Republic of the Philippines

SUPREME COURT

Manila

EN BANC

G.R. No. L-23004 June 30, 1965

MAKATI STOCK EXCHANGE, INC., petitioner,

vs.

SECURITIES AND EXCHANGE COMMISSION and MANILA STOCK EXCHANGE, respondents.

Hermenegildo B. Reyes for petitioner.

Office of the Solicitor General for respondent Securities and Exchange Commission.

Norberto J. Quisumbing and Emma Quisumbing-Fernando for respondent Manila Stock Exchange.

BENGZON, C.J.:

This is a review of the resolution of the Securities and Exchange Commission which would deny the
Makati Stock Exchange, Inc., permission to operate a stock exchange unless it agreed not to list for
trading on its board, securities already listed in the Manila Stock Exchange.

Objecting to the requirement, Makati Stock Exchange, Inc. contends that the Commission has no power
to impose it and that, anyway, it is illegal, discriminatory and unjust.
Under the law, no stock exchange may do business in the Philippines unless it is previously registered
with the Commission by filing a statement containing the information described in Sec. 17 of the
Securities Act (Commonwealth Act 83, as amended).

It is assumed that the Commission may permit registration if the section is complied with; if not, it may
refuse. And there is now no question that the section has been complied with, or would be complied
with, except that the Makati Stock Exchange, upon challenging this particular requirement of the
Commission (rule against double listing) may be deemed to have shown inability or refusal to abide by
its rules, and thereby to have given ground for denying registration. [Sec. 17 (a) (1) and (d)].

Such rule provides: "... nor shall a security already listed in any securities exchange be listed anew in any
other securities exchange ... ."

The objection of Makati Stock Exchange, Inc., to this rule is understandable. There is actually only one
securities exchange — The Manila Stock Exchange — that has been operating alone for the past 25
years; and all — or presumably all — available or worthwhile securities for trading in the market are
now listed there. In effect, the Commission permits the Makati Stock Exchange, Inc., to deal only with
other securities. Which is tantamount to permitting a store to open provided it sells only those goods
not sold in other stores. And if there's only one existing store, 1 the result is a monopoly.

It is not farfetched to assert — as petitioner does 2 that for all practical purposes, the Commission's
order or resolution would make it impossible for the Makati Stock Exchange to operate. So, its
"permission" amounted to a "prohibition."

Apparently, the Commission acted "in the public interest." 3 Hence, it is pertinent to inquire whether
the Commission may "in the public interest" prohibit (or make impossible) the establishment of another
stock exchange (besides the Manila Stock Exchange), on the ground that the operation of two or more
exchanges adversely affects the public interest.

At first glance, the answer should be in the negative, because the law itself contemplated, and,
therefore, tacitly permitted or tolerated at least, the operation of two or more exchanges.
Wherever two or more exchanges exist, the Commission, by order, shall require and enforce uniformity
of trading regulations in and/or between said exchanges. [Emphasis Ours] (Sec. 28b-13, Securities Act.)

In fact, as admitted by respondents, there were five stock exchanges in Manila, before the Pacific War
(p. 10, brief), when the Securities Act was approved or amended. (Respondent Commission even admits
that dual listing was practiced then.) So if the existence of more than one exchange were contrary to
public interest, it is strange that the Congress having from time to time enacted legislation amending the
Securities Act, 4 has not barred multiplicity of exchanges.

Forgetting for the moment the monopolistic aspect of the Commission's resolution, let us examine the
authority of the Commission to promulgate and implement the rule in question.

It is fundamental that an administrative officer has only such powers as are expressly granted to him by
the statute, and those necessarily implied in the exercise thereof.

In its brief and its resolution now subject to review, the Commission cites no provision expressly
supporting its rule. Nevertheless, it suggests that the power is "necessary for the execution of the
functions vested in it"; but it makes no explanation, perhaps relying on the reasons advanced in support
of its position that trading of the same securities in two or more stock exchanges, fails to give protection
to the investors, besides contravening public interest. (Of this, we shall treat later) .

On the legality of its rule, the Commission's argument is that: (a) it was approved by the Department
Head — before the War; and (b) it is not in conflict with the provisions of the Securities Act. In our
opinion, the approval of the Department, 5 by itself, adds no weight in a judicial litigation; and the test is
not whether the Act forbids the Commission from imposing a prohibition, but whether it empowers the
Commission to prohibit. No specific portion of the statute has been cited to uphold this power. It is not
found in sec. 28 (of the Securities Act), which is entitled "Powers (of the Commission) with Respect to
Exchanges and Securities." 6

According to many court precedents, the general power to "regulate" which the Commission has (Sec.
33) does not imply authority to prohibit." 7
The Manila Stock Exchange, obviously the beneficiary of the disputed rule, contends that the power may
be inferred from the express power of the Commission to suspend trading in a security, under said sec.
28 which reads partly:

And if in its opinion, the public interest so requires, summarily to suspend trading in any registered
security on any securities exchange ... . (Sec. 28[3], Securities Act.)

However, the Commission has not acted — nor claimed to have acted — in pursuance of such authority,
for the simple reason that suspension under it may only be for ten days. Indeed, this section, if
applicable, precisely argues against the position of the Commission because the "suspension," if it is,
and as applied to Makati Stock Exchange, continues for an indefinite period, if not forever; whereas this
Section 28 authorizes suspension for ten days only. Besides, the suspension of trading in the security
should not be on one exchange only, but on all exchanges; bearing in mind that suspension should be
ordered "for the protection of investors" (first par., sec. 28) in all exchanges, naturally, and if "the public
interest so requires" [sec. 28(3)].

This brings up the Commission's principal conclusions underlying its determination viz.: (a) that the
establishment of another exchange in the environs of Manila would be inimical to the public interest;
and (b) that double or multiple listing of securities should be prohibited for the "protection of the
investors."

(a) Public Interest — Having already adverted to this aspect of the matter, and the emerging monopoly
of the Manila Stock Exchange, we may, at this juncture, emphasize that by restricting free competition in
the marketing of stocks, and depriving the public of the advantages thereof the Commission all but
permits what the law punishes as monopolies as "crimes against public interest." 8

"A stock exchange is essentially monopolistic," the Commission states in its resolution (p. 14-a,
Appendix, Brief for Petitioner). This reveals the basic foundation of the Commission's process of
reasoning. And yet, a few pages afterwards, it recalls the benefits to be derived "from the existence of
two or more exchanges," and the desirability of "a healthy and fair competition in the securities
market," even as it expresses the belief that "a fair field of competition among stock exchanges should
be encouraged only to resolve, paradoxically enough, that Manila Stock Exchange shall, in effect,
continue to be the only stock exchange in Manila or in the Philippines.
"Double listing of a security," explains the Commission, "divides the sellers and the buyers, thus
destroying the essence of a stock exchange as a two-way auction market for the securities, where all the
buyers and sellers in one geographical area converge in one defined place, and the bidders compete
with each other to purchase the security at the lowest possible price and those seeking to sell it
compete with each other to get the highest price therefor. In this sense, a stock exchange is essentially
monopolistic."

Inconclusive premises, for sure. For it is debatable whether the buyer of stock may get the lowest price
where all the sellers assemble in only one place. The price there, in one sale, will tend to fix the price for
the succeeding, sales, and he has no chance to get a lower price except at another stock exchange.
Therefore, the arrangement desired by the Commission may, at most, be beneficial to sellers of stock —
not to buyers — although what applies to buyers should obtain equally as to sellers (looking for higher
prices). Besides, there is the brokerage fee which must be considered. Not to mention the personality of
the broker.

(b) Protection of investors. — At any rate, supposing the arrangement contemplated is beneficial to
investors (as the Commission says), it is to be doubted whether it is "necessary" for their "protection"
within the purview of the Securities Act. As the purpose of the Act is to give adequate and effective
protection to the investing public against fraudulent representations, or false promises and the
imposition of worthless ventures, 9 it is hard to see how the proposed concentration of the market has a
necessary bearing to the prevention of deceptive devices or unlawful practices. For it is not mere
semantics to declare that acts for the protection of investors are necessarily beneficial to them; but not
everything beneficial to them is necessary for their protection.

And yet, the Commission realizes that if there were two or more exchanges "the same security may sell
for more in one exchange and sell for less in the other. Variance in price of the same security would be
the rule ... ." Needless to add, the brokerage rates will also differ.

This, precisely, strengthens the objection to the Commission's ruling. Such difference in prices and rates
gives the buyer of shares alternative options, with the opportunity to invest at lower expense; and the
seller, to dispose at higher prices. Consequently, for the investors' benefit (protection is not the word),
quality of listing 10 should be permitted, nay, encouraged, and other exchanges allowed to operate. The
circumstance that some people "made a lot of money due to the difference in prices of securities traded
in the stock exchanges of Manila before the war" as the Commission noted, furnishes no sufficient
reason to let one exchange corner the market. If there was undue manipulation or unfair advantage in
exchange trading the Commission should have other means to correct the specific abuses.
Granted that, as the Commission observes, "what the country needs is not another" market for
securities already listed on the Manila Stock Exchange, but "one that would focus its attention and
energies on the listing of new securities and thus effectively help in raising capital sorely needed by
our ... unlisted industries and enterprises."

Nonetheless, we discover no legal authority for it to shore up (and stifle) free enterprise and individual
liberty along channels leading to that economic desideratum. 11

The Legislature has specified the conditions under which a stock exchange may legally obtain a permit
(sec. 17, Securities Act); it is not for the Commission to impose others. If the existence of two competing
exchanges jeopardizes public interest — which is doubtful — let the Congress speak. 12 Undoubtedly,
the opinion and recommendation of the Commission will be given weight by the Legislature, in judging
whether or not to restrict individual enterprise and business opportunities. But until otherwise directed
by law, the operation of exchanges should not be so regulated as practically to create a monopoly by
preventing the establishment of other stock exchanges and thereby contravening:

(a) the organizers' (Makati's) Constitutional right to equality before the law;

(b) their guaranteed civil liberty to pursue any lawful employment or trade; and

(c) the investor's right to choose where to buy or to sell, and his privilege to select the brokers in his
employment. 13

And no extended elucidation is needed to conclude that for a licensing officer to deny license solely on
the basis of what he believes is best for the economy of the country may amount to regimentation or, in
this instance, the exercise of undelegated legislative powers and discretion.

Thus, it has been held that where the licensing statute does not expressly or impliedly authorize the
officer in charge, he may not refuse to grant a license simply on the ground that a sufficient number of
licenses to serve the needs of the public have already been issued. (53 C.J.S. p. 636.)
Concerning res judicata. — Calling attention to the Commission's order of May 27, 1963, which Makati
Stock did not appeal, the Manila Stock Exchange pleads the doctrine of res judicata. 14 (The order now
reviewed is dated May 7, 1964.)

It appears that when Makati Stock Exchange, Inc. presented its articles of incorporation to the
Commission, the latter, after making some inquiries, issued on May 27, 1963, an order reading as
follows.

Let the certificate of incorporation of the MAKATI STOCK EXCHANGE be issued, and if the organizers
thereof are willing to abide by the foregoing conditions, they may file the proper application for the
registration and licensing of the said Exchange.

In that order, the Commission advanced the opinion that "it would permit the establishment and
operation of the proposed Makati Stock Exchange, provided ... it shall not list for trading on its board,
securities already listed in the Manila Stock Exchange ... ."

Admittedly, Makati Stock Exchange, Inc. has not appealed from that order of May 27, 1963. Now, Manila
Stock insists on res judicata.

Why should Makati have appealed? It got the certificate of incorporation which it wanted. The condition
or proviso mentioned would only apply if and when it subsequently filed the application for registration
as stock exchange. It had not yet applied. It was not the time to question the condition; 15 Makati was
still exploring the convenience of soliciting the permit to operate subject to that condition. And it could
have logically thought that, since the condition did not affect its articles of incorporation, it should not
appeal the order (of May 27, 1963) which after all, granted the certificate of incorporation (corporate
existence) it wanted at that time.

And when the Makati Stock Exchange finally found that it could not successfully operate with the
condition attached, it took the issue by the horns, and expressing its desire for registration and license, it
requested that the condition (against double listing) be dispensed with. The order of the Commission
denying, such request is dated May 7, 1964, and is now under, review.
Indeed, there can be no valid objection to the discussion of this issue of double listing now, 16 because
even if the Makati Stock Exchange, Inc. may be held to have accepted the permission to operate with
the condition against double listing (for having failed to appeal the order of May 27, 1963), still it was
not precluded from afterwards contesting 17 the validity of such condition or rule:

(1) An agreement (which shall not be construed as a waiver of any constitutional right or any right to
contest the validity of any rule or regulation) to comply and to enforce so far as is within its powers,
compliance by its members, with the provisions of this Act, and any amendment thereto, and any rule or
regulation made or to be made thereunder. (See. 17-a-1, Securities Act [Emphasis Ours].)

