’

"Answering the Supplemental Petition, [the CIR] averred that an application for compromise of a tax
liability under RR No. 6-2000 and RMO No. 42-2000 requires the evaluation and approval of either the
NEB or the Regional Evaluation Board (or ‘REB’), as the case may be.

"On June 14, 2001, [Reyes] filed a Motion for Judgment on the Pleadings; the motion was granted on
July 11, 2001. After submission of memoranda, the case was submitted for [D]ecision.

"On June 19, 2002, the CTA rendered a [D]ecision, the decretal portion of which pertinently reads:

‘WHEREFORE, in view of all the foregoing, the instant [P]etition for [R]eview is hereby DENIED.
Accordingly, [Reyes] is hereby ORDERED to PAY deficiency estate tax in the amount of Nineteen
Million Five Hundred Twenty Four Thousand Nine Hundred Nine and 78/100 (P19,524,909.78),
computed as follows:

xxxxxxxxx

‘[Reyes] is likewise ORDERED to PAY 20% delinquency interest on deficiency estate tax due
of P17,934,382.13 from January 11, 2001 until full payment thereof pursuant to Section 249(c) of the
Tax Code, as amended.’

"In arriving at its decision, the CTA ratiocinated that there can only be a perfected and consummated
compromise of the estate’s tax liability[,] if the NEB has approved [Reyes’s] application for compromise
in accordance with RR No. 6-2000, as implemented by RMO No. 42-2000.

"Anent the validity of the assessment notice and letter of demand against the estate, the CTA stated
that ‘at the time the questioned assessment notice and letter of demand were issued, the heirs knew
very well the law and the facts on which the same were based.’ It also observed that the petition was
not filed within the 30-day reglementary period provided under Sec. 11 of Rep. Act No. 1125 and Sec.
228 of the Tax Code."5

Ruling of the Court of Appeals

In partly granting the Petition, the CA said that Section 228 of the Tax Code and RR 12-99 were
mandatory and unequivocal in their requirement. The assessment notice and the demand letter should
have stated the facts and the law on which they were based; otherwise, they were deemed void.6 The
appellate court held that while administrative agencies, like the BIR, were not bound by procedural
requirements, they were still required by law and equity to observe substantive due process. The
reason behind this requirement, said the CA, was to ensure that taxpayers would be duly apprised of
-- and could effectively protest -- the basis of tax assessments against them.7Since the assessment
and the demand were void, the proceedings emanating from them were likewise void, and any order
emanating from them could never attain finality.

The appellate court added, however, that it was premature to declare as perfected and consummated
the compromise of the estate’s tax liability. It explained that, where the basic tax assessed
exceeded P1 million, or where the settlement offer was less than the prescribed minimum rates, the
National Evaluation Board’s (NEB) prior evaluation and approval were the conditio sine qua non to the
perfection and consummation of any compromise.8Besides, the CA pointed out, Section 204(A) of the
Tax Code applied to all compromises, whether government-initiated or not.9 Where the law did not
distinguish, courts too should not distinguish.

Hence, this Petition.10

The Issues

In GR No. 159694, petitioner raises the following issues for the Court’s consideration:

"I.
Whether petitioner’s assessment against the estate is valid.

"II.

Whether respondent can validly argue that she, as well as the other heirs, was not aware of the facts
and the law on which the assessment in question is based, after she had opted to propose several
compromises on the estate tax due, and even prematurely acting on such proposal by paying 20% of
the basic estate tax due."11

The foregoing issues can be simplified as follows: first, whether the assessment against the estate is
valid; and, second, whether the compromise entered into is also valid.

The Court’s Ruling

The Petition is unmeritorious.

First Issue:

Validity of the Assessment Against the Estate

The second paragraph of Section 228 of the Tax Code12 is clear and mandatory. It provides as follows:

"Sec. 228. Protesting of Assessment. --

x x x x x x x x xUnder the Tax Code, it is clear and mandatory that:

"The taxpayers shall be informed in writing of the law and the facts on which the assessment is made:
otherwise, the assessment shall be void."

In the present case, Reyes was not informed in writing of the law and the facts on which the
assessment of estate taxes had been made. She was merely notified of the findings by the CIR, who
had simply relied upon the provisions of former Section 22913 prior to its amendment by Republic Act
(RA) No. 8424, otherwise known as the Tax Reform Act of 1997.

First, RA 8424 has already amended the provision of Section 229 on protesting an assessment. The
old requirement of merely notifying the taxpayer of the CIR’s findings was changed in 1998
to informing the taxpayer of not only the law, but also of the facts on which an assessment would be
made; otherwise, the assessment itself would be invalid.

It was on February 12, 1998, that a preliminary assessment notice was issued against the estate. On
April 22, 1998, the final estate tax assessment notice, as well as demand letter, was also issued.
During those dates, RA 8424 was already in effect. The notice required under the old law was no
longer sufficient under the new law.

To be simply informed in writing of the investigation being conducted and of the recommendation for
the assessment of the estate taxes due is nothing but a perfunctory discharge of the tax function of
correctly assessing a taxpayer. The act cannot be taken to mean that Reyes already knew the law
and the facts on which the assessment was based. It does not at all conform to the compulsory
requirement under Section 228. Moreover, the Letter of Authority received by respondent on March
14, 1997 was for the sheer purpose of investigation and was not even the requisite notice under the
law.

The procedure for protesting an assessment under the Tax Code is found in Chapter III of Title VIII,
which deals with remedies. Being procedural in nature, can its provision then be applied retroactively?
The answer is yes.

The general rule is that statutes are prospective. However, statutes that are remedial, or that do not
create new or take away vested rights, do not fall under the general rule against the retroactive
operation of statutes.14 Clearly, Section 228 provides for the procedure in case an assessment is
protested. The provision does not create new or take away vested rights. In both instances, it can
surely be applied retroactively. Moreover, RA 8424 does not state, either expressly or by necessary
implication, that pending actions are excepted from the operation of Section 228, or that applying it to
pending proceedings would impair vested rights.

Second, the non-retroactive application of Revenue Regulation (RR) No. 12-99 is of no moment,
considering that it merely implements the law.
A tax regulation is promulgated by the finance secretary to implement the provisions of the Tax
Code.15 While it is desirable for the government authority or administrative agency to have one
immediately issued after a law is passed, the absence of the regulation does not automatically mean
that the law itself would become inoperative.

At the time the pre-assessment notice was issued to Reyes, RA 8424 already stated that the taxpayer
must be informed of both the law and facts on which the assessment was based. Thus, the CIR should
have required the assessment officers of the Bureau of Internal Revenue (BIR) to follow the clear
mandate of the new law. The old regulation governing the issuance of estate tax assessment notices
ran afoul of the rule that tax regulations -- old as they were -- should be in harmony with, and not
supplant or modify, the law.16

It may be argued that the Tax Code provisions are not self-executory. It would be too wide a stretch
of the imagination, though, to still issue a regulation that would simply require tax officials to inform the
taxpayer, in any manner, of the law and the facts on which an assessment was based. That
requirement is neither difficult to make nor its desired results hard to achieve.

Moreover, an administrative rule interpretive of a statute, and not declarative of certain rights and
corresponding obligations, is given retroactive effect as of the date of the effectivity of the statute.17 RR
12-99 is one such rule. Being interpretive of the provisions of the Tax Code, even if it was issued only
on September 6, 1999, this regulation was to retroact to January 1, 1998 -- a date prior to the issuance
of the preliminary assessment notice and demand letter.

Third, neither Section 229 nor RR 12-85 can prevail over Section 228 of the Tax Code.

No doubt, Section 228 has replaced Section 229. The provision on protesting an assessment has
been amended. Furthermore, in case of discrepancy between the law as amended and its
implementing but old regulation, the former necessarily prevails.18 Thus, between Section 228 of the
Tax Code and the pertinent provisions of RR 12-85, the latter cannot stand because it cannot go
beyond the provision of the law. The law must still be followed, even though the existing tax regulation
at that time provided for a different procedure. The regulation then simply provided that notice be sent
to the respondent in the form prescribed, and that no consequence would ensue for failure to comply
with that form.

Fourth, petitioner violated the cardinal rule in administrative law that the taxpayer be accorded due
process. Not only was the law here disregarded, but no valid notice was sent, either. A void
assessment bears no valid fruit.

The law imposes a substantive, not merely a formal, requirement. To proceed heedlessly with tax
collection without first establishing a valid assessment is evidently violative of the cardinal principle in
administrative investigations: that taxpayers should be able to present their case and adduce
supporting evidence.19 In the instant case, respondent has not been informed of the basis of the estate
tax liability. Without complying with the unequivocal mandate of first informing the taxpayer of the
government’s claim, there can be no deprivation of property, because no effective protest can be
made.20 The haphazard shot at slapping an assessment, supposedly based on estate taxation’s
general provisions that are expected to be known by the taxpayer, is utter chicanery.

Even a cursory review of the preliminary assessment notice, as well as the demand letter sent, reveals
the lack of basis for -- not to mention the insufficiency of -- the gross figures and details of the itemized
deductions indicated in the notice and the letter. This Court cannot countenance an assessment based
on estimates that appear to have been arbitrarily or capriciously arrived at. Although taxes are the
lifeblood of the government, their assessment and collection "should be made in accordance with law
as any arbitrariness will negate the very reason for government itself."21

Fifth, the rule against estoppel does not apply. Although the government cannot be estopped by the
negligence or omission of its agents, the obligatory provision on protesting a tax assessment cannot
be rendered nugatory by a mere act of the CIR .

Tax laws are civil in nature.22 Under our Civil Code, acts executed against the mandatory provisions
of law are void, except when the law itself authorizes the validity of those acts.23 Failure to comply with
Section 228 does not only render the assessment void, but also finds no validation in any provision in
the Tax Code. We cannot condone errant or enterprising tax officials, as they are expected to be
vigilant and law-abiding.

Second Issue:

Validity of Compromise
It would be premature for this Court to declare that the compromise on the estate tax liability has been
perfected and consummated, considering the earlier determination that the assessment against the
estate was void. Nothing has been settled or finalized. Under Section 204(A) of the Tax Code, where
the basic tax involved exceeds one million pesos or the settlement offered is less than the prescribed
minimum rates, the compromise shall be subject to the approval of the NEB composed of the petitioner
and four deputy commissioners.

Finally, as correctly held by the appellate court, this provision applies to all compromises, whether
government-initiated or not. Ubi lex non distinguit, nec nos distinguere debemos. Where the law does
not distinguish, we should not distinguish.

WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED. No
pronouncement as to costs.

SO ORDERED.

G.R. No. 175451 September 28, 2007

ROSARIO L. DADULO, Petitioner,

vs.
THE HON. COURT OF APPEALS, OFFICE OF THE OMBUDSMAN, HON. FELICIANO
BELMONTE, JR., in his capacity as City Mayor of Quezon City and GLORIA
PATANGUI, Respondents.

RESOLUTION

YNARES-SANTIAGO, J.:

For resolution is the motion for reconsideration filed by petitioner Rosario Dadulo of the Decision dated
April 13, 2007 which disposed of the case as follows:

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 89909
affirming the March 4, 2003 Decision of the Office of the Ombudsman in OMB-C-A-0470-J which found
petitioner Rosario Dadulo guilty of conduct prejudicial to the best interest of the service and imposed
upon her the penalty of suspension for six months is AFFIRMED.

SO ORDERED.1

Petitioner insists that the decision of the Office of the Ombudsman which found her guilty of conduct
prejudicial to the best interest of the service and imposed upon her the penalty of suspension for six
months, which was affirmed by the Court of Appeals in the assailed April 13, 2007 Decision, was not
supported by substantial evidence and that the implementation of the suspension Order is premature.

We deny the motion for reconsideration.

The factual findings of the Office of the Ombudsman upon which its decision on petitioner’s
administrative liability was based are supported by the evidence on record. These include the affidavits
of the parties to the instant case including those of respondent Gloria Patangui and Jessica Patangui,
and the counter-affidavits of petitioner and of the other Barangay Security Development Officers
(BSDO).

Respondent Gloria Patangui testified that on September 22, 2002, the construction materials were
taken from her house and were brought to the barangay outpost. Patangui was informed by a BSDO
that petitioner ordered the seizure.

Jessica, respondent’s 9 year-old daughter, testified that she witnessed the actual taking of the
construction materials; that she saw two men enter their premises and take the construction materials
while a woman was supervising the activity. She later identified these men as the co-accused of
petitioner.

Efren Pagabao, one of the BSDO administratively charged with petitioner, admitted that they went to
the residence of respondent upon orders of petitioner on September 22, 2002 to verify whether
respondent has a barangay permit for the house construction they were undertaking. This established
the presence of the barangay officials at the respondent’s residence and that they were there upon
orders of petitioner.
On the other hand, other than a sweeping general denial of the charges against her, petitioner merely
alleged that respondent was a professional squatter. She did not specifically deny any of the acts
imputed against her nor did she explain why the construction materials were later found at the
barangay outpost.

Thus, contrary to petitioner’s claim, there is substantial evidence on record sufficient to hold her
administratively liable. She also alleged that there was premature implementation of the suspension
order against her.

As to the alleged premature implementation of the suspension order, the same is likewise bereft of
merit.

Petitioner argues that her appeal has the effect of staying the execution of the decision of the
Ombudsman hence, the immediate implementation of the suspension order before it has become final
and executory, was premature. She cited the cases of Lapid v. Court of Appeals2 and Laxina v. Court
of Appeals3 where this Court ruled against the immediate implementation of the Ombudsman’s
dismissal orders in view of Section 274 of Republic Act No. 6770.5

As correctly observed by the Solicitor General, at the time the Lapid and Laxina cases were decided,
Section 7, Rule III of the Rules of Procedure of the Office of the Ombudsman was silent as to the
execution of its decisions pending appeal. This was later amended by Administrative Order No. 17
and Administrative Order No. 14-A as implemented by Memorandum Circular No. 1 s. 2006. Hence,
as amended, Section 7 of Rule III now reads:

Section 7. Finality and execution of decision. – Where the respondent is absolved of the charge, and
in case of conviction where the penalty imposed is public censure or reprimand, suspension of not
more than one month, or a fine equivalent to one month salary, the decision shall be final, executory
and unappealable. In all other cases, the decision may be appealed to the Court of Appeals on a
verified petition for review under the requirements and conditions set forth in Rule 43 of the Rules of
Court, within fifteen (15) days from receipt of the written Notice of the Decision or Order denying the
Motion for Reconsideration. 1âw phi1

An appeal shall not stop the decision from being executory. In case the penalty is suspension
or removal and the respondent wins such appeal, he shall be considered as having been under
preventive suspension and shall be paid the salary and such other emoluments that he did not
receive by reason of the suspension or removal.

A decision of the Office of the Ombudsman in administrative cases shall be executed as a

matter of course. The Office of the Ombudsman shall ensure that the decision shall be strictly
1âwphi1

enforced and properly implemented. The refusal or failure by any officer without just cause to comply
with an order of the Office of the Ombudsman to remove, suspend, demote, fine, or censure shall be
a ground for disciplinary action against said officer.

In the case of In the Matter to Declare in Contempt of Court Hon. Simeon A. Datumanong, Secretary
of DPWH,6 we held that:

The Rules of Procedure of the Office of the Ombudsman are clearly procedural and no vested right of
the petitioner is violated as he is considered preventively suspended while his case is on appeal.
Moreover, in the event he wins on appeal, he shall be paid the salary and such other emoluments that
he did not receive by reason of the suspension or removal. Besides, there is no such thing as a vested
interest in an office, or even an absolute right to hold office. Excepting constitutional offices which
provide for special immunity as regards salary and tenure, no one can be said to have any vested right
in an office.7

Well-settled is the rule that procedural laws are construed to be applicable to actions pending and
undetermined at the time of their passage, and are deemed retroactive in that sense and to that extent.
As a general rule, the retroactive application of procedural laws cannot be considered violative of any
personal rights because no vested right may attach to nor arise therefrom.8

Following the ruling in the above cited case, this Court, in Buencamino v. Court of Appeals,9 upheld
the resolution of the Court of Appeals denying Buencamino’s application for preliminary injunction
against the immediate implementation of the suspension order against him. The Court stated therein
that considering that an appeal under Administrative Order No. 17, the amendatory rule, shall not stop
the Decision of the Office of the Ombudsman from being executory, the Court of Appeals did not
commit grave abuse of discretion in denying petitioner’s application for injunctive relief.

Finally, the appeal of the decision of the Ombudsman to the Court of Appeals is through a Petition for Review under Rule 43 of the
Rules of Court, Section 12 of which categorically provides that the appeal shall not stay the award, judgment, final order or resolution
sought to be reviewed unless the Court of Appeals shall direct otherwise upon such terms as it may deem just.\
G.R. No. 147096 January 15, 2002

REPUBLIC OF THE PHILIPPINES, represented by NATIONAL TELECOMMUNICATIONS

COMMISSION, petitioner,
vs.
EXPRESS TELECOMMUNICATION CO., INC. and BAYAN TELECOMMUNICATIONS CO.,
INC., respondents.

x---------------------------------------------------------x

G.R. No. 147210 January 15, 2002

BAYAN TELECOMMUNICATIONS (Bayantel), INC., petitioner,

vs.
EXPRESS TELECOMMUNICATION CO., INC. (Extelcom), respondent.

YNARES-SANTIAGO, J.:

On December 29, 1992, International Communications Corporation (now Bayan Telecommunications,

Inc. or Bayantel) filed an application with the National Telecommunications Commission (NTC) for a
Certificate of Public Convenience or Necessity (CPCN) to install, operate and maintain a digital
Cellular Mobile Telephone System/Service (CMTS) with prayer for a Provisional Authority (PA). The
application was docketed as NTC Case No. 92-486.1

Shortly thereafter, or on January 22, 1993, the NTC issued Memorandum Circular No. 4-1-93 directing
all interested applicants for nationwide or regional CMTS to file their respective applications before the
Commission on or before February 15, 1993, and deferring the acceptance of any application filed
after said date until further orders.2

On May 6, 1993, and prior to the issuance of any notice of hearing by the NTC with respect to
Bayantel's original application, Bayantel filed an urgent ex-parte motion to admit an amended
application.3 On May 17, 1993, the notice of hearing issued by the NTC with respect to this amended
application was published in the Manila Chronicle. Copies of the application as well as the notice of
hearing were mailed to all affected parties. Subsequently, hearings were conducted on the amended
application. But before Bayantel could complete the presentation of its evidence, the NTC issued an
Order dated December 19, 1993 stating:

In view of the recent grant of two (2) separate Provisional Authorities in favor of ISLACOM and
GMCR, Inc., which resulted in the closing out of all available frequencies for the service being
applied for by herein applicant, and in order that this case may not remain pending for an
indefinite period of time, AS PRAYED FOR, let this case be, as it is, hereby ordered
ARCHIVED without prejudice to its reinstatement if and when the requisite frequency becomes
available.

SO ORDERED.4

On June 18, 1998, the NTC issued Memorandum Circular No. 5-6-98 re-allocating five (5) megahertz
(MHz) of the radio frequency spectrum for the expansion of CMTS networks. The re-allocated 5 MHz
were taken from the following bands: 1730-1732.5 / 1825-1827.5 MHz and 1732.5-1735 / 1827.5-1830
MHz.5

Likewise, on March 23, 1999, Memorandum Circular No. 3-3-99 was issued by the NTC re-allocating
an additional five (5) MHz frequencies for CMTS service, namely: 1735-1737.5 / 1830-1832.5 MHz;
1737.5-1740 / 1832.5-1835 MHz; 1740-1742.5 / 1835-1837.5 MHz; and 1742.5-1745 / 1837.5-1840
MHz.6

On May 17, 1999, Bayantel filed an Ex-Parte Motion to Revive Case,7 citing the availability of new
frequency bands for CMTS operators, as provided for under Memorandum Circular No. 3-3-99.

On February 1, 2000, the NTC granted BayanTel's motion to revive the latter's application and set the
case for hearings on February 9, 10, 15, 17 and 22, 2000.8 The NTC noted that the application was
ordered archived without prejudice to its reinstatement if and when the requisite frequency shall
become available.

Respondent Express Telecommunication Co., Inc. (Extelcom) filed in NTC Case No. 92-486 an
Opposition (With Motion to Dismiss) praying for the dismissal of Bayantel's application.9 Extelcom
argued that Bayantel's motion sought the revival of an archived application filed almost eight (8) years
ago. Thus, the documentary evidence and the allegations of respondent Bayantel in this application
are all outdated and should no longer be used as basis of the necessity for the proposed CMTS
service. Moreover, Extelcom alleged that there was no public need for the service applied for by
Bayantel as the present five CMTS operators --- Extelcom, Globe Telecom, Inc., Smart
Communication, Inc., Pilipino Telephone Corporation, and Isla Communication Corporation, Inc. ---
more than adequately addressed the market demand, and all are in the process of enhancing and
expanding their respective networks based on recent technological developments. 1âwphi1.nêt

Extelcom likewise contended that there were no available radio frequencies that could accommodate
a new CMTS operator as the frequency bands allocated in NTC Memorandum Circular No. 3-3-99
were intended for and had in fact been applied for by the existing CMTS operators. The NTC, in its
Memorandum Circular No. 4-1-93, declared it its policy to defer the acceptance of any application for
CMTS. All the frequency bands allocated for CMTS use under the NTC's Memorandum Circular No.
5-11-88 and Memorandum Circular No. 2-12-92 had already been allocated to the existing CMTS
operators. Finally, Extelcom pointed out that Bayantel is its substantial stockholder to the extent of
about 46% of its outstanding capital stock, and Bayantel's application undermines the very operations
of Extelcom.

On March 13, 2000, Bayantel filed a Consolidated Reply/Comment,10 stating that the opposition was
actually a motion seeking a reconsideration of the NTC Order reviving the instant application, and thus
cannot dwell on the material allegations or the merits of the case. Furthermore, Extelcom cannot claim
that frequencies were not available inasmuch as the allocation and assignment thereof rest solely on
the discretion of the NTC.

In the meantime, the NTC issued on March 9, 2000 Memorandum Circular No. 9-3-2000, re-allocating
the following radio frequency bands for assignment to existing CMTS operators and to public
telecommunication entities which shall be authorized to install, operate and maintain CMTS networks,
namely: 1745-1750MHz / 1840-1845MHz; 1750-1775MHz / 1845-1850MHz; 1765-1770MHz / 1860-
1865MHz; and 1770-1775MHz / 1865-1870MHz.11

On May 3, 2000, the NTC issued an Order granting in favor of Bayantel a provisional authority to
operate CMTS service.12 The Order stated in pertinent part:

On the issue of legal capacity on the part of Bayantel, this Commission has already taken
notice of the change in name of International Communications Corporation to Bayan
Telecommunications, Inc. Thus, in the Decision entered in NTC Case No. 93-284/94-200
dated 19 July 1999, it was recognized that Bayan Telecommunications, Inc., was formerly
named International Communications Corp. Bayantel and ICC Telecoms, Inc. are one and the
same entity, and it necessarily follows that what legal capacity ICC Telecoms has or has
acquired is also the legal capacity that Bayantel possesses.

On the allegation that the Commission has committed an error in allowing the revival of the
instant application, it appears that the Order dated 14 December 1993 archiving the same was
anchored on the non-availability of frequencies for CMTS. In the same Order, it was expressly
stated that the archival hereof, shall be without prejudice to its reinstatement "if and when the
requisite frequency becomes available." Inherent in the said Order is the prerogative of the
Commission in reviving the same, subject to prevailing conditions. The Order of 1 February
2001, cited the availability of frequencies for CMTS, and based thereon, the Commission,
exercising its prerogative, revived and reinstated the instant application. The fact that the
motion for revival hereof was made ex-parte by the applicant is of no moment, so long as the
oppositors are given the opportunity to be later heard and present the merits of their respective
oppositions in the proceedings.

On the allegation that the instant application is already obsolete and overtaken by
developments, the issue is whether applicant has the legal, financial and technical capacity to
undertake the proposed project. The determination of such capacity lies solely within the
discretion of the Commission, through its applicable rules and regulations. At any rate, the
oppositors are not precluded from showing evidence disputing such capacity in the
proceedings at hand. On the alleged non-availability of frequencies for the proposed service
in view of the pending applications for the same, the Commission takes note that it has issued
Memorandum Circular 9-3-2000, allocating additional frequencies for CMTS. The eligibility of
existing operators who applied for additional frequencies shall be treated and resolved in their
respective applications, and are not in issue in the case at hand.

Accordingly, the Motions for Reconsideration filed by SMARTCOM and GLOBE

TELECOMS/ISLACOM and the Motion to Dismiss filed by EXTELCOM are hereby DENIED
for lack of merit.13

The grant of the provisional authority was anchored on the following findings:

COMMENTS:
 1. Due to the operational mergers between Smart Communications, Inc. and Pilipino
Telephone Corporation (Piltel) and between Globe Telecom, Inc. (Globe) and Isla
Communications, Inc. (Islacom), free and effective competition in the CMTS market is
threatened. The fifth operator, Extelcom, cannot provide good competition in as much as it
provides service using the analog AMPS. The GSM system dominates the market.

2. There are at present two applicants for the assignment of the frequencies in the 1.7 Ghz
and 1.8 Ghz allocated to CMTS, namely Globe and Extelcom. Based on the number of
subscribers Extelcom has, there appears to be no congestion in its network - a condition that
is necessary for an applicant to be assigned additional frequencies. Globe has yet to prove
that there is congestion in its network considering its operational merger with Islacom.

3. Based on the reports submitted to the Commission, 48% of the total number of cities and
municipalities are still without telephone service despite the more than 3 million installed lines
waiting to be subscribed.

CONCLUSIONS:

1. To ensure effective competition in the CMTS market considering the operational merger of
some of the CMTS operators, new CMTS operators must be allowed to provide the service.

2. The re-allocated frequencies for CMTS of 3 blocks of 5 Mhz x 2 is sufficient for the number
of applicants should the applicants be qualified.

3. There is a need to provide service to some or all of the remaining cities and municipalities
without telephone service.

4. The submitted documents are sufficient to determine compliance to the technical

requirements. The applicant can be directed to submit details such as channeling plans, exact
locations of cell sites, etc. as the project implementation progresses, actual area coverage
ascertained and traffic data are made available. Applicant appears to be technically qualified
to undertake the proposed project and offer the proposed service.

IN VIEW OF THE FOREGOING and considering that there is prima facie evidence to show
that Applicant is legally, technically and financially qualified and that the proposed service is
technically feasible and economically viable, in the interest of public service, and in order to
facilitate the development of telecommunications services in all areas of the country, as well
as to ensure healthy competition among authorized CMTS providers, let a PROVISIONAL
AUTHORITY (P.A.) be issued to Applicant BAYAN TELECOMMUNICATIONS,
INC. authorizing it to construct, install, operate and maintain a Nationwide Cellular Mobile
Telephone Systems (CMTS), subject to the following terms and conditions without prejudice
to a final decision after completion of the hearing which shall be called within thirty (30) days
from grant of authority, in accordance with Section 3, Rule 15, Part IV of the Commission's
Rules of Practice and Procedure. xxx.14

Extelcom filed with the Court of Appeals a petition for certiorari and prohibition,15 docketed as CA-G.R.
SP No. 58893, seeking the annulment of the Order reviving the application of Bayantel, the Order
granting Bayantel a provisional authority to construct, install, operate and maintain a nationwide
CMTS, and Memorandum Circular No. 9-3-2000 allocating frequency bands to new public
telecommunication entities which are authorized to install, operate and maintain CMTS.

On September 13, 2000, the Court of Appeals rendered the assailed Decision,16 the dispositive portion
of which reads:

WHEREFORE, the writs of certiorari and prohibition prayed for are GRANTED. The Orders of
public respondent dated February 1, 2000 and May 3, 2000 in NTC Case No. 92-486 are
hereby ANNULLED and SET ASIDE and the Amended Application of respondent Bayantel
is DISMISSED without prejudice to the filing of a new CMTS application. The writ of preliminary
injunction issued under our Resolution dated August 15, 2000, restraining and enjoining the
respondents from enforcing the Orders dated February 1, 2000 and May 3, 2000 in the said
NTC case is hereby made permanent. The Motion for Reconsideration of respondent Bayantel
dated August 28, 2000 is denied for lack of merit.

SO ORDERED.17

Bayantel filed a motion for reconsideration of the above decision.18 The NTC, represented by the Office
of the Solicitor General (OSG), also filed its own motion for reconsideration.19 On the other hand,
Extelcom filed a Motion for Partial Reconsideration, praying that NTC Memorandum Circular No. 9-3-
2000 be also declared null and void.20
On February 9, 2001, the Court of Appeals issued the assailed Resolution denying all of the motions
for reconsideration of the parties for lack of merit.21

Hence, the NTC filed the instant petition for review on certiorari, docketed as G.R. No. 147096, raising
the following issues for resolution of this Court:

A. Whether or not the Order dated February 1, 2000 of the petitioner which revived the
application of respondent Bayantel in NTC Case No. 92-486 violated respondent Extelcom's
right to procedural due process of law;

B. Whether or not the Order dated May 3, 2000 of the petitioner granting respondent Bayantel
a provisional authority to operate a CMTS is in substantial compliance with NTC Rules of
Practice and Procedure and Memorandum Circular No. 9-14-90 dated September 4, 1990.22

Subsequently, Bayantel also filed its petition for review, docketed as G.R. No. 147210, assigning the
following errors:

I. THE COURT OF APPEALS SERIOUSLY ERRED IN ITS INTERPRETATION OF THE

PRINCIPLE OF "EXHAUSTION OF ADMINISTRATIVE REMEDIES" WHEN IT FAILED TO
DISMISS HEREIN RESPONDENT'S PETITION FOR CERTIORARI DESPITE ITS FAILURE
TO FILE A MOTION FOR RECONSIDERATION.

II. THE COURT OF APPEALS SERIOUSLY ERRED IN ITS FINDING THAT THE REVIVAL
OF NTC CASE NO. 92-486 ANCHORED ON A EX-PARTE MOTION TO REVIVE CASE WAS
TANTAMOUNT TO GRAVE ABUSE OF DISCRETION ON THE PART OF THE NTC.

III. THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT DENIED THE MANDATE OF
THE NTC AS THE AGENCY OF GOVERNMENT WITH THE SOLE DISCRETION
REGARDING ALLOCATION OF FREQUENCY BAND TO TELECOMMUNICATIONS
ENTITIES.

IV. THE COURT OF APPEALS SERIOUSLY ERRED IN ITS INTERPRETATION OF THE

LEGAL PRINCIPLE THAT JURISDICTION ONCE ACQUIRED CANNOT BE LOST WHEN IT
DECLARED THAT THE ARCHIVED APPLICATION SHOULD BE DEEMED AS A NEW
APPLICATION IN VIEW OF THE SUBSTANTIAL CHANGE IN THE CIRCUMSTANCES
ALLEGED IN ITS AMENDMENT APPLICATION.