Surely, this petition for review has suitably been coursed. And making reasonable allowances for the
presumption of regularity and validity of administrative action, we feel constrained to reach the
conclusion that the respondent Commission possesses no power to impose the condition of the rule,
which, additionally, results in discrimination and violation of constitutional rights.

ACCORDINGLY, the license of the petition to operate a stock exchange is approved without such
condition. Costs shall be paid by the Manila Stock Exchange. So ordered.

Bautista Angelo, Concepcion, Reyes, J.B.L., Paredes, Dizon, Regala, Makalintal, Bengzon, J.P., and
Zaldivar, JJ., concur.

Barrera, J., is on leave.

Footnotes

1Selling all goods usually needed in the community.

2"Its members (Makati's) will not ... spend their time exclusively in securities which are new and
unknown to the public, with prospect of losing their capital and wasting their time." (quoted on p. 57,
Brief of Commission.)
3The Commission's brief denies this (p. 15); but it is contradicted by the brief of Manila Stock Exchange,
p. 3.

4Commonwealth Acts 283 and 290; Republic Acts 635 and 1143.

5The present Department Head is quoted as hinting a desire for review thereof. (p. 3, Brief of
Commission.)

6In its brief, the Commission points to its authority (under Sec. 28b-3) "to alter or supplement the Rules
of such exchange, ... in respect of such matters as ... the listing or striking from listing of any security."

The argument has no merit, since no change of the Rules of Makati Exchange is involved here. And a
mere reading of the whole paragraph (b) will show its inapplicability to the pending controversy.

7"Regulate" does not include "prohibit." See many decisions collected in Words and Phrases, Permanent
Edition, Vol. 36A, pp. 315-317. (See Republic v. Esguerra, 81 Phil. 33; Primicias v. Fugoso, 80 Phil. 71.)

8Art. 186, Revised Penal Code; Commonwealth Act 146.

9People v. Rosenthal, 68 Phil. 42;, People v. Fernandez & Trinidad, G.R. No. 46655; Lawyers Journal, Vol.
VI, 589, June 18, 1538.

10It is allowed in the U.S. (p. 33, Commission's brief.)

11Figuratively speaking, why compel this new farmer (Makati Stock), to till virgin forest in order to let
the other farmer (Manila Stock) occupy the plain, which after all, does not belong to him? (In the
absence, of course, of special reasons calling for the exercise of the police power by the Congress).

12Lacson v. Roque, L-6225, Jan. 10, 1953.

13Unreasonably discriminatory regulation may be set aside on such basis. — Rivera, Law of Public
Administration, citing 42 Am. Jur. 429-430 and some cases.

14The Commission's printed brief does not raise it probably because although apprised of that
circumstance, it proceeded to act on the Makati's request, (p. 2 brief) and issued the order of May 7.

15It was a mere anticipatory statement of what the Commission would do when the petition for
registration is filed. Neither binding nor appealable. (See III Moran Comments on the Rules of Court 295
[1963 Ed.])

16Indeed, hinting some doubts about the rule, the Department Head expected a judicial review. (p. 3,
Brief for Commission.)

17This incidentally disposes of the alleged acceptance of the condition by one Mr. Gaberman on which
the respondents enlarged. (pp. 19-21, Brief for Commission)

Republic of the Philippines

SUPREME COURT

Manila

EN BANC

G.R. No. 85439 January 13, 1992

KILUSANG BAYAN SA PAGLILINGKOD NG MGA MAGTITINDA NG BAGONG PAMILIHANG BAYAN NG
MUNTINLUPA, INC. (KBMBPM), TERESITA A. FAJARDO, NADYESDA B. PONSONES, MA. FE V. BOMBASE,
LOIDA D. LUCES, MARIO S. FRANCISCO, AMADO V. MANUEL and ROLANDO G. GARCIA, incumbent
members of the Board, AMADO G. PEREZ and MA. FE V. BOMBASE, incumbent General Manager and
Secretary-Treasurer, respectively, petitioners,

vs.

HON. CARLOS G. DOMINGUEZ, Secretary of Agriculture, Regional Director of Region IV of the

Department of Agriculture ROGELIO P. MADRIAGA, RECTO CORONADO and Municipal Mayor IGNACIO R.
BUNYE, both in his capacity as Municipal Mayor of Muntinlupa, Metro Manila and as Presiding Officer of
Sangguniang Bayan ng Muntinglupa, and JOHN DOES, respondents.

G.R. No. 91927 January 13, 1992

IGNACIO R. BUNYE, JAIME R. FRESNEDI, CARLOS G. TENSUAN, VICTOR E. AGUINALDO, ALEJANDRO I.

MARTINEZ, EPIFANIO A. ESPELETA, REY E. BULAY, LUCIO B. CONSTANTINO, ROMAN E. NIEFES, NEMESIO
O. MOZO, ROGER SMITH, RUFINO B. JOAQUIN, NOLASCO I. DIAZ, RUFINO IBE and NESTOR SANTOS,
petitioners,

vs.

THE SANDIGANBAYAN, THE OMBUDSMAN and ROGER C. BERBANO, Special Prosecutor III, respondents.

Jose O. Villanueva and Roberto B. Romanillos for petitioners in G.R. No. 85439.

Alampay & Manhit Law Offices for petitioners in G.R. No. 91927.

DAVIDE, JR., J.:

These cases have been consolidated because they are closely linked with each other as to factual
antecedents and issues.
The first case, G.R. No. 85439 (hereinafter referred to as the Kilusang Bayan case), questions the validity
of the order of 28 October 1988 of then Secretary of Agriculture Hon. Carlos G. Dominguez which
ordered: (1) the take-over by the Department of Agriculture of the management of the petitioner
Kilusang Bayan sa Paglilingkod Ng Mga Magtitinda ng Bagong Pamilihang Bayan ng Muntilupa, Inc.
(KBMBPM) pursuant to the Department's regulatory and supervisory powers under Section 8 of P.D. No.
175, as amended, and Section 4 of Executive Order No. 13, (2) the creation of a Management Committee
which shall assume the management of KBMBPM upon receipt of the order, (3) the disbandment of the
Board of Directors, and (4) the turn over of all assets, properties and records of the KBMBPM the
Management Committee.

The second case. G.R. No. 91927 (hereinafter referred to as the Bunye case), seeks the nullification of
the Resolution of 4 January 1990 of the Sandiganbayan admitting the Amended Information against
petitioners in Criminal Case No. 13966 and denying their motion to order or direct preliminary
investigation, and its Resolution of 1 February 1990 denying the motion to reconsider the former.

The procedural and factual antecedents are not disputed.

On 2 September 1985, the Municipal Government of Muntinlupa (hereinafter, Municipality), Metro

Manila, thru its then Mayor Santiago Carlos, Jr., entered into a contract with the KILUSANG BAYAN SA
PAGLILINGKOD NG MGA MAGTITINDA SA BAGONG PAMILIHANG BAYAN NG MUNTINLUPA, INC.
(KBMBPM) represented by its General Manager, Amado Perez, for the latter's management and
operation of the new Muntinlupa public market. The contract provides for a twenty-five (25) year term
commencing on 2 September 1985, renewable for a like period, unless sooner terminated and/or
rescinded by mutual agreement of the parties, at a monthly consideration of Thirty-Five Thousand Pesos
(P35,000) to be paid by the KBMBPM within the first five (5) days of each month which shall, however,
be increased by ten percent (10%) each year during the first five (5) years only. 1

The KBMBPM is a service cooperative organized by and composed of vendors occupying the New
Muntinlupa Public Market in Alabang, Muntinlupa, Metro Manila pursuant to Presidential Decree No.
175 and Letter of Implementation No. 23; its articles of incorporation and by-laws were registered with
the then Office of the Bureau of Cooperatives Development (thereafter the Bureau of Agricultural
Cooperatives Development or BACOD and now the Cooperative Development Authority). 2
Following his assumption into office as the new mayor succeeding Santiago Carlos, Jr., petitioner Ignacio
Bunye, claiming to be particularly scandalized by the "virtual 50-year term of the agreement, contrary to
the provision of Section 143, paragraph 3 of Batas Pambansa Blg. 337," and the "patently inequitable
rental," directed a review of the aforesaid contract. 3 He sought opinions from both the Commission on
Audit and the Metro Manila Commission (MMC) on the validity of the instrument. In separate letters,
these agencies urged that appropriate legal steps be taken towards its rescission. The letter of Hon.
Elfren Cruz of the MMC even granted the Municipality authority "to take the necessary legal steps for
the cancellation/recission of the above cited contract and make representations with KBMBPM for the
immediate transfer/takeover of the possession, management and operation of the New Muntinlupa
Market to the Municipal Government of Muntinlupa." 4

Consequently, upon representations made by Bunye with the Municipal Council, the latter approved on
1 August 1988 Resolution No. 45 abrogating the contract. To implement this resolution, Bunye, together
with his co-petitioners and elements of the Capital Command of the Philippine Constabulary, proceeded,
on 19 August 1986, to the public market and announced to the general public and the stallholders
thereat that the Municipality was taking over the management and operation of the facility, and that
the stallholders should henceforth pay their market fees to the Municipality, thru the Market
Commission, and no longer to the KBMBPM. 5

On 22 August 1988, the KBMBPM filed with Branch 13 of the Regional Trial Court of Makati a complaint
for breach of contract, specific performance and damages with prayer for a writ of preliminary
injunction against the Municipality and its officers, which was docketed as Civil Case No. 88-1702. 6 The
complaint was premised on the alleged illegal take-over of the public market effected "in excess of his
(Bunye's) alleged authority" and thus "constitutes breach of contract and duty as a public official."

The writ applied for having been denied, 7 the KBMBPM officers resisted the attempts of Bunye and
company to complete the take-over; they continued holding office in the KBS building, under their
respective official capacities. The matter having been elevated to this Court by way of certiorari, 8 We
remanded the same to the Court of Appeals which docketed it as C.A.-G.R. No. L-16930. 9

On 26 August 1988, Amado Perez filed with the Office of the Ombudsman a letter-complaint charging
Bunye and his co-petitioners with oppression, harassment, abuse of authority and violation of the Anti-
Graft and Corrupt Practices Act 10 for taking over the management and operation of the public market
from KBMBPM. 11
In a subpoena dated 7 October 1988, prosecutor Mothalib C. Onos of the Office of the Special
Prosecutor directed Bunye and his co-petitioners to submit within ten (10) days from receipt thereof
counter-affidavits, affidavits of their witnesses and other supporting documents. 12 The subpoena and
letter-complaint were received on 12 October 1988.

On 20 October 1988, two (2) days before the expiration of the period granted to file said documents,
Bunye, et al. filed by mail an urgent motion for extension of "at least fifteen (15) days from October 22,
1988" within which to comply 13 with the subpoena.

Thereafter, the following transpired which subsequently gave rise to these petitions:

G.R. No. 85439

In the early morning of 29 October 1988, a Saturday, respondent Madriaga and Coronado, allegedly
accompanied by Mayor Bunye and the latters' heavily armed men, both in uniform and in civilian
clothes, together with other civilians, namely: Romulo Bunye II, Alfredo Bunye, Tomas Osias, Reynaldo
Camilon, Benjamin Taguibao, Benjamin Bulos and other unidentified persons, allegedly through force,
violence and intimidation, forcibly broke open the doors of the offices of petitioners located at the
second floor of the KBS Building, new Muntinlupa Public Market, purportedly to serve upon petitioners
the Order of respondent Secretary of Agriculture dated 28 October 1988, and to implement the same,
by taking over and assuming the management of KBMBPM, disbanding the then incumbent Board of
Directors for that purpose and excluding and prohibiting the General Manager and the other officers
from exercising their lawful functions as such. 14 The Order of the Secretary reads as follows: 15

ORDER

WHEREAS, the KILUSANG BAYAN SA PAGLILINGKOD NG MGA MAGTITINDA NG BAGONG PAMILIHANG

BAYAN NG MUNTINLUPA, INC., (KBMBPM), Alabang, Muntinlupa, Metro Manila is a Cooperative
registered under the provisions of Presidential Decree No. 175, as amended;

WHEREAS, the Department of Agriculture is empowered to regulate and supervise cooperatives

registered under the provisions of Presidential Decree No. 175, as amended;
WHEREAS, the general membership of the KBMBPM has petitioned the Department of Agriculture for
assistance in the removal of the members of the Board of Directors who were not elected by the general
membership of said cooperative;

WHEREAS, the on-going financial and management audit of the Department of Agriculture auditors
show (sic) that the management of the KBMBPM is not operating that cooperative in accordance with
PD. 175, LOI No. 23, the Circulars issued by DA/BACOD and the provisions of the by-laws of KBMBPM;

WHEREAS, the interest of the public so demanding it is evident and urgently necessary that the
KBMBPM MUST BE PLACED UNDER MANAGEMENT TAKE-OVER of the Department of Agriculture in
order to preserve the financial interest of the members of the cooperative and to enhance the
cooperative development program of the government;

WHEREAS, it is ordered that the Department of Agriculture in the exercise of its regulatory and
supervisory powers under Section 8 of PD 175, as amended, and Section 4 of Executive Order No. 113,
take over the management of KBMBPM under the following directives:

1. THAT a Management Committee is hereby created composed of the following:

a) Reg. Dir. or OIC RD — DA Region IV

b) Atty. Rogelio P. Madriaga — BACOD

c) Mr. Recto Coronado — KBMBPM

d) Mrs. Nadjasda Ponsones — KBMBPM

e) One (1) from the Municipal Government of Muntinlupa to be designated by the Sangguniang
Pambayan ng Muntinlupa;

2. THAT the Management Committee shall, upon receipt of this Order, assume the management of
KBMBPM;

3. THAT the present Board of Directors is hereby disbanded and the officers and Manager of the
KBMBPM are hereby directed to turnover all assets, properties and records of the KBMBPM to the
Management Committee herein created;

4. THAT the Management Committee is hereby empowered to promulgate rules of procedure to

govern its workings as a body;

5. THAT the Management Committee shall submit to the undersigned thru the Director of BACOD
monthly reports on the operations of KBMBPM;

6. THAT the Management Committee shall call a General Assembly of all registered members of
the KBMBPM within Ninety (90) days from date of this Order to decide such matters affecting the
KBMBPM, including the election of a new set of Board of Director (sic).

This Order takes effect immediately and shall continue to be in force until the members of the Board of
Directors shall have been duly elected and qualified.

Done this 28th day of October, 1988 at Quezon City.

As claimed by petitioners, the Order served on them was not written on the stationary of the
Department, does not bear its seal and is a mere xerox copy.

The so-called petition upon which the Order is based appears to be an unverified petition dated 10
October 1988 signed, according to Mayor Bunye, 16 by 371 members of the KBMBPM.
On 2 November 1988, petitioners filed the petition in this case alleging, inter alia, that:

(a) Respondent Secretary acted without or in excess of jurisdiction in issuing the Order for he
arrogated unto himself a judicial function by determining the alleged guilt of petitioners on the strength
of a mere unverified petition; the disbandment of the Board of Directors was done without authority of
law since under Letter of Implementation No. 23, removal of officers, directors or committee members
could be done only by the majority of the members entitled to vote at an annual or special general
assembly and only after an opportunity to be heard at said assembly.

(b) Respondent Secretary acted in a capricious, whimsical, arbitrary and despotic manner, so patent
and gross that it amounted to a grave abuse of discretion.

(c) The Order is a clear violation of the By-Laws of KBMBPM and is likewise illegal and unlawful for
it allows or tolerates the violation of the penal provisions under paragraph (c), Section 9 of P.D. No. 175.

(d) The Order is a clear violation of the constitutional right of the individual petitioners to be heard.
17

They pray that upon the filing of the petition, respondents, their agents, representatives or persons
acting on their behalf be ordered to refrain, cease and desist from enforcing and implementing the
questioned Order or from excluding the individual petitioners from the exercise of their rights as such
officers and, in the event that said acts sought to be restrained were already partially or wholly done, to
immediately restore the management and operation of the public market to petitioners, order
respondents to vacate the premises and, thereafter, preserve the status quo; and that, finally, the
challenged Order be declared null and void.

In the Resolution of 9 October 1988, 18 We required the respondents to Comment on the petition.
Before any Comment could be filed, petitioners filed on 2 January 1989 an Urgent Ex-Parte Motion
praying that respondent Atty. Rogelio Madriaga, who had assumed the position of Chairman of the
Management Committee, be ordered to stop and/or cancel the scheduled elections of the officers of the
KBMBPM on 6 January 1989 and, henceforth, desist from scheduling any election of officers or Members
of the Board of Directors thereof until further orders on the Court. 19 The elections were, nevertheless,
held and a new board of directors was elected. So, on 19 January 1989, petitioners filed a supplemental
motion 20 praying that respondent Madriaga and the "newly elected Board of Directors be ordered to
cease and desist from assuming, performing or exercising powers as such, and/or from removing or
replacing the counsels of petitioners as counsels for KBMBPM and for Atty. Fernando Aquino, Jr., to
cease and desist from unduly interfering with the affairs and business of the cooperative."

Respondent Bunye, by himself, filed his Comment on 23 January 1989. 21 He denies the factual
allegations in the petition and claims that petitioners failed to exhaust administrative remedies. A reply
thereto was filed by petitioners on 7 February 1989. 22

Respondent Recto Coronado filed two (2) Comments. The first was filed on 6 February 1989 23 by his
counsel, Atty. Fernando Aquino, Jr., and the second, which is for both him and Atty. Madriaga, was filed
by the latter on 10 February 1989. 24

On 20 February 1989, petitioners filed a Reply to the first Comment of Coronado 25 and an Ex-Parte
Motion for the immediate issuance of a cease and desist order 26 praying that the so-called new
directors and officers of KBMBPM, namely: Tomas M. Osias, Ildefonso B. Reyes, Paulino Moldez,
Fortunato M. Medina, Aurora P. del Rosario, Moises Abrenica, and Lamberto Casalla, be ordered to
immediately cease and desist from filing notices of withdrawals or motions to dismiss cases filed by the
Cooperative now pending before the courts, administrative offices and the Ombudsman and
Tanodbayan, and that if such motions or notices were already filed, to immediately withdraw and desist
from further pursuing the same until further orders of this Court. The latter was precipitated by the
Resolution No. 19 of the "new" board of directors withdrawing all cases filed by its predecessors against
Bunye, et al., and more particularly the following cases: (a) G.R. No. 85439 (the instant petition), (b) Civil
Case No. 88-1702, (c) OSP Case No. 88-2110 before the Ombudsman, (d) IBP Case No. 88-0119 before
the Tanodbayan, and Civil Case No. 88-118 for Mandamus. 27

On 1 March 1989, We required the Solicitor General to file his Comment to the petition and the urgent
motion for the immediate issuance of a cease and desist order. 28

A motion to dismiss the instant petition was filed on 30 March 1989. 29 On 19 April 1989, We resolved
to dismiss the case and consider it closed and terminated. 30 Thereupon, after some petitioners filed a
motion for clarification and reconsideration, We set aside the dismissal order and required the new
directors to comment on the Opposition to Motion to Dismiss filed by the former. 31
The new board, on 14 June 1989, prayed that its Manifestation of 6 June 1989 and Opposition dated 9
June 1989, earlier submitted it response to petitioners' motion for reconsideration of the order
dismissing the instant petition, be treated as its Comment. 32 Both parties then continued their legal
fencing, serving several pleadings on each other.

In Our Resolution of 9 August 1989, 33 We gave the petition due course and required the parties to
submit their respective Memoranda.

On 14 August 1989, petitioners filed an urgent ex-parte motion for the immediate issuance of a cease
and desist order 34 in view of the new board's plan to enter into a new management contract; the
motion was noted by this Court on 23 August 1989. A second ex-parte motion, noted on 18 October
1989, was filed on 19 September 1989 asking this court to consider the "Invitation to pre-qualify and
bid" for a new contract published by respondent Bunye. 35

In a belated Comment 36 for the respondent Secretary of Agriculture filed on 22 September 1989, the
Office of the Solicitor General asserts that individual petitioners, who were not allegedly elected by the
members or duly designated by the BACOD Director, have no right or authority to file this case; the
assailed Order of the Secretary was issued pursuant to P.D. No. 175, more particularly Section 8 thereof
which authorizes him "(d) to suspend the operation or cancel the registration of any cooperative after
hearing and when in its judgment and based on findings, such cooperative is operating in violation of
this Decree, rules and regulations, existing laws as well as the by-laws of the cooperative itself;" the
Order is reasonably necessary to correct serious flaws in the cooperative and provide interim measures
until election of regular members to the board and officers thereof; the elections conducted on 6
January 1989 are valid; and that the motion to dismiss filed by the new board of directors binds the
cooperative. It prays for the dismissal of the petition.

Respondent Secretary of Agriculture manifested on 22 September 1989 that he is adopting the

Comment submitted by the Office of the Solicitor General as his memorandum; 37 petitioners and
respondents Coronado and Madriaga filed their separate Memoranda on 6 November 1989; 38 while
the new board of directors submitted its Memorandum on 11 December 1989. 39

The new KBMBPM board submitted additional pleadings on 16 February 1990 which it deemed relevant
to the issues involved herein. Reacting, petitioners filed a motion to strike out improper and
inadmissible pleadings and annexes and sought to have the pleaders cited for contempt. Although We
required respondents to comment, the latter did not comply.

Nevertheless, a manifestation was filed by the same board on 25 February 1991 40 informing this Court
of the holding, on 9 January 1991, of its annual general assembly and election of its board of directors
for 1991. It then reiterates the prayer that the instant petition be considered withdrawn and dismissed.
Petitioners filed a counter manifestation alleging that the instant petition was already given due course
on 9 August 1989. 41 In its traverse to the counter manifestation, the new board insists that it "did not
derive authority from the October 28, 1988 Order, the acts of the Management Committee, nor (sic)
from the elections held in (sic) January 6, 1989," but rather from the members of the cooperative who
elected them into office during the elections.

Petitioners filed a rejoinder asserting that the election of new directors is not a supervening event
independent of the main issue in the present petition and that to subscribe to the argument that the
issues in the instant petition became moot with their assumption into office is to reward a wrong done.

G. R. NO. 91927

Petitioners claim that without ruling on their 20 October 1988 motion for an extension of at last 15 days
from 22 October 1988 within which to file their counter-affidavits, which was received by the Office of
the Special Prosecutor on 3 November 1988, Special Prosecutor Onos promulgated on 11 November
1988 a Resolution finding the evidence on hand sufficient to establish a prima facie case against
respondents (herein petitioners) and recommending the filing of the corresponding information against
them before the Sandiganbayan. 42 Petitioners also claim that they submitted their counter-affidavits
on 9 November 1988. 43

In their motion dated 2 December 1988, petitioners move for a reconsideration of the above Resolution,
44 which was denied by Onos 45 in his 18 January 1989 Order. The information against the petitioners
was attached to this order.

Upon submission of the records for his approval, the Ombudsman issued a first indorsement on 4 April
1989 referring to "Judge Gualberto J. de la Llana, Acting Director , IEO/RSSO, this Office, the within
records of OSP Case No. 88-02110 . . . for further preliminary investigation . . ." 46
Thereafter, on 28 April 1989, Bunye and company received a subpoena from de la Llana requiring them
to appear before the latter on 25 April 1989, 47 submit a report and file comment. After being granted
an extension, Bunye and company submitted their comment on 18 May 1989. 48

On 22 August 1989, de la Llana recommended the filing of an information for violation of section 3 (e) of
the Anti-Graft and Corrupt Practices Act. 49 The case was referred to special prosecuting officer Jose
Parentela, Jr. who, in his Memorandum 50 to the Ombudsman through the Acting Special Prosecutor,
likewise urged that an information be filed against herein petitioners. On 3 October 1989, the
Ombudsman signed his conformity to the Memorandum and approved the 18 January information
prepared by Onos, which was then filed with the Sandiganbayan.

Consequently, Bunye, et al. were served arrest warrants issued by the Sandiganbayan. Detained at the
NBI on 9 October 1989, they claim to have discovered only then the existence of documents
recommending and approving the filing of the complaint and a memorandum by special prosecutor
Bernardita G. Erum proposing the dismissal of the same. 51

Arraignment was set for 18 October 1989. 52

However, on 14 October 1989, petitioners filed with the Sandiganbayan an "Omnibus Motion to
Remand to the Office of the Ombudsman; to Defer Arraignment and to Suspend Proceedings." 53

Subsequently, through new counsel, petitioners filed on 17 October 1989 a Consolidated Manifestation
and Supplemental Motion 54 praying, inter alia, for the quashal of the information on the ground that
they were deprived of their right to a preliminary investigation and that the information did not charge
an offense.

The Sandiganbayan issued an order on 18 October 1989 deferring arraignment and directing the parties
to submit their respective memoranda, 55 which petitioners complied with on 2 November 1989. 56 On
16 November 1989, special Prosecutor Berbano filed a motion to admit amended

information. 57
On 17 November 1989, the Sandiganbayan handed down a Resolution 58 denying for lack of merit the
Omnibus Motion to Remand the Case To The Office of the Ombudsman, to Defer Arraignment and to
Suspend Proceedings. Petitioners then filed a motion to order a preliminary investigation 59 on the basis
of the introduction by the amended information of new, material and substantive allegations, which the
special prosecutor opposed, 60 thereby precipitating a rejoinder filed by petitioners. 61

On 4 January 1990, the Sandiganbayan handed down a Resolution 62 admitting the Amended
Information and denying the motion to direct preliminary investigation. Their motion to reconsider this
Resolution having been denied in the Resolution of 1 February 1990, 63 petitioners filed the instant
petition on 12 February 1990.

Petitioners claim that respondent Sandiganbayan acted without or in excess of jurisdiction or with
manifest grave abuse of discretion amounting to lack of jurisdiction in denying petitioners their right to
preliminary investigation and in admitting the Amended Information.