V. CONTRARY TO THE FINDING OF THE COURT OF APPEALS, THE ARCHIVING OF THE

BAYANTEL APPLICATION WAS A VALID ACT ON THE PART OF THE NTC EVEN IN THE
ABSENCE OF A SPECIFIC RULE ON ARCHIVING OF CASES SINCE RULES OF
PROCEDURE ARE, AS A MATTER OF COURSE, LIBERALLY CONSTRUED IN
PROCEEDINGS BEFORE ADMINISTRATIVE BODIES AND SHOULD GIVE WAY TO THE
GREATER HIERARCHY OF PUBLIC WELFARE AND PUBLIC INTEREST.

VI. CONTRARY TO THE FINDING OF THE COURT OF APPEALS, THE ARCHIVING OF

BAYANTEL'S APPLICATION WAS NOT VIOLATIVE OF THE SUMMARY NATURE OF THE
PROCEEDINGS IN THE NTC UNDER SEC. 3, RULE 1 OF THE NTC REVISED RULES OF
PROCEDURE.

VII. THE COURT OF APPEALS SERIOUSLY ERRED IN ITS FINDING THAT THE
ARCHIVING OF BAYANTEL'S APPLICATION WAS VIOLATIVE OF THE ALLEGED
DECLARED POLICY OF THE GOVERNMENT ON THE TRANSPARENCY AND FAIRNESS
OF ADMINISTRATIVE PROCESS IN THE NTC AS LAID DOWN IN SEC 4(1) OF R.A. NO.
7925.

VIII. THE COURT OF APPEALS SERIOUSLY ERRED IN ITS FINDING THAT THE NTC
VIOLATED THE PROVISIONS OF THE CONSTITUTION PERTAINING TO DUE PROCESS
OF LAW.

IX. THE COURT OF APPEALS SERIOUSLY ERRED IN DECLARING THAT THE MAY 3,
2000 ORDER GRANTING BAYANTEL A PROVISIONAL AUTHORITY SHOULD BE SET
ASIDE AND REVERSED.

i. Contrary to the finding of the Court of Appeals, there was no violation of the NTC Rule that
the legal, technical, financial and economic documentations in support of the prayer for
provisional authority should first be submitted.
 ii. Contrary to the finding of the Court of Appeals, there was no violation of Sec. 3, Rule 15 of
the NTC Rules of Practice and Procedure that a motion must first be filed before a provisional
authority could be issued.

iii. Contrary to the finding of the Court of Appeals that a plea for provisional authority
necessitates a notice and hearing, the very rule cited by the petitioner (Section 5, Rule 4 of
the NTC Rules of Practice and Procedure) provides otherwise.

iv. Contrary to the finding of the Court of Appeals, urgent public need is not the only basis for
the grant of a provisional authority to an applicant;

v. Contrary to the finding of the Court of Appeals, there was no violation of the constitutional
provision on the right of the public to information when the Common Carrier Authorization
Department (CCAD) prepared its evaluation report.23

Considering the identity of the matters involved, this Court resolved to consolidate the two petitions.24

At the outset, it is well to discuss the nature and functions of the NTC, and analyze its powers and
authority as well as the laws, rules and regulations that govern its existence and operations.

The NTC was created pursuant to Executive Order No. 546, promulgated on July 23, 1979. It assumed
the functions formerly assigned to the Board of Communications and the Telecommunications Control
Bureau, which were both abolished under the said Executive Order. Previously, the NTC's functions
were merely those of the defunct Public Service Commission (PSC), created under Commonwealth
Act No. 146, as amended, otherwise known as the Public Service Act, considering that the Board of
Communications was the successor-in-interest of the PSC. Under Executive Order No. 125-A, issued
in April 1987, the NTC became an attached agency of the Department of Transportation and
Communications.

In the regulatory telecommunications industry, the NTC has the sole authority to issue Certificates of
Public Convenience and Necessity (CPCN) for the installation, operation, and maintenance of
communications facilities and services, radio communications systems, telephone and telegraph
systems. Such power includes the authority to determine the areas of operations of applicants for
telecommunications services. Specifically, Section 16 of the Public Service Act authorizes the then
PSC, upon notice and hearing, to issue Certificates of Public Convenience for the operation of public
services within the Philippines "whenever the Commission finds that the operation of the public service
proposed and the authorization to do business will promote the public interests in a proper and suitable
manner."25 The procedure governing the issuance of such authorizations is set forth in Section 29 of
the said Act, the pertinent portion of which states:

All hearings and investigations before the Commission shall be governed by rules adopted by
the Commission, and in the conduct thereof, the Commission shall not be bound by the
technical rules of legal evidence. xxx.

In granting Bayantel the provisional authority to operate a CMTS, the NTC applied Rule 15, Section 3
of its 1978 Rules of Practice and Procedure, which provides:

Sec. 3. Provisional Relief. --- Upon the filing of an application, complaint or petition or at any
stage thereafter, the Board may grant on motion of the pleader or on its own initiative, the relief
prayed for, based on the pleading, together with the affidavits and supporting documents
attached thereto, without prejudice to a final decision after completion of the hearing which
shall be called within thirty (30) days from grant of authority asked for. (underscoring ours)

Respondent Extelcom, however, contends that the NTC should have applied the Revised Rules which
were filed with the Office of the National Administrative Register on February 3, 1993. These Revised
Rules deleted the phrase "on its own initiative;" accordingly, a provisional authority may be issued only
upon filing of the proper motion before the Commission.

In answer to this argument, the NTC, through the Secretary of the Commission, issued a certification
to the effect that inasmuch as the 1993 Revised Rules have not been published in a newspaper of
general circulation, the NTC has been applying the 1978 Rules.

The absence of publication, coupled with the certification by the Commissioner of the NTC stating that
the NTC was still governed by the 1978 Rules, clearly indicate that the 1993 Revised Rules have not
taken effect at the time of the grant of the provisional authority to Bayantel. The fact that the 1993
Revised Rules were filed with the UP Law Center on February 3, 1993 is of no moment. There is
nothing in the Administrative Code of 1987 which implies that the filing of the rules with the UP Law
Center is the operative act that gives the rules force and effect. Book VII, Chapter 2, Section 3 thereof
merely states:
 Filing. --- (1) Every agency shall file with the University of the Philippines Law Center three (3)
certified copes of every rule adopted by it. Rules in force on the date of effectivity of this Code
which are not filed within three (3) months from the date shall not thereafter be the basis of
any sanction against any party or persons.

(2) The records officer of the agency, or his equivalent functionary, shall carry out the
requirements of this section under pain or disciplinary action.

(3) A permanent register of all rules shall be kept by the issuing agency and shall be open to
public inspection.

The National Administrative Register is merely a bulletin of codified rules and it is furnished only to the
Office of the President, Congress, all appellate courts, the National Library, other public offices or
agencies as the Congress may select, and to other persons at a price sufficient to cover publication
and mailing or distribution costs.26 In a similar case, we held:

This does not imply however, that the subject Administrative Order is a valid exercise of such
quasi-legislative power. The original Administrative Order issued on August 30, 1989, under
which the respondents filed their applications for importations, was not published in the Official
Gazette or in a newspaper of general circulation. The questioned Administrative Order, legally,
until it is published, is invalid within the context of Article 2 of Civil Code, which reads:

"Article 2. Laws shall take effect after fifteen days following the completion of their
publication in the Official Gazette (or in a newspaper of general circulation in the
Philippines), unless it is otherwise provided. x x x"

The fact that the amendments to Administrative Order No. SOCPEC 89-08-01 were filed with,
and published by the UP Law Center in the National Administrative Register, does not cure
the defect related to the effectivity of the Administrative Order.

This Court, in Tañada vs. Tuvera (G.R. No. L-63915, December 29, 1986, 146 SCRA
446) stated, thus:

"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 is fixed by the legislature.

Covered by this rule are presidential decrees and executive orders promulgated by the
President in the exercise of legislative power 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.

xxx

We agree that the publication must be in full or it is no publication at all since its
purpose is to inform the public of the contents of the laws."

The Administrative Order under consideration is one of those issuances which should be
published for its effectivity, since its purpose is to enforce and implement an existing law
pursuant to a valid delegation, i.e., P.D. 1071, in relation to LOI 444 and EO 133.27

Thus, publication in the Official Gazette or a newspaper of general circulation is a condition sine qua
non before statutes, rules or regulations can take effect. This is explicit from Executive Order No. 200,
which repealed Article 2 of the Civil Code, and which states 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.28

The Rules of Practice and Procedure of the NTC, which implements Section 29 of the Public Service
Act (C.A. 146, as amended), fall squarely within the scope of these laws, as explicitly mentioned in the
case Tañada v. Tuvera.29
 Our pronouncement in Tañada vs. Tuvera is clear and categorical. Administrative rules and
regulations must be published if their purpose is to enforce or implement existing law pursuant
to a valid delegation. The only exceptions are interpretative regulations, those merely internal
in nature, or those so-called letters of instructions issued by administrative superiors
concerning the rules and guidelines to be followed by their subordinates in the performance of
their duties.30

Hence, the 1993 Revised Rules should be published in the Official Gazette or in a newspaper of
general circulation before it can take effect. Even the 1993 Revised Rules itself mandates that said
Rules shall take effect only after their publication in a newspaper of general circulation.31 In the absence
of such publication, therefore, it is the 1978 Rules that governs.

In any event, regardless of whether the 1978 Rules or the 1993 Revised Rules should apply, the
records show that the amended application filed by Bayantel in fact included a motion for the issuance
of a provisional authority. Hence, it cannot be said that the NTC granted the provisional authority motu
proprio. The Court of Appeals, therefore, erred when it found that the NTC issued its Order of May 3,
2000 on its own initiative. This much is acknowledged in the Decision of the Court of Appeals:

As prayer, ICC asked for the immediate grant of provisional authority to construct, install,
maintain and operate the subject service and to charge the proposed rates and after due notice
and hearing, approve the instant application and grant the corresponding certificate of public
convenience and necessity.32

The Court of Appeals also erred when it declared that the NTC's Order archiving Bayantel's application
was null and void. The archiving of cases is a widely accepted measure designed to shelve cases in
which no immediate action is expected but where no grounds exist for their outright dismissal, albeit
without prejudice. It saves the petitioner or applicant from the added trouble and expense of re-filing a
dismissed case. Under this scheme, an inactive case is kept alive but held in abeyance until the
situation obtains wherein action thereon can be taken.

In the case at bar, the said application was ordered archived because of lack of available frequencies
at the time, and made subject to reinstatement upon availability of the requisite frequency. To be sure,
there was nothing irregular in the revival of the application after the condition therefor was fulfilled.

While, as held by the Court of Appeals, there are no clear provisions in the Rules of the NTC which
expressly allow the archiving of any application, this recourse may be justified under Rule 1, Section
2 of the 1978 Rules, which states:

Sec. 2. Scope.--- These rules govern pleadings, practice and procedure before the Board of
Communications (now NTC) in all matters of hearing, investigation and proceedings within the
jurisdiction of the Board. However, in the broader interest of justice and in order to best serve
the public interest, the Board may, in any particular matter, except it from these rules and apply
such suitable procedure to improve the service in the transaction of the public
business. (underscoring ours)

The Court of Appeals ruled that the NTC committed grave abuse of discretion when it revived
Bayantel's application based on an ex-parte motion. In this regard, the pertinent provisions of the NTC
Rules:

Sec. 5. Ex-parte Motions. --- Except for motions for provisional authorization of proposed
services and increase of rates, ex-parte motions shall be acted upon by the Board only upon
showing of urgent necessity therefor and the right of the opposing party is not substantially
impaired.33

Thus, in cases which do not involve either an application for rate increase or an application for a
provisional authority, the NTC may entertain ex-parte motions only where there is an urgent necessity
to do so and no rights of the opposing parties are impaired. 1âwphi 1.nêt

The Court of Appeals ruled that there was a violation of the fundamental right of Extelcom to due
process when it was not afforded the opportunity to question the motion for the revival of the
application. However, it must be noted that said Order referred to a simple revival of the archived
application of Bayantel in NTC Case No. 92-426. At this stage, it cannot be said that Extelcom's right
to procedural due process was prejudiced. It will still have the opportunity to be heard during the full-
blown adversarial hearings that will follow. In fact, the records show that the NTC has scheduled
several hearing dates for this purpose, at which all interested parties shall be allowed to register their
opposition. We have ruled that there is no denial of due process where full-blown adversarial
proceedings are conducted before an administrative body.34 With Extelcom having fully participated in
the proceedings, and indeed, given the opportunity to file its opposition to the application, there was
clearly no denial of its right to due process.
 In Zaldivar vs. Sandiganbayan (166 SCRA 316 [1988]), we held that the right to be heard does
not only refer to the right to present verbal arguments in court. A party may also be heard
through his pleadings. where opportunity to be heard is accorded either through oral
arguments or pleadings, there is no denial of procedural due process. As reiterated in National
Semiconductor (HK) Distribution, Ltd. vs. NLRC (G.R. No. 123520, June 26, 1998), the
essence of due process is simply an opportunity to be heard, or as applied to administrative
proceedings, an opportunity to explain one's side. Hence, in Navarro III vs. Damaso (246
SCRA 260 [1995]), we held that a formal or trial-type hearing is not at all times and not in all
instances essential. Plainly, petitioner was not denied due process.35

Extelcom had already entered its appearance as a party and filed its opposition to the application. It
was neither precluded nor barred from participating in the hearings thereon. Indeed, nothing, not even
the Order reviving the application, bars or prevents Extelcom and the other oppositors from
participating in the hearings and adducing evidence in support of their respective oppositions. The
motion to revive could not have possibly caused prejudice to Extelcom since the motion only sought
the revival of the application. It was merely a preliminary step towards the resumption of the hearings
on the application of Bayantel. The latter will still have to prove its capability to undertake the proposed
CMTS. Indeed, in its Order dated February 1, 2000, the NTC set several hearing dates precisely
intended for the presentation of evidence on Bayantel's capability and qualification. Notice of these
hearings were sent to all parties concerned, including Extelcom.

As regards the changes in the personal circumstances of Bayantel, the same may be ventilated at the
hearings during Bayantel's presentation of evidence. In fact, Extelcom was able to raise its arguments
on this matter in the Opposition (With Motion to Dismiss) anent the re-opening and re-instatement of
the application of Bayantel. Extelcom was thus heard on this particular point.

Likewise, the requirements of notice and publication of the application is no longer necessary
inasmuch as the application is a mere revival of an application which has already been published
earlier. At any rate, the records show that all of the five (5) CMTS operators in the country were duly
notified and were allowed to raise their respective oppositions to Bayantel's application through the
NTC's Order dated February 1, 2000.

It should be borne in mind that among the declared national policies under Republic Act No. 7925,
otherwise known as the Public Telecommunications Policy Act of the Philippines, is the healthy
competition among telecommunications carriers, to wit:

A healthy competitive environment shall be fostered, one in which telecommunications carriers

are free to make business decisions and to interact with one another in providing
telecommunications services, with the end in view of encouraging their financial viability while
maintaining affordable rates.36

The NTC is clothed with sufficient discretion to act on matters solely within its competence. Clearly,
the need for a healthy competitive environment in telecommunications is sufficient impetus for the
NTC to consider all those applicants who are willing to offer competition, develop the market and
provide the environment necessary for greater public service. This was the intention that came to light
with the issuance of Memorandum Circular 9-3-2000, allocating new frequency bands for use of
CMTS. This memorandum circular enumerated the conditions prevailing and the reasons which
necessitated its issuance as follows:

- the international accounting rates are rapidly declining, threatening the subsidy to the local
exchange service as mandated in EO 109 and RA 7925;

- the public telecommunications entities which were obligated to install, operate and maintain
local exchange network have performed their obligations in varying degrees;

- after more than three (3) years from the performance of the obligations only 52% of the
total number of cities and municipalities are provided with local telephone service.

- there are mergers and consolidations among the existing cellular mobile telephone service
(CMTS) providers threatening the efficiency of competition;

- there is a need to hasten the installation of local exchange lines in unserved areas;

- there are existing CMTS operators which are experiencing congestion in the network
resulting to low grade of service;

- the consumers/customers shall be given the freedom to choose CMTS operators from
which they could get the service.37
Clearly spelled out is the need to provide enhanced competition and the requirement for more landlines
and telecommunications facilities in unserved areas in the country. On both scores, therefore, there
was sufficient showing that the NTC acted well within its jurisdiction and in pursuance of its avowed
duties when it allowed the revival of Bayantel's application.

We now come to the issue of exhaustion of administrative remedies. The rule is well-entrenched that
a party must exhaust all administrative remedies before resorting to the courts. The premature
invocation of the intervention of the court is fatal to one's cause of action. This rule would not only give
the administrative agency an opportunity to decide the matter by itself correctly, but would also prevent
the unnecessary and premature resort to courts.38 In the case of Lopez v. City of Manila,39 we held:

As a general rule, where the law provides for the remedies against the action of an
administrative board, body or officer, relief to courts can be sought only after exhausting all
remedies provided. The reason rests upon the presumption that the administrative body, if
given the chance to correct its mistake or error, may amend its decision on a given matter and
decide it properly. Therefore, where a remedy is available within the administrative machinery,
this should be resorted to before resort can be made to the courts, not only to give the
administrative agency the opportunity to decide the matter by itself correctly, but also to
prevent unnecessary and premature resort to courts.

Clearly, Extelcom violated the rule on exhaustion of administrative remedies when it went directly to
the Court of Appeals on a petition for certiorari and prohibition from the Order of the NTC dated May
3, 2000, without first filing a motion for reconsideration. It is well-settled that the filing of a motion for
reconsideration is a prerequisite to the filing of a special civil action for certiorari.

The general rule is that, in order to give the lower court the opportunity to correct itself, a
motion for reconsideration is a prerequisite to certiorari. It also basic that petitioner must
exhaust all other available remedies before resorting to certiorari. This rule, however, is subject
to certain exceptions such as any of the following: (1) the issues raised are purely legal in
nature, (2) public interest is involved, (3) extreme urgency is obvious or (4) special
circumstances warrant immediate or more direct action.40

This case does not fall under any of the recognized exceptions to this rule. Although the Order of the
NTC dated May 3, 2000 granting provisional authority to Bayantel was immediately executory, it did
not preclude the filing of a motion for reconsideration. Under the NTC Rules, a party adversely affected
by a decision, order, ruling or resolution may within fifteen (15) days file a motion for reconsideration.
That the Order of the NTC became immediately executory does not mean that the remedy of filing a
motion for reconsideration is foreclosed to the petitioner.41

Furthermore, Extelcom does not enjoy the grant of any vested interest on the right to render a public
service. The Constitution is quite emphatic that the operation of a public utility shall not be exclusive.
Thus:

No franchise, certificate, or any other form of authorization for the operation of a public utility
shall be granted to citizens of the Philippines or to corporations organized under the laws of
the Philippines at least sixty per centum of whose capital is owned by such citizens, nor shall
such franchise, certificate or authorization be exclusive in character or for a longer period than
fifty years. Neither shall any such franchise or right be granted except under the condition that
it shall be subject to amendment, alteraion, or repeal by the Congress when the common good
so requires. xxx xxx xxx.42

In Radio Communications of the Phils., Inc. v. National Telecommunications Commission,43 we held:

It is well within the powers of the public respondent to authorize the installation by the private
respondent network of radio communications systems in Catarman, Samar and San Jose,
Mindoro. Under the circumstances, the mere fact that the petitioner possesses a franchise to
put up and operate a radio communications system in certain areas is not an insuperable
obstacle to the public respondent's issuing the proper certificate to an applicant desiring to
extend the same services to those areas. The Constitution mandates that a franchise cannot
be exclusive in nature nor can a franchise be granted except that it must be subject to
amendment, alteration, or even repeal by the legislature when the common good so requires.
(Art. XII, sec. 11 of the 1986 Constitution). There is an express provision in the petitioner's
franchise which provides compliance with the above mandate (RA 2036, sec. 15).

Even in the provisional authority granted to Extelcom, it is expressly stated that such authority is not
exclusive. Thus, the Court of Appeals erred when it gave due course to Extelcom's petition and ruled
that it constitutes an exception to the rule on exhaustion of administrative remedies.
Also, the Court of Appeals erred in annulling the Order of the NTC dated May 3, 2000, granting
Bayantel a provisional authority to install, operate and maintain CMTS. The general rule is that purely
administrative and discretionary functions may not be interfered with by the courts. Thus, in Lacuesta
v. Herrera,44 it was held:

xxx (T)he powers granted to the Secretary of Agriculture and Commerce (natural resources)
by law regarding the disposition of public lands such as granting of licenses, permits, leases
and contracts, or approving, rejecting, reinstating, or canceling applications, are all executive
and administrative in nature. It is a well recognized principle that purely administrative and
discretionary functions may not be interfered with by the courts. (Coloso vs. Board of
Accountancy, G.R. No. L-5750, April 20, 1953) In general, courts have no supervising power
over the proceedings and actions of the administrative departments of the government. This
is generally true with respect to acts involving the exercise of judgement or discretion and
findings of fact. (54 Am. Jur. 558-559) xxx.

The established exception to the rule is where the issuing authority has gone beyond its statutory
authority, exercised unconstitutional powers or clearly acted arbitrarily and without regard to his duty
or with grave abuse of discretion.45 None of these obtains in the case at bar.

Moreover, in petitions for certiorari, evidentiary matters or matters of fact raised in the court below are
not proper grounds nor may such be ruled upon in the proceedings. As held in National Federation of
Labor v. NLRC:46

At the outset, it should be noted that a petition for certiorari under Rule 65 of the Rules of Court
will prosper only if there is a showing of grave abuse of discretion or an act without or in excess
of jurisdiction on the part of the National Labor Relations Commission. It does not include an
inquiry as to the correctness of the evaluation of evidence which was the basis of the labor
official or officer in determining his conclusion. It is not for this Court to re-examine conflicting
evidence, re-evaluate the credibility of witnesses nor substitute the findings of fact of an
administrative tribunal which has gained expertise in its special field. Considering that the
findings of fact of the labor arbiter and the NLRC are supported by evidence on record, the
same must be accorded due respect and finality.

This Court has consistently held that the courts will not interfere in matters which are addressed to the
sound discretion of the government agency entrusted with the regulation of activities coming under
the special and technical training and knowledge of such agency.47 It has also been held that the
exercise of administrative discretion is a policy decision and a matter that can best be discharged by
the government agency concerned, and not by the courts.48 In Villanueva v. Court of Appeals,49 it was
held that findings of fact which are supported by evidence and the conclusion of experts should not be
disturbed. This was reiterated in Metro Transit Organization, Inc. v. National Labor Relations
Commission,50 wherein it was ruled that factual findings of quasi-judicial bodies which have acquired
expertise because their jurisdiction is confined to specific matters are generally accorded not only
respect but even finality and are binding even upon the Supreme Court if they are supported by
substantial evidence. 1âwphi1.nêt

Administrative agencies are given a wide latitude in the evaluation of evidence and in the exercise of
its adjudicative functions. This latitude includes the authority to take judicial notice of facts within its
special competence.

In the case at bar, we find no reason to disturb the factual findings of the NTC which formed the basis
for awarding the provisional authority to Bayantel. As found by the NTC, Bayantel has been granted
several provisional and permanent authorities before to operate various telecommunications
services.51 Indeed, it was established that Bayantel was the first company to comply with its obligation
to install local exchange lines pursuant to E.O. 109 and R.A. 7925. In recognition of the same, the
provisional authority awarded in favor of Bayantel to operate Local Exchange Services in Quezon City,
Malabon, Valenzuela and the entire Bicol region was made permanent and a CPCN for the said
service was granted in its favor. Prima facie evidence was likewise found showing Bayantel's legal,
financial and technical capacity to undertake the proposed cellular mobile telephone service.

Likewise, the May 3, 2000 Order did not violate NTC Memorandum Circular No. 9-14-90 dated
September 4, 1990, contrary to the ruling of the Court of Appeals. The memorandum circular sets forth
the procedure for the issuance of provisional authority thus:

EFFECTIVE THIS DATE, and as part of the Commission's drive to streamline and fast track
action on applications/petitions for CPCN other forms of authorizations, the Commission shall
be evaluating applications/petitions for immediate issuance of provisional authorizations,
pending hearing and final authorization of an application on its merit.
 For this purpose, it is hereby directed that all applicants/petitioners seeking for provisional
authorizations, shall submit immediately to the Commission, either together with their
application or in a Motion all their legal, technical, financial, economic documentations in
support of their prayer for provisional authorizations for evaluation. On the basis of their
completeness and their having complied with requirements, the Commission shall be issuing
provisional authorizations.

Clearly, a provisional authority may be issued even pending hearing and final determination of an
application on its merits.

Finally, this Court finds that the Manifestations of Extelcom alleging forum shopping on the part of the
NTC and Bayantel are not impressed with merit. The divisions of the Supreme Court are not to be
considered as separate and distinct courts. The Supreme Court remains a unit notwithstanding that it
works in divisions. Although it may have three divisions, it is but a single court. Actions considered in
any of these divisions and decisions rendered therein are, in effect, by the same Tribunal. The divisions
of this Court are not to be considered as separate and distinct courts but as divisions of one and the
same court.52

Moreover, the rules on forum shopping should not be literally interpreted. We have stated thus:

It is scarcely necessary to add that Circular No. 28-91 must be so interpreted and applied as
to achieve the purposes projected by the Supreme Court when it promulgated that circular.
Circular No. 28-91 was designed to serve as an instrument to promote and facilitate the orderly
administration of justice and should not be interpreted with such absolute literalness as to
subvert its own ultimate and legitimate objection or the goal of all rules of procedure – which
is to achieve substantial justice as expeditiously as possible.53

Even assuming that separate actions have been filed by two different parties involving essentially the
same subject matter, no forum shopping was committed as the parties did not resort to multiple judicial
remedies. The Court, therefore, directed the consolidation of the two cases because they involve
essentially the same issues. It would also prevent the absurd situation wherein two different divisions
of the same court would render altogether different rulings in the cases at bar.

We rule, likewise, that the NTC has legal standing to file and initiate legal action in cases where it is
clear that its inaction would result in an impairment of its ability to execute and perform its functions.
Similarly, we have previously held in Civil Service Commission v. Dacoycoy54 that the Civil Service
Commission, as an aggrieved party, may appeal the decision of the Court of Appeals to this Court.

As correctly stated by the NTC, the rule invoked by Extelcom is Rule 65 of the Rules of Civil Procedure,
which provides that public respondents shall not appear in or file an answer or comment to the petition
or any pleading therein.55 The instant petition, on the other hand, was filed under Rule 45 where no
similar proscription exists.

WHEREFORE, in view of the foregoing, the consolidated petitions are GRANTED. The Court of
Appeals' Decision dated September 13, 2000 and Resolution dated February 9, 2001
are REVERSED and SET ASIDE. The permanent injunction issued by the Court of Appeals
is LIFTED. The Orders of the NTC dated February 1, 2000 and May 3, 2000 are REINSTATED. No
pronouncement as to costs.

SO ORDERED.
G.R. No. L-49774 February 24, 1981

SAN MIGUEL CORPORATION (CAGAYAN COCA-COLA PLANT), petitioner,

vs.
Hon. AMADO G. INCIONG, Deputy Minister of Labor and CAGAYAN COCA-COLA FREE
WORKERS UNION, respondents.

DE CASTRO, J.:

Petition for certiorari and prohibition, with preliminary injunction to review the Order 1 dated December
19, 1978 rendered by the Deputy Minister of Labor in STF ROX Case No. 009-77 docketed as
"Cagayan Coca-Cola Free Workers Union vs. Cagayan Coca-Cola Plant, San Miguel Corporation, "
which denied herein petitioner's motion for reconsideration and ordered the immediate execution of a
prior Order 2 dated June 7, 1978.

On January 3, 1977, Cagayan Coca-Cola Free Workers Union, private respondent herein, filed a
complaint against San Miguel Corporation (Cagayan Coca-Cola Plant), petitioner herein, alleging
failure or refusal of the latter to include in the computation of 13th- month pay such items as sick,
vacation or maternity leaves, premium for work done on rest days and special holidays, including pay
for regular holidays and night differentials.

An Order 3 dated February 15, 1977 was issued by Regional Office No. X where the complaint was
filed requiring herein petitioner San Miguel Corporation (Cagayan Coca-Cola Plant) "to pay the
difference of whatever earnings and the amount actually received as 13th month pay excluding
overtime premium and emergency cost of living allowance. "

Herein petitioner appealed from that Order to the Minister of Labor in whose behalf the Deputy Minister
of Labor Amado G. Inciong issued an Order 4 dated June 7, 1978 affirming the Order of Regional Office
No. X and dismissing the appeal for lack of merit. Petitioner's motion for reconsideration having been
denied, it filed the instant petition.

On February 14, 1979, this Court issued a Temporary Restraining Order 5 enjoining respondents from
enforcing the Order[ dated December 19, 1978.

The crux of the present controversy is whether or not in the computation of the 13th-month pay under
Presidential Decree 851, payments for sick, vacation or maternity leaves, premium for work done on
rest days and special holidays, including pay for regular holidays and night differentials should be
considered.

Public respondent's consistent stand on the matter since the effectivity of Presidential Decree 851 is
that "payments for sick leave, vacation leave, and maternity benefits, as well as salaries paid to
employees for work performed on rest days, special and regular holidays are included in the
computation of the 13th-month pay. 6 On its part, private respondent cited innumerable past rulings,
opinions and decisions rendered by then Acting Labor Secretary Amado G. Inciong to the effect that,
"in computing the mandatory bonus, the basis is the total gross basic salary paid by the employer
during the calendar year. Such gross basic salary includes: (1) regular salary or wage; (2) payments
for sick, vacation and maternity leaves; (3) premium for work performed on rest days or holidays: (4)
holiday pay for worked or unworked regular holiday; and (5) emergency allowance if given in the form
of a wage adjustment." 7

Petitioner, on the other hand, assails as erroneous the aforesaid order, ruling and opinions, vigorously
contends that Presidential Decree 851 speaks only of basic salary as basis for the determination of
the 13th-month pay; submits that payments for sick, vacation, or maternity leaves, night differential
pay, as well as premium paid for work performed on rest days, special and regular holidays do not
form part of the basic salary; and concludes that the inclusion of those payments in the computation
of the 13th-month pay is clearly not sanctioned by Presidential Decree 851.

The Court finds petitioner's contention meritorious.

The provision in dispute is Section 1 of Presidential Decree 851 and provides:

All employers are hereby required to pay all their employees receiving a basic salary
of not more than Pl,000 a month, regardless of the nature of the employment, a 13th-
month pay not later than December 24 of every year.

Section 2 of the Rules and Regulations for the implementation of Presidential Decree 851 provides:
 a) Thirteenth-month pay shall mean one twelfth (1/12) of the basic salary of an
employee within a calendar year

b) Basic salary shall include all remunerations on earnings paid by an employer to an

employee for services rendered but may not include cost-of-living allowances granted
pursuant to Presidential Decree No. 525 or Letter of Instructions No. 174, profit sharing
payments and all allowances and monetary benefits which are not considered or
integrated as part of the regular or basic salary of the employee at the time of the
promulgation of the Decree on December 16, 1975.