They then pray that: (a) the 4 January and 1 February 1990 Resolutions of the Sandiganbayan, admitting
the amended information and denying the motion for reconsideration, respectively, be annulled; (b) a
writ be issued enjoining the Sandiganbayan from proceeding further in Criminal Case No. 13966; and (c)
respondents be enjoined from pursuing further actions in the graft case.

We required the respondents to Comment on the petition.

On 21 February 1990, petitioners' counsel filed a motion to drop Epifanio Espeleta and Rey E. Dulay as
petitioners, 64 and in the Comment they filed on 30 March 1990, in compliance with Our Resolution of 1
March 1990, they state that they do not interpose any objection to the motion.

On 20 March 1990, the Office of the Solicitor General moved that it be excused from filing comment for
the respondents as it cannot subscribe to the position taken by the latter with respect to the questions
of law involved. 65 We granted this motion in the resolution of 8 May 1990.

Respondent Berbano filed his comment on 10 September 1991 and petitioners replied on 20 December
1990; Berbano subsequently filed a Rejoinder thereto on 11 January 1991. 66 The Sandiganbayan then
filed a manifestation proposing that it be excused from filing comment as its position
on the matters in issue is adequately stated in the resolutions sought to be annulled. 67 On 7 March
1991, We resolved to note the manifestation and order the instant petition consolidated with G.R. No.
85439.

The present dispute revolves around the validity of the antecedent proceedings which led to the filing of
the original information on 18 January 1989 and the amended information afterwards.

THE ISSUES AND THEIR RESOLUTION

1. G. R. No. 85439.

As adverted to in the introductory portion of this Decision, the principal issue in G.R. No. 85439 is the
validity of the 28 October 1988 Order of respondent Secretary of Agriculture. The exordium of said
Order unerringly indicates that its basis is the alleged petition of the general membership of the
KBMBPM requesting the Department for assistance "in the removal of the members of the Board of
Directors who were not elected by the general membership" of the cooperative and that the "ongoing
financial and management audit of the Department of Agriculture auditors show (sic) that the
management of the KBMBPM is not operating that cooperative in accordance with P.D. 175, LOI 23, the
Circulars issued by DA/BACOD and the provisions and by-laws of KBMBPM." It is also professed therein
that the Order was issued by the Department "in the exercise of its regulatory and supervisory powers
under Section 8 of P.D. 175, as amended, and Section 4 of Executive Order No. 113."

Respondents challenge the personality of the petitioners to bring this action, set up the defense of non-
exhaustion of administrative remedies, and assert that the Order was lawfully and validly issued under
the above decree and Executive Order.

We find merit in the petition and the defenses interposed do not persuade Us.

Petitioners have the personality to file the instant petition and ask, in effect, for their reinstatement as
Section 3, Rule 65 of the Rules of Court, defining an action for mandamus, permits a person who has
been excluded from the use and enjoyment of a right or office to which he is entitled, to file suit. 68
Petitioners, as ousted directors of the KBMBPM, are questioning precisely the act of respondent
Secretary in disbanding the board of directors; they then pray that this Court restore them to their prior
stations.

As to failure to exhaust administrative remedies, the rule is well-settled that this requirement does not
apply where the respondent is a department secretary whose acts, as an alter ego of the President, bear
the implied approval of the latter, unless actually disapproved by him. 69 This doctrine of qualified
political agency ensures speedy access to the courts when most needed. There was no need then to
appeal the decision to the office of the President; recourse to the courts could be had immediately.
Moreover, the doctrine of exhaustion of administrative remedies also yields to other exceptions, such as
when the question involved is purely legal, as in the instant case, 70 or where the questioned act is
patently illegal, arbitrary or oppressive. 71 Such is the claim of petitioners which, as hereinafter shown,
is correct.

And now on the validity of the assailed Order.

Regulation 34 of Letter of Implementation No. 23 (implementing P.D. No. 175) provides the procedure
for the removal of directors or officers of cooperatives, thus:

An elected officer, director or committee member may be removed by a vote of majority of the
members entitled to vote at an annual or special general assembly. The person involved shall have an
opportunity to be heard.

A substantially identical provision, found in Section 17, Article III of the KBMBPM's by-laws, reads:

Sec. 17. Removal of Directors and Committee Members. — Any elected director or committee member
may be removed from office for cause by a majority vote of the members in good standing present at
the annual or special general assembly called for the purpose after having been given the opportunity to
be heard at the assembly.

Under the same article are found the requirements for the holding of both the annual general assembly
and a special general assembly.
Indubitably then, there is an established procedure for the removal of directors and officers of
cooperatives. It is likewise manifest that the right to due process is respected by the express provision
on the opportunity to be heard. But even without said provision, petitioners cannot be deprived of that
right.

The procedure was not followed in this case. Respondent Secretary of Agriculture arrogated unto
himself the power of the members of the KBMBPM who are authorized to vote to remove the
petitioning directors and officers. He cannot take refuge under Section 8 of P.D. No. 175 which grants
him authority to supervise and regulate all cooperatives. This section does not give him that right.

An administrative officer has only such powers as are expressly granted to him and those necessarily
implied in the exercise thereof. 72 These powers should not be extended by implication beyond what
may to necessary for their just and reasonable execution. 73

Supervision and control include only the authority to: (a) act directly whenever a specific function is
entrusted by law or regulation to a subordinate; (b) direct the performance of duty; restrain the
commission of acts; (c) review, approve, reverse or modify acts and decisions of subordinate officials or

units; (d) determine priorities in the execution of plans and programs; and (e) prescribe standards,
guidelines, plans and programs. Specifically, administrative supervision is limited to the authority of the
department or its equivalent to: (1) generally oversee the operations of such agencies and insure that
they are managed effectively, efficiently and economically but without interference with day-to-day
activities; (2) require the submission of reports and cause the conduct of management audit,
performance evaluation and inspection to determine compliance with policies, standards and guidelines
of the department; (3) take such action as may be necessary for the proper performance of official
functions, including rectification of violations, abuses and other forms of mal-administration; (4) review
and pass upon budget proposals of such agencies but may not increase or add to them. 74

The power to summarily disband the board of directors may not be inferred from any of the foregoing
as both P.D. No. 175 and the by-laws of the KBMBPM explicitly mandate the manner by which directors
and officers are to be removed. The Secretary should have known better than to disregard these
procedures and rely on a mere petition by the general membership of the KBMBPM and an on-going
audit by Department of Agriculture auditors in exercising a power which he does not have, expressly or
impliedly. We cannot concede to the proposition of the Office of the Solicitor General that the
Secretary's power under paragraph (d), Section 8 of P.D. No. 175 above quoted to suspend the
operation or cancel the registration of any cooperative includes the "milder authority of suspending
officers and calling for the election of new officers." Firstly, neither suspension nor cancellation includes
the take-over and ouster of incumbent directors and officers, otherwise the law itself would have
expressly so stated. Secondly, even granting that the law intended such as postulated, there is the
requirement of a hearing. None was conducted.

Likewise, even if We grant, for the sake of argument, that said power includes the power to disband the
board of directors and remove the officers of the KBMBPM, and that a hearing was not expressly
required in the law, still the Order can be validly issued only after giving due process to the affected
parties, herein petitioners.

Due process is guaranteed by the Constitution 75 and extends to administrative proceedings. In the
landmark case of Ang Tibay vs. Court of Industrial Relations, 76 this Court, through Justice Laurel, laid
down the cardinal primary requirements of due process in administrative proceedings, foremost of
which is the right to a hearing, which includes the right to present one's case and submit evidence in
support thereof. The need for notice and the opportunity to be heard is the heart of procedural due
process, be it in either judicial or administrative proceedings. 77 Nevertheless, a plea of a denial of
procedural due process does not lie where a defect consisting in an absence of notice of hearing was
thereafter cured by the aggrieved party himself as when he had the opportunity to be heard on a
subsequent motion for reconsideration. This is consistent with the principle that what the law prohibits
is not the absence of previous notice but the absolute absence thereof and lack of an opportunity to be
heard. 78

In the instant case, there was no notice of a hearing on the alleged petition of the general membership
of the KBMBPM; there was, as well, not even a semblance of a hearing. The Order was based solely on
an alleged petition by the general membership of the KBMBPM. There was then a clear denial of due
process. It is most unfortunate that it was done after democracy was restored through the peaceful
people revolt at EDSA and the overwhelming ratification of a new Constitution thereafter, which
preserves for the generations to come the gains of that historic struggle which earned for this Republic
universal admiration.

If there were genuine grievances against petitioners, the affected members should have timely raise
these issues in the annual general assembly or in a special general assembly. Or, if such a remedy would
be futile for some reason or another, judicial recourse was available.

Be that as it may, petitioners cannot, however, be restored to their positions. Their terms expired in
1989, thereby rendering their prayer for reinstatement moot and academic. Pursuant to Section 13 of
the by-laws, during the election at the first annual general assembly after registration, one-half plus one
(4) of the directors obtaining the highest number of votes shall serve for two years, and the remaining
directors (3) for one year; thereafter, all shall be elected for a term of two years. Hence, in 1988, when
the board was disbanded, there was a number of directors whose terms would have expired the next
year (1989) and a number whose terms would have expired two years after (1990). Reversion to the
status quo preceding 29 October 1988 would not be feasible in view of this turn of events. Besides,
elections were held in 1990 and 1991. 79 The affairs of the cooperative are presently being managed by
a new board of directors duly elected in accordance with the cooperative's by-laws.

2. G. R. No. 91927.

The right of an accused to a preliminary investigation is not among

the rights guaranteed him in the Bill of Rights. As stated in Marcos, et al. vs. Cruz, 80 "the preliminary
investigation in criminal cases is not a creation of the Constitution; its origin is statutory and it exists and
the right thereto can be invoked when so established and granted by law. It is so specifically granted by
procedural law. 81 If not waived, absence thereof may amount to a denial of due process. 82 However,
lack of preliminary investigation is not a ground to quash or dismiss a complaint or information. Much
less does it affect the court's jurisdiction. In People vs. Casiano, 83 this Court ruled:

Independently of the foregoing, the absence of such investigation [preliminary] did not impair the
validity of the information or otherwise render it defective. Much less did it affect the jurisdiction of the
court of first instance over the present case. Hence, had the defendant-appellee been entitled to
another preliminary investigation, and had his plea of not guilty upon arraignment not implied a waiver
of said right, the court of first instance should have, either conducted such preliminary investigation, or
ordered the Provincial Fiscal to make it, in pursuance of section 1687 of the Revised Administrative Code
(as amended by Republic Act No. 732), or remanded the record for said investigation to the justice of
the peace court, instead of dismissing the case as it did in the order appealed from.

This doctrine was thereafter reiterated or affirmed in several case. 84

In the instant case, even if it is to be conceded for argument's sake that there was in fact no preliminary
investigation, the Sandiganbayan, per Doromal vs. Sandiganbayan, 85 "should merely suspend or hold in
abeyance proceedings upon the questioned Amended Information and remand the case to the Office of
the Ombudsman for him to conduct a preliminary investigation."
It is Our view, however, that petitioners were not denied the right to preliminary investigation. They,
nevertheless, insist that the preliminary investigation conducted by the Office of the Special Prosecutor
existed more in form than in substance. This is anchored on the failure by prosecutor Onos to consider
the counter-affidavits filed by petitioners. The same sin of omission is ascribed to Acting Director de la
Llana who purportedly failed to consider the comments submitted by the petitioners pursuant to a
subpoena dated 13 April 1989. The failure of special prosecutor Berbano to conduct a preliminary
investigation before amending the information is also challenged.

It is finally urged that the Sandiganbayan completely disregarded the "glaring anomaly that on its face
the Information filed by the Office of the Special Prosecutor" was prepared and subscribed on 18
January 1989, while the records indicate that the preliminary investigation was concluded on 3 October
1989.

In his Comment, respondent Berbano dispassionately traces the genesis of the criminal information filed
before the Sandiganbayan. His assessment that a preliminary investigation sufficient in substance and
manner was conducted prior to the filing of the information reflects the view of the Sandiganbayan,
maintained in both the 17 November 1989 and 4 January 1990 resolutions, that there was compliance
with the requirements of due process.

Petitioners were provided a reasonable period within which to submit their counter-affidavits; they did
not avail of the original period; they moved for an extension of at least fifteen (15) days from 22 October
1988. Despite the urgency of its nature, the motion was sent by mail. The extension prayed for was good
up to 6 November 1988. But, as admitted by them, they filed the Counter-Affidavits only on 9 November
1988. Yet, they blamed prosecutor Onos for promulgating the 11 November 1989 Resolution and for,
allegedly, not acting on the motion. Petitioners then should not lay the blame on Onos; they should
blame themselves for presuming that the motion would be granted.

This notwithstanding, petitioners were able to file a Motion for Reconsideration on 13 December 1988
requesting that the reviewing prosecutor consider the belatedly filed documents; 86 thus, there is the
recommendation of prosecutor Bernardita Erum calling for the dismissal of the charges on 2 March
1989, which, however, was not sustained upon subsequent review. The Sandiganbayan, in its 17
November 1989 Resolution, succinctly summed up the matter when it asserted that "even granting, for
the sake of argument, that prosecutor Onos . . . failed to consider accused-movants' counter-affidavits,
such defect was cured when a "Motion for Reconsideration" was filed, and
which . . . de la Llana took into account upon review."

It may not then be successfully asserted that the counter-affidavits were not considered by the
Ombudsman in approving the information. Perusal of the factual antecedents reveals that a second
investigation was conducted upon the "1st Indorsement" of the Ombudsman of 4 April 1989. As a result,
subpoenas were issued and comments were asked to be submitted, which petitioners did, but only after
a further extension of fifteen (15) days from the expiration of the original deadline. From this submission
the matter underwent further review.

Moreover, in the 18 January 1989 Order of prosecutor Onos, there was an ample discussion of the
defenses raised by the petitioners in their counter-affidavits, thus negating the charge that the issues
raised by them were not considered at all. 87

It is indisputable that the respondents were not remiss in their duty to afford the petitioners the
opportunity to contest the charges thrown their way. Due process does not require that the accused
actually file his counter-affidavits before the preliminary investigation is deemed completed. All that is
required is that he be given the opportunity to submit such if he is so minded. 88

In any event, petitioners did in fact, although belatedly, submit their counter-affidavits and as a result
thereof, the prosecutors concerned considered them in subsequent reviews of the information,
particularly in the re-investigation ordered by the Ombudsman.

And now, as to the protestation of lack of preliminary investigation prior to the filing of the Amended
Information. The prosecution may amend the information without leave of court before arraignment, 89
and such does not prejudice the accused. 90 Reliance on the pronouncements in Doromal vs.
Sandiganbayan 91 is misplaced as what obtained therein was the preparation of an entirely new
information as contrasted with mere amendments introduced in the amended information, which also
charges petitioners with violating Section 3 (e) of the Anti-Graft Law.

In Gaspar vs. Sandiganbayan, 92 We held that there is no rule or law requiring the Tanodbayan to
conduct another preliminary investigation of a case under review by it. On the contrary, under P.D. No.
911, in relation to Rule 12, Administrative Order No. VII, the Tanodbayan may, upon review, reverse the
findings of the investigator and thereafter "where he finds a prima facie case, to cause the filing of an
information in court against the respondent, based on the same sworn statements or evidence
submitted, without the necessity of conducting another preliminary investigation."

Respondent Sandiganbayan did not then commit any grave abuse of discretion in respect to its
Resolutions of 4 January 1990 and 1 February 1990.

The petition then must fail.

CONCLUSION

WHEREFORE, judgment is hereby rendered:

1. GRANTING the petition in G.R. No. 85439; declaring null and void the challenged Order of 28
October 1988 of the respondent Secretary of Agriculture; but denying, for having become moot and
academic, the prayer of petitioners that they be restored to their positions in the KBMBPM.

2. DISMISSING, for lack of merit, the petition in G.R. No. 91927.

No pronouncement as to costs.

IT IS SO ORDERED.

Narvasa, C.J., Melencio-Herrera, Cruz, Paras, Feliciano, Padilla, Bidin, Griño-Aquino, Medialdea, Regalado
and Romero, JJ., concur.

Gutierrez, Jr. and Nocon, JJ., took no part.

Footnotes

1 Annex "C" of Petition, Bunye case.

2 Rollo, Kilusang Bayan case, 5.

3 Rollo, Bunye case, 3-4.

4 Id., 6.

5 Id., 8.

6 Annex "H", Bunye case.

7 Annex "M", Id.

8 G.R. No. 86750.

9 In the decision promulgated on 23 September 1991, the Court of Appeals, finding no reversible
error in the challenged Orders, dismissed the petition.

10 R.A. No. 3019.

11 Annex "I", Id.

12 Annex "J", Bunye case.

13 Annex "K", Id.

14 Rollo, Kilusang Bayan case, 10-11.

15 Annex "K", Id., 102-103.

16 Annex "I" of Mayor Bunye's Answer, Rollo, Kilusang Bayan case, 136-152.

17 Rollo, Kilusang Bayan case, 12-19.

18 Rollo, Kilusang Bayan case, 108.

19 Id., 112.

20 Id., 123.

21 Id., 129, et seq.

22 Id., 259, et seq.

23 Rollo, Kilusang Bayan case, 227.

24 Id., 272.

25 Id., 366.

26 Id., 381.

27 Id., 403-404.

28 Rollo, Kilusang Bayan case, 425.

29 Id., 427.

30 Id., 444.

31 Id., 450.

32 Id., 497.

33 Id., 620-A.

34 Rollo, Kilusang Bayan case, 623.

35 Id., 645.

36 Id., 653, et seq.

37 Rollo, Kilusang Bayan case, 650.

38 Id., 702, et seq.; 827, et seq.

39 Id., 996, et seq.

40 Id., 1166.

41 Id., 1190.

42 Annex "L", Bunye case, Id., 94, et seq.

43 Id., 9.

44 Id., 11.

45 Comment of public respondent Berbano; Id., 202-204.

46 Annex "15", Bunye case, 263; emphasis supplied.

47 Annexes "16" and "16-A", Id., 264-265.

48 Id., 206. According to petitioners, they filed it on 17 May 1989, Id., 11.
49 Annex "18" Id., 266, et seq.

50 Annex "19" Id., 276, et seq.

51 Rollo, Bunye case, 11-12.

52 Id., 14.

53 Annex "O" of Petition.

54 Annex "P", Id.

55 Annex "Q", Id.

56 Annex "S", Id.

57 Annex "T", Id.

58 Annexes "22" and "23", Comment of Berbano.

59 Annex "V" of Petition.

60 Annex "25", op. cit.

61 Annex "26", Id.

62 Annex "A", op. cit.

63 Annex "B", Id.

64 Rollo, Bunye case, 165.

65 Id., 170.

66 Id., 430.

67 Id., 447.

68 MORAN, M., Comments on the Rules of Court, vol. III, 1980 ed., 199.

69 Bartulata vs. Peralta, Jr., 59 SCRA 7 and cases cited. Demaisip vs. Court of Appeals, 106 Phil. 237.
See also Almine vs. Court of Appeals, 177 SCRA 796; Brett vs. IAC, 191 SCRA 687; Industrial Power Sales,
Inc. vs. Sinsuat, 160 SCRA 19; Supangan vs. Santos, 189 SCRA 56.

70 Pascual vs. Provincial Board, 106 Phil. 466; Tapales vs. President, 7 SCRA 553; Gonzales vs.
Hechanova, 9 SCRA 230; Velasco vs. Provincial Board, 115 SCRA 540.

71 NDC vs. Collector, 9 SCRA 429; Mangubat vs. Osmeña, 105 Phil. 1308.

72 Gonzalo Sy Trading vs. Central Bank, 70 SCRA 570.

73 42 Am. Jur., 316-318.

74 Paragraph (1) and (2) of Section 38, Chapter 7, Book IV, Administrative Code of 1987, Executive
Order No. 292.

75 Section I, Article III, 1987 Constitution.

76 69 Phil. 635.

77 BERNAS, J., The Constitution of the Republic of the Philippines, vol. I, 1987, ed., 47, citing
Mendoza vs. NHA, 111 SCRA 637; Malayan Insurance vs. Salas, 90 SCRA 252; Molino vs. Court of
Appeals, G.R. No. 59283, 30 July 1982; Berina vs. PMI, G.R. No. 58610, 30 September 1982. See also
Robusta Agro-Marine Products, Inc. vs. Gorombalem, et al., 175 SCRA 93.

78 Catura, et al. vs. CIR, 37 SCRA 303, citing Batangas Laguna Tayabas Bus Co. vs. Cadiao, 22 SCRA
987; Vda. de Pineda, et al. vs. Peña, et al., 187 SCRA 22.

79 Annex "18-A", Rollo, 346; Annex "D", Id., 1175.

80 68 Phil. 96. See also People vs. Abejuela, 38 SCRA 324.

81 Rule 112, Rules of Court.

82 San Diego vs. Hernandez, 24 SCRA 110.

83 1 SCRA 478 (1961).

84 Notably, People vs. Abejuela, supra.; People vs. Figueroa, 27 SCRA 1239; Bandiala vs. CFI, 35
SCRA 237; People v. La Caste, 37 SCRA 767; Luciano vs. Mariano, 40 SCRA 187; Ilagan vs. Enrile, 139
SCRA 349; Sanciangco vs. People, et al., 149 SCRA 1; Doromal vs. Sandiganbayan, 177 SCRA 354.

85 Supra.

86 Annex "J" to "J-20" of the Omnibus Motion, cited in footnote 8 of the Sandiganbayan's
Resolution of 17 November 1989.

87 Order, 12-14, Rollo, Bunye case, 259-261.

88 Soliven vs. Makasiar, 167 SCRA 393.

89 Rule 110, Section 14, Rules of Court. Roda vs. People, G.R. No. 86371, 19 January 1988, Minute
Resolution.

90 People vs. Dacudao, 170 SCRA 489.

91 Supra.

92 44 SCRA 415.

The Lawphil Project - Arellano Law Foundation

EN BANC

[G.R. No. 144463. January 14, 2004]

SENATOR ROBERT S. JAWORSKI, petitioner, vs. PHILIPPINE AMUSEMENT AND GAMING CORPORATION
and SPORTS AND GAMES ENTERTAINMENT CORPORATION, respondents.

DECISION

YNARES-SANTIAGO, J.:

The instant petition for certiorari and prohibition under Rule 65 of the Rules of Court seeks to nullify the
Grant of Authority and Agreement for the Operation of Sports Betting and Internet Gaming, executed by
respondent Philippine Amusement and Gaming Corporation (hereinafter referred to as PAGCOR) in
favor of respondent Sports and Games and Entertainment Corporation (also referred to as SAGE).

The facts may be summarized as follows:

PAGCOR is a government owned and controlled corporation existing under Presidential Decree No. 1869
issued on July 11, 1983 by then President Ferdinand Marcos. Pertinent provisions of said enabling law
read:

SECTION 1. Declaration of Policy. It is hereby declared to be the policy of the State to centralize and
integrate all games of chance not heretofore authorized by existing franchises or permitted by law in
order to attain the following objectives:
xxxxxxxxx

b) To establish and operate clubs and casinos, for amusement and recreation, including sports, gaming
pools (basketball, football, lotteries, etc.) and such other forms of amusement and recreation including
games of chance, which may be allowed by law within the territorial jurisdiction of the Philippines and
which will: x x x (3) minimize, if not totally eradicate, the evils, malpractices and corruptions that are
normally prevalent in the conduct and operation of gambling clubs and casinos without direct
government involvement.

xxxxxxxxx

TITLE IV GRANT OF FRANCHISE

Sec.10. Nature and term of franchise. Subject to the terms and conditions established in this Decree, the
Corporation is hereby granted for a period of twenty-five (25) years, renewable for another twenty-five
(25) years, the rights, privileges and authority to operate and maintain gambling casinos, clubs, and
other recreation or amusement places, sports, gaming pools, i.e. basketball, football, lotteries, etc.
whether on land or sea, within the territorial jurisdiction of the Republic of the Philippines.

On March 31, 1998, PAGCORs board of directors approved an instrument denominated as Grant of
Authority and Agreement for the Operation of Sports Betting and Internet Gaming, which granted SAGE
the authority to operate and maintain Sports Betting station in PAGCORs casino locations, and Internet
Gaming facilities to service local and international bettors, provided that to the satisfaction of PAGCOR,
appropriate safeguards and procedures are established to ensure the integrity and fairness of the
games.

On September 1, 1998, PAGCOR, represented by its Chairperson, Alicia Ll. Reyes, and SAGE, represented
by its Chairman of the Board, Henry Sy, Jr., and its President, Antonio D. Lacdao, executed the above-
named document.
Pursuant to the authority granted by PAGCOR, SAGE commenced its operations by conducting gambling
on the Internet on a trial-run basis, making pre-paid cards and redemption of winnings available at
various Bingo Bonanza outlets.