Under Presidential Decree 851 and its implementing rules, the basic salary of an employee is used as
the basis in the determination of his 13th-month pay. Any compensations or remunerations which are
deemed not part of the basic pay is excluded as basis in the computation of the mandatory bonus.

Under the Rules and Regulations Implementing Presidential Decree 851, the following compensations
are deemed not part of the basic salary:

a) Cost-of-living allowances granted pursuant to Presidential Decree 525 and Letter of

Instructions No. 174;

b) Profit sharing payments;

c) All allowances and monetary benefits which are not considered or integrated as part
of the regular basic salary of tile employee at the time of the promulgation of the Decree
on December 16, 1975.

Under a later set of Supplementary Rules and Regulations Implementing Presidential Decree 851
issued by the then Labor Secretary Blas Ople, overtime pay, earnings and other remunerations are
excluded as part of the basic salary and in the computation of the 13th-month pay.

The exclusion of cost-of-living allowances under Presidential Decree 525 and Letter of Instructions
No. 174, and profit sharing payments indicate the intention to strip basic salary of other payments
which are properly considered as "fringe" benefits. Likewise, the catch-all exclusionary phrase "all
allowances and monetary benefits which are not considered or integrated as part of the basic salary"
shows also the intention to strip basic salary of any and all additions which may be in the form of
allowances or "fringe" benefits.

Moreover, the Supplementary Rules and Regulations Implementing Presidential Decree 851 is even
more emphatic in declaring that earnings and other remunerations which are not part of the basic
salary shall not be included in the computation of the 13th-month pay.

While doubt may have been created by the prior Rules and Regulations Implementing Presidential
Decree 851 which defines basic salary to include all remunerations or earnings paid by an employer
to an employee, this cloud is dissipated in the later and more controlling Supplementary Rules and
Regulations which categorically, exclude from the definition of basic salary earnings and other
remunerations paid by employer to an employee. A cursory perusal of the two sets of Rules indicates
that what has hitherto been the subject of a broad inclusion is now a subject of broad exclusion. The
Supplementary rules and Regulations cure the seeming tendency of the former rules to include all
remunerations and earnings within the definition of basic salary.

The all-embracing phrase "earnings and other renumeration" which are deemed not part of the basic
salary includes within its meaning payments for sick, vacation, or maternity leaves. Maternity premium
for works performed on rest days and special holidays pays for regular holidays and night differentials.
As such they are deemed not part of the basic salary and shall not be considered in the computation
of the 13th-month they, were not so excluded, it is hard to find any "earnings and other remunerations"
expressly excluded in the computation of the 13th-month pay. Then the exclusionary provision would
prove to be Idle and with no purpose.

This conclusion finds strong support under the Labor Code of the Philippines. To cite a few provisions:

Art. 87. — overtime work. Work may be performed beyond eight hours a day provided
what the employee is paid for the overtime work, additional compensation equivalent
to his regular wage plus at least twenty-five (25%) percent thereof.

It is clear that overtime pay is an additional compensation other than and added to the regular wage
or basic salary, for reason of which such is categorically excluded from the definition of basic salary
under the Supplementary Rules and Regulations Implementing Presidential Decree 851.

In Article 93 of the same Code, paragraph

 c) work performed on any special holiday shall be paid an additional compensation of
at least thirty percent (30%) of the regular wage of the employee.

It is likewise clear that prernium for special holiday which is at least 30% of the regular wage is an
additional compensation other than and added to the regular wage or basic salary. For similar reason
it shall not be considered in the computation of the 13th- month pay.

WHEREFORE, the Orders of the Deputy Labor Minister dated June 7, 1978 and December 19, 1978
are hereby set aside and a new one entered as above indicated. The Temporary Restraining Order
issued by this Court on February 14, 1979 is hereby made permanent. No pronouncement as to costs.

SO ORDERED.

Weight accorded to contemporaneous construction

G.R. No. L-19337 September 30, 1969

ASTURIAS SUGAR CENTRAL, INC., petitioner,

vs.
COMMISSIONER OF CUSTOMS and COURT OF TAX APPEALS, respondents.

Laurea, Laurea and Associates for petitioner.

Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General Esmeraldo Umali and
Solicitor Sumilang V. Bernardo for respondents.

CASTRO, J.:

This is a petition for review of the decision of the Court of Tax Appeals of November 20, 1961, which
denied recovery of the sum of P28,629.42, paid by the petitioner, under protest, in the concept of
customs duties and special import tax, as well as the petitioner's alternative remedy to recover the
said amount minus one per cent thereof by way of a drawback under sec. 106 (b) of the Tariff and
Customs Code.

The petitioner Asturias Sugar Central, Inc. is engaged in the production and milling of centrifugal sugar
for export, the sugar so produced being placed in containers known as jute bags. In 1957 it made two
importations of jute bags. The first shipment consisting of 44,800 jute bags and declared under entry
48 on January 8, 1967, entered free of customs duties and special import tax upon the petitioner's
filing of Re-exportation and Special Import Tax Bond no. 1 in the amounts of P25,088 and P2,464.50,
conditioned upon the exportation of the jute bags within one year from the date of importation. The
second shipment consisting of 75,200 jute bags and declared under entry 243 on February 8, 1957,
likewise entered free of customs duties and special import tax upon the petitioner's filing of Re-
exportation and Special Import Tax Bond no. 6 in the amounts of P42,112 and P7,984.44, with the
same conditions as stated in bond no. 1.

Of the 44,800 jute bags declared under entry 48, only 8,647 were exported within one year from the
date of importation as containers of centrifugal sugar. Of the 75,200 jute bags declared under entry
243, only 25,000 were exported within the said period of one year. In other words, of the total number
of imported jute bags only 33,647 bags were exported within one year after their importation. The
remaining 86,353 bags were exported after the expiration of the one-year period but within three years
from their importation.

On February 6, 1958 the petitioner, thru its agent Theo. H. Davies & Co., Far East, Ltd., requested the
Commissioner of Customs for a week's extension of Re-exportation and Special Import Tax Bond no.
6 which was to expire the following day, giving the following as the reasons for its failure to export the
remaining jute bags within the period of one year: (a) typhoons and severe floods; (b) picketing of the
Central railroad line from November 6 to December 21, 1957 by certain union elements in the employ
of the Philippine Railway Company, which hampered normal operations; and (c) delay in the arrival of
the vessel aboard which the petitioner was to ship its sugar which was then ready for loading. This
request was denied by the Commissioner per his letter of April 15, 1958.

Due to the petitioner's failure to show proof of the exportation of the balance of 86,353 jute bags within
one year from their importation, the Collector of Customs of Iloilo, on March 17, 1958, required it to
pay the amount of P28,629.42 representing the customs duties and special import tax due thereon,
which amount the petitioner paid under protest.

In its letter of April 10, 1958, supplemented by its letter of May 12, 1958, the petitioner demanded the
refund of the amount it had paid, on the ground that its request for extension of the period of one year
was filed on time, and that its failure to export the jute bags within the required one-year period was
due to delay in the arrival of the vessel on which they were to be loaded and to the picketing of the
Central railroad line. Alternatively, the petitioner asked for refund of the same amount in the form of a
drawback under section 106(b) in relation to section 105(x) of the Tariff and Customs Code.

After hearing, the Collector of Customs of Iloilo rendered judgment on January 21, 1960 denying the
claim for refund. From his action, appeal was taken to the Commissioner of Customs who upheld the
decision of the Collector. Upon a petition for review the Court of Tax Appeals affirmed the decision of
the Commissioner of Customs.

The petitioner imputes three errors to the Court of Tax Appeals, namely:

1. In not declaring that force majeure and/or fortuitous event is a sufficient justification for the
failure of the petitioner to export the jute bags in question within the time required by the bonds.

2. In not declaring that it is within the power of the Collector of Customs and/or the
Commissioner of Customs to extend the period of one (1) year within which the jute bags
should be exported.

3. In not declaring that the petitioner is entitled to a refund by way of a drawback under the
provisions of section 106, par. (b), of the Tariff and Customs Code.

1. The basic issue tendered for resolution is whether the Commissioner of Customs is vested, under
the Philippine Tariff Act of 1909, the then applicable law, with discretion to extend the period of one
year provided for in section 23 of the Act. Section 23 reads:

SEC. 23. That containers, such as casks, large metal, glass, or other receptacles which are,
in the opinion of the collector of customs, of such a character as to be readily identifiable may
be delivered to the importer thereof upon identification and the giving of a bond with sureties
satisfactory to the collector of customs in an amount equal to double the estimated duties
thereon, conditioned for the exportation thereof or payment of the corresponding duties
thereon within one year from the date of importation, under such rules and regulations as the
Insular Collector of Customs shall provide.1

To implement the said section 23, Customs Administrative Order 389 dated December 6, 1940 was
promulgated, paragraph XXVIII of which provides that "bonds for the re-exportation of cylinders and
other containers are good for 12 months without extension," and paragraph XXXI, that "bonds for
customs brokers, commercial samples, repairs and those filed to guarantee the re-exportation of
cylinders and other containers are not extendible."

And insofar as jute bags as containers are concerned, Customs Administrative Order 66 dated August
25, 1948 was issued, prescribing rules and regulations governing the importation, exportation and
identification thereof under section 23 of the Philippine Tariff Act of 1909. Said administrative order
provides:

That importation of jute bags intended for use as containers of Philippine products for
exportation to foreign countries shall be declared in a regular import entry supported by a
surety bond in an amount equal to double the estimated duties, conditioned for the exportation
or payment of the corresponding duties thereon within one year from the date of importation.

It will be noted that section 23 of the Philippine Tariff Act of 1909 and the superseding sec. 105(x) of
the Tariff and Customs Code, while fixing at one year the period within which the containers therein
mentioned must be exported, are silent as to whether the said period may be extended. It was surely
by reason of this silence that the Bureau of Customs issued Administrative Orders 389 and 66, already
adverted to, to eliminate confusion and provide a guide as to how it shall apply the law, 2 and, more
specifically, to make officially known its policy to consider the one-year period mentioned in the law as
non-extendible.

Considering that the statutory provisions in question have not been the subject of previous judicial
interpretation, then the application of the doctrine of "judicial respect for administrative
construction," 3 would, initially, be in order.

Only where the court of last resort has not previously interpreted the statute is the rule applicable that
courts will give consideration to construction by administrative or executive departments of the state.4 1aw phîl.nèt

The formal or informal interpretation or practical construction of an ambiguous/ or uncertain

statute or law by the executive department or other agency/ charged with its administration or
enforcement/ is entitled to consideration and the highest respect from the courts, /and must
be accorded appropriate weight in determining the meaning of the law,/ especially when the
construction or interpretation is long continued and uniform/ or is contemporaneous with the
 first workings of the statute, or when the enactment of the statute was suggested by such
agency.5

The administrative orders in question appear to be in consonance with the intention of the legislature
to limit the period within which to export imported containers to one year, without extension, from the
date of importation. Otherwise, in enacting the Tariff and Customs Code to supersede the Philippine
Tariff Act of 1909, Congress would have amended section 23 of the latter law so as to overrule the
long-standing view of the Commissioner of Customs that the one-year period therein mentioned is not
extendible.

Implied legislative approval by failure to change a long-standing administrative construction is

not essential to judicial respect for the construction but is an element which greatly increases
the weight given such construction.6

The correctness of the interpretation given a statute by the agency charged with administering
its provision is indicated where it appears that Congress, with full knowledge of the agency's
interpretation, has made significant additions to the statute without amending it to depart from
the agency's view.7

Considering that the Bureau of Customs is the office charged with implementing and enforcing the
provisions of our Tariff and Customs Code, the construction placed by it thereon should be given
controlling weight.1awphîl.nèt

In applying the doctrine or principle of respect for administrative or practical construction, the courts
often refer to several factors which may be regarded as bases of the principle, as factors leading the
courts to give the principle controlling weight in particular instances, or as independent rules in
themselves. These factors are the respect due the governmental agencies charged with
administration, their competence, expertness, experience, and informed judgment and the fact that
they frequently are the drafters of the law they interpret; that the agency is the one on which the
legislature must rely to advise it as to the practical working out of the statute, and practical application
of the statute presents the agency with unique opportunity and experiences for discovering
deficiencies, inaccuracies, or improvements in the statute; ... 8

If it is further considered that exemptions from taxation are not favored, 9 and that tax statutes are to
be construed in strictissimi juris against the taxpayer and liberally in favor of the taxing
authority, 10 then we are hard put to sustain the petitioner's stand that it was entitled to an extension
of time within which to export the jute bags and, consequently, to a refund of the amount it had paid
as customs duties.

In the light of the foregoing, it is our considered view that the one-year period prescribed in section 23
of the Philippine Tariff Act of 1909 is non-extendible and compliance therewith is mandatory.

The petitioner's argument that force majeure and/or fortuitous events prevented it from exporting the
jute bags within the one-year period cannot be accorded credit, for several reasons. In the first place,
in its decision of November 20, 1961, the Court of Tax Appeals made absolutely no mention of or
reference to this argument of the petitioner, which can only be interpreted to mean that the court did
not believe that the "typhoons, floods and picketing" adverted to by the petitioner in its brief were of
such magnitude or nature as to effectively prevent the exportation of the jute bags within the required
one-year period. In point of fact nowhere in the record does the petitioner convincingly show that the
so-called fortuitous events or force majeure referred to by it precluded the timely exportation of the
jute bags. In the second place, assuming, arguendo, that the one-year period is extendible, the jute
bags were not actually exported within the one-week extension the petitioner sought. The record
shows that although of the remaining 86,353 jute bags 21,944 were exported within the period of one
week after the request for extension was filed, the rest of the bags, amounting to a total of 64,409,
were actually exported only during the period from February 16 to May 24, 1958, long after the
expiration of the one-week extension sought by the petitioner. Finally, it is clear from the record that
the typhoons and floods which, according to the petitioner, helped render impossible the fulfillment of
its obligation to export within the one-year period, assuming that they may be placed in the category
of fortuitous events or force majeure, all occurred prior to the execution of the bonds in question, or
prior to the commencement of the one-year period within which the petitioner was in law required to
export the jute bags.

2. The next argument of the petitioner is that granting that Customs Administrative Order 389 is valid
and binding, yet "jute bags" cannot be included in the phrase "cylinders and other containers"
mentioned therein. It will be noted, however, that the Philippine Tariff Act of 1909 and the Tariff and
Customs Code, which Administrative Order 389 seeks to implement, speak of "containers" in general.
The enumeration following the word "containers" in the said statutes serves merely to give examples
of containers and not to specify the particular kinds thereof. Thus, sec. 23 of the Philippine Tariff Act
states, "containers such as casks large metals, glass or other receptacles," and sec. 105 (x) of the
Tariff and Customs Code mentions "large containers," giving as examples "demijohn cylinders, drums,
casks and other similar receptacles of metal, glass or other materials." (emphasis supplied) There is,
therefore, no reason to suppose that the customs authorities had intended, in Customs Administrative
Order 389 to circumscribe the scope of the word "container," any more than the statures sought to be
implemented actually intended to do.

3. Finally, the petitioner claims entitlement to a drawback of the duties it had paid, by virtue of section
106 (b) of the Tariff and Customs Code, 11 which reads:

SEC. 106. Drawbacks: ...

b. On Articles Made from Imported Materials or Similar Domestic Materials and Wastes
Thereof. — Upon the exportation of articles manufactured or produced in the Philippines,
including the packing, covering, putting up, marking or labeling thereof, either in whole or in
part of imported materials, or from similar domestic materials of equal quantity and productive
manufacturing quality and value, such question to be determined by the Collector of Customs,
there shall be allowed a drawback equal in amount to the duties paid on the imported materials
so used, or where similar domestic materials are used, to the duties paid on the equivalent
imported similar materials, less one per cent thereof: Provided, That the exportation shall be
made within three years after the importation of the foreign material used or constituting the
basis for drawback ... .

The petitioner argues that not having availed itself of the full exemption granted by sec. 105(x) of the
Tariff and Customs Code due to its failure to export the jute bags within one year, it is nevertheless,
by authority of the above-quoted provision, entitled to a 99% drawback of the duties it had paid,
averring further that sec. 106(b) does not presuppose immediate payment of duties and taxes at the
time of importation.

The contention is palpably devoid of merit.

The provisions invoked by the petitioner (to sustain his claim for refund) offer two options to an
importer. The first, under sec. 105 (x), gives him the privilege of importing, free from import duties, the
containers mentioned therein as long as he exports them within one year from the date of acceptance
of the import entry, which period as shown above, is not extendible. The second, presented by sec.
106 (b), contemplates a case where import duties are first paid, subject to refund to the extent of 99%
of the amount paid, provided the articles mentioned therein are exported within three years from
importation.

It would seem then that the Government would forego collecting duties on the articles mentioned in
section 105(x) of Tariff and Customs Code as long as it is assured, by the filing of a bond, that the
same shall be exported within the relatively short period of one year from the date of acceptance of
the import entry. Where an importer cannot provide such assurance, then the Government, under sec.
106(b) of said Code, would require payment of the corresponding duties first. The basic purpose of
the two provisions is the same, which is, to enable a local manufacturer to compete in foreign markets,
by relieving him of the disadvantages resulting from having to pay duties on imported merchandise,
thereby building up export trade and encouraging manufacture in the country. 12 But there is a
difference, and it is this: under section 105(x) full exemption is granted to an importer who justifies the
grant of exemption by exporting within one-year. The petitioner, having opted to take advantage of the
provisions of section 105(x), may not, after having failed to comply with the conditions imposed
thereby, avoid the consequences of such failure by being allowed a drawback under section 106(b) of
the same Act without having complied with the conditions of the latter section.

For it is not to be supposed that the legislature had intended to defeat compliance with the terms of
section 105(x) thru a refuge under the provisions of section 106(b). A construction should be avoided
which affords an opportunity to defeat compliance with the terms of a statute. 13 Rather courts should
proceed on the theory that parts of a statute may be harmonized and reconciled with each other.

A construction of a statute which creates an inconsistency should be avoided when a reasonable

interpretation can be adopted which will not do violence to the plain words of the act and will carry out
the intention of Congress.

In the construction of statutes, the courts start with the assumption that the legislature intended
to enact an effective law, and the legislature is not to be presumed to have done a vain thing
in the enactment of a statute. Hence, it is a general principle, embodied in the maxim, "ut res
magis valeat quam pereat," that the courts should, if reasonably possible to do so without
violence to the spirit and language of an act, so interpret the statute to give it efficient operation
and effect as a whole. An interpretation should, if possible, be avoided under which a statute
or provision being construed is defeated, or as otherwise expressed, nullified, destroyed,
emasculated, repealed, explained away, or rendered insignificant, meaningless, inoperative,
or nugatory. 14
Quasi-Judicial Power

G.R. No. 96681 December 2, 1991

HON. ISIDRO CARIÑO, in his capacity as Secretary of the Department of Education, Culture &
Sports, DR. ERLINDA LOLARGA, in her capacity as Superintendent of City Schools of
Manila, petitioners,
vs.
THE COMMISSION ON HUMAN RIGHTS, GRACIANO BUDOY, JULIETA BABARAN, ELSA
IBABAO, HELEN LUPO, AMPARO GONZALES, LUZ DEL CASTILLO, ELSA REYES and
APOLINARIO ESBER, respondents.

NARVASA, J.:

The issue raised in the special civil action of certiorari and prohibition at bar, instituted by
the Solicitor General, may be formulated as follows: where the relief sought from the
Commission on Human Rights by a party in a case consists of the review and reversal or
modification of a decision or order issued by a court of justice or government agency or
official exercising quasi-judicial functions, may the Commission take cognizance of the
case and grant that relief? Stated otherwise, where a particular subject-matter is placed
by law within the jurisdiction of a court or other government agency or official for purposes
of trial and adjudgment, may the Commission on Human Rights take cognizance of the
same subject-matter for the same purposes of hearing and adjudication?

The facts narrated in the petition are not denied by the respondents and are hence taken
as substantially correct for purposes of ruling on the legal questions posed in the present
action. These facts, 1 together with others involved in related cases recently resolved by
this Court 2 or otherwise undisputed on the record, are hereunder set forth.

1. On September 17, 1990, a Monday and a class day, some 800 public school teachers,
among them members of the Manila Public School Teachers Association (MPSTA) and
Alliance of Concerned Teachers (ACT) undertook what they described as "mass
concerted actions" to "dramatize and highlight" their plight resulting from the alleged
failure of the public authorities to act upon grievances that had time and again been
brought to the latter's attention. According to them they had decided to undertake said
"mass concerted actions" after the protest rally staged at the DECS premises on
September 14, 1990 without disrupting classes as a last call for the government to
negotiate the granting of demands had elicited no response from the Secretary of
Education. The "mass actions" consisted in staying away from their classes, converging
at the Liwasang Bonifacio, gathering in peaceable assemblies, etc. Through their
representatives, the teachers participating in the mass actions were served with an order
of the Secretary of Education to return to work in 24 hours or face dismissal, and a
memorandum directing the DECS officials concerned to initiate dismissal proceedings
against those who did not comply and to hire their replacements. Those directives
notwithstanding, the mass actions continued into the week, with more teachers joining in
the days that followed. 3
Among those who took part in the "concerted mass actions" were the eight (8) private respondents herein, teachers at the Ramon
Magsaysay High School, Manila, who had agreed to support the non-political demands of the MPSTA. 4

2. For failure to heed the return-to-work order, the CHR complainants (private respondents) were administratively charged on the
basis of the principal's report and given five (5) days to answer the charges. They were also preventively suspended for ninety (90)
days "pursuant to Section 41 of P.D. 807" and temporarily replaced (unmarked CHR Exhibits, Annexes F, G, H). An investigation
committee was consequently formed to hear the charges in accordance with P.D. 807. 5

3. In the administrative case docketed as Case No. DECS 90-082 in which CHR complainants Graciano Budoy, Jr., Julieta Babaran,
Luz del Castillo, Apolinario Esber were, among others, named respondents, 6
the latter filed separate answers,
opted for a formal investigation, and also moved "for suspension of the administrative
proceedings pending resolution by . . (the Supreme) Court of their application for issuance
of an injunctive writ/temporary restraining order." But when their motion for suspension
was denied by Order dated November 8, 1990 of the Investigating Committee, which later
also denied their motion for reconsideration orally made at the hearing of November 14,
1990, "the respondents led by their counsel staged a walkout signifying their intent to
boycott the entire proceedings." 7 The case eventually resulted in a Decision of Secretary
Cariño dated December 17, 1990, rendered after evaluation of the evidence as well as
the answers, affidavits and documents submitted by the respondents, decreeing
dismissal from the service of Apolinario Esber and the suspension for nine (9) months of
Babaran, Budoy and del Castillo. 8
4. In the meantime, the "MPSTA filed a petition for certiorari before the Regional Trial Court of Manila against petitioner (Cariño),
which was dismissed (unmarked CHR Exhibit, Annex I). Later, the MPSTA went to the Supreme Court (on certiorari, in an attempt to
nullify said dismissal, grounded on the) alleged violation of the striking teachers" right to due process and peaceable assembly
docketed as G.R. No. 95445, supra. The ACT also filed a similar petition before the Supreme Court . . . docketed as G.R. No.
95590." 9
Both petitions in this Court were filed in behalf of the teacher associations, a few
named individuals, and "other teacher-members so numerous similarly situated" or "other
similarly situated public school teachers too numerous to be impleaded."

5. In the meantime, too, the respondent teachers submitted sworn statements dated
September 27, 1990 to the Commission on Human Rights to complain that while they
were participating in peaceful mass actions, they suddenly learned of their replacements
as teachers, allegedly without notice and consequently for reasons completely unknown
to them. 10
6. Their complaints — and those of other teachers also "ordered suspended by the . . . (DECS)," all numbering forty-two (42) — were
docketed as "Striking Teachers CHR Case No. 90775." In connection therewith the Commission scheduled a "dialogue" on October
11, 1990, and sent a subpoena to Secretary Cariño requiring his attendance therein. 11

On the day of the "dialogue," although it said that it was "not certain whether he (Sec. Cariño) received the subpoena which was
served at his office, . . . (the) Commission, with the Chairman presiding, and Commissioners Hesiquio R. Mallilin and Narciso C.
Monteiro, proceeded to hear the case;" it heard the complainants' counsel (a) explain that his clients had been "denied due process
and suspended without formal notice, and unjustly, since they did not join the mass leave," and (b) expatiate on the grievances which
were "the cause of the mass leave of MPSTA teachers, (and) with which causes they (CHR complainants) sympathize." 12
The
Commission thereafter issued an Order 13reciting these facts and making the following
disposition:

To be properly apprised of the real facts of the case and be accordingly guided in
its investigation and resolution of the matter, considering that these forty two
teachers are now suspended and deprived of their wages, which they need very
badly, Secretary Isidro Cariño, of the Department of Education, Culture and Sports,
Dr. Erlinda Lolarga, school superintendent of Manila and the Principal of Ramon
Magsaysay High School, Manila, are hereby enjoined to appear and enlighten the
Commission en banc on October 19, 1990 at 11:00 A.M. and to bring with them
any and all documents relevant to the allegations aforestated herein to assist the
Commission in this matter. Otherwise, the Commission will resolve the complaint
on the basis of complainants' evidence.

xxx xxx xxx

7. Through the Office of the Solicitor General, Secretary Cariño sought and was granted
leave to file a motion to dismiss the case. His motion to dismiss was submitted on
November 14, 1990 alleging as grounds therefor, "that the complaint states no cause of
action and that the CHR has no jurisdiction over the case." 14

8. Pending determination by the Commission of the motion to dismiss, judgments affecting the "striking teachers" were promulgated
in two (2) cases, as aforestated, viz.:

a) The Decision dated December l7, 1990 of Education Secretary Cariño in Case No. DECS 90-082, decreeing dismissal
from the service of Apolinario Esber and the suspension for nine (9) months of Babaran, Budoy and del Castillo; 15 and

b) The joint Resolution of this Court dated August 6, 1991 in G.R. Nos. 95445 and 95590 dismissing the petitions "without
prejudice to any appeals, if still timely, that the individual petitioners may take to the Civil Service Commission on the matters
 complained of," 16 and inter alia "ruling that it was prima facie lawful for petitioner Cariño to issue return-to-work orders, file
administrative charges against recalcitrants, preventively suspend them, and issue decision on those charges." 17

9. In an Order dated December 28, 1990, respondent Commission denied Sec. Cariño's motion to dismiss and required him and
Superintendent Lolarga "to submit their counter-affidavits within ten (10) days . . . (after which) the Commission shall proceed to hear
and resolve the case on the merits with or without respondents counter affidavit." 18
It held that the "striking teachers"
"were denied due process of law; . . . they should not have been replaced without a
chance to reply to the administrative charges;" there had been a violation of their civil and
political rights which the Commission was empowered to investigate; and while
expressing its "utmost respect to the Supreme Court . . . the facts before . . . (it) are
different from those in the case decided by the Supreme Court" (the reference being
unmistakably to this Court's joint Resolution of August 6, 1991 in G.R. Nos. 95445 and
95590, supra).

It is to invalidate and set aside this Order of December 28, 1990 that the Solicitor General,
in behalf of petitioner Cariño, has commenced the present action of certiorari and
prohibition.

The Commission on Human Rights has made clear its position that it does not feel bound
by this Court's joint Resolution in G.R. Nos. 95445 and 95590, supra. It has also made
plain its intention "to hear and resolve the case (i.e., Striking Teachers HRC Case No. 90-
775) on the merits." It intends, in other words, to try and decide or hear and determine,
i.e., exercise jurisdiction over the following general issues:

1) whether or not the striking teachers were denied due process, and just cause exists
for the imposition of administrative disciplinary sanctions on them by their superiors; and

2) whether or not the grievances which were "the cause of the mass leave of MPSTA
teachers, (and) with which causes they (CHR complainants) sympathize," justify their
mass action or strike.

The Commission evidently intends to itself adjudicate, that is to say, determine with
character of finality and definiteness, the same issues which have been passed upon and
decided by the Secretary of Education, Culture & Sports, subject to appeal to the Civil
Service Commission, this Court having in fact, as aforementioned, declared that the
teachers affected may take appeals to the Civil Service Commission on said matters, if
still timely.

The threshold question is whether or not the Commission on Human Rights has the power
under the Constitution to do so; whether or not, like a court of justice, 19 or even a quasi-
judicial agency, 20 it has jurisdiction or adjudicatory powers over, or the power to try and
decide, or hear and determine, certain specific type of cases, like alleged human rights
violations involving civil or political rights.

The Court declares the Commission on Human Rights to have no such power; and that it
was not meant by the fundamental law to be another court or quasi-judicial agency in this
country, or duplicate much less take over the functions of the latter.

The most that may be conceded to the Commission in the way of adjudicative power is
that it may investigate, i.e., receive evidence and make findings of fact as regards claimed
human rights violations involving civil and political rights. But fact finding is not
adjudication, and cannot be likened to the judicial function of a court of justice, or even a
quasi-judicial agency or official. The function of receiving evidence and ascertaining
therefrom the facts of a controversy is not a judicial function, properly speaking. To be
considered such, the faculty of receiving evidence and making factual conclusions in a
controversy must be accompanied by the authority of applying the law to those factual
conclusions to the end that the controversy may be decided or determined authoritatively,
finally and definitively, subject to such appeals or modes of review as may be provided
by law. 21 This function, to repeat, the Commission does not have. 22
The proposition is made clear by the constitutional provisions specifying the powers of the Commission on Human Rights.

The Commission was created by the 1987 Constitution as an independent office. 23

Upon its constitution, it
succeeded and superseded the Presidential Committee on Human Rights existing at the
time of the effectivity of the Constitution. 24 Its powers and functions are the following 25

(1) Investigate, on its own or on complaint by any party, all forms of human rights violations involving civil and political rights;

(2) Adopt its operational guidelines and rules of procedure, and cite for contempt for violations thereof in accordance with
the Rules of Court;

(3) Provide appropriate legal measures for the protection of human rights of all persons within the Philippines, as well as
Filipinos residing abroad, and provide for preventive measures and legal aid services to the underprivileged whose human
rights have been violated or need protection;

(4) Exercise visitorial powers over jails, prisons, or detention facilities;

(5) Establish a continuing program of research, education, and information to enhance respect for the primacy of human
rights;

(6) Recommend to the Congress effective measures to promote human rights and to provide for compensation to victims
of violations of human rights, or their families;

(7) Monitor the Philippine Government's compliance with international treaty obligations on human rights;

(8) Grant immunity from prosecution to any person whose testimony or whose possession of documents or other evidence
is necessary or convenient to determine the truth in any investigation conducted by it or under its authority;

(9) Request the assistance of any department, bureau, office, or agency in the performance of its functions;

(10) Appoint its officers and employees in accordance with law; and

(11) Perform such other duties and functions as may be provided by law.