Petitioner, in his capacity as member of the Senate and Chairman of the Senate Committee on Games,
Amusement and Sports, files the instant petition, praying that the grant of authority by PAGCOR in favor
of SAGE be nullified. He maintains that PAGCOR committed grave abuse of discretion amounting to lack
or excess of jurisdiction when it authorized SAGE to operate gambling on the internet. He contends that
PAGCOR is not authorized under its legislative franchise, P.D. 1869, to operate gambling on the internet
for the simple reason that the said decree could not have possibly contemplated internet gambling since
at the time of its enactment on July 11, 1983 the internet was yet inexistent and gambling activities
were confined exclusively to real-space. Further, he argues that the internet, being an international
network of computers, necessarily transcends the territorial jurisdiction of the Philippines, and the grant
to SAGE of authority to operate internet gambling contravenes the limitation in PAGCORs franchise,
under Section 14 of P.D. No. 1869 which provides:

Place. The Corporation [i.e., PAGCOR] shall conduct gambling activities or games of chance on land or
water within the territorial jurisdiction of the Republic of the Philippines. x x x

Moreover, according to petitioner, internet gambling does not fall under any of the categories of the
authorized gambling activities enumerated under Section 10 of P.D. No. 1869 which grants PAGCOR the
right, privilege and authority to operate and maintain gambling casinos, clubs, and other recreation or
amusement places, sports gaming pools, within the territorial jurisdiction of the Republic of the
Philippines.[1] He contends that internet gambling could not have been included within the commonly
accepted definition of gambling casinos, clubs or other recreation or amusement places as these terms
refer to a physical structure in real-space where people who intend to bet or gamble go and play games
of chance authorized by law.

The issues raised by petitioner are as follows:

I. WHETHER OR NOT RESPONDENT PAGCOR IS AUTHORIZED UNDER P.D. NO. 1869 TO OPERATE
GAMBLING ACTIVITIES ON THE INTERNET;
II. WHETHER RESPONDENT PAGCOR ACTED WITHOUT OR IN EXCESS OF ITS JURISDICTION, OR GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION, WHEN IT AUTHORIZED
RESPONDENT SAGE TO OPERATE INTERNET GAMBLING ON THE BASIS OF ITS RIGHT TO OPERATE AND
MAINTAIN GAMBLING CASINOS, CLUBS AND OTHER AMUSEMENT PLACES UNDER SECTION 10 OF P.D.
1869;

III. WHETHER RESPONDENT PAGCOR ACTED WITHOUT OR IN EXCESS OF ITS JURISDICTION OR WITH
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT GRANTED
AUTHORITY TO SAGE TO OPERATE GAMBLING ACTIVITIES IN THE INTERNET.

The above-mentioned issues may be summarized into a single pivotal question: Does PAGCORs
legislative franchise include the right to vest another entity, SAGE in this case, with the authority to
operate Internet gambling? Otherwise put, does Presidential Decree No. 1869 authorize PAGCOR to
contract any part of its franchise to SAGE by authorizing the latter to operate Internet gambling?

Before proceeding with our main discussion, let us first try to hurdle a number of important procedural
matters raised by the respondents.

In their separate Comments, respondents PAGCOR and SAGE insist that petitioner has no legal standing
to file the instant petition as a concerned citizen or as a member of the Philippine Senate on the ground
that he is not a real party-in-interest entitled to the avails of the suit. In this light, they argue that
petitioner does not have the requisite personal and substantial interest to impugn the validity of
PAGCORs grant of authority to SAGE.

Objections to the legal standing of a member of the Senate or House of Representative to maintain a
suit and assail the constitutionality or validity of laws, acts, decisions, rulings, or orders of various
government agencies or instrumentalities are not without precedent. Ordinarily, before a member of
Congress may properly challenge the validity of an official act of any department of the government
there must be an unmistakable showing that the challenged official act affects or impairs his rights and
prerogatives as legislator.[2] However in a number of cases,[3] we clarified that where a case involves an
issue of utmost importance, or one of overreaching significance to society, the Court, in its discretion,
can brush aside procedural technicalities and take cognizance of the petition. Considering that the
instant petition involves legal questions that may have serious implications on public interests, we rule
that petitioner has the requisite legal standing to file this petition.
Respondents likewise urge the dismissal of the petition for certiorari and prohibition because under
Section 1, Rule 65 of the 1997 Rules of Civil Procedure, these remedies should be directed to any
tribunal, board, officer or person whether exercising judicial, quasi-judicial, or ministerial functions. They
maintain that in exercising its legally-mandated franchise to grant authority to certain entities to
operate a gambling or gaming activity, PAGCOR is not performing a judicial or quasi-judicial act. Neither
should the act of granting licenses or authority to operate be construed as a purely ministerial act.
According to them, in the event that this Court takes cognizance of the instant petition, the same should
be dismissed for failure of petitioner to observe the hierarchy of courts.

Practically the same procedural infirmities were raised in Del Mar v. Philippine Amusement and Gaming
Corporation where an almost identical factual setting obtained. Petitioners therein filed a petition for
injunction directly before the Court which sought to enjoin respondent from operating the jai-alai games
by itself or in joint venture with another corporate entity allegedly in violation of law and the
Constitution. Respondents contended that the Court had no jurisdiction to take original cognizance of a
petition for injunction because it was not one of the actions specifically mentioned in Section 1 of Rule
56 of the 1997 Rules of Civil Procedure. Respondents likewise took exception to the alleged failure of
petitioners to observe the doctrine on hierarchy of courts. In brushing aside the apparent procedural
lapse, we held that x x x this Court has the discretionary power to take cognizance of the petition at bar
if compelling reasons, or the nature and importance of the issues raised, warrant the immediate
exercise of its jurisdiction.[4]

In the case at bar, we are not inclined to rule differently. The petition at bar seeks to nullify, via a
petition for certiorari and prohibition filed directly before this Court, the Grant of Authority and
Agreement for the Operation of Sports Betting and Internet Gaming by virtue of which SAGE was vested
by PAGCOR with the authority to operate on-line Internet gambling. It is well settled that averments in
the complaint, and not the nomenclature given by the parties, determine the nature of the action.[5]
Although the petition alleges grave abuse of discretion on the part of respondent PAGCOR, what it
primarily seeks to accomplish is to prevent the enforcement of the Grant of Authority and Agreement
for the Operation of Sports Betting and Internet Gaming. Thus, the action may properly be characterized
as one for Prohibition under Section 2 of Rule 65, which incidentally, is another remedy resorted to by
petitioner.

Granting arguendo that the present action cannot be properly treated as a petition for prohibition, the
transcendental importance of the issues involved in this case warrants that we set aside the technical
defects and take primary jurisdiction over the petition at bar. One cannot deny that the issues raised
herein have potentially pervasive influence on the social and moral well being of this nation, specially
the youth; hence, their proper and just determination is an imperative need. This is in accordance with
the well-entrenched principle that rules of procedure are not inflexible tools designed to hinder or
delay, but to facilitate and promote the administration of justice. Their strict and rigid application, which
would result in technicalities that tend to frustrate, rather than promote substantial justice, must always
be eschewed.[6]

Having disposed of these procedural issues, we now come to the substance of the action.

A legislative franchise is a special privilege granted by the state to corporations. It is a privilege of public
concern which cannot be exercised at will and pleasure, but should be reserved for public control and
administration, either by the government directly, or by public agents, under such conditions and
regulations as the government may impose on them in the interest of the public. It is Congress that
prescribes the conditions on which the grant of the franchise may be made. Thus the manner of granting
the franchise, to whom it may be granted, the mode of conducting the business, the charter and the
quality of the service to be rendered and the duty of the grantee to the public in exercising the franchise
are almost always defined in clear and unequivocal language.[7]

After a circumspect consideration of the foregoing discussion and the contending positions of the
parties, we hold that PAGCOR has acted beyond the limits of its authority when it passed on or shared
its franchise to SAGE.

In the Del Mar case where a similar issue was raised when PAGCOR entered into a joint venture
agreement with two other entities in the operation and management of jai alai games, the Court,[8] in
an En Banc Resolution dated 24 August 2001, partially granted the motions for clarification filed by
respondents therein insofar as it prayed that PAGCOR has a valid franchise, but only by itself (i.e. not in
association with any other person or entity), to operate, maintain and/or manage the game of jai-alai.

In the case at bar, PAGCOR executed an agreement with SAGE whereby the former grants the latter the
authority to operate and maintain sports betting stations and Internet gaming operations. In essence,
the grant of authority gives SAGE the privilege to actively participate, partake and share PAGCORs
franchise to operate a gambling activity. The grant of franchise is a special privilege that constitutes a
right and a duty to be performed by the grantee. The grantee must not perform its activities arbitrarily
and whimsically but must abide by the limits set by its franchise and strictly adhere to its terms and
conditionalities. A corporation as a creature of the State is presumed to exist for the common good.
Hence, the special privileges and franchises it receives are subject to the laws of the State and the
limitations of its charter. There is therefore a reserved right of the State to inquire how these privileges
had been employed, and whether they have been abused.[9]

While PAGCOR is allowed under its charter to enter into operators and/or management contracts, it is
not allowed under the same charter to relinquish or share its franchise, much less grant a veritable
franchise to another entity such as SAGE. PAGCOR can not delegate its power in view of the legal
principle of delegata potestas delegare non potest, inasmuch as there is nothing in the charter to show
that it has been expressly authorized to do so. In Lim v. Pacquing,[10] the Court clarified that since ADC
has no franchise from Congress to operate the jai-alai, it may not so operate even if it has a license or
permit from the City Mayor to operate the jai-alai in the City of Manila. By the same token, SAGE has to
obtain a separate legislative franchise and not ride on PAGCORs franchise if it were to legally operate
on-line Internet gambling.

WHEREFORE, in view of all the foregoing, the instant petition is GRANTED. The Grant of Authority and
Agreement to Operate Sports Betting and Internet Gaming executed by PAGCOR in favor of SAGE is
declared NULL and VOID.

SO ORDERED.

Davide, Jr., C.J., Puno, Vitug, Panganiban, Quisumbing, Sandoval-Gutierrez, Carpio, Austria-Martinez,
Corona, Carpio-Morales, Callejo, Sr., Azcuna, and Tinga, JJ., concur.

[1] Rollo, p. 18.

[2] Philippine Constitutional Association v. Enriquez, G.R. No. 113888, 19 August 1994, 235 SCRA 506;
Bayan (Bagong Alyansang Makabayan) v. Zamora, G.R. No. 138570, 10 October 2000, 342 SCRA 450.

[3] Kilosbayan Inc. v. Guingona, G.R. No. 113375, 5 May 1994, 232 SCRA 110; Lopez, et al. v. Philippine
International Air Terminals Co., Inc, et al., G.R. No. 155661, 5 May 2003.
[4] Del Mar v. Philippine Amusement and Gaming Corporation, G.R. No. 138298, 29 November 2000, 346
SCRA 501; citing Fortich, et al. v. Corona, et al., G.R. No. 131457, 24 April 1998, 289 SCRA 624.

[5] Abad v. Court of First Instance of Pangasinan, Br. VIII, G.R. Nos. 58507-08, 26 February 1992, 206
SCRA 567, 579; Solid Homes, Inc. v. Court of Appeals, 337 Phil. 605 (1997).

[6] Serrano v. Galant Maritime Services, et al., G.R. No. 151833, 7 August 2003.

[7] Supra, note 3.

[8] Del Mar v. Philippine Amusement and Gaming Corporation, et al., 416 Phil. 172 (2001).

[9] Bataan Shipyard & Engineering Co., Inc. v. PCGG, G.R. No. No L-75885, 27 May 1987, 150 SCRA 181.

[10] 310 Phil. 722 (1995).

Republic of the Philippines

SUPREME COURT

Manila
FIRST DIVISION

G.R. No. 93237 November 6, 1992

RADIO COMMUNICATIONS OF THE PHILIPPINES, INC. (RCPI), petitioner,

vs.

NATIONAL TELECOMMUNICATIONS COMMISSION (NTC) and JUAN A. ALEGRE, respondents.

PADILLA, J.:

Private respondent Juan A. Alegre's wife, Dr. Jimena Alegre, sent two (2) RUSH telegrams through
petitioner RCPI's facilities in Taft Ave., Manila at 9:00 in the morning of 17 March 1989 to his sister and
brother-in-law in Valencia, Bohol and another sister-in-law in Espiritu, Ilocos Norte, with the following
identical texts:

MANONG POLING DIED INTERMENT TUESDAY 1

Both telegrams did not reach their destinations on the expected dates. Private respondent filed a letter-
complaint against the RCPI with the National Telecommunications Commission (NTC) for poor service,
with a request for the imposition of the appropriate punitive sanction against the company.

Taking cognizance of the complaint, NTC directed RCPI to answer the complaint and set the initial
hearing of the case to 2 May 1989. After two (2) resettings, RCPI moved to dismiss the case on the
following grounds:
1. Juan Alegre is not the real party in interest;

2. NTC has no jurisdiction over the case;

3. the continued hearing of the case violates its constitutional right to due process of law. 2

RCPI likewise moved for deferment of scheduled hearings until final determination of its motion to
dismiss.

On 15 June 1989, NTC proceeded with the hearing and received evidence for private respondent Juan
Alegre. On 3 October 1989, RCPI's motion to dismiss was denied, thus:

The herein complainant is the husband of the sender of the "rush" telegram that respondent allegedly
failed to deliver in a manner respondent bound itself to undertake, so his legal interest in this
administrative case cannot be seriously called in question. As regards the issue of jurisdiction, the
authority of the Commission to hear and decide this case stems from its power of control and
supervision over the operation of public communication utilities as conferred upon it by law.

Besides, the filing of a motion to dismiss is not allowed by the rules (Section 1, Rule 12, Rules of Practice
and Procedures). Following, however, the liberal construction of the rules, respondent (sic) motion shall
be treated as its answer or be passed upon after the conclusion of the hearing on the merits. . . . 3

Hearings resumed in the absence of petitioner RCPI which was, however, duly notified thereof. On 27
November 1989, NTC disposed of the controversy in the following manner:

WHEREFORE, in view of all the foregoing, the Commission finds respondent administratively liable for
deficient and inadequate service defined under Section 19(a) of C.A. 146 and hereby imposes the
penalty of FINE payable within thirty (30) days from receipt hereof in the aggregate amount of ONE
THOUSAND PESOS (P1,000.00) for:
1. Rush Telegram sent to Valencia, Bohol on March 17, 1989 and received on March 21, 1989

3 days x P200.00 per day = P600.00

2. Rush Telegram sent to Espiritu, Ilocos Norte on March 17, 1989 and received on March 20, 1989

2 days x P200.00 per day = P400.00

Total = P1,000.00

ENTERED. November 27, 1989. 4

A motion for reconsideration by RCPI reiterating averments in its earlier motion to dismiss was denied
for lack of merit; 5 hence, this petition for review invoking C.A. 146 Sec. 19(a) which limits the
jurisdiction of the Public Service Commission (precursor of the NTC) to the fixing of rates. RCPI submits
that its position finds support in two (2) decided cases 6 identical with the present one. Then Justice
(later Chief Justice) Fernando writing for the Court stated:

. . . There can be no justification then for the Public Service Commission imposing the fines for these two
petitions. The law cannot be any clearer. The only power it possessed over radio companies, as noted
was the (sic ) fix rates. It could not take to task a radio company for negligence or misfeasance. It was
bereft of such competence. It was not vested within such authority. . . .

The Public Service Commission having been abolished by virtue of a Presidential Decree, as set forth at
the outset, and a new Board of Communications having been created to take its place, nothing said in its
decision has reference to whatever powers are now lodged in the latter body. . . . . . . (Footnotes
omitted)

Two (2) later cases, 7 adhering to the above tenet ruled:

Even assuming that the respondent Board of Communications has the power of jurisdiction over
petitioner in the exercise of its supervision to insure adequate public service, petitioner cannot be
subjected to payment of fine under sec. 21 of the Public Service Act, because this provision of the law
subjects to a fine every public service that violates or falls (sic) to comply with the terms and conditions
of any certificate or any orders, decisions and regulations of the Commission. . . . .

The Office of the Solicitor General now claims that the cited cases are no longer applicable, that the
power and authority of the NTC to impose fines is incidental to its power to regulate public service
utilities and to supervise telecommunications facilities, which are now clearly defined in Section 15,
Executive Order No. 546 dated 23 July 1979: thus:

Functions of the Commission. The Commission shall exercise the following functions:

xxx xxx xxx

b. Establish, prescribe and regulate the areas of operation of particular operators of the public
service communications;

xxx xxx xxx

h. Supervise and inspect the operation of radio stations and telecommunications facilities.

Regulatory administrative agencies necessarily impose sanctions, adds the Office of the Solicitor
General. RCPI was fined based on the finding of the NTC that it failed to undertake adequate service in
delivering two (2) rush telegrams. NTC takes the view that its power of supervision was broadened by E.
O. No. 546, and that this development superseded the ruling in RCPI vs. Francisco Santiago and
companion cases.
The issues of due process and real parties in interest do not have to be discussed in this case. This
decision will dwell on the primary question of jurisdiction of the NTC to administratively impose fines on
a telegraph company which fails to render adequate service to a consumer.

E. O. 546, it will be observed, is couched in general terms. The NTC stepped "into the shoes" of the
Board of Communications which exercised powers pursuant to the Public Service Act. The power to
impose fines should therefore be read in the light of the Francisco Santiago case because subsequent
legislation did not grant additional powers to the Board of Communications. The Board in other words,
did not possess the power to impose administrative fines on public services rendering deficient service
to customers, ergo its successor cannot arrogate unto itself such power, in the absence of legislation. It
is true that the decision in RCPI vs. Board of Communications seems to have modified the Santiago
ruling in that the later case held that the Board of Communications can impose fines if the public service
entity violates or fails to comply with the terms and conditions of any certificate or any order, decision
or regulation of the Commission. But can private respondent's complaint be similarly treated when the
complaint seeks redress of a grievance against the company? 8 NTC has no jurisdiction to impose a fine.
Globe Wireless Ltd. vs. Public Service Commission (G. R. No. L-27250, 21 January 1987, 147 SCRA 269)
says so categorically.

Verily, Section 13 of Commonwealth Act No. 146, as amended, otherwise known as the Public Service
Act, vested in the Public Service Commission jurisdiction, supervision and control over all public services
and their franchises, equipment and other properties.

xxx xxx xxx

The act complained of consisted in petitioner having allegedly failed to deliver the telegraphic message
of private respondent to the addressee in Madrid, Spain. Obviously, such imputed negligence has
nothing whatsoever to do with the subject matter of the very limited jurisdiction of the Commission
over petitioner.

Moreover, under Section 21 of C. A. 146, as amended, the Commission was empowered to impose an
administrative fine in cases of violation of or failure by a public service to comply with the terms and
conditions of any certificate or any orders, decisions or regulations of the Commission. Petitioner
operated under a legislative franchise, so there were no terms nor conditions of any certificate issued by
the Commission to violate. Neither was there any order, decision or regulation from the Commission
applicable to petitioner that the latter had allegedly violated, disobeyed, defied or disregarded.
No substantial change has been brought about by Executive Order No. 546 invoked by the Solicitor
General's Office to bolster NTC's jurisdiction. The Executive Order is not an explicit grant of power to
impose administrative fines on public service utilities, including telegraphic agencies, which have failed
to render adequate service to consumers. Neither has it expanded the coverage of the supervisory and
regulatory power of the agency. There appears to be no alternative but to reiterate the settled doctrine
in administrative law that:

Too basic in administrative law to need citation of jurisprudence is the rule that jurisdiction and powers
of administrative agencies, like respondent Commission, are limited to those expressly granted or
necessarily implied from those granted in the legislation creating such body; and any order without or
beyond such jurisdiction is void and ineffective . . . (Globe Wireless case, supra).

WHEREFORE, the decision appealed from is REVERSED and SET ASIDE for lack of jurisdiction of the NTC
to render it. The temporary restraining order issued on 18 June 1990 is made PERMANENT without
prejudice, however, to the filing by the party aggrieved by the conduct of RCPI, of the proper action in
the proper forum. No costs.

SO ORDERED.

Cruz, Griño-Aquino and Bellosillo, JJ., concur.

Medialdea, J., is on leave.

Footnotes

1 Exhibit "D" — NTC records.

2 Rollo, pp. 19-23.

3 Ibid., p. 24.

4 Ibid., p. 29.

5 Ibid., pp. 39-40.

6 RCPI vs. Francisco Santiago and Enrique Medina, G. R. No. L-29236, 21 August 1974, and RCPI vs.
Constancio Jaugan, G.R. No. L-29247, 21 August 1974, 58 SCRA 493.

7 RCPI vs. Board of Communications, G. R. No. L-43653, 29 November 1977 and RCPI vs. Board of
Communications, G. R. No. L-45378, 29 November 1977, 80 SCRA 471.

8 There is no doubt that when the complaint seek damages in the case of a breach of contractual
obligation on the part of the telecommunications company (failure to send a telegram on time,
included), the RTC has jurisdiction (see RCPI and Globe Mackay and Radio Corporation vs. Rufus
Rodriguez), G. R. No. 83768, 28 February 1990, 182 SCRA 899; RCPI vs. Court of Appeals, et al., G.R. No.
79578, 13 March 1991, 195 SCRA 147.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines

SUPREME COURT

Manila

THIRD DIVISION

G.R. No. L-45839 June 1, 1988

RUFINO MATIENZO, GODOFREDO ESPIRITU, DIOSCORRO FRANCO, AND LA SUERTE TRANSPORTATION

CORPORATION, petitioners,

vs.

HON. LEOPOLDO M. ABELLERA, ACTING CHAIRMAN OF THE BOARD OF TRANSPORTATION, HON.

GODOFREDO Q. ASUNCION, MEMBER OF THE BOARD OF TRANSPORTATION, ARTURO DELA CRUZ, MS
TRANSPORTATION CO., INC., NEW FAMILIA TRANSPORTATION CO., ROBERTO MOJARES, ET AL.,
respondents.

GUTIERREZ, JR., J.:

This is a petition for certiorari and prohibition, with application for preliminary injunction, seeking the
annulment and inhibition of the grant or award of provisional permits or special authority by the
respondent Board of Transportation (BOT) to respondent taxicab operators, for the operation and
legalization of "excess taxicab units" under certain provisions of Presidential Decree No. 101 "despite
the lapse of the power to do so thereunder," and "in violation of other provisions of the Decree, Letter
of Instructions No. 379 and other relevant rules of the BOT."

The petitioners and private respondents are all authorized taxicab operators in Metro Manila. The
respondents, however, admittedly operate "colorum" or "kabit" taxicab units. On or about the second
week of February, 1977, private respondents filed their petitions with the respondent Board for the
legalization of their unauthorized "excess" taxicab units citing Presidential Decree No. 101, promulgated
on January 17, 1973, "to eradicate the harmful and unlawful trade of clandestine operators, by replacing
or allowing them to become legitimate and responsible operators." Within a matter of days, the
respondent Board promulgated its orders setting the applications for hearing and granting applicants
provisional authority to operate their "excess taxicab units" for which legalization was sought. Thus, the
present petition.

Opposing the applications and seeking to restrain the grant of provisional permits or authority, as well
as the annulment of permits already granted under PD 101, the petitioners allege that the BOT acted
without jurisdiction in taking cognizance of the petitions for legalization and awarding special permits to
the private respondents.

Presidential Decree No. 101 vested in the Board of Transportation the power, among others "To grant
special permits of limited term for the operation of public utility motor vehicles as may, in the judgment
of the Board, be necessary to replace or convert clandestine operators into legitimate and responsible
operators." (Section 1, PD 101)

Citing, however, Section 4 of the Decree which provides:

SEC. 4. Transitory Provision. — Six months after the promulgation of this Decree, the Board of
Transportation, the Bureau of Transportation, The Philippine Constabulary, the city and municipal
forces, and the provincial and city fiscals shall wage a concerted and relentless drive towards the total
elimination and punishment of all clandestine and unlawful operators of public utility motor vehicles."

the petitioners argue that neither the Board of Transportation chairman nor any member thereof had
the power, at the time the petitions were filed (i.e. in 1977), to legitimize clandestine operations under
PD 101 as such power had been limited to a period of six (6) months from and after the promulgation of
the Decree on January 17, 1973. They state that, thereafter, the power lapses and becomes functus
officio.

To reinforce their stand, the petitioners refer to certain provisions of the Rules and Regulations
implementing PD 101 issued by respondent Board, Letter of Instructions No. 379, and BOT
Memorandum Circular No. 76-25 (a). In summary, these rules provide inter alia that (1) only applications
for special permits for "colorum" or "kabit" operators filed before July 17, 1973 shall be accepted and
processed (Secs. 3 and 16 (c), BOT-LTC-HPG Joint Regulations Implementing PD 101, pp. 33 and 47,
Rollo); (2) Every provisional authority given to any taxi operator shall be cancelled immediately and no
provisional authority shall thereafter be issued (par. 6, Letter of Instructions No. 379, issued March 10,
1976, p. 58, Rollo); (3) Effective immediately, no provisional authorities on applications for certificates of
public convenience shall be granted or existing provisional authorities on new applications extended to,
among others, taxi denominations in Metro Manila (BOT Memorandum Circular No. 75-25 (a), August
30, 1976, p. 64, Rollo); (4) All taxis authorized to operate within Metro Manila shall obtain new special
permits from the BOT, which permits shall be the only ones recognized within the area (par. 8, LOI No.
379, supra); and (5) No bonafide applicant may apply for special permit to operate, among others, new
taxicab services, and, no application for such new service shall be accepted for filing or processed by any
LTC agency or granted under these regulations by any LTC Regional Office until after it shall have
announced its program of development for these types of public motor vehicles (Sec. 16d, BOT-LTC-HPG
Joint Regulations, p. 47, Rollo).