As should at once be observed, only the first of the enumerated powers and functions bears any resemblance to adjudication or
adjudgment. The Constitution clearly and categorically grants to the Commission the power to investigate all forms of human rights
violations involving civil and political rights. It can exercise that power on its own initiative or on complaint of any person. It may
exercise that power pursuant to such rules of procedure as it may adopt and, in cases of violations of said rules, cite for contempt in
accordance with the Rules of Court. In the course of any investigation conducted by it or under its authority, it may grant immunity
from prosecution to any person whose testimony or whose possession of documents or other evidence is necessary or convenient to
determine the truth. It may also request the assistance of any department, bureau, office, or agency in the performance of its functions,
in the conduct of its investigation or in extending such remedy as may be required by its findings. 26

But it cannot try and decide cases (or hear and determine causes) as courts of justice, or even quasi-judicial bodies do. To investigate
is not to adjudicate or adjudge. Whether in the popular or the technical sense, these terms have well understood and quite distinct
meanings.

"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: . . . to subject to an
official probe . . .: to conduct an official inquiry." 27
The purpose of 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;" 28 "to inquire; to make an investigation," "investigation" being
in turn describe as "(a)n administrative function, the exercise of which ordinarily does not
require a hearing. 2 Am J2d Adm L Sec. 257; . . . an inquiry, judicial or otherwise, for the
discovery and collection of facts concerning a certain matter or matters." 29

"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 the parties to a court case) on the merits of issues raised: . . .
to pass judgment on: settle judicially: . . . act as judge." 30
And "adjudge" means "to decide or rule upon as
a judge or with judicial or quasi-judicial powers: . . . to award or grant judicially in a case
of controversy . . . ." 31
In the 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. . . . Implies a
judicial determination of a fact, and the entry of a judgment." 32

Hence it is that the Commission on Human Rights, having merely the power "to investigate," cannot and should not "try and resolve
on the merits" (adjudicate) the matters involved in Striking Teachers HRC Case No. 90-775, as it has announced it means to do; and
it cannot do so even if there be a claim that in the administrative disciplinary proceedings against the teachers in question, initiated
and conducted by the DECS, their human rights, or civil or political rights had been transgressed. More particularly, the Commission
has no power to "resolve on the merits" the question of (a) whether or not the mass concerted actions engaged in by the teachers
constitute and are prohibited or otherwise restricted by law; (b) whether or not the act of carrying on and taking part in those actions,
and the failure of the teachers to discontinue those actions, and return to their classes despite the order to this effect by the Secretary
of Education, constitute infractions of relevant rules and regulations warranting administrative disciplinary sanctions, or are justified
by the grievances complained of by them; and (c) what where the particular acts done by each individual teacher and what sanctions,
if any, may properly be imposed for said acts or omissions.

These are matters undoubtedly and clearly within the original jurisdiction of the Secretary of Education, being within the scope of the
disciplinary powers granted to him under the Civil Service Law, and also, within the appellate jurisdiction of the Civil Service
Commission.

Indeed, the Secretary of Education has, as above narrated, already taken cognizance of the issues and resolved them, 33
and it
appears that appeals have been seasonably taken by the aggrieved parties to the Civil
Service Commission; and even this Court itself has had occasion to pass upon said
issues. 34

Now, it is quite obvious that whether or not the conclusions reached by the Secretary of Education in disciplinary cases are correct
and are adequately based on substantial evidence; whether or not the proceedings themselves are void or defective in not having
accorded the respondents due process; and whether or not the Secretary of Education had in truth committed "human rights violations
involving civil and political rights," are matters which may be passed upon and determined through a motion for reconsideration
addressed to the Secretary Education himself, and in the event of an adverse verdict, may be reviewed by the Civil Service
Commission and eventually the Supreme Court.

The Commission on Human Rights simply has no place in this scheme of things. It has no business intruding into the jurisdiction and
functions of the Education Secretary or the Civil Service Commission. It has no business going over the same ground traversed by
the latter and making its own judgment on the questions involved. This would accord success to what may well have been the
complaining teachers' strategy to abort, frustrate or negate the judgment of the Education Secretary in the administrative cases against
them which they anticipated would be adverse to them.

This cannot be done. It will not be permitted to be done.

In any event, the investigation by the Commission on Human Rights would serve no useful purpose. If its investigation should result
in conclusions contrary to those reached by Secretary Cariño, it would have no power anyway to reverse the Secretary's conclusions.
Reversal thereof can only by done by the Civil Service Commission and lastly by this Court. The only thing the Commission can do, if
it concludes that Secretary Cariño was in error, is to refer the matter to the appropriate Government agency or tribunal for assistance;
that would be the Civil Service Commission. 35 It cannot arrogate unto itself the appellate jurisdiction of
the Civil Service Commission.

WHEREFORE, the petition is granted; the Order of December 29, 1990 is ANNULLED
and SET ASIDE, and the respondent Commission on Human Rights and the Chairman
and Members thereof are prohibited "to hear and resolve the case (i.e., Striking Teachers
HRC Case No. 90-775) on the merits."

SO ORDERED.

G.R. No. 153310 March 2, 2004

MEGAWORLD GLOBUS ASIA, INC., petitioner,

vs.
DSM CONSTRUCTION AND DEVELOPMENT CORPORATION and PRUDENTIAL GUARANTEE
AND ASSURANCE, INC., respondents.

Megaworld Globus Asia vs. DSM Construction

Findings of fact of administrative agencies and quasi-judicial bodies, which have acquired expertise
because their jurisdiction is confined to specific matters, are generally accorded not only respect, but finality
when affirmed by the Court of Appeals.

DECISION

TINGA, J.:

Before this Court is a Petition for Review on Certiorari assailing the Decision dated February 14, 2002,
of the Court of Appeals in CA G.R. SP No. 67432,1 which affirmed the Decision2 of the Construction
Industry Arbitration Commission (CIAC)3 dated September 8, 2001, in CIAC Case No. 22-2000 finding
petitioner Megaworld Globus Asia, Inc., liable to DSM Construction in the amount of ₱62,760,558.49.

The antecedents are as follows:

Relative to the construction of a condominium project called "The Salcedo Park," located at H.V. dela
Costa St., Salcedo Village, Makati City, the project owner, Megaworld, entered into three separate
contracts with DSM Construction, namely: (1) Contract for Architectural Finishing Works; (2) Contract
for Interior Finishing Works; and (3) Contract for Supply and Installation of Kitchen Cabinets and
Closets. The total contract price, which was initially placed at ₱300 Million, was later reduced to ₱240
Million when the items for kitchen cabinets and walk-in closets were deleted.4 The contracts also
contain a stipulation for Retention Money, which is a portion of the total contract price (usually, as in
this case, 10%) set aside by the project owner from all approved billings and retained for a certain
period to guarantee the performance by the contractor of all corrective works during the defect-liability
period which, in this case, is twelve months from the issuance of the Taking Over Certificate of Works.5

The Letter of Award for Architectural Finishing Works provides that the period for commencement and
completion shall be twelve months, from August 1, 1997 to July 31, 1998. However, on February 21,
2000, representatives of both Megaworld and DSM Construction entered into an Interim
Agreement whereby they agreed on a new schedule of the turnover of units from the 26th floor to the
40th floor, which was the last of the contracted works.6 The consideration agreed upon in the Interim
Agreement was ₱53,000,000.00. Of this amount, ₱3,000,000.00 was to be released immediately while
five (5) equal installments of ₱7,000,000.00 were to be released depending on the turn-over of units
from the 26th floor to the 40th floor. The remaining amount of ₱15,000,000.00 of the ₱53,000,000.00
consisted of half of the retention money.7

Because of the differences that arose from the billings, DSM Construction filed on August 21, 2002,
a Complaint before the CIAC for compulsory arbitration, claiming payment of ₱97,743,808.33 for the
outstanding balance of the three construction contracts, variation works, labor escalation, preliminaries
loss and expense, earned retention money, interests, and attorney’s fees.8 DSM Construction alleged
that it already commenced the finishing works on the existing 12 floors on August 1, 1997, instead of
waiting for the entire 40-floor structure to be completed. At one time, DSM Construction worked with
other contractors whose work often depended on, interfered or conflicted with said contractors. Delay
by a trade contractor would start a chain reaction by delaying or putting off other works.9

Interposing mainly the defense of delay in the turn-over of units and the poor quality of work of DSM
Construction, Megaworld filed its Answer and made a counter-claim for loss of profits, liquidated
damages, costs of take-over and rectification works, administration expenses, interests, attorney’s
fees and cost of arbitration in the total amount of ₱85,869,870.28.10

Prudential Guarantee and Assurance, Inc. (PGAI), which issued a Performance Bond to guarantee
Megaworld’s contractual obligation on the project, was impleaded by Megaworld as a third-party
respondent.11

On March 28, 2001, the parties signed before the members of the Arbitral Tribunal the Terms of
Reference12 (TOR) where they setforth their admitted facts,13 respective documentary
evidence,14 summary of claims15 and issues to be resolved by the tribunal.16 After presenting their
evidence in the form of affidavits of witnesses,17 the parties submitted their respective
memoranda/draft decisions.18

On October 19, 2001, the Arbitral Tribunal promulgated its Decision dated September 28, 2001,
awarding ₱62,760,558.49 to DSM Construction and ₱9,473,799.46 to Megaworld.19

Megaworld filed a Petition for Review under Rule 43 of the Rules of Civil Procedure before the Court
of Appeals. It faulted the Arbitral Tribunal for finding that DSM Construction achieved a 95.56% level
of accomplishment as of February 14, 2000; for absolving DSM Corporation of the consequences of
the alleged delay in the performance of its work; and for ruling that DSM Construction had complied
with the contractual requirements for filing requests for extension. Megaworld likewise questioned the
sufficiency of evidence to justify the awards for liquidated damages; the balance of the contract price;
the balance of amounts payable on account of the Interim Agreement of February 21, 2000; the
amount of ₱6,596,675.55 for variation orders; the amount of ₱29,380,902.35 as reimbursement for
preliminaries/loss and expense; the amount of ₱413,041.52 for labor escalation costs; and the balance
of the retention money in the amount of ₱14,700,000.00 despite its award of ₱11,820,000.00 under
the February 21, 2000, Interim Agreement. Finally, Megaworld claimed that the Arbitral Tribunal erred
in denying its claim for liquidated damages, expenses incurred for the cost of take-over work,
administrative expenses, and its recourse against PGAI and for limiting its recovery for rectification
work to only ₱9,197,863.55.20

On February 14, 2002, the Court of Appeals promulgated its Decision21 affirming that of the Arbitral
Tribunal. The court pointed out that only questions of law may be raised before it on appeal from an
award of the CIAC.22 That pronouncement notwithstanding, the Court of Appeals proceeded to review
the decision of the Arbitral Tribunal and found the same to be amply supported by evidence.23

Megaworld sought reconsideration of the Court of Appeals’ Decision arguing, among other things, that
the appellate court ignored the ruling in Metro Construction, Inc. v. Chatham Properties24 that the
review of the CIAC award may involve either questions of fact, law, or both fact and law.

The Court of Appeals denied the motion for reconsideration in its Resolution25 dated April 25, 2002.
While acknowledging that the findings of fact of the CIAC may be questioned in line with Metro
Construction,26 the appellate court stressed that the tribunal’s decision is not devoid of factual or
evidentiary support.

Megaworld elevated the case to this Court through the present Petition, advancing the following
grounds, viz:

IWON THE CA’S ADOPTION OF FACTS FROM THE DECISION OF CIAC WAS PROPER

THE COURT OF APPEALS IN EFFECT REFUSED TO HEED THE RULE LAID DOWN BY THIS
Honorable Court in the Metro Construction, INC. vs. Chatham properties, inc. case when it dismissed
mgai’s petition despite the grave questions of both fact and law brought before it by the petitioner.

II

the finding of the appellate court that the decision was based on substantial evidence adduced by both
parties sans any review of the record or of attachments of dsm is fatally wrong, such finding being
merely an adoption of the tribunal’s decision which, as earlier pointed out, was not supported by
competent, credible and admissible evidence.
III

the court of appeals seriously erred in giving blanket approval of all the unfounded claims and
conclusions of the ciac arbitral tribunal’s SEPTEMBER 28, 2001 decision to the detriment of
petitioner’s cardinal right to due process, particularly to its right to administrative due process.

IV

the findings and conclusions made by a highly partisan ciac arbitral tribunal have no basis on the
evidence on record. hence, the exception to the rule that only questions of law may be brought to the
honorable court is applicable in the case AT bar.27

Although Megaworld, at the outset,28 intimates that the case involves grave questions of both fact and
law, a cursory reading of the Petition reveals that, except for the amorphous advertence to
administrative due process, the alleged errors fundamentally involve only questions of fact.
Megaworld’s plea for the Court to pass upon the findings of facts of the Arbitral Tribunal, which were
upheld by the appellate court, must perforce fail.

To jumpstart its bid, Megaworld exploits the Court of Appeals’ pronouncement in the assailed decision
that only questions of law may be raised before it from an award of the CIAC. The appellate court did
so, Megaworld continues, in evident disregard of Metro Construction.29

Under Section 19 of Executive Order No. 1008,30 the CIAC’s arbitral award "shall be final and
inappealable except on questions of law which shall be appealable to the Supreme Court." In Metro
Construction, however, this Court held that, with the modification of E.O. No. 1008 by subsequent laws
and issuances,31 decisions of the CIAC may be appealed to the Court of Appeals not only on questions
of law but also on questions of fact and mixed questions of law and fact.

Of such subsequent laws and issuances, only Section 1,32 Rule 43 of the 1997 Rules of Civil Procedure
expressly mentions the CIAC. While an argument may be made that procedural rules cannot modify
substantive law, adding in support thereof that Section 1, Rule 43 has increased the jurisdiction of the
Court of Appeals by expanding the scope of review of CIAC awards, or that it contravenes the rationale
for arbitration, extant from the record is the fact that no party raised such argument. Consequently, the
matter need not be delved into.

In any case, the attack against the merits of the Court of Appeals’ Decision must fail. Although Metro
Construction may have been unbeknownst to the appellate court when it promulgated its Decision, the
fact remains that, as noted therein,33 it reviewed the findings of facts of the CIAC and ruled that the
findings are amply supported by the evidence.

The Court of Appeals is presumed to have reviewed the case based on the Petition and its annexes,
and weighed them against the Comment of DSM Construction and the Decision of the Arbitral Tribunal
to arrive at the conclusion that the said Decision is based on substantial evidence. In administrative or
quasi-judicial bodies like the CIAC, a fact may be established / if supported by substantial evidence or
that amount of relevant evidence which a reasonable mind might accept as adequate to justify a
conclusion.34

The tenability of the assailed Decision is clear from the following discussion of the arguments raised
by Megaworld before the Court of Appeals which significantly are the same arguments it has raised
before this Court.

Issue of Accomplishment Level

Megaworld contested the finding of 95.56% level of accomplishment by the Arbitral Tribunal, alleging
that the receipts DSM Construction issued for payments under the Interim Agreement show that the
latter only achieved 90% accomplishment up to the 31st floor while the 32nd to the 34th floors were only
60% completed.35 Megaworld insisted, therefore, that the level of accomplishment was nowhere near
90%.

DSM Construction countered that Megaworld, in claiming a level of accomplishment of only 90%,
contradicted its own Project Manager, TCGI,36 which came up with a different percentage of
accomplishment that are notably higher than Megaworld’s computation.37

In resolving this issue, the Arbitral Tribunal relied on the computation of Davis Langdon & Seah (DLS),
the project’s independent surveyor,38 which found the level of accomplishment as of February 14,
2000, to be 95.56%. DLS’s computation is recited in Exhibit "NN",39 thus:

Architectural Finishing :40

 The 24th
Progress
Billing
evaluated
by DLS
covering the
period
November
=
15, 1999 to Php213,658,888.7741Php223,456,756.6842
95.62%
December
15, 1999
over the
Contract
Price for
Architectural
Finishing
Works.
Kitchen Cabinets & Bedroom Closets:43
The 9th
Progress
Billing
evaluated
by DLS
covering the
period
December
=
1, 1999 to Php26,228,091.7344Php28,556,915.1745
91.84%
December
9, 1999 over
the contract
price for
Kitchen
Cabinet and
Bedroom
Closet.
Interior Finishing Works:46
The 13th
Progress
Billing
evaluated
by DLS
covering the
period
January 8,
2000 to
=
February 7, Php49,383,114.6747Php50,685,416.5548
95.55%
2000 for the
Interior
Finishing
Works over
the contract
price for
Interior
Finishing
Work.
Php213,658,888.77 Php26,228,091.72 Php49,383,114.67 289,270,295.17=95.56
+ + = %
Php223,456,756.68 Php 28,556,915.17 Php50,685,416.55 302,699,097.40

Clearly, thus, CIAC’s finding that the level of accomplishment of DSM Construction as of February 12,
2002, stood at 95.56% was affirmed by the Court of Appeals because it is supported by substantial
evidence.
The Court of Appeals also noted that the Arbitral Tribunal did not give due course to all of DSM
Construction’s claims. Indeed, the Arbitral Tribunal rejected the construction company’s demand for
payment for subsequent works done after February 12, 2000, because Exhibit "OO," on which DSM
Construction’s demand was based, does not bear any mark that it had been received by Megaworld.
Thus, the Arbitral Tribunal concluded that subsequent works up to September 22, 2000, when DSM
Construction supposedly stopped working on the project, had not been established.49

This Court observes that between the two contrasting claims of Megaworld and DSM Construction on
the percentage of work accomplishment, the Arbitral Tribunal instead accorded weight to the
assessment of DLS which is the project surveyor. Apart from being reasonable, DLS’s evaluation is
impartial. Thus, as correctly pointed out by the Arbitral Tribunal, DLS rejected DSM Construction’s
99% accomplishment claim when it limited its evaluation to only 95.56%.

Issues of Delay and Liquidated Damages

Next, Megaworld attributed the delay in the completion of the construction project solely to DSM
Construction. The latter countered that among the causes of delay was the lack of coordination among
trade contractors and the absence of a general contractor.50 Although the contract purportedly contains
a provision for the coordination of trade contractors, the lack of privity among them prevented
coordination such that DSM Construction could not require compliance on the part of the other trade
contractors.

The Arbitral Tribunal decided this question by turning to Section 2.01 of the General Conditions of the
Contract, which states:

2.01 SITE, ACCESS & WORKS

The Contractor shall accept the Site as found on the date for possession and at their own expense
clear the site of any debris which may have been left by the preceding occupants/contractors.

The Arbitral Tribunal held that Section 2.01 presupposes that on the date of possession by DSM
Construction of the work premises, the preceding contractor had already left the same.51 The tribunal
explained that the delay incurred by other trade contractors also resulted in the delay of the work of
DSM Construction.

It also pointed out that under Section 5.3 (1)52 of the Interim Agreement,53 Megaworld is required to
complete and turn over to DSM Construction preceding works for the latter to complete their works in
accordance with the Revised Work Schedule. Section 5.3 (1), the Arbitral Tribunal noted, even allows
DSM Construction to recover losses incurred on account of the standby time of DSM’s
personnel/manpower or workers mobilized while Megaworld is not ready to turn over the preceding
works. The Arbitral Tribunal further held that, in accordance with Section 5.3 (2)54of the Interim
Agreement, DSM Construction was entitled to an extension of time corresponding to the number of
days of delay reckoned from the time the preceding work item or area should have been turned over
to DSM Construction. Consequently, such delay, which is not exclusively imputable to DSM
Construction, negates the claim for liquidated damages by Megaworld.55

In affirming the Arbitral Tribunal’s disposition of the issues of delay and payment of liquidated
damages, the appellate court noted that the Arbitral Tribunal narrated the claims and defenses of both
DSM Construction and Megaworld before making an evaluation thereof and arriving at its
conclusion.56 Clearly, the evidence and arguments were carefully weighed to justify the said
disposition.

The Tribunal’s finding that the project had already been delayed even before DSM Construction
commenced its work is borne out by the evidence. In his letter, Exhibit X-2,57 Project Management
Consultant Eduardo C. Arrojado, conceded that the previous contractors had delayed the project, at
the same time faulting DSM Construction for incurring its own delay. Furthermore, the work of DSM
Construction pertaining as it did to the architectural and interior finishing stages as well as the supply
and installation of kitchen cabinets and closets, obviously related to the final details and completion
stage of the project. Thus, commencement of its task had to depend on the turn over of the complete
work of the prior contractors. Hence, the delay of the previous contractors resulted in the delay of DSM
Construction’s work.

Issues of the Contract Price Balance and Retention Money

Megaworld also questioned the Arbitral Tribunal’s awards of ₱7,129,825.19 corresponding to the
balance of the contract price, and ₱11,820,000.00 pursuant to the Interim Agreement.58 Megaworld
alleged that DSM Construction was no longer entitled to the balance of the contract price and the
retention money after the latter received payments pursuant to the Interim Agreement in the amounts
of ₱5,444,553.18 for the 26th to the 28th floors, another ₱5,444,553.18 for the 29th to the 31st floors at
a 90% completion rate, and ₱4,161,818.18 for the 32nd to the 34thfloors which were 60% completed.
Megaworld also contended that since it spent more money to complete the scope of work of DSM
Construction, the latter was no longer entitled to any of the balance.

On the other hand, DSM Construction argued that the award was justified in view of the failure of
Megaworld to controvert the amount of ₱7,129,825.19 included in the Account Overview of DLS. DSM
Construction also emphasized that it was not claiming the entire ₱53 Million under the Interim
Agreement but only the amount corresponding to the actual work done. Even based on DLS’s
computation, a total of ₱11,820,000.00 of retention money is still unpaid out of the 50% agreed to be
released under the Interim Agreement (₱15,000,000.00 less ₱3,180,000.00 retention money or
₱11,820,000.00 for the paid billings).59

The Arbitral Tribunal ruled that the balance claimed under the three contracts was based on what DSM
Construction had actually accomplished less the payments it had previously received. Considering
that the remaining works which were performed by another trade contractor, Deticio and Isabedra
Builders, were paid directly by Megaworld, no other cost for work accomplished in the Interim
Agreement is due DSM Construction except the retention money of ₱11,820,000.00.60

The Court of Appeals affirmed the award of the Arbitral Tribunal regarding the balance of the contract
price of ₱7,129,825.19 and the retention money of ₱11,820,000.00 to DSM Construction. The Court
of Appeals noted that the Arbitral Tribunal again narrated the claims and defenses of both DSM
Construction and Megaworld before arriving at its conclusion. The appellate court further stated that
the mere fact that the tribunal did not award the whole amount claimed by DSM Construction
(₱12,820,000.00) and instead awarded only ₱11,820,000.00 belies Megaworld’s allegation that the
tribunal adopted "hook, line and sinker" DSM Construction’s claims.61

This Court finds the award of the balance of the contract price of ₱7,129,825.20 justified in view of
DLS’ explanation in Exhibit MM-362 that the amount of ₱7,129,825.20 represented the unpaid billing
for architectural, interior and kitchen billings before Megaworld and DSM Construction drafted
the Interim Agreement.

Issue of Variation Works

Megaworld also disputed before the Court of Appeals the ₱6,686,675.5563 award by the Arbitral
Tribunal for variation works. Variation works consist of the addition, omission or alteration to the kind,
quality or quantity of the works.64 DSM Construction originally claimed a total of ₱26,208,639.00 for
variation works done but, of this claim, the Arbitral Tribunal only awarded ₱6,686,675.55 in line with
the evaluation of DLS.

Megaworld conceded that DSM Construction performed additional works to the extent of
₱5,036,252.81. However, Megaworld claimed that since it incurred expenses when it hired another
trade contractor to take over the works left uncompleted by DSM Construction, the latter lost its right
to claim such amount especially since DSM Construction did not comply with the documentation when
claiming variation works.65

DSM Construction asserted that the Arbitral Tribunal, in fact, should have awarded ₱26,208,639.00
instead of limiting the award to only ₱6,686,675.55 because it was not even disputed that variation
works were performed. It also contended that it cannot be faulted for the lack of documentation
because the fault lay on Megaworld’s project manager who failed to forward the variation orders to
DLS.66

The Arbitral Tribunal ruled in favor of DSM Construction, holding that there was enough evidence to
prove that the contractor made a request for change or variation orders. The Arbitral Tribunal also
found the testimony of Engineer Eduardo C. Arrojado convincing, factual and balanced despite
Megaworld’s attempt to discredit him. However, while the amount claimed for variation works was
₱26,208,639.00, the Arbitral Tribunal limited the awarded to only ₱6,686,675.5567 since a closer
scrutiny of the other items indicated that some works were not performed.68

The appellate court upheld the award of the Arbitral Tribunal because the award was based not only
on the documentary exhibits prepared by DLS but on the testimony of Engineer Eduardo C. Arrojado,
as well.69

This Court is convinced that payments for variation works is due. Undoubtedly, variation works were
performed by DSM Construction. This was confirmed by Engineer Eduardo C. Arrojado who testified
that he recommended the payment for substantial additional works to DSM Construction. He further
stated that since time was of the essence in the completion of the project, there were variation orders
which were performed without the prior approval of the owner. However, he explained that this was a
common construction practice. Finally, he stated that he agreed with the evaluation of DLS.70
The testimony justified the Arbitral Tribunal’s reliance on the evaluation made by DLS which limited
the claim for variation works to ₱6,596,675.55.

Issue of Preliminaries/Loss and Expense

Megaworld also disputed the award of ₱29,380,902.35 for preliminaries/losses and expense.

The provision for preliminaries/loss and expense in the contract assumes a direct loss and/or expense
incurred in the regular progress of work for which the contractor would not be reimbursed under any
other provision of the contract.71 DSM Construction’s claim for preliminaries/loss and expense in the
amount of ₱36,603,192.82 covered the loss and expense incurred on payroll, equipment rental,
materials and site clearing on account of such factors as delay in the execution of the works for causes
not attributable to DSM Construction.72

Megaworld refused to recognize DSM Construction’s claim because the latter allegedly failed to
comply with Clause 6.16 of the Conditions of Contract, which imposes a two-month deadline for
submission of claims for preliminaries reckoned from "the happening of the event giving rise to the
loss and expense."73 DSM Construction, however, argued that the documentary evidence shows that
out of the four claims for preliminaries, only one (Exhibit MM-5with an evaluation of ₱17,552,722.47),
covering the period August 1, 1998 to April 1999, was submitted beyond the two-months
requirement.74 DSM Construction also pointed out that the two-month requirement for this claim was
waived by Megaworld through DLS when the latter recognized the validity of claims by coming up with
an evaluation of ₱17,552,722.47 for the period covered in Exhibit MM-5.75

The Arbitral Tribunal ruled that DSM Construction was entitled to extended preliminaries considering
that delay was not attributable to DSM Construction. The Arbitral Tribunal observed that Megaworld
did not present evidence to refute the claim for extended preliminaries which were previously
evaluated by DLS. However, after assessing the two previous evaluations by DLS, the tribunal ruled
that the claims for hauling and disposal and cleaning and clearing of debris should not be included in
the extended preliminaries. Hence, the Arbitral Tribunal reduced the amount of ₱44,051.62 from the
claim of ₱2,655,879.89 per Exhibit "MM-7," and ₱3,883,309.54 from the claim of ₱5,651,235.24
per Exhibit "MM-8," such amounts being unnecessary.76

The appellate court affirmed the award, stressing the fact that the Arbitral Tribunal denied some of the
claims which it did not find valid.77

DSM Construction’s entitlement to the payment for preliminaries was explained by Engineer Eduardo
C. Arrojado to be the necessary result of the extension of the contract between DSM Construction and
Megaworld.78 Notably, majority of the claims of DSM Construction was reduced by the Arbitral Tribunal
on the basis of Exhibit MM-479 or the Summary of Variation Order Status Report prepared by DLS.

Although the Arbitral Tribunal ruled that DSM Construction was entitled to claim for preliminaries, the
award was not based on the claim of DSM Construction but on the evaluation made by DLS.

The foregoing disquisition adequately shows that the evidence on record supports the findings of facts
of the Arbitral Tribunal on which the Court of Appeals based its decision. In fact, although not all the
exhibits in the Arbitral Tribunal were presented before the Court of Appeals, the record of the appellate
court contains the operative facts and the substance of said exhibits, thus enabling the intelligent
disposition of the issues presented before it. This Court went over all the records, including the
exhibits, to ascertain whether the appellate court missed any crucial point. It did not.

The alleged undue favor accorded by the Arbitral Tribunal to DSM Construction is belied by the fact
that the Arbitral Tribunal did not grant all of DSM Construction’s claims. In majority of DSM
Construction’s claims, the Arbitral Tribunal awarded amounts lower than what DSM Construction
demanded. The Arbitral Tribunal also granted some of Megaworld’s claims.80

Neither did the Court of Appeals merely "swallow hook, line and sinker" the award of the Arbitral
Tribunal. While the appellate court affirmed the decision of the Arbitral Tribunal, it also ruled in favor
of Megaworld when it limited DSM Construction’s lien to only six units instead of all the condominium
units to which DSM was entitled under the Contract, rationalizing that the ₱62 Million award can be
covered by the value of the six units of the condominium project.81

Considering that the computations, as well as the propriety of the awards of the Arbitral Tribunal, are
unquestionably factual issues that have been discussed and ruled upon by Arbitral Tribunal and
affirmed by the Court of Appeals, we cannot depart from such findings. Findings of fact of
administrative agencies and quasi-judicial bodies, which have acquired expertise /because their
jurisdiction is confined to specific matters/, are generally accorded not only respect, but finality when
affirmed by the Court of Appeals.82
Megaworld, however, adamantly contends that the present case constitutes an exception to the above
rule because: (1) there is grave abuse of discretion in the appreciation of facts; (2) the judgment is
premised on misapprehension of facts; and, (3) the findings of fact of the Court of Appeals is premised
on the supposed absence of evidence and is contradicted by the evidence on record.83

We disagree. None of these flaws appear in this case. Grave abuse of discretion means the capricious
or whimsical exercise of judgment that is so patent and gross as to amount to an evasion of positive
duty or a virtual refusal to perform a duty enjoined by law, or to act at all in contemplation of law, as
where the power is exercised in an arbitrary and despotic manner by reason of passion or
hostility.84 No abuse of discretion was established by Megaworld. On the contrary, what is apparent is
Megaworld’s effort to attribute grave abuse of discretion to the Arbitral Tribunal simply because of the
unfavorable judgment against it. Megaworld’s assertion that there was misapprehension of facts and
that the evidence is insufficient to support the decision is also untenable. The Decisions of the Arbitral
Tribunal and the Court of Appeals adequately explain the reasons therefor and are supported by
substantial evidence.

Likewise unmeritorious is Megaworld’s assertion that it was deprived of administrative due process.
The Arbitral Tribunal considered the arguments and the evidence submitted by both parties. That it
accorded greater weight to DSM Construction’s evidence, by itself, does not constitute a denial of due
process.

WHEREFORE, the Petition is DENIED. The Decision dated February 14, 2001, of the Court of
Appeals is AFFIRMED. The Temporary Restraining Order issued by this Court on July 12, 2002, is
hereby LIFTED. Costs against Petitioner.

SO ORDERED.

G.R. No. 148318 November 22, 2004

NATIONAL POWER CORPORATION, petitioner,

vs.
HON. ROSE MARIE ALONZO-LEGASTO, as Presiding Judge, RTC of Quezon City, Branch 99,
JOSE MARTINEZ, Deputy Sheriff, RTC of Quezon City, CARMELO V. SISON, Chairman,
Arbitration Board, and FIRST UNITED CONSTRUCTORS CORPORATION, respondents.

DECISION

TINGA, J.:

National Power Corporation (NPC) filed the instant Petition for Review1 dated July 19, 2001, assailing
the Decision2of the Court of Appeals dated May 28, 2001 which affirmed with modification the
Order3 and Writ of Execution4respectively dated May 22, 2000 and June 9, 2000 issued by the
Regional Trial Court. In its assailed Decision, the appellate court declared respondent First United
Constructors Corporation (FUCC) entitled to just compensation for blasting works it undertook in
relation to a contract for the construction of power facilities it entered into with petitioner. The Court
of Appeals, however, deleted the award for attorney's fees having found no basis therefor.

The facts culled from the Decision of the Court of Appeals are undisputed:

On April 14, 1992, NPC and FUCC entered into a contract for the construction of power
facilities (civil works) – Schedule 1 – 1x20 MW Bacon-Manito II Modular Geothermal Power
Plant (Cawayan area) and Schedule 1A – 1x20 MW Bacon-Manito II Modular Geothermal
Power Plant (Botong area) in Bacon, Sorsogon (BACMAN II). The total contract price for the
two schedules is P108,493,966.30, broken down as follows:

SCHEDULE

1 – Cawayan area P 52,081,421.00

1A – Botong area P 56,412,545.30

P 108,493,966.30

Appended with the Contract is the contract price schedule which was submitted by the
respondent FUCC during the bidding. The price for grading excavation was P76.00 per cubic
meter.
Construction activities commenced in August 1992. In the latter part of September 1992 and
after excavating 5.0 meters above the plant elevation, FUCC requested NPC that it be
allowed to blast to the design grade of 495 meters above sea level as its dozers and rippers
could no longer excavate. It further requested that it be paid P1,346.00 per cubic meter
similar to the rate of NPC's project in Palinpinon.

While blasting commenced on October 6, 1992, NPC and FUCC were discussing the
propriety of an extra work order and if such is in order, at what price should FUCC be paid.

Sometime in March 1993, NPC Vice President for Engineering Construction, Hector
Campos, created a task force to review FUCC's blasting works. The technical task force
recommended that FUCC be paid P458.07 per cubic meter as such being the price agreed
upon by FUCC.

The matter was further referred to the Department of Public [W]orks and Highways (DPWH),
which in a letter dated May 19, 1993, recommended the price range of P500.00 to P600.00
per cubic meter as reasonable. It further opined that the price of P983.75 per cubic meter
proposed by Lauro R. Umali, Project Manager of BACMAN II was high. A copy of the DPWH
letter is attached as Annex "C", FUCC's Exhibit EEE-Arbitration.

In a letter dated June 28, 1993, FUCC formally informed NPC that it is accepting the
proposed price of P458.07 per cubic meter. A copy of the said letter is attached as Annex
"D", FUCC's Exhibit L Arbitration.

In the meantime, by March 1993, the works in Botong area were in considerable delay. By
May 1993, civil works in Botong were kept at a minimum until on November 1, 1993, the
entire operation in the area completely ceased and FUCC abandoned the project.

Several written and verbal warnings were given by NPC to FUCC. On March 14, 1994,
NPC's Board of Directors passed Resolution No. 94-63 approving the recommendation of
President Francisco L. Viray to take over the contract. President Viray's recommendation to
take over the project was compelled by the need to stave-off huge pecuniary and non-
monetary losses, namely:

(a) Generation loss estimated to be at P26,546,400/month;

(b) Payment of steam penalties to PNOC-EDC the amount estimated to be at

P10,206,048.00/month;

(c) Payment of liquidated damages due to the standby of electromechanical

contractor;

(d) Loss of guaranteed protection (warranties) of all delivered plant

equipment and accessories as Mitsubishi Corporation, electromechanical
contractor, will not be liable after six months of delivery.

To prevent NPC from taking over the project, on March 28, 1994, FUCC filed an action for
Specific Performance and Damages with Preliminary Injunction and Temporary Restraining
Order before Branch 99, Regional Trial Court, Quezon City.

Under paragraph 19 of its Complaint, FUCC admitted that it agreed to pay the price of
P458.07 per cubic meter.

On April 5, 1994, Judge de Guzman issued a temporary restraining order and on April 21,
1994, the trial court resolved to grant the application for issuance of a writ of preliminary
injunction.

On July 7, 1994, NPC filed a Petition for Certiorari with Prayer for Temporary Restraining
Order and Preliminary Injunction before the First Division of the Court of Appeals asserting
that no injunction may issue against any government projects pursuant to Presidential
Decree 1818.

On July 8, 1994, the Court of Appeals through then Associate Justice Bernardo Pardo issued
a temporary restraining order and on October 20, 1994, the said court rendered a Decision
granting NPC's Petition for Certiorari and setting aside the lower court's Order dated April 21,
1994 and the Writ of Preliminary Injunction dated May 5, 1994.

However, notwithstanding the dissolution by the Court of Appeals of the said injunction, on
July 15, 1995, FUCC filed a Complaint before the Office of the Ombudsman against several
NPC employees for alleged violation of Republic Act No. 3019, otherwise known as the Anti-
Graft and Corrupt Practices Act. Together with the complaint was an Urgent Ex-Parte Motion
for the issuance of a cease and [d]esist [o]rder to restrain NPC and other NPC officials
involved in the BACMAN II project from canceling and/or from taking over FUCC's contract
for civil works of said project.

Then on November 16, 1994, FUCC filed before the Supreme Court a Petition for Review
assailing the Decision of the Court of [A]ppeals dated October 20, 1994. In its Comment,
NPC raised the issue that FUCC resorted to forum shopping as it applied for a cease and
desist order before the National Ombudsman despite the dissolution of the injunction by the
Court of Appeals.

Pending the petition filed by FUCC before the Supreme Court, on April 20, 1995 the NPC
and FUCC entered into a Compromise Agreement.

Under the Compromise Agreement, the parties agreed on the following:

1. Defendant shall process and pay the undisputed unpaid billings of Plaintiff in
connection with the entire project fifteen (15) days after a reconciliation of accounts
by both Plaintiff and Defendant or thirty (30) days from the date of approval of this
Compromise Agreement by the Court whichever comes first. Both parties agree to
submit and include those accounts which could not be reconciled among the issues
to be arbitrated as hereunder provided;

2. Plaintiff accepts and acknowledges that Defendant shall have the right to proceed
with the works by re-bidding or negotiating the project immediately upon the signing
of herein Compromise Agreement;

3. This Compromise Agreement shall serve as the Supplemental Agreement for

payment of plaintiff's blasting works at the Botong site;

4. Upon approval of this Compromise Agreement by the Court or Plaintiff's receipt of

payment of this undisputed unpaid billings from Defendant whichever comes first, the
parties shall immediately file a Joint Manifestation and Motion for the withdrawal of
the following Plaintiff's petition from the Supreme Court, Plaintiff's Complaint from the
National Ombudsman, the Complaint and Amended Complaint from the RTC, Br. 99
of Quezon City;

5. Upon final resolution of the Arbitration, as hereunder prescribed, the parties shall
immediately execute the proper documents mutually terminating Plaintiff's contract
for the civil works of the BACMAN II Project (Contract No. Sp90DLM-918 (I & A);

6. Such mutual termination of Plaintiff's contract shall have the following effects
and/or consequences: (a) the construction works of Plaintiff at the Kawayan and
Bolong sites, at its present stage of completion, shall be accepted and/or deemed to
have been accepted by defendant; (b) Plaintiff shall have no more obligation to
Defendant in respect of the BACMAN II Project except as provided in clause (e)
below; (c) Defendant shall release all retention moneys of plaintiff within a maximum
period of thirty (30) days from the date of final Resolution of the Arbitration; (d) no
retention money shall thenceforth be withheld by Defendant in its payment to Plaintiff
under this Compromise Agreement, and (e) Plaintiff shall put up a one-year guaranty
bond for its completed civil works at the Kawayan site, retroactive to the date of
actual use of the plant by defendant;

7. Plaintiff's blasting works claims and other unresolved claims, as well as the claims
of damages of both parties shall be settled through a two stage process to wit:

STAGE 1

7.1 Plaintiff and Defendant shall execute and sign this Compromise
Agreement which they will submit for approval by this Court. Under this
Compromise Agreement both parties agree that:

xxx xxx

STAGE 2

7.1 The parties shall submit for arbitration to settle: (a) the price of blasting,
(b) both parties' claims for damages, delays, interests, and (c) all other
 unresolved claims of both parties, including the exact volume of blasted
rocks;

7.2 The arbitration shall be through a three-member commission to be

appointed by the Honorable Court. Each party shall nominate one member.
The Chairman of the Arbitration Board shall be [a] person mutually
acceptable to both parties, preferably from the academe;

7.3 The parties shall likewise agree upon the terms under which the
arbitrable issues shall be referred to the Arbitration Board. The terms of
reference shall form part of the Compromise Agreement and shall be
submitted by the parties to the Honorable Court within a period of seven (7)
days from the signing of the Compromise Agreement;

7.4 The Arbitration Board shall have a non-extendible period of three (3)
months within which to complete the arbitration process and submit its
Decision to the Honorable Court;

7.5 The parties agree that the Decision of the Arbitration Board shall be final
and executory;

7.6 By virtue of this Compromise Agreement, except as herein provided, the

parties shall mutually waive, forgo and dismiss all of their other claims and/or
counterclaim in this case. Plaintiff and defendant warrant that after approval
by the Court of this Compromise Agreement neither party shall file Criminal
or Administrative cases or suits against each other or its Board or member of
its officials on grounds arising from the case.

The Compromise Agreement was subsequently approved by the Court on May 24, 1995.

The case was subsequently referred by the parties to the arbitration board pursuant to their
Compromise Agreement. On December 9, 1999 the Arbitration Board rendered its ruling the
dispositive portion of which states:

WHEREFORE, claimant is hereby declared entitled to an award of P118,681,328.28 as just

compensation for blasting works, plus ten percent (10%) thereof for attorney's fees and
expenses of litigation.

Considering that payment in the total amount of P36,550,000.00 had previously been made,
respondent is hereby ordered to pay claimant the remaining sum of P82,131,328.28 for
attorney's fees and expenses of litigation.

Pursuant to the Compromise Agreement approved by this Honorable Court, the parties have
agreed that the decision of the Arbitration Board shall be final and executory.

SO ORDERED.

On December 10, 1999 plaintiff FUCC filed a Motion for Execution while defendant NPC filed
a Motion to Vacate Award by the Arbitration Board on December 20, 1999.

On May 22, 2000 Presiding Judge Rose Marie Alonzo Legasto issued an order the
dispositive portion of which states:

"WHEREFORE, the Arbitration Award issued by the Arbitration Board is hereby APPROVED
and the Motion for Execution filed by plaintiff hereby GRANTED. The Motion to Vacate
Award filed by defendant is hereby DENIED for lack of merit.

Accordingly, let a writ of execution be issued to enforce the Arbitration Award.

SO ORDERED."5 (Bracketed words supplied)

NPC went to the Court of Appeals on the lone issue of whether respondent judge acted with grave
abuse of discretion in issuing the Order dated May 22, 2000 and directing the issuance of a Writ of
Execution.

In its assailed Decision, the appellate court declared that the court a quo did not commit grave abuse
of discretion considering that the Arbitration Board acted pursuant to its powers under the
Compromise Agreement and that its award has factual and legal bases.
The Court of Appeals gave primacy to the court-approved Compromise Agreement entered into by
the parties and concluded that they intended the decision of the arbitration panel to be final and
executory. Said the court:

For one, what the price agreed to be submitted for arbitration are pure issues of fact (i.e., the
price of blasting; both parties' claims for damages, delay, interests and all other unresolved
claims of both parties, including the exact volume of blasted rocks). Also, the manner by
which the Arbitration Board was formed and the terms under which the arbitrable issues
were referred to said Board are specified in the agreement. Clearly, the parties had left to the
Arbitration Board the final adjudication of their remaining claims and waived their right to
question said Decision of the Board. Hence, they agreed in clear and unequivocal terms in
the Compromise Agreement that said Decision would be immediately final and executory.
Plaintiff relied upon this stipulation in complying with its various obligations under the
agreement. To allow defendant to now go back on its word and start questioning the
Decision would be grossly unfair considering that the latter was also a party to the
Compromise Agreement entered into part of which dealt with the creation of the Arbitration
Board.6

The appellate court likewise held that petitioner failed to present evidence to prove its claim of bias
and partiality on the part of the Chairman of the Arbitration Board, Mr. Carmelo V. Sison (Mr. Sison).

Further, the Court of Appeals found that blasting is not part of the unit price for grading and structural
excavation provided for in the contract for the BACMAN II Project, and that there was no perfected
contract between the parties for an extra work order for blasting. Nonetheless, since FUCC relied on
the representation of petitioner's officials that the extra work order would be submitted to its Board of
Directors for approval and that the blasting works would be paid, the Court of Appeals ruled that
FUCC is entitled to just compensation on grounds of equity and promissory estoppel.

Anent the issue of just compensation, the appellate court took into account the estimate prepared by
a certain Mr. Lauro R. Umali (Mr. Umali), Project Manager of the BACMAN II Project, which itemized
the various costs involved in blasting works and came up with P1,310.82 per cubic meter, consisting
of the direct cost for drilling, blasting excavation, stockpiling and hauling, and a 30% mark up for
overhead, contractor's tax and contingencies. This estimate was later changed to P983.75 per cubic
meter to which FUCC agreed. The Court of Appeals, however, held that just compensation should
cover only the direct costs plus 10% for overhead expenses. Thus, it declared that the amount of
P763.007 per cubic meter is sufficient. Since the total volume of blasted rocks as computed by Dr.
Benjamin Buensuceso, Jr.8 of the U.P. College of Engineering is 97,032.16 cubic meters, FUCC is
entitled to the amount of P74,035,503.50 as just compensation.

Although the Court of Appeals adjudged FUCC entitled to interest,9 the dispositive portion of the
assailed Decision10did not provide for the payment of interest. Moreover, the award of attorney's fees
was deleted as there was no legal and factual ground for its imposition.

Petitioner, represented by the Office of the Solicitor General in the instant Petition, rehashes its
submissions before the Court of Appeals. It claims that the appellate court failed to pass upon the
following issues:

1. The Chairman of the Arbitration Board showed extreme bias in prejudging the case.

2. The Chairman of the Arbitration Board greatly exceeded his powers when he mediated for
settlement in the court of arbitration proceedings.

3. The Chairman of the Arbitration Board committed serious irregularity in hastily convening
the Board in two days, which thereafter released its report.

4. The Arbitration Board Committed manifest injustice prejudicial to petitioner based on the
following:

a. It rendered an award based on equity despite the mandatory provision of the law.

b. The Board's decision to justify that equity applies herein despite the fact that
FUCC never submitted its own actual costs for blasting and PHESCO, INC., the
succeeding contractor, did not employ blasting but used ordinary excavation method
at P75.59 per cubic meter which is approximately the same unit price of plaintiff
(FUCC).

c. It gravely erred when the Board claimed that an award of just compensation must
be given to respondent FUCC for what it has actually spent and yet instead of using
 as basis P458.07 which is the price agreed upon by FUCC, it chose an estimate
made by an NPC employee.

d. It gravely erred when it relied heavily on the purported letter of NPC Project
Manager Lauro R. Umali, when the same has not been identified nor were the
handwritten entries in Annex ii established to be made by him.

5. The Arbitration Board gravely erred in computing interest at 12% and from the time of
plaintiff's extrajudicial claim despite the fact that herein case is an action for specific
performance and not for payment of loan or forbearance of money, and despite the fact that
it has resolved that there was no perfected contract and there was no bad faith on the part of
defendant.

6. On June 25, 2000, NPC discovered the Sub-Contract Agreement of FUCC with a unit
price of only P430/per cubic meter.11 [Emphasis in the original]

Specifically, petitioner asserts that Mr. Sison exhibited bias and prejudgment when he exhorted it to
pay FUCC for the blasting works after concluding that the latter was allowed to blast. Moreover, Mr.
Sison allegedly attempted to mediate the conflict between the parties in violation of Section
20,12 paragraph 2 of Republic Act No. 876 (R.A. 876) otherwise known as the Arbitration Law.
Petitioner also questions the abrupt manner by which the decision of the Arbitration Board was
released.

Petitioner avers that FUCC's claim for blasting works was not approved by authorized officials in
accordance with Presidential Decree No. 1594 (P.D. 1594) and its implementing rules which
specifically require the approval of the extra work by authorized officials before an extra work order
may be issued in favor of the contractor. Thus, it should not be held liable for the claim. If at all, only
the erring officials should be held liable. Further, FUCC did not present evidence to prove the actual
expenses it incurred for the blasting works. What the Arbitration Board relied upon was the
memorandum of Mr. Umali which was neither identified or authenticated during the arbitration
proceedings nor marked as evidence for FUCC. Moreover, the figures indicated in Mr. Umali's
memorandum were allegedly mere estimates and were recommendatory at most.

Petitioner likewise claims that its succeeding contractor, Phesco, Inc. (Phesco), was able to
excavate the same rock formation without blasting.

Finally, it asserts that the award of P763.00 per cubic meter has no factual and legal basis as the
sub-contract between FUCC and its blasting sub-contractor, Dynamic Blasting Specialists of the
Philippines (Dynamic), was only P430.00 per cubic meter.

In its Comment13 dated October 15, 2001, FUCC points out that petitioner's arguments are exactly
the same as the ones it raised before the Arbitration Board, the trial court and the Court of Appeals.
Moreover, in the Compromise Agreement between the parties, petitioner committed to abide by the
decision of the Arbitration Board. It should not now be allowed to question the decision.

FUCC likewise notes that Atty. Jose G. Samonte (Atty. Samonte), one of the members of the
Arbitration Board, was nominated by petitioner itself. If there was any irregularity in its proceedings
such as the bias and prejudgment petitioner imputes upon Mr. Sison, Atty. Samonte would have
complained. As it is, Atty. Samonte concurred in the decision of the Arbitration Board and dissented
only as to the award of attorney's fees.

As regards the issue of interest, FUCC claims that the case involves forbearance of money and not
a claim for damages for breach of an obligation in which case interest on the amount of damages
awarded may be imposed at the rate of six percent (6%) per annum.

Finally, FUCC asserts that its sub-contract agreement with Dynamic is not newly-discovered
evidence. Petitioner's lawyers allegedly had a copy of the sub-contract in their possession. In any
event, the unit price of P430.00 per cubic meter appearing in the sub-contract represents only a
fraction of the costs incurred by FUCC for the blasting works.

Petitioner filed a Reply14 dated March 18, 2002 reiterating its earlier submissions.

The parties in the present case mutually agreed to submit to arbitration the settlement of the price of
blasting, the parties' claims for damages, delay and interests and all other unresolved claims
including the exact volume of blasted rocks.15 They further mutually agreed that the decision of the
Arbitration Board shall be final and immediately executory.16

A stipulation submitting an ongoing dispute to arbitration is valid. As a rule, the arbitrator's award
cannot be set aside for mere errors of judgment either as to the law or as to the facts. Courts are
generally without power to amend or overrule merely because of disagreement with matters of law or
facts determined by the arbitrators. They will not review the findings of law and fact contained in an
award, and will not undertake to substitute their judgment for that of the arbitrators. A contrary rule
would make an arbitration award the commencement, not the end, of litigation. Errors of law and
fact, or an erroneous decision on matters submitted to the judgment of the arbitrators, are insufficient
to invalidate an award fairly and honestly made. Judicial review of an arbitration award is, thus, more
limited than judicial review of a trial.17

However, an arbitration award is not absolute and without exceptions. Where the conditions
described in Articles 2038, 2039 and 2040 of the Civil Code18 applicable to both compromises and
arbitrations are obtaining, the arbitrators' award may be annulled or rescinded.19 Additionally, judicial
review of an arbitration award is warranted when the complaining party has presented proof of the
existence of any of the grounds for vacating, modifying or correcting an award outlined under
Sections 24 and 25 of R.A. 876, viz:

Section 24. Grounds for vacating an award. — In any of the following cases, the court must
make an order vacating the award upon the petition of any party to the controversy when
such party proves affirmatively that in the arbitration proceedings:

(a) The award was procured by corruption, fraud, or other undue means; or

(b) That there was evident partiality or corruption in the arbitrators or any of them; or

(c) That the arbitrators were guilty of misconduct in refusing to postpone the hearing
upon sufficient cause shown, or in refusing to hear evidence pertinent and material to
the controversy; that one or more of the arbitrators was disqualified to act as such
under section nine hereof, and willfully refrained from disclosing such
disqualifications or of any other misbehavior by which the rights of any party have
been materially prejudiced; or

(d) That the arbitrators exceeded their powers, or so imperfectly executed them, that
a mutual, final and definite award upon the subject matter submitted to them was not
made.

When an award is vacated, the court, in its discretion, may direct a new hearing either before
the same arbitrators or before a new arbitrator or arbitrators to be chosen in the manner
provided in the submission or contract for the selection of the original arbitrator or arbitrators,
and any provision limiting the time in which the arbitrators may make a decision shall be
deemed applicable to the new arbitration to commence from the date of the court's order.

Where the court vacates an award, costs not exceeding fifty pesos and disbursements may
be awarded to the prevailing party and the payment thereof may be enforced in like manner
as the payment of costs upon the motion in an action.

Section 25. Grounds for modifying or correcting an award. — In any one of the following
cases, the court must make an order modifying or correcting the award, upon the application
of any party to the controversy which was arbitrated:

(a) Where there was an evident miscalculation of figures, or an evident mistake in the
description of any person, thing or property referred to in the award; or

(b) Where the arbitrators have awarded upon a matter not submitted to them, not
affecting the merits of the decision upon the matter submitted; or

(c) Where the award is imperfect in a matter of form not affecting the merits of the
controversy, and if it had been a commissioner's report, the defect could have been
amended or disregarded by the court.

The order may modify and correct the award so as to effect the intent thereof and promote
justice between the parties.

In this case, petitioner does not specify which of the foregoing grounds it relies upon for judicial
review. Petitioner avers that "if and when the factual circumstances referred to in the provisions
aforementioned are present, judicial review of the award is warranted."20 From its presentation of
issues, however, it appears that the alleged evident partiality of Mr. Sison is singled out as a ground
to vacate the board's decision.

We note, however, that the Court of Appeals found that petitioner did not present any proof to back
up its claim of evident partiality on the part of Mr. Sison. Its averments to the effect that Mr. Sison
was biased and had prejudged the case do not suffice to establish evident partiality. Neither does
the fact that a party was disadvantaged by the decision of the arbitration committee prove evident
partiality.21

According to the appellate court, "[p]etitioner was never deprived of the right to present evidence nor
was there any showing that the Board showed signs of any bias in favor of FUCC. As correctly found
by the trial court, this Court cannot find its way to support petitioner's contention that there was
evident partiality in the assailed Award of the Arbitrator in favor of the respondent because the
conclusion of the Board, which the Court found to be well-founded, is fully supported by substantial
evidence."22

There is no reason to depart from this conclusion.

However, we take exception to the arbitrators' determination that based on promissory estoppel per
se or alone, FUCC is entitled to just compensation for blasting works for the reasons discussed
hereunder.

Section 9 of P.D. No. 1594, entitled Prescribing Policies, Guidelines, Rules and Regulations for
Government Infrastructure Contracts, provides:

SECTION 9. Change Order and Extra Work Order.—A change order or extra work order may
be issued only for works necessary for the completion of the project and, therefore, shall be
within the general scope of the contract as bid[ded] and awarded. All change orders and
extra work orders shall be subject to the approval of the Minister of Public Works,
Transportation and Communications, the Minister of Public Highways, or the Minister of
Energy, as the case may be.

The pertinent portions of the Implementing Rules and Regulations of P.D. 1594 provide:

CI - Contract Implementation:

These Provisions Refer to Activities During Project Construction, i.e., After Contract Award
Until Completion, Except as May Otherwise be Specifically Referred to Provisions Under
Section II. IB - Instructions to Bidders.

CI 1 - Variation Orders - Change Order/Extra Work Order/Supplemental Agreement

4. An Extra Work Order may be issued by the implementing official to cover the introduction
of new work items after the same has been found to strictly comply with Section CI-1-1 and
approved by the appropriate official if the amount of the Extra Work Order is within the limits
of the former's authority to approve original contracts and under the following conditions:

a. Where there are additional works needed and necessary for the completion, improvement
or protection of the project which were not included as items of work in the original contract.

b. Where there are subsurface or latent physical conditions at the site differing materially
from those indicated in the contract.

c. Where there are duly unknown physical conditions at the site of an unusual nature
differing materially from those ordinarily encountered and generally recognized as inherent in
the work or character provided for in the contract.

d. Where there are duly approved construction drawings or any instruction issued by the
implementing office/agency during the term of contract which involve extra cost.

6. A separate Supplemental Agreement may be entered into for all Change Orders and Extra
Work Orders if the aggregate amount exceeds 25% of the escalated original contract price.
All change orders/extra work orders beyond 100% of the escalated original contract cost
shall be subject to public bidding except where the works involved are inseparable from the
original scope of the project in which case negotiation with the incumbent contractor may be
allowed, subject to approval by the appropriate authorities.

7. Any Variation Order (Change Order, Extra Work Order or Supplemental Agreement) shall
be subject to the escalation formula used to adjust the original contract price less the cost of
mobilization. In claiming for any Variation Order, the contractor shall, within seven (7)
calendar days after such work has been commenced or after the circumstances leading to
 such condition(s) leading to the extra cost, and within 28 calendar days deliver a written
communication giving full and detailed particulars of any extra cost in order that it may be
investigated at that time. Failure to provide either of such notices in the time stipulated shall
constitute a waiver by the contractor for any claim. The preparation and submission of
Change Orders, Extra Work Orders or Supplemental Agreements are as follows:

a. If the Project Engineer believes that a Change Order, Extra Work Order or Supplemental
Agreement should be issued, he shall prepare the proposed Order or Supplemental
Agreement accompanied with the notices submitted by the contractor, the plans therefore,
his computations as to the quantities of the additional works involved per item indicating the
specific stations where such works are needed, the date of his inspections and investigations
thereon, and the log book thereof, and a detailed estimate of the unit cost of such items of
work, together with his justifications for the need of such Change Order, Extra Work Order or
Supplemental Agreement, and shall submit the same to the Regional Director of
office/agency/corporation concerned.

b. The Regional Director concerned, upon receipt of the proposed Change Order, Extra
Work Order or Supplemental Agreement shall immediately instruct the technical staff of the
Region to conduct an on-the-spot investigation to verify the need for the work to be
prosecuted. A report of such verification shall be submitted directly to the Regional Director
concerned.

c. The Regional Director concerned after being satisfied that such Change Order, Extra Work
Order or Supplemental Agreement is justified and necessary, shall review the estimated
quantities and prices and forward the proposal with the supporting documentation to the
head of office/agency/corporation for consideration.

d. If, after review of the plans, quantities and estimated unit cost of the items of work
involved, the proper office/agency/corporation committee empowered to review and evaluate
Change Orders, Extra Work Orders or Supplemental Agreements recommends approval
thereof, the head of office/agency/corporation, believing the Change Order, Extra Work
Order or Supplemental Agreement to be in order, shall approve the same. The limits of
approving authority for any individual, and the aggregate of, Change Orders, Extra Work
Orders or Supplemental Agreements for any project of the head of office/agency/corporation
shall not be greater than those granted for an original project.

CI 3 - Conditions under which Contractor is to Start Work under Variation Orders and
Receive Payments

1. Under no circumstances shall a contractor proceed to commence work under any Change
Order, Extra Work Order or Supplemental Agreement unless it has been approved by the
Secretary or his duly authorized representative. Exceptions to the preceding rule are the
following:

a. The Regional Director, or its equivalent position in agencies/offices/corporations without

plantilla position for the same, may, subject to the availability of funds, authorize the
immediate start of work under any Change or Extra Work Order under any or all of the
following conditions:

(1) In the event of an emergency where the prosecution of the work is urgent to avoid
detriment to public service, or damage to life and/or property; and/or

(2) When time is of the essence; provided, however, that such approval is valid on work done
up to the point where the cumulative increase in value of work on the project which has not
yet been duly fully approved does not exceed five percent (5%) of the adjusted original
contract price, or P500,000 whichever is less; provided, further, that immediately after the
start of work, the corresponding Change/Extra Work Order shall be prepared and submitted
for approval in accordance with the above rules herein set. Payments for works satisfactorily
accomplished on any Change/Extra Work Order may be made only after approval of the
same by the Secretary or his duly authorized representative.

b. For a Change/Extra Work Order involving a cumulative amount exceeding five percent
(5%) of the original contract price or original adjusted contract price no work thereon may be
commenced unless said Change/Extra Work Order has been approved by the Secretary or
his duly authorized representative. [Emphasis supplied]

It is petitioner's submission, and FUCC does not deny, that the claim for payment of blasting works
in Botong alone was approximately P170,000,000.00, a figure which far exceeds the original
contract price of P80,000,000.00 for two (2) project sites. Under the foregoing implementing rules,
for an extra work order which exceeds 5% of the original contract price, no blasting work may be
commenced without the approval of the Secretary or his duly authorized representative. Moreover,
the procedure for the preparation and approval of the extra work order outlined under Contract
Implementation (CI) 1(7) above should have been complied with. Accordingly, petitioner's officials
should not have authorized the commencement of blasting works nor should FUCC have proceeded
with the same.

The following events, culled from the decision of the Arbitration Board and the assailed Decision, are
made the bases for the finding of promissory estoppel on the part of petitioner:

1. After claimant [respondent herein] encountered what it claimed to be massive hard rock
formation (Testimony of witness Dumaliang, TSN, 28 October 1996, pp. 41-42; Testimony of
witness Lataquin, 28 November 1996, pp. 2-3; 20-23; Exh. "JJJ" and sub-markings) and
informed respondent [petitioner herein] about it, respondent's own geologists went to the
Botong site to investigate and confirmed the rock formation and recommended blasting (Cf.
Memorandum of Mr. Petronilo E. Pana, Acting Manager of the Geoscience Services
Department and the report of the geologists who conducted the site investigation; Exhs. "F"
and "F-1").

2. Claimant asked for clearance to blast the rock formation to the design grade (Letter dated
28 September 1992; Exh. "UU"). The engineers of respondent at the project site advised
claimant to proceed with its suggested method of extraction (Order/Instruction given by Mr.
Reuel R. Declaro and Mr. Francis A. Paderna dated 29 September 1992; Exh. "C").

3. Claimant requested that the intended blasting works be confirmed as extra work order by
responsible officials of respondent directly involved in the BACMAN II Project (i.e., then
BACMAN II Project Manager, Mr. Lauro R. Umali and Mr. Angelito G. Senga, Section Chief,
Civil Engineering Design of respondent's Design Department which bidded the project).
These officials issued verbal instructions to the effect: (a) that claimant could blast the rock
formation down to the design grade of 495 masl; (b) that said blasting works would be an
extra work order; and (c) that claimant would be paid for said blasting works using the price
per cubic meter for similar blasting works at Palinpinon, or at P1,346.00 per cubic meter.

4. Claimant sent two (2) confirmatory letters to respondent, both addressed to its President,
one dated 30 September 1992, and sent through Mr. Angelito Senga, Chief Civil Design –
Thermal, the other dated 02 October 1992, and sent through Mr. Lauro R. Umali, Project
Manager–BacMan II (Exhs. "D" and "E"; Testimony of witness Dumaliang, TSN, 28 October
1996, pp. 43-49). The identical letters read:

We wish to confirm your instruction for us to proceed with the blasting of the Botong Plant
site to the design grade pending issuance of the relevant variation order. This is to avoid
delay in the implementation of this critical project due to the urgent need to blast rocks on the
plant site.

We are confirming further your statement that the said blasting works is an extra work order
and that we will be paid using the price established in your Palinpinon contract with Phesco.

Thank you for your timely action and we look forward to the immediate issuance of the extra
work order.

We are now mobilizing equipment and manpower for the said work and hope to start blasting
next week.

5. Respondent received the letters but did not reply thereto nor countermand the earlier
instructions given to claimant to proceed with the blasting works. The due execution and
authenticity of these letters (Exhs. "D-1" and "E-1") and the fact of receipt (Exhs. "D-2" and
"E-2") were duly proved by claimant (Testimony of witness Dumaliang, TSN, 28 October
1996, 43-49).

6. In mid-October 1992, three (3) Vice-Presidents of respondent visited the project site and
were informed of claimant's blasting activities. While respondent claims that one of the Vice-
Presidents, Mr. Rodrigo Falcon, raised objections to claimant's blasting works as an extra
work order, they instructed claimant to speed up the works because of the power crisis then
hounding the country. Stipulation no. 24 of the Joint Stipulation of Facts of the parties which
reads: "24. In mid-October 1992, three (3) Vice-Presidents of respondent, namely: Mr.
Hector N. Campos, Sr., of Engineering Construction, Mr. C.A. Pastoral of Engineering
Design, and Mr. Rodrigo P. Falcon, visited the project site and were likewise apprised of
claimant's blasting activities. They never complained about the blasting works, much less
 ordered its cessation. In fact, no official of respondent ever ordered that the blasting works
be stopped."

7. After visiting Botong, Mr. Hector N. Campos, Sr., then Vice President of Engineering
Construction, instructed Mr. Fernando A. Magallanes then Manager of the Luzon
Engineering Projects Department, to evaluate claimant's blasting works and to submit his
recommendations on the proper price therefor. In a memorandum dated 17 November 1992
(Exh. "G" and sub-markings), Mr. Magallanes confirmed that claimant's blasting works was
an extra work order and recommended that it be paid at the price for similar blasting works at
Palinpinon, or at P1,346.00 per cubic meter. Mr. Campos concurred with the findings and
recommendations of Mr. Magallanes and instructed Mr. Lauro R. Umali, then Project
Manager of BacMan II, to implement the same as shown by his instructions scribbled on the
memorandum.

8. Mr. Umali and the project team prepared proposed Extra Work Order No. 2 – Blasting
(Exh. "DDD" – Memorandum of Mr. Umali to Mr. Campos dated 20 January 1993 forwarding
proposed Extra Work Order No. 2), recommending a price of P983.75 per cubic meter for
claimant's blasting works. Claimant agreed to this price (Testimony of witness Dumaliang, 7
November 1996, p. 48).

9. On 19 February 1993, claimant brought the matter of its unpaid blasting works to the
attention of the then NPC Chairman [also Secretary of the Department of Energy then] Delfin
L. Lazaro during a meeting with the multi-sectoral task force monitoring the implementation
of power plant projects, who asked then NPC President Pablo B. Malixi what he was doing
about the problem. President Malixi thereafter convened respondent's vice-presidents and
ordered them to quickly document the variation order and pay claimant. The vice-president,
and specifically Mr. Campos, pledged that the variation order for claimant's blasting works
would be submitted for the approval of the NPC Board during the first week of March 1993.
Claimant thereafter sent respondent a letter dated 22 February 1993 (Ex. "K") to confirm this
pledge (Testimony of witness Dumaliang, 7 November 1996, pp. 28-30).

10. Mr. Campos created a task force (i.e., the Technical Task Force on the Study and
Review of Extra Work Order No. 2; Exh. "FFF") to review claimant's blasting works. After
several meetings with the task force, claimant agreed to the lower price of P458.07 per cubic
meter, in exchange for quick payment (Testimony of witness Dumaliang, 7 November 1996,
p. 30).

11. However, no variation order was issued and no payment came, although it appears from
two (2) radiograms sent by Mr. Campos to Mr. Paderna at the project site that the variation
order was being processed and that payment to claimant was forthcoming (Exhs. "AAA" and
"BBB").

12. Respondent asked the Department of Public Works and Highways (DPWH) about the
standard prices for blasting in the projects of the DPWH. The DPWH officially replied to
respondent's query in a letter dated 19 May 1993 but the task force still failed to seek Board
approval for claimant's variation order. The task force eventually recommended that the
issue of grading excavation and structural excavation and the unit prices therefor be brought
into voluntary arbitration (Testimony of witness Dumaliang, 7 November 1996, pp. 30-57).

13. Claimant thereafter saw Mr. Francisco L. Viray, the new NPC President, who proposed
that claimant accept the price of P458.07 per cubic meter for its blasting works with the
balance of its claim to be the subject of arbitration. Claimant accepted the offer and sent the
letter dated 28 September 1993 (Exh. "O") to formalize said acceptance. However, no
variation order was issued and the promised payment never came. (Testimony of witness
Dumaliang, 7 November 1996, p. 58).

14. After some time, claimant met Mr. Viray on 19 October 1993 at the project site, and with
some NPC officers in attendance, particularly Mr. Gilberto A. Pastoral, Vice-President for
Engineering Design, who was instructed by Mr. Viray to prepare the necessary
memorandum (i.e., that claimant would be paid P458.07 per cubic meter with the balance of
its claim to be the subject of arbitration) for the approval of the NPC Board. Claimant
formalized what transpired during this meeting in its letter to Mr. Pastoral dated 22 October
1993 (Exhibit "R"). But no action was taken by Mr. Pastoral and no variation order was
issued by respondent (Testimony of witness Dumaliang, 7 November 1996, pp. 57-
58).23 [Emphasis supplied and bracketed words]

Promissory estoppel "may arise from the making of a promise, even though without consideration, if
it was intended that the promise should be relied upon and in fact it was relied upon, and if a refusal
to enforce it would be virtually to sanction the perpetration of fraud or would result in other
injustice."24 Promissory estoppel presupposes the existence of a promise on the part of one against
whom estoppel is claimed. The promise must be plain and unambiguous and sufficiently specific so
that the court can understand the obligation assumed and enforce the promise according to its
terms.25

In the present case, the foregoing events clearly evince that the promise that the blasting works
would be paid was predicated on the approval of the extra work order by petitioner's Board. Even
FUCC acknowledged that the blasting works should be an extra work order and requested that the
extra work order be confirmed as such and approved by the appropriate officials. Notably, even as
the extra work order allegedly promised to it was not yet forthcoming, FUCC commenced blasting.

The alleged promise to pay was therefore conditional and up to this point, promissory estoppel
cannot be established as the basis of petitioner's liability especially in light of P.D. 1594 and its
implementing rules of which both parties are presumed to have knowledge. In Mendoza v. Court of
Appeals, supra, we ruled that "[a] cause of action for promissory estoppel does not lie where an
alleged oral promise was conditional, so that reliance upon it was not reasonable. It does not
operate to create liability where it does not otherwise exist."

Petitioner's argument that it is not bound by the acts of its officials who acted beyond the scope of
their authority in allowing the blasting works is correct. Petitioner is a government agency with a
juridical personality separate and distinct from the government. It is not a mere agency of the
government but a corporate entity performing proprietary functions. It has its own assets and
liabilities and exercises corporate powers, including the power to enter into all contracts, through its
Board of Directors.

In this case, petitioner's officials exceeded the scope of their authority when they authorized FUCC
to commence blasting works without an extra work order properly approved in accordance with P.D.
1594. Their acts cannot bind petitioner unless it has ratified such acts or is estopped from
disclaiming them.26

However, the Compromise Agreement entered into by the parties, petitioner being represented by its
President, Mr. Guido Alfredo A. Delgado, acting pursuant to its Board Resolution No. 95-54 dated
April 3, 1995, is a confirmatory act signifying petitioner's ratification of all the prior acts of its officers.
Significantly, the parties agreed that "[t]his Compromise Agreement shall serve as the Supplemental
Agreement for the payment of plaintiff's blasting works at the Botong site"27 in accordance with CI
1(6) afore-quoted. In other words, it is primarily by the force of this Compromise Agreement that the
Court is constrained to declare FUCC entitled to payment for the blasting works it undertook.

Moreover, since the blasting works were already rendered by FUCC and accepted by petitioner and
in the absence of proof that the blasting was done gratuitously, it is but equitable that petitioner
should make compensation therefor, pursuant to the principle that no one should be permitted to
enrich himself at the expense of another.28

This brings us to the issue of just compensation.

The parties proposed in the terms of reference jointly submitted to the Arbitration Board that should
FUCC be adjudged entitled to just compensation for its blasting works, the price therefor should be
determined based on the payment for blasting works in similar projects of FUCC and the amount it
paid to its blasting subcontractor.29 They agreed further that "the price of the blasting at the Botong
site . . . shall range from Defendant's position of P76.00 per cubic meter as per contract to a
maximum of P1,144.00"30

Petitioner contends that the Arbitration Board, trial court and the appellate court unduly relied on the
memorandum of Mr. Umali which was allegedly not marked as an exhibit. We note, however, that
this memorandum actually forms part of the record of the case as Exhibit "DDD."31 Moreover, both the
Arbitration Board and the Court of Appeals found that Mr. Umali's proposal is the best evidence on
record as it is supported by detailed cost estimates that will serve as basis to determine just
compensation.

While the Arbitration Board found that FUCC did not present evidence showing the amount it paid to
its blasting sub-contractor, it did present testimony to the effect that it incurred other costs and
expenses on top of the actual blasting cost. Hence, the amount of P430.00 per cubic meter indicated
in FUCC's Contract of Agreement with Dynamic is not controlling.

Moreover, FUCC presented evidence showing that in two (2) other projects where blasting works
were undertaken, petitioner paid the contractors P1,346 per cubic meter for blasting and disposal of
solid rocks in the Palinpinon project and P1,144.51 per cubic meter for rock excavation in the
Hermosa Balintawak project. Besides, while petitioner claims that in a contract with Wilper
Construction for the construction of the Tayabas sub-station, the price agreed for blasting was only
P96.13, petitioner itself did not present evidence in support of this claim.32
Parenthetically, the point raised by petitioner that its subsequent contractor, Phesco, did not
undertake blasting works in excavating the same rock formation is extraneous and irrelevant. The
fact is that petitioner allowed FUCC to blast and undertook to pay for the blasting works.

At this point, adhered to the rule that the findings of the Arbitration Board, affirmed by the trial court
and the Court of Appeals and supported as they are by substantial evidence, should be accorded
not only respect but finality.33 Accordingly, the amount of P763.00 per cubic meter fixed by the
Arbitration Board and affirmed by the appellate court as just compensation should stand.

As regards the issue of interest, while the appellate court declared in the body of its Decision "that
interest which would represent the cost of the money spent be imposed on the money actually spent
by claimant for the blasting works,"34 there is no pronouncement as to the payment of interest in the
dispositive portion of the Decision even as it specifically deleted the award of attorney's fees.

Despite its knowledge of the appellate court's omission, FUCC did not file a motion for
reconsideration or appeal from its Decision. In failing to do so, FUCC allowed the Decision to
become final as to it.

In Edwards v. Arce,35 we ruled that in a case decided by a court, the true judgment of legal effect is
that entered by the clerk of said court pursuant to the dispositive part of its decision. The only portion
of the decision that may be the subject of execution is that which is ordained or decreed in the
dispositive portion. Whatever may be found in the body of the decision can only be considered as
part of the reasons or conclusions of the court and serve only as guides to determine the ratio
decidendi.36

Even so, the Court allows a judgment which had become final and executory to be clarified when
there is an ambiguity caused by an omission or mistake in the dispositive portion of the decision.37 In
Reinsurance Company of the Orient, Inc. v. Court of Appeals,38 we held:

In Republic Surety and Insurance Company, Inc. v. Intermediate Appellate Court, the Court
applying the above doctrine said:

"xxx We clarify, in other words, what we did affirm. What is involved here is not what is
ordinarily regarded as a clerical error in the dispositive part of the decision of the Court of
First Instance, which type of error is perhaps best typified by an error in arithmetical
computation. At the same time, what is involved here is not a correction of an erroneous
judgment or dispositive portion of a judgment. What we believe is involved here is in the
nature of an inadvertent omission on the part of the Court of First Instance (which should
have been noticed by private respondent's counsel who had prepared the complaint), of
what might be described as a logical follow-through of something set forth both in the body of
the decision and in the dispositive portion thereof: the inevitable follow-through, or translation
into, operational or behavioral terms, of the annulment of the Deed of Sale with Assumption
of Mortgage, from which petitioners' title or claim of title embodied in TCT 133153 flows."
(Italics supplied)39

In this case, the omission of the award of interest was obviously inadvertent. Correction is therefore
in order. However, we do not agree with the Arbitration Board that the interest should be computed
at 12%. Since the case does not involve a loan or forbearance of money, goods or credit and court
judgments thereon, the interest due shall be computed at 6% per annum computed from the time the
claim was made in 1992 as determined by the Arbitration Board and in accordance with Articles
2209 and 1169 of the Civil Code. The actual base for the computation of legal interest shall be on
the amount finally adjudged.40 Further, when the judgment awarding a sum of money becomes final
and executory, the rate of legal interest shall be 12% per annum from such finality until its
satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.41

WHEREFORE, the petition is GRANTED in part. The appealed decision is MODIFIED in that the
amount of P74,035,503.50 shall earn legal interest of six percent (6%) from 1992. A twelve percent
(12%) interest, in lieu of six percent (6%), shall be imposed on such amount upon finality of this
decision until the payment thereof.

SO ORDERED.

G.R. No. 77372 April 29, 1988

LUPO L. LUPANGCO, RAYMOND S. MANGKAL, NORMAN A. MESINA, ALEXANDER R.
REGUYAL, JOCELYN P. CATAPANG, ENRICO V. REGALADO, JEROME O. ARCEGA,
ERNESTOC. BLAS, JR., ELPEDIO M. ALMAZAN, KARL CAESAR R. RIMANDO, petitioner,
vs.
COURT OF APPEALS and PROFESSIONAL REGULATION COMMISSION, respondent.

Balgos & Perez Law Offices for petitioners.

The Solicitor General for respondents.

GANCAYCO, J.:

Is the Regional Trial Court of the same category as the Professional Regulation Commission so that it cannot pass upon the validity of the
administrative acts of the latter? Can this Commission lawfully prohibit the examiness from attending review classes, receiving handout
materials, tips, or the like three (3) days before the date of the examination? Theses are the issues presented to the court by this petition for
certiorari to review the decision of the Court of Appeals promulagated on January 13, 1987, in CA-G.R. SP No. 10598, * declaring null and
void the other dated Ocober 21, 1986 issued by the Regional Trial Court of Manila, Branch 32 in Civil Case No. 86-37950 entitled " Lupo L.
Lupangco, et al. vs. Professional Regulation Commission."

The records shows the following undisputed facts:

On or about October 6, 1986, herein respondent Professional Regulation Commission (PRC) issued
Resolution No. 105 as parts of its "Additional Instructions to Examiness," to all those applying for
admission to take the licensure examinations in accountancy. The resolution embodied the following
pertinent provisions:

No examinee shall attend any review class, briefing, conference or the like
conducted by, or shall receive any hand-out, review material, or any tip from any
school, college or university, or any review center or the like or any reviewer,
lecturer, instructor official or employee of any of the aforementioned or similars
institutions during the three days immediately proceeding every examination day
including examination day.

Any examinee violating this instruction shall be subject to the sanctions prescribed by
Sec. 8, Art. III of the Rules and Regulations of the Commission. 1

On October 16, 1986, herein petitioners, all reviewees preparing to take the licensure examinations
in accountancy schedule on October 25 and November 2 of the same year, filed on their own behalf
of all others similarly situated like them, with the Regional Trial Court of Manila, Branch XXXII, a
complaint for injuction with a prayer with the issuance of a writ of a preliminary injunction against
respondent PRC to restrain the latter from enforcing the above-mentioned resolution and to declare
the same unconstitutional.

Respondent PRC filed a motion to dismiss on October 21, 1987 on the ground that the lower court
had no jurisdiction to review and to enjoin the enforcement of its resolution. In an Order of October
21, 1987, the lower court ruled in favor of the petitioners.

Not satisfied therewith, respondent PRC, on November 10, 1986, filed with the Court of Appeals a
petition for the nullification of the above Order of the lower court. Said petiton was granted in the
Decision of the Court of Appeals promulagated on January 13, 1987, to wit:

WHEREFORE, finding the petition meritorious the same is hereby GRANTED and
the other dated October 21, 1986 issued by respondent court is declared null and
void. The respondent court is further directed to dismiss with prejudice Civil Case No.
86-37950 for want of jurisdiction over the subject matter thereof. No cost in this
instance.

SO ORDERED. 2

Hence, this petition.

The Court of Appeals, in deciding that the Regional Trial Court of Manila had no jurisdiction to
entertain the case and to enjoin the enforcement of the Resolution No. 105, stated as its basis its
conclusion that the Professional Regulation Commission and the Regional Trial Court are co-equal
bodies. Thus it held —
 That the petitioner Professional Regulatory Commission is at least a co-equal body
with the Regional Trial Court is beyond question, and co-equal bodies have no power
to control each other or interfere with each other's acts. 3

To strenghten its position, the Court of Appeals relied heavily on National Electrification
Administration vs. Mendoza, 4 which cites Pineda vs. Lantin 5 and Philippine Pacific Fishing, Inc. vs.
Luna, 6 where this Court held that a Court of First Instance cannot interfere with the orders of the
Securities and Exchange Commission, the two being co-equal bodies.

After a close scrutiny of the facts and the record of this case,

We rule in favor of the petitioner.

The cases cited by respondent court are not in point. It is glaringly apparent that the reason why this
Court ruled that the Court of First Instance could not interfere with the orders of the Securities and
Exchange Commission was that this was so provided for by the law. In Pineda vs. Lantin, We
explained that whenever a party is aggrieved by or disagree with an order or ruling of the Securities
and Exchange Commission, he cannot seek relief from courts of general jurisdiction since under the
Rules of Court and Commonwealth Act No. 83, as amended by Republic Act No. 635, creating and
setting forth the powers and functions of the old Securities and Exchange Commission, his remedy
is to go the Supreme Court on a petition for review. Likewise, in Philippine Pacific Fishing Co., Inc.
vs. Luna,it was stressed that if an order of the Securities and Exchange Commission is erroneous,
the appropriate remedy take is first, within the Commission itself, then, to the Supreme Court as
mandated in Presidential Decree No. 902-A, the law creating the new Securities and Exchange
Commission. Nowhere in the said cases was it held that a Court of First Instance has no jurisdiction
over all other government agencies. On the contrary, the ruling was specifically limited to the
Securities and Exchange Commission.

The respondent court erred when it placed the Securities and Exchange Commission and the
Professional Regulation Commission in the same category. As already mentioned, with respect to
the Securities and Exchange Commission, the laws cited explicitly provide with the procedure that
need be taken when one is aggrieved by its order or ruling. Upon the other hand, there is no law
providing for the next course of action for a party who wants to question a ruling or order of the
Professional Regulation Commission. Unlike Commonwealth Act No. 83 and Presidential Decree
No. 902-A, there is no provision in Presidential Decree No. 223, creating the Professional Regulation
Commission, that orders or resolutions of the Commission are appealable either to the Court of
Appeals or to theSupreme Court. Consequently, Civil Case No. 86-37950, which was filed in order to
enjoin the enforcement of a resolution of the respondent Professional Regulation Commission
alleged to be unconstitutional, should fall within the general jurisdiction of the Court of First Instance,
now the Regional Trial Court. 7

What is clear from Presidential Decree No. 223 is that the Professional Regulation Commission is
attached to the Office of the President for general direction and coordination. 8 Well settled in our
jurisprudence is the view that even acts of the Office of the President may be reviewed by the Court
of First Instance (now the Regional Trial Court). In Medalla vs. Sayo, 9 this rule was thoroughly
propounded on, to wit:

In so far as jurisdiction of the Court below to review by certiorari decisions and/or

resolutions of the Civil Service Commission and of the residential Executive
Asssistant is concerned, there should be no question but that the power of judicial
review should be upheld. The following rulings buttress this conclusion:

The objection to a judicial review of a Presidential act arises from a

failure to recognize the most important principle in our system of
government, i.e., the separation of powers into three co-equal
departments, the executives, the legislative and the judicial, each
supreme within its own assigned powers and duties. When a
presidential act is challenged before the courts of justice, it is not to
be implied therefrom that the Executive is being made subject and
subordinate to the courts. The legality of his acts are under judicial
review, not because the Executive is inferior to the courts, but
because the law is above the Chief Executive himself, and the courts
seek only to interpret, apply or implement it (the law). A judicial
review of the President's decision on a case of an employee decided
by the Civil Service Board of Appeals should be viewed in this light
and the bringing of the case to the Courts should be governed by the
same principles as govern the jucucial review of all administrative
acts of all administrative officers. 10
Republic vs. Presiding Judge, CFI of Lanao del Norte, Br. II, 11 is another case in point. Here, "the
Executive Office"' of the Department of Education and Culture issued Memorandum Order No. 93
under the authority of then Secretary of Education Juan Manuel. As in this case, a complaint for
injunction was filed with the Court of First Instance of Lanao del Norte because, allegedly, the
enforcement of the circular would impair some contracts already entered into by public school
teachers. It was the contention of petitioner therein that "the Court of First Instance is not
empowered to amend, reverse and modify what is otherwise the clear and explicit provision of the
memorandum circular issued by the Executive Office which has the force and effect of law." In
resolving the issue, We held:

... We definitely state that respondent Court lawfully acquired jurisdiction in Civil
Case No. II-240 (8) because the plaintiff therein asked the lower court for relief, in the
form of injunction, in defense of a legal right (freedom to enter into contracts) . . . . .

Hence there is a clear infringement of private respondent's constitutional right to

enter into agreements not contrary to law, which might run the risk of being violated
by the threatened implementation of Executive Office Memorandum Circular No. 93,
dated February 5, 1968, which prohibits, with certain exceptions, cashiers and
disbursing officers from honoring special powers of attorney executed by the payee
employees. The respondent Court is not only right but duty bound to take cognizance
of cases of this nature wherein a constitutional and statutory right is allegedly
infringed by the administrative action of a government office. Courts of first Instance
have original jurisdiction over all civil actions in which the subject of the litigation is
not capable of pecuniary estimation (Sec. 44, Republic Act 296, as
amended). 12 (Emphasis supplied.)

In San Miguel Corporation vs. Avelino, 13 We ruled that a judge of the Court of First Instance has the
authority to decide on the validity of a city tax ordinance even after its validity had been contested
before the Secretary of Justice and an opinion thereon had been rendered.

In view of the foregoing, We find no cogent reason why Resolution No. 105, issued by the
respondent Professional Regulation Commission, should be exempted from the general jurisdiction
of the Regional Trial Court.

Respondent PRC, on the other hand, contends that under Section 9, paragraph 3 of B.P. Blg. 129, it
is the Court of Appeals which has jurisdiction over the case. The said law provides:

SEC. 9. Jurisdiction. — The Intermediate Appellate Court shall exercise:

xxx xxx xxx

(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions,
orders, or 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 contention is devoid of merit.

In order to invoke the exclusive appellate jurisdiction of the Court of Appeals as provided for in
Section 9, paragraph 3 of B.P. Blg. 129, there has to be a final order or ruling which resulted from
proceedings wherein the administrative body involved exercised its quasi-judicial functions. In
Black's Law Dictionary, quasi-judicial is defined as a term applied to the action, discretion, etc., of
public administrative officers or bodies 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. To expound thereon, quasi-judicial adjudication would mean
a determination of rights, privileges and duties resulting in a decision or order which applies to a
specific situation . 14This does not cover rules and regulations of general applicability issued by the
administrative body to implement its purely administrative policies and functions like Resolution No.
105 which was adopted by the respondent PRC as a measure to preserve the integrity of licensure
examinations.

The above rule was adhered to in Filipinas Engineering and Machine Shop vs. Ferrer. 15 In this case,
the issue presented was whether or not the Court of First Instance had jurisdiction over a case
involving an order of the Commission on Elections awarding a contract to a private party which
originated from an invitation to bid. The said issue came about because under the laws then in force,
final awards, judgments, decisions or orders of the Commission on Elections fall within the exclusive
jurisdiction of the Supreme Court by way of certiorari. Hence, it has been consistently held that "it is
the Supreme Court, not the Court of First Instance, which has exclusive jurisdiction to review on
certiorari final decisions, orders, or rulings of the Commission on Elections relative to the conduct of
elections and the enforcement of election laws." 16

As to whether or not the Court of First Instance had jurisdiction in saidcase, We said:

We are however, far from convinced that an order of the COMELEC awarding a
contract to a private party, as a result of its choice among various proposals
submitted in response to its invitation to bid comes within the purview of a "final
order" which is exclusively and directly appealable to this court on certiorari. What is
contemplated by the term "final orders, rulings and decisions, of the COMELEC
reviewable by certiorari by the Supreme Court as provided by law are those rendered
in actions or proceedings before the COMELEC and taken cognizance of by the said
body in the exercise of its adjudicatory or quasi-judicial powers. (Emphasis supplied.)

xxx xxx xxx

We agree with petitioner's contention that the order of the Commission granting the
award to a bidder is not an order rendered in a legal controversy before it wherein
the parties filed their respective pleadings and presented evidence after which the
questioned order was issued; and that this order of the commission was issued
pursuant to its authority to enter into contracts in relation to election purposes. In
short, the COMELEC resolution awarding the contract in favor of Acme was not
issued pursuant to its quasi-judicial functions but merely as an incident of its inherent
administrative functions over the conduct of elections, and hence, the said resolution
may not be deemed as a "final order reviewable by certiorari by the Supreme
Court. Being non-judicial in character, no contempt order may be imposed by the
COMELEC from said order, and no direct and exclusive appeal by certiorari to this
Tribunal lie from such order. Any question arising from said order may be well taken
in an ordinary civil action before the trial courts. (Emphasis supplied.) 17

One other case that should be mentioned in this regard is Salud vs. Central Bank of the
Philippines. 18 Here, petitioner Central Bank, like respondent in this case, argued that under Section
9, paragraph 3 of B.P. Blg. 129, orders of the Monetary Board are appealable only to the
Intermediate Appellate Court. Thus:

The Central Bank and its Liquidator also postulate, for the very first time, that the
Monetary Board is among the "quasi-judicial ... boards" whose judgments are within
the exclusive appellate jurisdiction of the IAC; hence, it is only said Court, "to the
exclusion of the Regional Trial Courts," that may review the Monetary Board's
resolutions. 19

Anent the posture of the Central Bank, We made the following pronouncement:

The contention is utterly devoid of merit. The IAC has no appellate jurisdiction over
resolution or orders of the Monetary Board. No law prescribes any mode of appeal
from the Monetary Board to the IAC. 20

In view of the foregoing, We hold that the Regional Trial Court has jurisdiction to entertain Civil Case
No. 86-37950 and enjoin the respondent PRC from enforcing its resolution.

Although We have finally settled the issue of jurisdiction, We find it imperative to decide once and for
all the validity of Resolution No. 105 so as to provide the much awaited relief to those who are and
will be affected by it.

Of course, We realize that the questioned resolution was adopted for a commendable purpose which
is "to preserve the integrity and purity of the licensure examinations." However, its good aim cannot
be a cloak to conceal its constitutional infirmities. On its face, it can be readily seen that it is
unreasonable in that an examinee cannot even attend any review class, briefing, conference or the
like, or receive any hand-out, review material, or any tip from any school, collge or university, or any
review center or the like or any reviewer, lecturer, instructor, official or employee of any of the
aforementioned or similar institutions . ... 21

The unreasonableness is more obvious in that one who is caught committing the prohibited acts
even without any ill motives will be barred from taking future examinations conducted by the
respondent PRC. Furthermore, it is inconceivable how the Commission can manage to have a
watchful eye on each and every examinee during the three days before the examination period.
It is an aixiom in administrative law that administrative authorities should not act arbitrarily and
capriciously in the issuance of rules and regulations. To be valid, such rules and regulations must be
reasonable and fairly adapted to the end in view. If shown to bear no reasonable relation to the
purposes for which they are authorized to be issued, then they must be held to be invalid. 22

Resolution No. 105 is not only unreasonable and arbitrary, it also infringes on the examinees' right to
liberty guaranteed by the Constitution. Respondent PRC has no authority to dictate on the reviewees
as to how they should prepare themselves for the licensure examinations. They cannot be restrained
from taking all the lawful steps needed to assure the fulfillment of their ambition to become public
accountants. They have every right to make use of their faculties in attaining success in their
endeavors. They should be allowed to enjoy their freedom to acquire useful knowledge that will
promote their personal growth. As defined in a decision of the United States Supreme Court:

The term "liberty" means more than mere freedom from physical restraint or the
bounds of a prison. It means freedom to go where one may choose and to act in
such a manner not inconsistent with the equal rights of others, as his judgment may
dictate for the promotion of his happiness, to pursue such callings and vocations as
may be most suitable to develop his capacities, and giv to them their highest
enjoyment. 23

Another evident objection to Resolution No. 105 is that it violates the academic freedom of the
schools concerned. Respondent PRC cannot interfere with the conduct of review that review schools
and centers believe would best enable their enrolees to meet the standards required before
becoming a full fledged public accountant. Unless the means or methods of instruction are clearly
found to be inefficient, impractical, or riddled with corruption, review schools and centers may not be
stopped from helping out their students. At this juncture, We call attention to Our pronouncement
in Garcia vs. The Faculty Admission Committee, Loyola School of Theology, 24 regarding academic
freedom to wit:

... It would follow then that the school or college itself is possessed of such a right. It
decides for itself its aims and objectives and how best to attain them. It is free from
outside coercion or interference save possibly when the overriding public welfare
calls for some restraint. It has a wide sphere of autonomy certainly extending to the
choice of students. This constitutional provision is not to be construed in a niggardly
manner or in a grudging fashion.

Needless to say, the enforcement of Resolution No. 105 is not a guarantee that the alleged leakages
in the licensure examinations will be eradicated or at least minimized. Making the examinees suffer
by depriving them of legitimate means of review or preparation on those last three precious days-
when they should be refreshing themselves with all that they have learned in the review classes and
preparing their mental and psychological make-up for the examination day itself-would be like
uprooting the tree to get ride of a rotten branch. What is needed to be done by the respondent is to
find out the source of such leakages and stop it right there. If corrupt officials or personnel should be
terminated from their loss, then so be it. Fixers or swindlers should be flushed out. Strict guidelines
to be observed by examiners should be set up and if violations are committed, then licenses should
be suspended or revoked. These are all within the powers of the respondent commission as
provided for in Presidential Decree No. 223. But by all means the right and freedom of the
examinees to avail of all legitimate means to prepare for the examinations should not be curtailed.

In the light of the above, We hereby REVERSE and SET ASIDE, the decision of the Court of
Appeals in CA-G.R. SP No. 10591 and another judgment is hereby rendered declaring Resolution
No. 105 null and void and of no force and effect for being unconstitutional. This decision is
immediately executory. No costs.

SO ORDERED.
G.R. No. 73123 September 2, 1991

IN RE: PETITION FOR DECLARATION OF INSOLVENCY OF [A] FILAND MANUFACTURING

AND ESTATE DEVELOPMENT COMPANY; [B] TOP CONSTRUCTION ENTERPRISES, INC.
AND [C] SPOUSES EMILIO CHING AND INAI TEH; EMILIO CHING, petitioner, LAND BANK OF
THE PHILIPPINES, oppositor. LAND BANK OF THE PHILIPPINES, petitioner,
vs.
HON. DIONISIO N. CAPISTRANO, JUDGE OF THE REGIONAL TRIAL COURT OF PASAY CITY,
EMILIO CHING AND FILAND MANUFACTURING AND ESTATE DEVELOPMENT CO.,
INC., respondents.

Lily K. Gruba and Florencio S. Jimenez for Land Bank of the Philippines.

FERNAN, C.J.:

Assailed in this petition for review on certiorari is the jurisdiction of the Regional Trial Court (RTC) of
Pasay City over a petition for declaration of insolvency of two (2) private corporations.

The antecedent facts are undisputed:

On September 19, 1980, private respondents Filand Manufacturing and Estate Development Co., Inc.
(hereafter, Filand Manufacturing) and Emilio Ching obtained from petitioner Land Bank of the
Philippines a loan in the amount of Ten Million Pesos (P10,000,000.00). Private respondents having
failed to pay the loan on its due date, petitioner instituted before the RTC of Manila a complaint for
recovery thereof, docketed as Civil Case No. 0184-P.

During the pendency of the collection suit on December 29, 1984, private respondents Filand
Manufacturing, Emilio Ching and his spouse Inai Teh and Top Construction Enterprises, Inc., thru
Emilio Ching, filed before the respondent RTC of Pasay City a petition docketed as Special
Proceedings No. 3232P for declaration of insolvency. Cited as ground therefor was their inability to
pay the various debts and liabilities incurred by them, either jointly or solidarily or guaranteed by one
for the other, in the course of their businesses, such inability being due to business reserves brought
about by the fire on January 2, 1984 which gutted the old Holiday Plaza Building then owned and
operated by Filand Manufacturing, as well as the economic crisis which gripped the country following
the assassination of former Senator Benigno S. Aquino in 1983.1

Acting on said petition, respondent court on January 29, 1985 issued an Order of Adjudication
declaring private respondents insolvent pursuant to Section 18 of the Insolvency Law (Act No. 1956).
The Sheriff of Pasay City was "directed to take possession of, and safely keep, until the appointment
of a receiver or assignee, all the deeds, vouchers, books of account, papers, notes, bonds, bills and
securities of (therein) petitioners, and all the real and personal properties, estates and effects of the
same petitioners, except such as may, by law, be exempt from execution." Respondent court set
"March 25, 1985 at 9:00 A.M. in its premises ... as the date of the meeting of the creditors of the
petitioners for them to choose an assignee/assignees of the estates of the petitioners."2

Petitioner bank moved for a reconsideration of the Order of Adjudication on two (2) grounds, namely:
(1) that the court has no jurisdiction over the subject matter of the petition insofar as petitioning
corporations are concerned; and (2) the petition is defective in form and substance.3 After an exchange
of pleadings between petitioner and private respondents, respondent court issued on July 19, 1985
an Order upholding its jurisdiction over the petition and appointing petitioner bank as the assignee for
and in behalf of all the creditors without bond, thus:

WHEREFORE, all motions seeking to have this Court make a declaration that it has no
jurisdiction over the above-entitled proceeding are hereby DENIED, and the Land Bank of the
Philippines is appointed as the assignee for and in behalf of all the creditors of the petitioners,
without bond, to which assignee the Clerk of Court, thru the Branch Sheriff, shall deliver any
and all real and personal properties, estates and effects, as well as the pertinent papers and
all deeds, vouchers, books of accounts, papers, notes, bonds, bills and securities taken by him
pursuant to the order of this Court of January 29, 1985.

The assignee is hereby ordered to comply with the time limit provided for in Sec. 43 of Act
1956, and for this purpose, hereby sets his report for hearing on October 29, 1985, at 9:00
A.M.

SO ORDERED.4
Petitioner bank declined the appointment and the City Treasurer of Pasay City, being the second
biggest creditor of private respondents, was appointed in its stead Petitioner bank then filed a Notice
of Appeal and a Record on Appeal on August 19, 1985, on the basis of which the respondent court
forwarded the records of the case directly to this Court.

By resolution dated September 23, 1985, the Court resolved to "REQUIRE the Branch Clerk of Court
of the (respondent court) to EXPLAIN why he forwarded to this Court the aforesaid records when the
mode of seeking review by this Court of a lower court's judgment under R.A. 5440 is by petition for
review on certiorari; and the Presiding Judge of said trial court is also directed to EXPLAIN why he
accepted and approved the forwarding to this Court of the aforesaid records, both within ten (10) days
from notice hereof." Petitioner bank and/or counsel were also "REQUIRED to EXPLAIN within ten (10)
days from notice ..., since they failed to pay timely the docket and legal research fund fees and to file
timely a petition for review on certiorari under R.A. 5440 why the judgment sought to be reviewed
should not be now deemed final and executory and the records returned for execution of
judgment".5 Upon submission of the required explanations, the Court on December 4, 1985 resolved
to require the petitioner bank to file a petition for review on certiorari and to pay the docket and legal
research fund fees, both within a non-extendible period of ten (10) days from notice.6 This Order was
seasonably complied with.

After the private respondents had submitted their comment on the petition, petitioner bank filed on
March 24, 1986 a "Manifestation with motion for issuance of writ of preliminary injunction" informing
the Court that on March 3, 1986, the respondent court rendered a decision in Special Proceedings No.
3232-P, providing in its dispositive portion as follows:

WHEREFORE, judgment is hereby rendered, as follows:

1. Petitioners Filand Manufacturing & Estate Development Co., Inc., and Top Construction
Enterprises, Inc., are declared by this Court as insolvent and, pursuant to Sec. 52 of Act 1956,
as amended, their properties and assets shall be distributed to the creditors in the proceeding
with respect to the appointment of the City Treasurer of Pasay City as receiver of their estates
and effects. However, they are not discharged from their liabilities in accordance with Sec. 52
of Act 1956, as amended.

2. Petitioners spouses Emilio Ching and Inai Teh are likewise declared insolvent and their
application for discharge is hereby approved, and they are hereby ordered discharged and
released from all claims, debts, liabilities and demands, whether actual or contingent, and
whether personally or as guarantors or in a joint and solidary capacity, with respect to the
obligations set forth in the schedule and inventory of accounts due and payable, Annex 'A' of
the petition, as well as with respect to the obligations and creditors listed in the manifestation
of April 29, 1985, and the supplemental manifestation dated May 22, 1985, in the above-
entitled proceedings.

The other aspect of the above-entitled proceedings as regards the receiver and all incidents
and matters in connection with his functions and duties are hereby considered as mere
interlocutory matters in the process of winding up this proceeding.

SO ORDERED.7

Acting on said manifestation and motion, the Court on April 14, 1986 issued a temporary restraining
order enjoining the respondent court from enforcing its decision of March 3, 1986.8 The temporary
restraining order was however lifted insofar as private respondents spouses Emilio Ching and Inai Teh
were concerned, the latter being natural persons over whom the jurisdiction of the respondent court is
not being questioned.9

In its petition, given due course by the Court per resolution dated January 28, 1987, petitioner bank
advances the argument that it is the Securities and Exchange Commission (SEC), rather than the
Regional Trial Court (RTC) which has jurisdiction over the petition for declaration of insolvency filed
by private respondent corporations. This theory is allegedly anchored on specific provisions of
Presidential Decree No. 902-A, as amended, namely: Sections 3, 5(d) and 6(c) and (d), which
petitioner bank construes as having repealed the Insolvency Law (Act 1956), which confers jurisdiction
over insolvency proceedings on the regular courts. Private respondents maintain the opposite view,
contending simply that a petition for declaration of insolvency is not one of those cases enumerated
under Section 5, P.D. No. 902-A, as amended, over which the SEC has original and exclusive
jurisdiction.

In view of the far reaching importance of the issue presented before the Court, both from a legal and
economic standpoint, we resolved to implead the SEC as a party to this case and to require it to inform
the Court of its practice regarding insolvency proceedings.10 The SEC thru the Solicitor General, filed
its memorandum on December 13, 1989.
After deliberating on the SEC's memorandum, the Court resolved to set the case for hearing on May
14, 1990 at 10:00 o'clock in the morning. A senior and knowledgeable officer of the SEC was requested
to "appear and inform the Court of the law and practice actually applied and followed by the SEC in
respect of suspension of payments by, and voluntary and involuntary insolvencies of Philippine
corporations . ..." Former SEC Chairman Julito Sulit, Jr. was appointed amicus curiae and was
requested to appear at the hearing in that capacity.11

Before addressing the principal issue in the instant petition, the Court notes with dismay that the
petitioner and the lower court appear to be still in the dark as to the proper mode of appeal to this
Court. Hence, for their elucidation as well as the others similarly misinformed, we deem it proper to
quote the following resolution dated March 1, 1990 of the Court en banc in UDK 9748, "Murillo v.
Consul":

R.A. No. 5440 changed the mode of appeal from courts of first instance (now Regional Trial
Courts) to the Supreme Court in cases involving only questions of law, or the constitutionality
or validity of any treaty, law, ordinance, etc. or the legality of any tax, impost, assessment or
toll, etc., or the jurisdiction of any inferior court, from ordinary appeal — i.e., by notice of appeal,
record on appeal and appeal bond, under Rule 41— to appeal by certiorari, under Rule 45.

xxx xxx xxx

At present then, except in criminal cases where the penalty imposed is life imprisonment
or reclusion perpetua, there is no way by which judgments of regional trial courts may be
appealed to this Court except by petition for review on certiorari in accordance with Rule 45 of
the Rules of Court, in relation to Section 17 of the Judiciary Act of 1948, as amended. The
proposition is clearly stated in the Interim Rules: 'Appeals to the Supreme Court shall be taken
by petition for certiorari which shall be governed by Rule 45 of the Rules of Court.

xxx xxx xxx

... To repeat, appeals to this Court cannot now be made by petition for review or by notice of
appeal (and, in certain instances, by record on appeal), but only by petition for review on
certiorari under Rule 45. As was stressed by this Court as early as 1980 in Buenbrazo v.
Marave, 101 SCRA 848, all the members of the bench and bar are charged with knowledge,
not only that since the enactment of Republic Act No. 6031 in 1969,' 'the review of the decision
of the Court of First Instance in a case exclusively cognizable by the inferior court ... cannot
be made in an ordinary appeal or by record on appeal but also that 'appeal by record on appeal
to the Supreme Court under Rule 42 of the Rules of Court was abolished by Republic Act No.
5440 which, as already stated, took effect on September 9, 1968.' Similarly, in Santos, Jr. v.
C.A., 152 SCRA 378, this Court declared that 'Republic Act No. 5440 had long superseded
Rule 41 and Section 1, Rule 122 of the Rules of Court on direct appeals from the court of first
instance to the Supreme Court in civil and criminal cases,' ... and that 'direct appeals to this
Court from the trial court on questions of law had to be through the filing of a petition for review
on certiorari, wherein this Court could either give due course to the proposed appeal or deny
it outright to prevent the clogging of its docket with unmeritorious and dilatory appeals.

Going now to the issue of jurisdiction raised in this petition and considering the arguments proferred
by the parties' respective counsel, the view spoused by the amicus curiae as well as the submissions
of the SEC thru the Office of the Solicitor General and its Assistant Executive Director, we find for
private respondents.

Under Act 1956, otherwise known as the Insolvency Law, jurisdiction over proceedings for suspension
of payments, voluntary and involuntary insolvency is exclusively vested in the regular courts. However,
P.D. No. 1758 issued in 1981 added to the exclusive and original jurisdiction of the SEC defined and
delineated in Section 5 of P.D. 902-A,12the following:

d) Petitions of corporations, partnerships or associations to be declared in the state of

suspension of payments in cases where the corporation, partnership or association possesses
sufficient property to cover all its debts but foresees the impossibility of meeting them when
they respectively fall due or in cases where the corporation, partnership or association has no
sufficient assets to cover its liabilities, but is under the management of a Rehabilitation
Receiver or Management Committee created pursuant to this Decree.

It is petitioner's contention that said additional par. (d) effectively repealed the Insolvency Law so as
to transfer and confer upon the SEC jurisdiction theretofore enjoyed by the regular courts over
proceedings for suspension of payments and voluntary and involuntary insolvency. We do not share
such interpretation.
The SEC like any other administrative body, is a tribunal of limited jurisdiction and as such, could wield
only such powers as are specifically granted to it by its enabling statute.13 Its jurisdiction should be
interpreted in strictissimi juris. (strictest letter of the law.)

Section 5, par. (d) should be construed as vesting upon the SEC original and exclusive jurisdiction
only over petitions to be declared in a state of suspension of payments, which may either be: (a) a
simple petition for suspension of payments based on the provisions of the Insolvency Law, or (b) a
similar petition accompanied by a prayer for the creation/appointment of a management committee
and/or rehabilitation receiver based on the provisions of P.D. No. 902-A. Said provision cannot be
stretched to include petitions for insolvency. The reason is that under said Section 5, par. (d) above-
quoted, the jurisdiction of the SEC over cases where the corporation, partnership or association has
no sufficient assets to cover its liabilities, (and therefore insolvent) is qualified by the conjunctive
phrase "but is under the management of a Rehabilitation Receiver or Management Committee created
pursuant to this Decree." This qualification effectively circumscribes the jurisdiction of the SEC over
insolvent corporations, partnerships and associations, and consequently, over proceedings for the
declaration of insolvency. It demonstrates beyond doubt that jurisdiction over insolvency proceedings
pertains neither in the first instance nor exclusively to the SEC but only in continuation of or as an
incident to the exercise of its jurisdiction over petitions to be declared in a state of suspension of
payments wherein the petitioning corporation, partnership or association had previously been placed
under a rehabilitation receiver or management committee by the SEC itself.

Viewed differently, where the petition filed is one for declaration of a state of suspension of payments
due to a recognition of the inability to pay one's debts and liabilities, and where the petitioning
corporation either: (a) has sufficient property to cover all its debts but foresees the impossibility of
meeting them when they fall due (solvent but illiquid or (b) has no sufficient property (insolvent) but is
under the management of a rehabilitation receiver or a management committee, the applicable law is
P.D. No. 902-A pursuant to Sec. 5 par. (d) thereof. However, if the petitioning corporation has no
sufficient assets to cover its liabilities and is not under a rehabilitation receiver or a management
committee created under P.D. No. 902-A and does not seek merely to have the payments of its debts
suspended, but seeks a declaration of insolvency, as in this case, the applicable law is Act 1956 where
regular courts have jurisdiction

Sec. 14. — An insolvent debtor, owing debts exceeding in amount the sum of one thousand
pesos, may apply to be discharged from his debts and liabilities by petition to the Court of First
Instance of the province or city in which he has resided for six month next preceding the filing
of such petition. In his petition, he shall set forth his place of residence, the period of his
residence therein immediately prior to filing said petition, his inability to pay all his debts in full,
his willingness to surrender all his property, estate, and effects not exempt from execution for
the benefit of his creditors, and an application to be adjudged an insolvent. He shall annex to
his petition a schedule and inventory in the form hereinafter provided. The filing of such petition
shall be an act of insolvency.

Neither could the grant of additional powers to SEC under Section 6(c) and (d) of P.D. No. 902- A, as
amended, be construed as vesting upon it exclusive and original jurisdiction over insolvency
proceedings. The pertinent provisions read:

SEC. 6. In order to effectively exercise such jurisdiction, the Commission shall possess the
following powers:

xxx xxx xxx

c) To appoint one or more receivers of the property, real and personal, which is the subject of
the action pending before the Commission in accordance with the pertinent provisions of the
Rules of Court in such other cases whenever necessary to preserve the rights of the parties-
litigants to and/or protect the interest of the investing public and creditors; Provided, however,
that the Commission may, in appropriate cases, appoint a rehabilitation receiver of
corporations, partnerships or other associations not supervised or regulated by other
government agencies who shall have, in addition to the powers of a regular receiver under the
provisions of the Rules of Court, such functions and powers as are provided for in the
succeeding paragraph (d) hereof; Provided, further that the Commission may appoint a
rehabilitation receiver of corporations, partnerships or other nations supervised or regulated
by other government agencies, such as banks and insurance companies, upon request of the
government agency concerned; Provided, finally that upon appointment of a management
committee, rehabilitation receiver, board or body pursuant to this Decree, all actions for claims
against corporations, partnerships or nations under management or receivership pending
before any court, tribunal, board or body shall be suspended accordingly.

d) To create and appoint a management committee, board, or body upon petition or motu
proprio to undertake the management of corporations, partnerships or other associations not
supervised or regulated by other government agencies in appropriate cases when there is
 imminent danger of dissipation, loss, wastage or destruction of assets or other properties or
paralization of business operations of such corporations or entities which may be prejudicial
to the interest of minority stockholders, parties-litigants or the general public; Provided, further,
that the Commission may create or appoint a management committee, board or body to
undertake the management of corporations, partnerships or other associations supervised or
regulated by other government agencies, such as banks and insurance companies, upon
request of the government agency concerned.

The management committee or rehabilitation receiver, board or body shall have the power to
take custody of, and control over, all the existing assets and property of such entities under
management; to evaluate the existing assets and liabilities, earnings and operations of such
corporations, partnerships or other associations, to determine the best way to wage and
protect the interest of the investors and creditors; to study, review and evaluate the feasibility
of continuing operations and restructure and rehabilitate such entities if determined to be
feasible by the Commission. It shall report and be responsible to the Commission until
dissolved by order of the Commission: Provided, however, that the Commission may, on the
basis of the findings and recommendation of the management committee, or rehabilitation
receiver, board or body, or on its own findings, determine that the continuance in business of
such corporation or entity would not be feasible or profitable nor work to the best interest of
the stockholders, parties-litigants, creditors, or the general public, order the dissolution of such
corporation entity and its remaining assets liquidated accordingly.

The management committee or rehabilitation receiver, board or body may overrule or revoke
the actions of the previous management and board of directors of the entity or entities under
management notwithstanding any provision of law, articles of incorporation or by-laws to the
contrary.

The management committee, or rehabilitation receiver, board or body shall not be subject to
any action, claim or demand for, or in connection with any act done or omitted to be done by
it in good faith in the exercise of its functions, or in connection with the exercise of its powers
herein conferred.

As declared by the law itself, these are merely ancillary powers to enable the SEC to effectively
exercise its jurisdiction. These additional ancillary powers can be exercised only in connection with an
action pending before the SEC and therefore had to be viewed in relation to Section 5 which defines
the SEC's original and exclusive jurisdiction. Section 6 does not enlarge or add to the exclusive and
original jurisdiction of the SEC as particularly enumerated under Section 5 of said Presidential Decree,
as amended.

A well-recognized rule in statutory construction is that repeals by implication are not favored and will
not be so declared unless it be manifest that the legislature so intended.15 When statutes are in pari
material they should be construed together. In construing them the old statutes relating to the same
subject matter should be compared with the new provisions and if possible by reasonable construction,
both should be so construed that effect may be given to every provision of each.16

Construing P.D. 902-A, as amended, in relation to Act 1956, we rule that insofar as petitions for
declaration of insolvency of private corporations are concerned, it is the regular court that has
exclusive and original jurisdiction thereon. The SEC may entertain such petitions only as an incident
of and in continuation of its already acquired jurisdiction over petitions to be declared in the state of
suspension of payments in the two (2) cases provided in Section 5 (d) of P.D. 902-A, as amended.

WHEREFORE, the instant petition for review on certiorari is DENIED. The temporary restraining order
issued on April 14, 1986 is LIFTED. No pronouncement as to costs.

SO ORDERED.
G.R. No. 116033 February 26, 1997

ALFREDO L. AZARCON, petitioner,

vs.
SANDIGANBAYAN, PEOPLE OF THE PHILIPPINES and JOSE C. BATAUSA, respondents.

PANGANIBAN, J.:

Does the Sandiganbayan have jurisdiction over a private individual who is charged with malversation
of public funds as a principal after the said individual had been designated by the Bureau of Internal
Revenue as a custodian of distrained property? Did such accused become a public officer and
therefore subject to the graft court's jurisdiction as a consequence of such designation by the BIR?

These are the main questions in the instant petition for review of Respondent Sandiganbayan's
Decision1 in Criminal Case No. 14260 promulgated on March 8, 1994, convicting petitioner of
malversation of public funds and property, and Resolution2 dated June 20, 1994, denying his motion
for new trial or reconsideration thereof.

The Facts

Petitioner Alfredo Azarcon owned and operated an earth-moving business, hauling "dirt and ore."3 His
services were contracted by the Paper Industries Corporation of the Philippines (PICOP) at its
concession in Mangagoy, Surigao del Sur. Occasionally, he engaged the services of sub-contractors
like Jaime Ancla whose trucks were left at the former's premises.4 From this set of circumstances arose
the present controversy.

. . . It appears that on May 25, 1983, a Warrant of Distraint of Personal Property was
issued by the Main Office of the Bureau of Internal Revenue (BIR) addressed to the
Regional Director (Jose Batausa) or his authorized representative of Revenue Region
10, Butuan City commanding the latter to distraint the goods, chattels or effects and
other personal property of Jaime Ancla, a sub-contractor of accused Azarcon and, a
delinquent taxpayer. The Warrant of Garnishment was issued to accused Alfredo
Azarcon ordering him to transfer, surrender, transmit and/or remit to BIR the property
in his possession owned by taxpayer Ancla. The Warrant of Garnishment was received
by accused Azarcon on June 17, 1985.5

Petitioner Azarcon, in signing the "Receipt for Goods, Articles, and Things Seized Under Authority of
the National Internal Revenue," assumed the undertakings specified in the receipt the contents of
which are reproduced as follows:

(I), the undersigned, hereby acknowledge to have received from Amadeo V. San
Diego, an Internal Revenue Officer, Bureau of Internal Revenue of the Philippines, the
following described goods, articles, and things:

Kind of property — Isuzu dump truck

Motor number — E120-229598
Chassis No. — SPZU50-1772440
Number of CXL — 6
Color — Blue
Owned By — Mr. Jaime Ancla

the same having been this day seized and left in (my) possession pending investigation
by the Commissioner of Internal Revenue or his duly authorized representative. (I)
further promise that (I) will faithfully keep, preserve, and, to the best of (my) ability,
protect said goods, articles, and things seized from defacement, demarcation,
leakage, loss, or destruction in any manner; that (I) will neither alter nor remove, nor
permit others to alter or remove or dispose of the same in any manner without the
express authority of the Commissioner of Internal Revenue; and that (I) will produce
and deliver all of said goods, articles, and things upon the order of any court of the
Philippines, or upon demand of the Commissioner of Internal Revenue or any
authorized officer or agent of the Bureau of Internal Revenue.6

Subsequently, Alfredo Azarcon wrote a letter dated November 21, 1985 to the BIR's Regional Director
for Revenue Region 10 B, Butuan City stating that

. . . while I have made representations to retain possession of the property and signed
a receipt of the same, it appears now that Mr. Jaime Ancla intends to cease his
 operations with us. This is evidenced by the fact that sometime in August, 1985 he
surreptitiously withdrew his equipment from my custody. . . . In this connection, may I
therefore formally inform you that it is my desire to immediately relinquish whatever
responsibilities I have over the above-mentioned property by virtue of the receipt I have
signed. This cancellation shall take effect immediately. . . .7

Incidentally, the petitioner reported the taking of the truck to the security manager of PICOP,
Mr. Delfin Panelo, and requested him to prevent this truck from being taken out of the PICOP
concession. By the time the order to bar the truck's exit was given, however, it was too late.8

Regional Director Batausa responded in a letter dated May 27, 1986, to wit:

An analysis of the documents executed by you reveals that while you are (sic) in
possession of the dump truck owned by JAIME ANCLA, you voluntarily assumed the
liabilities of safekeeping and preserving the unit in behalf of the Bureau of Internal
Revenue. This is clearly indicated in the provisions of the Warrant of Garnishment
which you have signed, obliged and committed to surrender and transfer to this office.
Your failure therefore, to observe said provisions does not relieve you of your
responsibility.9

Thereafter, the Sandiganbayan found that

On 11 June 1986, Mrs. Marilyn T. Calo, Revenue Document Processor of Revenue

Region 10 B, Butuan City, sent a progress report to the Chief of the Collection Branch
of the surreptitious taking of the dump truck and that Ancla was renting out the truck
to a certain contractor by the name of Oscar Cueva at PICOP (Paper Industries
Corporation of the Philippines, the same company which engaged petitioner's earth
moving services), Mangagoy, Surigao del Sur. She also suggested that if the report
were true, a warrant of garnishment be reissued against Mr. Cueva for whatever
amount of rental is due from Ancla until such time as the latter's tax liabilities shall be
deemed satisfied. . . However, instead of doing so, Director Batausa filed a letter-
complaint against the (herein Petitioner) and Ancla on 22 January 1988, or after more
than one year had elapsed from the time of Mrs. Calo's report. 10

Provincial Fiscal Pretextato Montenegro "forwarded the records of the complaint . . . to the Office of
the Tanodbayan" on May 18, 1988. He was deputized Tanodbayan prosecutor and granted authority
to conduct preliminary investigation on August 22, 1988, in a letter by Special Prosecutor Raul
Gonzales approved by Ombudsman (Tanodbayan) Conrado Vasquez. 11

Along with his co-accused Jaime Ancla, Petitioner Azarcon was charged before the Sandiganbayan
with the crime of malversation of public funds or property under Article 217 in relation to Article 222 of
the Revised Penal Code (RPC) in the following Information 12 filed on January 12, 1990, by Special
Prosecution Officer Victor Pascual:

That on or about June 17, 1985, in the Municipality of Bislig, Province of Surigao del
Sur, Philippines, and within the jurisdiction of this Honorable Court, accused Alfredo L.
Azarcon, a private individual but who, in his capacity as depository/administrator of
property seized or deposited by the Bureau of Internal Revenue, having voluntarily
offered himself to act as custodian of one Isuzu Dumptruck (sic) with Motor No. E120-
22958, Chasis No. SPZU 50-1772440, and number CXL-6 and was authorized to be
such under the authority of the Bureau of Internal Revenue, has become a responsible
and accountable officer and said motor vehicle having been seized from Jaime C.
Ancla in satisfaction of his tax liability in the total sum of EIGHTY THOUSAND EIGHT
HUNDRED THIRTY ONE PESOS and 59/100 (P80,831.59) became a public property
and the value thereof as public fund, with grave abuse of confidence and conspiring
and confederating with said Jaime C. Ancla, likewise, a private individual, did then and
there wilfully, (sic) unlawfully and feloniously misappropriate, misapply and convert to
his personal use and benefit the aforementioned motor vehicle or the value thereof in
the aforestated amount, by then and there allowing accused Jaime C. Ancla to remove,
retrieve, withdraw and tow away the said Isuzu Dumptruck (sic) with the authority,
consent and knowledge of the Bureau of Internal Revenue, Butuan City, to the damage
and prejudice of the government in the amount of P80,831.59 in a form of unsatisfied
tax liability.

CONTRARY TO LAW.

The petitioner filed a motion for reinvestigation before the Sandiganbayan on May 14, 1991, alleging
that: (1) the petitioner never appeared in the preliminary investigation; and (2) the petitioner was not a
public officer, hence a doubt exists as to why he was being charged with malversation under Article
217 of the Revised Penal Code. 13 The Sandiganbayan granted the motion for reinvestigation on May
22, 1991. 14 After the reinvestigation, Special Prosecution Officer Roger Berbano, Sr., recommended
the "withdrawal of the information" 15 but was "overruled by the Ombudsman." 16

A motion to dismiss was filed by petitioner on March 25, 1992 on the ground that the Sandiganbayan
did not have jurisdiction over the person of the petitioner since he was not a public officer. 17 On May
18, 1992; the Sandiganbayan denied the motion. 18

When the prosecution finished presenting its evidence, the petitioner then filed a motion for leave to
file demurrer to evidence which was denied on November 16, 1992, "for being without merit." 19 The
petitioner then commenced and finished presenting his evidence on February 15, 1993.

The Respondent Court's Decision

On March 8, 1994, Respondent Sandiganbayan 20 rendered a Decision, 21 the dispositive portion of

which reads:

WHEREFORE, the Court finds accused Alfredo Azarcon y Leva GUILTY beyond
reasonable doubt as principal of Malversation of Public Funds defined and penalized
under Article 217 in relation to Article 222 of the Revised Penal Code and, applying
the Indeterminate Sentence Law, and in view of the mitigating circumstance of
voluntary surrender, the Court hereby sentences the accused to suffer the penalty of
imprisonment ranging from TEN (10) YEARS and ONE (1) DAY of prision mayor in its
maximum period to SEVENTEEN (17) YEARS, FOUR (4) MONTHS and ONE (1) DAY
of Reclusion Temporal. To indemnify the Bureau of Internal Revenue the amount of
P80,831.59; to pay a fine in the same amount without subsidiary imprisonment in case
of insolvency; to suffer special perpetual disqualification; and, to pay the costs.

Considering that accused Jaime Ancla has not yet been brought within the jurisdiction
of this Court up to this date, let this case be archived as against him without prejudice
to its revival in the event of his arrest or voluntary submission to the jurisdiction of this
Court.

SO ORDERED.

Petitioner, through new counsel, 22 filed a motion for new trial or reconsideration on March 23, 1994,
which was denied by the Sandiganbayan in its Resolution 23 dated December 2, 1994.

Hence, this petition.

The Issues

The petitioner submits the following reasons for the reversal of the Sandiganbayan's assailed Decision
and Resolution:

I. The Sandiganbayan does not have jurisdiction over crimes

committed solely by private individuals.

II. In any event, even assuming arguendo that the appointment of a

private individual as a custodian or a depositary of distrained property
is sufficient to convert such individual into a public officer, the petitioner
cannot still be considered a public officer because:

[A]

There is no provision in the National Internal Revenue Code which

authorizes the Bureau of Internal Revenue to constitute private
individuals as depositaries of distrained properties.

[B]

His appointment as a depositary was not by virtue of a direct provision

of law, or by election or by appointment by a competent authority.

III. No proof was presented during trial to prove that the distrained
vehicle was actually owned by the accused Jaime Ancla;
consequently, the government's right to the subject property has not
been established.
 IV. The procedure provided for in the National Internal Revenue Code
concerning the disposition of distrained property was not followed by
the B.I.R., hence the distraint of personal property belonging to Jaime
C. Ancla and found allegedly to be in the possession of the petitioner
is therefore invalid.

V. The B.I.R. has only itself to blame for not promptly selling the
distrained property of accused Jaime C. Ancla in order to realize the
amount of back taxes owed by Jaime C. Ancla to the Bureau. 24

In fine, the fundamental issue is whether the Sandiganbayan had jurisdiction over the subject matter
of the controversy. Corollary to this is the question of whether petitioner can be considered a public
officer by reason of his being designated by the Bureau of Internal Revenue as a depositary of
distrained property.

The Court's Ruling

The petition is meritorious.

Jurisdiction of the Sandiganbayan

It is hornbook doctrine that in order "(to) ascertain whether a court has jurisdiction or not, the provisions
of the law should be inquired into." 25 Furthermore, "the jurisdiction of the court must appear clearly
from the statute law or it will not be held to exist. It cannot be presumed or implied." 26 And for this
purpose in criminal cases, "the jurisdiction of a court is determined by the law at the time of
commencement of the action." 27

In this case, the action was instituted with the filing of this information on January 12, 1990; hence, the
applicable statutory provisions are those of P.D. No. 1606, as amended by P.D. No. 1861 on March
23, 1983, but prior to their amendment by R.A. No. 7975 on May 16, 1995. At that time, Section 4 of
P.D. No. 1606 provided that:

Sec. 4. Jurisdiction. — The Sandiganbayan shall exercise:

(a) Exclusive original jurisdiction in all cases involving:

(1) Violations of Republic Act No. 3019, as amended, otherwise known

as the Anti-Graft and Corrupt Practices Act, Republic Act No. 1379,
and Chapter II, Section 2, Title VII of the Revised Penal Code;

(2) Other offenses or felonies committed by public officers and

employees in relation to their office, including those employed in
government-owned or controlled corporations, whether simple or
complexed with other crimes, where the penalty prescribed by law is
higher than prision correccional or imprisonment for six (6) years, or a
fine of P6,000.00: PROVIDED, HOWEVER, that offenses or felonies
mentioned in this paragraph where the penalty prescribed by law does
not exceed prision correccional or imprisonment for six (6) years or a
fine of P6,000.00 shall be tried by the proper Regional Trial Court,
Metropolitan Trial Court, Municipal Trial Court and Municipal Circuit
Trial Court.

xxx xxx xxx

In case private individuals are charged as co-principals, accomplices or accessories

with the public officers or employees, including those employed in government-owned
or controlled corporations, they shall be tried jointly with said public officers and
employees.

xxx xxx xxx

The foregoing provisions unequivocally specify the only instances when the Sandiganbayan will have
jurisdiction over a private individual, i.e. when the complaint charges the private individual either as a
co-principal, accomplice or accessory of a public officer or employee who has been charged with a
crime within its jurisdiction.

Azarcon: A Public Officer or A Private Individual?

The Information does not charge petitioner Azarcon of being a co-principal, accomplice or accessory
to a public officer committing an offense under the Sandiganbayan's jurisdiction. Thus, unless
petitioner be proven a public officer, the Sandiganbayan will have no jurisdiction over the crime
charged. Article 203 of the RPC determines who are public officers:

Who are public officers. — For the purpose of applying the provisions of this and the
preceding titles of the book, any person who, by direct provision of the law, popular
election, popular election or appointment by competent authority, shall take part in the
performance of public functions in the Government of the Philippine Islands, or shall
perform in said Government or in any of its branches public duties as an employee,
agent, or subordinate official, of any rank or classes, shall be deemed to be a public
officer.

Thus,

(to) be a public officer, one must be —

(1) Taking part in the performance of public functions in the government, or

Performing in said Government or any of its branches public duties as

an employee, agent, or subordinate official, of any rank or class; and

(2) That his authority to take part in the performance of public functions or to perform
public duties must be —

a. by direct provision of the law, or

b. by popular election, or

c. by appointment by competent authority. 28

Granting arguendo that the petitioner, in signing the receipt for the truck constructively distrained by
the BIR, commenced to take part in an activity constituting public functions, he obviously may not be
deemed authorized by popular election. The next logical query is whether petitioner's designation by
the BIR as a custodian of distrained property qualifies as appointment by direct provision of law, or by
competent authority. 29 We answer in the negative.

The Solicitor General contends that the BIR, in effecting constructive distraint over the truck allegedly
owned by Jaime Ancla, and in requiring Petitioner Alfredo Azarcon who was in possession thereof to
sign a pro forma receipt for it, effectively "designated" petitioner a depositary and, hence,
citing U.S. vs. Rastrollo, 30 a public officer. 31 This is based on the theory that

(t)he power to designate a private person who has actual possession of a distrained
property as a depository of distrained property is necessarily implied in the BIR's power
to place the property of a delinquent tax payer (sic) in distraint as provided for under
Sections 206, 207 and 208 (formerly Sections 303, 304 and 305) of the National
Internal Revenue Code, (NIRC) . . . . 32

We disagree. The case of U.S. vs. Rastrollo is not applicable to the case before us simply because
the facts therein are not identical, similar or analogous to those obtaining here. While the cited case
involved a judicial deposit of the proceeds of the sale of attached property in the hands of the debtor,
the case at bench dealt with the BIR's administrative act of effecting constructive distraint over alleged
property of taxpayer Ancla in relation to his back taxes, property which was received by Petitioner
Azarcon. In the cited case, it was clearly within the scope of that court's jurisdiction and judicial power
to constitute the judicial deposit and give "the depositary a character equivalent to that of a public
official." 33 However, in the instant case, while the BIR had authority to require Petitioner Azarcon to
sign a receipt for the distrained truck, the NIRC did not grant it power to appoint Azarcon a public
officer.

It is axiomatic in our constitutional framework, which mandates a limited government, that its branches
and administrative agencies exercise only that power delegated to them as "defined either in the
Constitution or in legislation or in both." 34 Thus, although the "appointing power is the exclusive
prerogative of the President, . . ." 35the quantum of powers possessed by an administrative agency
forming part of the executive branch will still be limited to that "conferred expressly or by necessary or
fair implication" in its enabling act. Hence, "(a)n administrative officer, it has been held, has only such
powers as are expressly granted to him and those necessarily implied in the exercise
thereof." 36 Corollarily, implied powers "are those which are necessarily included in, and are therefore
of lesser degree than the power granted. It cannot extend to other matters not embraced therein, nor
are not incidental thereto." 37 For to so extend the statutory grant of power "would be an encroachment
on powers expressly lodged in Congress by our Constitution." 38 It is true that Sec. 206 of the NIRC,
as pointed out by the prosecution, authorizes the BIR to effect a constructive distraint by requiring "any
person" to preserve a distrained property, thus:

xxx xxx xxx

The constructive distraint of personal property shall be effected by requiring the

taxpayer or any person having possession or control of such property to sign a receipt
covering the property distrained and obligate himself to preserve the same intact and
unaltered and not to dispose of the same in any manner whatever without the express
authority of the Commissioner.

xxx xxx xxx

However, we find no provision in the NIRC constituting such person a public officer by reason of such
requirement. The BIR's power authorizing a private individual to act as a depositary cannot be
stretched to include the power to appoint him as a public officer. The prosecution argues that "Article
222 of the Revised Penal Code . . . defines the individuals covered by the term 'officers' under Article
217 39 . . ." of the same Code. 40 And accordingly, since Azarcon became "a depository of the truck
seized by the BIR" he also became a public officer who can be prosecuted under Article 217 . . . ." 41

The Court is not persuaded. Article 222 of the RPC reads:

Officers included in the preceding provisions. — The provisions of this chapter shall
apply to private individuals who, in any capacity whatever, have charge of any insular,
provincial or municipal funds, revenues, or property and to any administrator or
depository of funds or property attached, seized or deposited by public authority, even
if such property belongs to a private individual.

"Legislative intent is determined principally from the language of a statute. Where the language of a
statute is clear and unambiguous, the law is applied according to its express terms, and interpretation
would be resorted to only where a literal interpretation would be either impossible or absurd or would
lead to an injustice." 42 This is particularly observed in the interpretation of penal statutes which "must
be construed with such strictness as to carefully safeguard the rights of the defendant . . . ." 43 The
language of the foregoing provision is clear. A private individual who has in his charge any of the public
funds or property enumerated therein and commits any of the acts defined in any of the provisions of
Chapter Four, Title Seven of the RPC, should likewise be penalized with the same penalty meted to
erring public officers. Nowhere in this provision is it expressed or implied that a private individual falling
under said Article 222 is to be deemed a public officer.

After a thorough review of the case at bench, the Court thus finds Petitioner Alfredo Azarcon and his
co-accused Jaime Ancla to be both private individuals erroneously charged before and convicted by
Respondent Sandiganbayan which had no jurisdiction over them. The Sandiganbayan's taking
cognizance of this case is of no moment since "(j)urisdiction cannot be conferred by . . . erroneous
belief of the court that it had jurisdiction." 44 As aptly and correctly stated by the petitioner in his
memorandum:

From the foregoing discussion, it is evident that the petitioner did not cease to be a
private individual when he agreed to act as depositary of the garnished dump truck.
Therefore, when the information charged him and Jaime Ancla before the
Sandiganbayan for malversation of public funds or property, the prosecution was in
fact charging two private individuals without any public officer being similarly charged
as a co-conspirator. Consequently, the Sandiganbayan had no jurisdiction over the
controversy and therefore all the proceedings taken below as well as the Decision
rendered by Respondent Sandiganbayan, are null and void for lack of jurisdiction. 45

WHEREFORE, the questioned Resolution and Decision of the Sandiganbayan are hereby SET ASIDE
and declared NULL and VOID for lack of jurisdiction. No costs.

SO ORDERED.
G.R. No. L-25133 September 28, 1968

S/SGT. JOSE SANTIAGO, petitioner-appellant,

vs.
LT. COL. CELSO ALIKPALA, ET AL., respondents-appellees.

Floro A. Sarmiento and Noe Maines for petitioner-appellant.

Cuadrato Palma and the Office of the Solicitor General for respondents-appellees.

FERNANDO, J.:

The validity of a court-martial proceeding was challenged in the lower court on due process grounds
to show lack of jurisdiction. Petitioner, a sergeant in the Philippine Army and the accused in a court-
martial proceeding, through a writ of certiorari and prohibition, filed on April 17, 1963, with the lower
court, sought to restrain respondents, the officers, constituting the court-martial, that was then in the
process of trying petitioner for alleged violation of two provisions of the Articles of War, from
continuing with the proceedings on the ground of its being without jurisdiction. There was likewise a
plea for a restraining order, during the pendency of his petition, but it was unsuccessful.

No response, either way, was deemed necessary by the then Presiding Judge of the lower court,
now Justice Nicasio Yatco of the Court of Appeals, as petitioner had, in the meanwhile, been
convicted by the court-martial. The lower court verdict, rendered on September 16, 1963, was one of
dismissal, as in its opinion, "this case had already become moot and academic ... ."

An appeal was taken to us, the same due process objections being raised. We think that the
question before us is of such import and significance that an easy avoidance through the technicality
of the "moot and academic" approach hardly recommends itself. For reasons to be more fully set
forth, we find that such court-martial was not lawfully convened, and, consequently, devoid of
jurisdiction. Accordingly, we reverse the lower court.

There was a stipulation of facts submitted to the lower court on July 10, 1963, to the following effect:
"That the arraignment of the petitioner on December 17, 1962 was for the purpose of avoiding
prescription pursuant to Article of War 38 of one of the offenses with which the accused is charged
since, as charged, same was allegedly committed on or about December 18, 1960; That prior to the
said arraignment, no written summons or subpoena was issued addressed to the petitioner or his
counsel, informing them of said arraignment; That instead of said written summons or subpoena Col.
Eladio Samson, Constabulary Staff Judge Advocate called up First Sergeant Manuel Soriano at the
Headquarters II Philippine Constabulary Zone, Camp Vicente Lim, Canlubang, Laguna on December
16, 1962 by telephone with instructions to send the petitioner to HPC, Camp Crame, Quezon City,
under escort, for arraignment and only for arraignment; That upon arrival in HPC, the petitioner was
directed to proceed to the PC Officer's Clubhouse, where a General Court-Martial composed of the
respondents, created to try the case of 'People vs. Capt. Egmidio Jose, for violation of Articles of
War 96 and 97', pursuant to paragraph 10, Special Order No. 14, Headquarters Philippine
Constabulary, dated 18 July 1962, ..., was to resume, as scheduled, the trial of 'People vs. Pfc.
Numeriano Ohagan, for violation of Articles of War 64, 85, and 97'; That it was only at the time
(December 17, 1962) that petitioner learned that he will be arraigned for alleged violation of Articles
of War 85 and 97, after being informed by one of the respondents, Capt. Cuadrato Palma as Trial
Judge Advocate why he was there; That prior to that arraignment on December 17, 1962 there was
no special order published by the Headquarters Philippine Constabulary creating or directing the
General Court-Martial composed of the respondents to arraign and try the case against the
petitioner, there however was already an existing court trying another case; That the respondents
relied on the first indorsement of the Acting Adjutant General, HPC, Camp Crame, Quezon City,
dated December 14, 1962 and addressed to the Trial Judge Advocate of the General Court-martial
... directing the said Trial Judge Advocate to refer the case against petitioner to the above-mentioned
court, ...; That the above paragraph 10, Special Order No. 14 dated 18 July 1962, does not contain
the phrase 'and such other cases which may be referred to it,' but however said orders were
amended only on 8 January 1963, to include such phrase, ... ."1

It was further stipulated that petitioner's counsel did object to his arraignment asserting that a
general court-martial then convened was without jurisdiction, as there was no special order
designating respondents to compose a general court-martial for the purpose of trying petitioner, as
petitioner was not furnished a copy of the charge sheet prior to his arraignment as required in the
Manual for Court-Martial, except on the very day thereof, and as there was no written summons or
subpoena served on either the petitioner, as accused, or the counsel. Respondents, acting as the
general court-martial, overruled the above objections, and the Trial Judge Advocate was then
ordered to proceed to read the charges and specifications against petitioner over the vigorous
objections of counsel. It was shown, likewise, in the stipulation of facts, that the case, having been
postponed to February 21, 1963, petitioner's counsel had in the meanwhile complained to the Chief
of Constabulary against the proceedings on the ground of its nullity, and sought to have respondents
restrained from continuing with the trial of petitioner due to such lack of jurisdiction but the Chief of
Constabulary ruled that he could not act on such complaint until the records of the trial were
forwarded to him for review. With such a ruling, and with the denial of two other motions by petitioner
upon the court-martial being convened anew on February 21, 1963, one to invalidate his
arraignment on December 17, 1962, and the other to quash the complaint based on the denial of
due process and lack of jurisdiction, the present petition for certiorari and prohibition was filed with
the lower court. 2

As above noted, the lower court dismissed the petition due to its belief that, petitioner having been
convicted in the meanwhile, there being no restraining order, the matter had become moot and
academic. As was set forth earlier, we differ, the alleged lack of jurisdiction being too serious a
matter to be thus summarily ignored.

The firm insistence on the part of petitioner that the general court-martial lacks jurisdiction on due
process grounds, cannot escape notice. The basic objection was the absence of a special order
"designating respondents to compose a general court-martial to convene and try the case of
petitioner; ... ." It was expressly stipulated that the respondents were convened to try the case of a
certain Capt. Egmidio Jose and not that filed against petitioner. As a matter of fact, the opening
paragraph of the stipulation of facts made clear that he was arraigned on December 17, 1962 by
respondents as a general court-martial appointed precisely to try the above Capt. Jose solely "for the
purpose of avoiding prescription pursuant to Article of War 38 of one of the offenses with which the
accused is charged ... ."

Is such a departure from what the law and regulations 3 prescribe offensive to the due process
clause? If it were, then petitioner should be sustained in his plea for a writ of certiorari and
prohibition, as clearly the denial of the constitutional right would oust respondents of jurisdiction,
even on the assumption that they were vested with it originally. Our decisions to that effect are
impressive for their unanimity.

In Harden v. The Director of Prisons, 4 Justice Tuason, speaking for the Court, explicitly announced
that "deprivation of any fundamental or constitutional rights" justify a proceeding for habeas
corpus on the ground of lack of jurisdiction. Abriol v. Homeres 5 is even more categorical. In that
case, the action of a lower court, denying the accused the opportunity to present proof for his
defense, his motion for dismissal failing, was held by this Court as a deprivation of his right to due
process. As was made clear by the opinion of Justice Ozaeta: "No court of justice under our system
of government has the power to deprive him of that right. If the accused does not waive his right to
be heard but on the contrary — as in the instant case — invokes the right, and the court denies it to
him, that court no longer has jurisdiction to proceed; it has no power to sentence the accused
without hearing him in his defense; and the sentence thus pronounced is void and may be
collaterally attacked in a habeas corpus proceeding." 6

A recent decision rendered barely a month ago, in Chavez v. Court of Appeals, 7 is even more in
point. Here, again, habeas corpus was relied upon by petitioner whose constitutional rights were not
respected, but, in addition, the special civil actions of certiorari and mandamus were likewise availed
of, in view of such consequent lack of jurisdiction. The stress though in the opinion of Justice
Sanchez was on habeas corpus. Thus: "The course which petitioner takes is correct. Habeas
corpus is a high prerogative writ. It is traditionally considered as an exceptional remedy to release a
person whose liberty is illegally restrained such as when the accused's constitutional rights are
disregarded. Such defect results in the absence or loss of jurisdiction and therefore invalidates the
trial and the consequent conviction of the accused whose fundamental right was violated. That void
judgment of conviction may be challenged by collateral attack, which precisely is the function
of habeas corpus. This writ may issue even if another remedy which is less effective may be availed
of by the defendant."

The due process concept rightfully referred to as "a vital and living force in our jurisprudence" calls
for respect and deference, otherwise the governmental action taken suffers from a fatal infirmity. As
was so aptly expressed by the then Justice, now Chief Justice, Concepcion: "... acts of Congress, as
well as those of the Executive, can deny due process only under pain of nullity, and judicial
proceedings suffering from the same flaw are subject to the same sanction, any statutory provision
to the contrary notwithstanding." 8

The crucial question, then, is whether such failure to comply with the dictates of the applicable law
insofar as convening a valid court martial is concerned, amounts to a denial of due process. We hold
that it does. There is such a denial not only under the broad standard which delimits the scope and
reach of the due process requirement, but also under one of the specific elements of procedural due
process.
It is to be admitted that there is no controlling and precise definition of due process which, at the
most furnishes a standard to which governmental action should conform in order to impress with the
stamp of validity any deprivation of life, liberty or property. A recent decision of this Court, in Ermita-
Malate Hotel v. Mayor of Manila 9 treated the matter thus: "It is responsiveness to the supremacy of
reason, obedience to the dictates of justice. Negatively put, arbitrariness is ruled out and unfairness
avoided. To satisfy the due process requirement, official action, to paraphrase Cardozo, must not
outrun the bounds of reason and result in sheer oppression. Due process is thus hostile to any
official action marred by lack of reasonableness. Correctly has it been identified as freedom from
arbitrariness. It is the embodiment of the sporting idea of fair play. It exacts fealty 'to those strivings
for justice' and judges the act of officialdom of whatever branch 'in the light of reason drawn from
considerations of fairness that reflect [democratic] traditions of legal and political thought.'"

Nor is such a reliance on the broad reach of due process the sole ground on which the lack of
jurisdiction of the court-martial convened in this case could be predicated. Recently, stress was laid
anew by us on the first requirement of procedural due process, namely, the existence of the court or
tribunal clothed with judicial, or quasi-judicial, power to hear and determine the matter before
it. 10 This is a requirement that goes back to Banco Español-Filipino v. Palanca, a decision rendered
half a century ago. 11

There is the express admission in the statement of facts that respondents, as a court-martial, were
not convened to try petitioner but someone else, the action taken against petitioner being induced
solely by a desire to avoid the effects of prescription; it would follow then that the absence of a
competent court or tribunal is most marked and undeniable. Such a denial of due process is
therefore fatal to its assumed authority to try petitioner. The writ of certiorari and prohibition should
have been granted and the lower court, to repeat, ought not to have dismissed his petition
summarily.

The significance of such insistence on a faithful compliance with the regular procedure of convening
court-martials in accordance with law cannot be over-emphasized. As was pointed out by Justice
Tuason in Ruffy v. The Chief of Staff, Philippine Army: 12 "Courts-martial are agencies of executive
character, and one of the authorities for the ordering of courts-martial has been held to be attached
to the constitutional functions of the President as Commander-in-Chief, independently of legislation.
(Winthrop's Military Law and Precedents, 2d Edition, p. 49.) Unlike courts of law, they are not a
portion of the judiciary." Further on, his opinion continues: "Not belonging to the judicial branch of the
government, it follows that courts-martial must pertain to the executive department; and they are in
fact simply instrumentalities of the executive power, provided by Congress for the President as
Commander-in-Chief, to aid him in properly commanding the army and navy and enforcing discipline
therein, and utilized under his orders or those of his authorized military representatives." 13

It is even more indispensable, therefore, that such quasi-judicial agencies, clothed with the solemn
responsibility of depriving members of the Armed Forces of their liberties, even of their lives, as a
matter of fact, should be held all the more strictly bound to manifest fidelity to the fundamental
concept of fairness and the avoidance of arbitrariness for which due process stands as a living vital
principle. If it were otherwise, then, abuses, even if not intended, might creep in, and the safeguards
so carefully thrown about the freedom of an individual, ignored or disregarded. Against such an
eventuality, the vigilance of the judiciary furnishes a shield. That is one of its grave responsibilities.
Such a trust must be lived up to; such a task cannot be left undone.

WHEREFORE, the order of respondent Court of September 6, 1963, dismissing the petition
for certiorari and prohibition is reversed, and the writ of certiorari and prohibition granted, annulling
the proceedings as well as the decision rendered by respondents as a court-martial and perpetually
restraining them from taking any further action on the matter. Without pronouncement as to costs.

Concepcion, C.J., Reyes, J.B.L., Makalintal, Sanchez, Angeles and Capistrano, JJ., concur.
Dizon and Zaldivar, JJ., are on leave.

G.R. No. L-19180 October 31, 1963

NATIONAL DEVELOPMENT COMPANY, ET AL., petitioners-appellees,

vs.
THE COLLECTOR OF CUSTOMS OF MANILA, respondent-appellant.

Ross, Selph and Carrascoso for petitioners-appellees.

Office of the Solicitor General for respondent-appellant.

BAUTISTA ANGELO, J.:

The National Development Company which is engaged in the shipping business under the name of
"Philippine National Lines" is the owner of steamship "S.S. Doña Nati" whose local agent in Manila is
A. V. Rocha. On August 4, 1960, the Collector of Customs sent a notice to C.F. Sharp & Company as
alleged operator of the vessel informing it that said vessel was apprehended and found to have
committed a violation of the customs laws and regulations in that it carried an unmanifested cargo
consisting of one RCA Victor TV set 21" in violation of Section 2521 of the Tariff and Customs Code.
Inserted in said notice is a note of the following tenor: "The above article was being carried away by
Dr. Basilio de Leon y Mendez, official doctor of M/S "Doña Nati" who readily admitted ownership of
the same." C.F. Sharp & Company was given 48 hours to show cause why no administrative fine
should be imposed upon it for said violation.

C.F. Sharp & Company, not being the agent or operator of the vessel, referred the notice to A. V.
Rocha, the agent and operator thereof, who on August 8, 1960, answered the notice stating, among
other things, that the television set referred to therein was not a cargo of the vessel and, therefore,
was not required by law to be manifested. Rocha stated further: "If this explanation is not sufficient,
we request that this case be set for investigation and hearing in order to enable the vessel to be
informed of the evidence against it to sustain the charge and to present evidence in its defense."

The Collector of Customs replied to Rocha on August 9, 1960 stating that the television set in question
was a cargo on board the vessel and that he does not find his explanation satisfactory enough to
exempt the vessel from liability for violating Section 2521 of the Tariff and Customs Code. In said
letter, the collector imposed a fine of P5,000.00 on the vessel and ordered payment thereof within 48
hours with a threat that he will deny clearance to said vessel and will issue a warrant of seizure and
detention against it if the fine is not paid.

And considering that the Collector of Customs has exceeded his jurisdiction or committed a grave
abuse of discretion in imposing the fine of P5,000.00 on the vessel without the benefit of an
investigation or hearing as requested by A. V. Rocha, the National Development Company, as owner
of the vessel, as well as A. V. Rocha as agent and operator thereof, filed the instant special civil action
of certiorari with preliminary injunction before the Court of First Instance of Manila against the official
abovementioned. The court, finding the petition for injunction sufficient in form and substance,
issued ex parte the writ prayed for upon the filing of a bond in the amount of P5,00.00.

Respondent set up the following special defenses: (1) the court a quo has no jurisdiction to act on
matters arising from violations of the Customs Law, but the Court of Tax Appeals; (2) assuming that it
has, petitioners have not exhausted all available administrative remedies, one of which is to appeal to
the Commissioner of Customs; (3) the requirements of administrative due process have already been
complied with in that the written notice given by respondent to petitioner Rocha clearly specified the
nature of the violation complained of and that the defense set up by Rocha constitute merely a legal
issue which does not require further investigation; and (4) the investigation conducted by the customs
authorities showed that the television set in question was unloaded by the ship's doctor without going
thru the custom house as required by law and was not declared either in the ship's manifest or in the
crew declaration list.

On the basis of the stipulation of facts submitted by the parties, the court a quo rendered decision
setting aside the ruling of respondent which imposes a fine of P5,000.00 on the vessel Doña Nati
payable within 48 hours from receipt thereof. The court stated that said ruling appears to be unjust
and arbitrary because the party affected has not been accorded the investigation it requested from the
Collector of Customs.

Respondent interposed the present appeal.

When the customs authorities found that the vessel Doña Nati carried on board an unmanifested cargo
consisting of one RCA Victor TV set 21" in violation of Section 2521 of the Tariff and Customs Code,
respondent sent a written notice to C. F. Sharp & Company, believing it to be the operator or agent of
the vessel, and when the latter referred the notice to A. V. Rocha, the real operator of the vessel, for
such step as he may deem necessary to be taken the latter answered the letter stating that the
television set was not cargo and so was not required by law to be manifested, and he added to his
answer the following: "If this explanation is not sufficient, we request that this case be set for
investigation and hearing in order to enable the vessel to be informed of the evidence against it to
sustain the charge and to present evidence in its defense. "Respondent, however, replied to this letter
saying that said television was a cargo within the meaning of the law and so he does not find his
explanation satisfactory and then and there imposed on the vessel a fine of P5,00.00. Respondent
even went further. He ordered that said fine be paid within 48 hours from receipt with a threat that the
vessel would be denied clearance and a warrant of seizure would be issued if the fine will not be paid.
Considering this to be a grave abuse of discretion, petitioners commenced the present action for
certiorari before the court a quo.

We find this action proper for it really appears that petitioner Rocha was not given an opportunity to
prove that the television set complained of is not a cargo that needs to be manifested as required by
Section 2521 of the Tariff and Customs Code. Under said section, in order that an imported article or
merchandise may be considered a cargo that should be manifested it is first necessary that it be so
established for the reason that there are other effects that a vessel may carry that are excluded from
the requirement of the law, among which are the personal effects of the members of the crew. The
fact that the set in question was claimed by the customs authorities not to be within the exception does
not automatically make the vessel liable. It is still necessary that the vessel, its owner or operator, be
given a chance to show otherwise. This is precisely what petitioner Rocha has requested in his letter.
Not only was he denied this chance, but respondent collector immediately imposed upon the vessel
the huge fine of P5,000.00. This is a denial of the elementary rule of due process.

True it is that the proceedings before the Collector of Customs insofar as the determination of any act
or irregularity that may involve a violation of any customs law or regulation is concerned, or of any act
arising under the Tariff and Customs Code, are not judicial in character, but merely administrative,
where the rules of procedure are generally disregarded, but even in the administrative proceedings
due process should be observed because that is a right enshrined in our Constitution. The right to due
process is not merely statutory. It is a constitutional right. Indeed, our Constitution provides that "No
person shall be deprived of life, liberty, or property without due process of law", which clause epitomize
the principle of justice which hears before it condemns, which proceeds upon inquiry and renders
judgment only after trial. That this principle applies with equal force to administrative proceedings was
well elaborated upon by this Court in the Ang Tibay case as follows:

... The fact, however, that the Court of Industrial Relations may be said to be free from the
rigidity of certain procedural requirements does not mean that it can, in justiciable case coming
before it, entirely ignore or disregard the fundamental and essential requirements of due
process in trials and investigations of an administrative character.

... There are cardinal primary rights which must be respected even in proceedings of this
character. The first of these rights is the right to a hearing, which includes the right of the party
interested or affected to present his own case and submit evidence in support thereof. Not
only must the party be given an opportunity to present his case and to adduce evidence tending
to establish the rights which he asserts but the tribunal must consider the evidence presented.
While the duty to deliberate does not impose the obligation to decide right, it does imply a
necessity which cannot be disregarded, namely, that of having something to support its
decision. No only must there be some evidence to support a finding or conclusion, but the
evidence must be substantial. The decision must be rendered on the evidence presented at
the hearing, or at least contained in the record and disclosed to the parties affected. The Court
of Industrial Relations or any of its judges, therefore, 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 in arriving at a decision. The Court of Industrial Relations should, in all
controversial questions, render its decision in such a manner that the parties to the proceeding
can know the various issues involved, and the reason for the decision rendered. The
performance of this duty is inseparable from the authority conferred upon it. (Ang Tibay, et al.
v. The Court of Industrial Relations, et al., 40 O.G., No. 11, Supp. p. 29).

There is, therefore, no point in the contention that the court a quo has no jurisdiction over the present
case because what is here involved is not whether the imposition of the fine by the Collector of
Customs on the operator of the ship is correct or not but whether he acted properly in imposing said
fine without first giving the operator an opportunity to be heard. Here we said that he acted
improvidently and so the action taken against him is in accordance with Rule 67 of our Rules of Court.

Another point raised is that petitioners have brought this action prematurely for they have not yet
exhausted all the administrative remedies available to them, one of which is to appeal the ruling to the
Commissioner of Customs. This may be true, but such step we do not consider a plain, speedy or
adequate remedy in the ordinary course of law as would prevent petitioners from taking the present
action, for it is undisputed that respondent collector has acted in utter disregard of the principle of due
process.

WHEREFORE, the decision appealed from is affirmed. No costs