The petitioners raise the following issues:

I. WHETHER OR NOT THE BOARD OF TRANSPORTATION HAS THE POWER TO GRANT PROVISIONAL
PERMITS TO OPERATE DESPITE THE BAN THEREON UNDER LETTER OF INSTRUCTIONS NO. 379;

II. WHETHER OR NOT THE BOARD OF TRANSPORTATION HAS THE POWER TO LEGALIZE, AT THIS
TIME, CLANDESTINE AND UNLAWFUL TAXICAB OPERATIONS UNDER SECTION 1, P.D. 101; AND

III. WHETHER OR NOT THE PROCEDURE BEING FOLLOWED BY THE BOARD IN THE CASES IN
QUESTION SATISFIES THE PROCEDURAL DUE PROCESS REQUIREMENTS. (p. 119, Rollo)

We need not pass upon the first issue raised anent the grant of provisional authority to respondents.
Considering that the effectivity of the provisional permits issued to the respondents was expressly
limited to June 30, 1977, as evidenced by the BOT orders granting the same (Annexes G, H, I and J
among others) and Memorandum Circular No. 77-4 dated January 20, 1977 (p. 151, Rollo),
implementing paragraph 6 of LOI 379 (ordering immediate cancellation of all provisional authorities
issued to taxicab operators, supra), which provides:

5. After June 30, 1977, all provisional authorities are deemed cancelled, even if hearings on the
main application have not been terminated.
the issue is MOOT and ACADEMIC. Only the issue on legalization remains under consideration.

Justifying its action on private respondent's applications, the respondent Board emphasizes public need
as the overriding concern. It is argued that under PD 101, it is the fixed policy of the State "to eradicate
the harmful and unlawful trade of clandestine operators by replacing or allowing them to become
legitimate and responsible ones" (Whereas clause, PD 101). In view thereof, it is maintained that
respondent Board may continue to grant to "colorum" operators the benefits of legalization under PD
101, despite the lapse of its power, after six (6) months, to do so, without taking punitive measures
against the said operators.

Indeed, a reading of Section 1, PD 101, shows a grant of powers to the respondent Board to issue
provisional permits as a step towards the legalization of colorum taxicab operations without the alleged
time limitation. There is nothing in Section 4, cited by the petitioners, to suggest the expiration of such
powers six (6) months after promulgation of the Decree. Rather, it merely provides for the withdrawal of
the State's waiver of its right to punish said colorum operators for their illegal acts. In other words, the
cited section declares when the period of moratorium suspending the relentless drive to eliminate illegal
operators shall end. Clearly, there is no impediment to the Board's exercise of jurisdiction under its
broad powers under the Public Service Act to issue certificates of public convenience to achieve the
avowed purpose of PD 101 (Sec. 16a, Public Service Act, Nov. 7, 1936).

It is a settled principle of law that in determining whether a board or commission has a certain power,
the authority given should be liberally construed in the light of the purposes for which it was created,
and that which is incidentally necessary to a full implementation of the legislative intent should be
upheld as being germane to the law. Necessarily, too, where the end is required, the appropriate means
are deemed given (Martin, Administrative Law, 1979, p. 46). Thus, as averred by the respondents:

... [A]ll things considered, the question is what is the best for the interest of the public. Whether PD 101
has lost its effectiveness or not, will in no way prevent this Board from resolving the question in the
same candor and spirit that P.D. 101 and LOI 379 were issued to cope with the multifarious ills that
plague our transport system. ... (Emphasis supplied) (pp. 91-92, Rollo)

This, the private respondents appreciate, as they make reference to PD 101, merely to cite the
compassion with which colorum operators were dealt with under the law. They state that it is "in the
same vein and spirit that this Honorable Board has extended the Decree of legalization to the operatives
of the various PUJ and PUB services along legislative methods," that respondents pray for authorization
of their colorum units in actual operation in Metro Manila (Petitions for Legalization, Annexes E & F, par.
7, pp. 65-79, Rollo).

Anent the petitioners' reliance on the BOT Rules and Regulations Implementing PD 101 as well as its
Memorandum Circular No. 76-25(a), the BOT itself has declared:

In line with its duty to rationalize the transport industry, the Board shall. from time to time, re- study the
public need for public utilities in any area in the Philippines for the purpose of re- evaluating the policies.
(p. 64, Rollo)

Thus, the respondents correctly argue that "as the need of the public changes and oscillates with the
trends of modern life, so must the Memo Orders issued by respondent jibe with the dynamic and
flexible standards of public needs. ... Respondent Board is not supposed to 'tie its hands' on its issued
Memo Orders should public interest demand otherwise" (Answer of private respondents, p. 121, Rollo).

The fate of the private respondent's petitions is initially for the Board to determine. From the records of
the case, acceptance of the respondent's applications appears to be a question correctly within the
discretion of the respondent Board to decide. As a rule, where the jurisdiction of the BOT to take
cognizance of an application for legalization is settled, the Court enjoins the exercise thereof only when
there is fraud, abuse of discretion or error of law. Furthermore, the court does not interfere, as a rule,
with administrative action prior to its completion or finality . It is only after judicial review is no longer
premature that we ascertain in proper cases whether the administrative findings are not in violation of
law, whether they are free from fraud or imposition and whether they find substantial support from the
evidence.

Finally, with respect to the last issue raised by the petitioners alleging the denial of due process by
respondent Board in granting the provisional permits to the private respondents and in taking
cognizance of their applications for legalization without notice and hearing, suffice it to say that PD 101
does not require such notice or hearing for the grant of temporary authority . The provisional nature of
the authority and the fact that the primary application shall be given a full hearing are the safeguards
against its abuse. As to the applications for legalization themselves, the Public Service Act does enjoin
the Board to give notice and hearing before exercising any of its powers under Sec. 16 thereof. However,
the allegations that due process has been denied are negated by the hearings set by the Board on the
applications as expressed in its orders resolving the petitions for special permits (Annexes G, H, I, pp. 80-
102, Rollo).
The Board stated:

The grounds involved in the petition are of first impression. It cannot resolve the issue ex-parte. It needs
to hear the views of other parties who may have an interest, or whose interest may be affected by any
decision that this Board may take.

The Board therefore, decides to set the petition for hearing.

xxx xxx xxx

As to the required notice, it is impossible for the respondent Board to give personal notice to all parties
who may be interested in the matter, which parties are unknown to it. Its aforementioned order
substantially complies with the requirement. The petitioners having been able to timely oppose the
petitions in question, any lack of notice is deemed cured.

WHEREFORE. the petition is hereby DISMISSED for lack of merit. The questioned orders of the then
Board of Transportation are AFFIRMED.

SO ORDERED.

Fernan (Chairman), Feliciano, Bidin and Cortes, JJ., concur.

The Lawphil Project - Arellano Law Foundation

SECOND DIVISION

[G.R. No. 137489. May 29, 2002]

COOPERATIVE DEVELOPMENT AUTHORITY, petitioner, vs. DOLEFIL AGRARIAN REFORM BENEFICIARIES

COOPERATIVE, INC., ESMERALDO A. DUBLIN, ALICIA SAVAREZ, EDNA URETA, ET AL., respondents.

DECISION

DE LEON, JR. J.

At the core of the instant petition for review on certiorari of the Decision[1] of the Court of Appeals,
13th Division, in CA-G.R. SP. No. 47933 promulgated on September 9, 1998 and its Resolution[2] dated
February 9, 1999 is the issue of whether or not petitioner Cooperative Development Authority (CDA for
brevity) is vested with quasi-judicial authority to adjudicate intra-cooperative disputes.

The record shows that sometime in the later part of 1997, the CDA received from certain members of
the Dolefil Agrarian Reform Beneficiaries Cooperative, Inc. (DARBCI for brevity), an agrarian reform
cooperative that owns 8,860 hectares of land in Polomolok, South Cotabato, several complaints alleging
mismanagement and/or misappropriation of funds of DARBCI by the then incumbent officers and
members of the board of directors of the cooperative, some of whom are herein private respondents.

Acting on the complaints docketed as CDA-CO Case No. 97-011, CDA Executive Director Candelario L.
Verzosa, Jr. issued an order[3] dated December 8, 1997 directing the private respondents to file their
answer within ten (10) days from receipt thereof.
Before the private respondents could file their answer, however, CDA Administrator Alberto P. Zingapan
issued on December 15, 1997 an order,[4] upon the motion of the complainants in CDA-CO Case No. 97-
011, freezing the funds of DARBCI and creating a management committee to manage the affairs of the
said cooperative.

On December 18, 1991, the private respondents filed a Petition for Certiorari[5] with a prayer for
preliminary injunction, damages and attorneys fees against the CDA and its officers namely: Candelario
L. Verzosa, Jr. and Alberto P. Zingapan, including the DOLE Philippines Inc. before the Regional Trial
Court (RTC for brevity) of Polomolok, South Cotabato, Branch 39. The petition which was docketed as SP
Civil Case No. 25, primarily questioned the jurisdiction of the CDA to resolve the complaints against the
private respondents, specifically with respect to the authority of the CDA to issue the freeze order and
to create a management committee that would run the affairs of DARBCI.

On February 24, 1998, CDA Chairman Jose C. Medina, Jr. issued an order[6] in CDA-CO Case No. 97-011
placing the private respondents under preventive suspension, hence, paving the way for the newly-
created management committee[7] to assume office on March 10, 1998.

On March 27, 1998, the RTC of Polomolok, South Cotabato, Branch 39, issued a temporary restraining
order[8] (TRO), initially for seventy-two (72) hours and subsequently extended to twenty (20) days, in an
Order dated March 31, 1998. The temporary restraining order, in effect, directed the parties to restore
status quo ante, thereby enabling the private respondents to reassume the management of DARBCI.

The CDA questioned the propriety of the temporary restraining order issued by the RTC of Polomolok,
South Cotabato on March 27, 1998 through a petition for certiorari before the Court of Appeals, 12th
Division, which was docketed as CA-G.R. SP No. 47318.

On April 21, 1998, the Court of Appeals, 12th Division, issued a temporary restraining order[9] in CA-G.R.
SP No. 47318 enjoining the RTC of Polomolok, South Cotabato, Branch 39, from enforcing the restraining
order which the latter court issued on March 27, 1998, and ordered that the proceedings in SP Civil Case
No. 25 be held in abeyance.

Consequently, the CDA continued with the proceedings in CDA-CO Case No. 97-011. On May 26, 1998
CDA Administrator Arcadio S. Lozada issued a resolution[10] which directed the holding of a special
general assembly of the members of DARBCI and the creation of an ad hoc election committee to
supervise the election of officers and members of the board of directors of DARBCI scheduled on June
14, 1998.

The said resolution of the CDA, issued on May 26, 1998 prompted the private respondents to file on
June 8, 1998 a Petition for Prohibition[11] with a prayer for preliminary mandatory injunction and
temporary restraining order with the Court of Appeals, 13th Division, which was docketed as CA-G.R. SP
No. 47933. On June 10, 1998, the appellate court issued a resolution[12] restraining the CDA and its
administrator, Arcadio S. Lozada, the three (3) members of the ad hoc election committee or any and all
persons acting in their behalf from proceeding with the election of officers and members of the board of
directors of DARBCI scheduled on June 14, 1998.

Incidentally, on the same date that the Court of Appeals issued a temporary restraining order in CA-G.R.
SP No. 47933 on June 10, 1998, a corporation by the name of Investa Land Corporation (Investa for
brevity) which allegedly executed a Lease Agreement with Joint Venture with DARBCI filed a petition[13]
with the RTC of Polomolok, South Cotabato, Branch 39, docketed as SP Civil Case No. 28, essentially
seeking the annulment of orders and resolutions issued by the CDA in CDA-CO Case No. 97-011 with a
prayer for temporary restraining order and preliminary injunction. On the following day, June 11, 1998,
the trial court issued a temporary restraining order[14] enjoining the respondents therein from
proceeding with the scheduled special general assembly and the elections of officers and members of
the board of directors of DARBCI on June 14, 1998. Thereafter, it also issued a writ of preliminary
injunction.

With the issuance of the two (2) restraining orders by the Court of Appeals, 13th Division, and the RTC of
Polomolok, South Cotabato, Branch 39, on June 10 and 11, 1998, respectively, the scheduled special
general assembly and the election of officers and members of the board of directors of DARBCI on June
14, 1998 did not take place.

Nevertheless, on July 12, 1998, the majority of the 7,511 members of DARBCI, on their own initiative,
convened a general assembly and held an election of the members of the board of directors and officers
of the cooperative, thereby effectively replacing the private respondents. Hence, the private
respondents filed a Twin Motions for Contempt of Court and to Nullify Proceedings[15] with the Court of
Appeals in CA-G.R. SP No. 47933.

On September 9, 1998 the Court of Appeals, 13th Division, promulgated its subject appealed
Decision[16] granting the petition in CA-G.R. SP No. 47933, the dispositive portion of which reads:
Wherefore, the foregoing considered, the Petition is hereby GRANTED. The Orders of the respondent
Cooperative Development Authority in CDA-CO case No. 97-011 dated 08 December 1997, 15 December
1997, 26 January 1998, 24 February 1998, 03 March 1998, and the Resolution dated 26 May 1998, are
hereby declared NULL AND VOID and of no legal force and effect.

Further, the respondents are hereby ORDERED to perpetually CEASE AND DESIST from taking any further
proceedings in CDA-CO Case No. 97-011.

Lastly, the respondent CDA is hereby ORDERED to REINSTATE the Board of Directors of DARBCI who
were ousted by virtue of the questioned Orders, and to RESTORE the status quo prior to the filing of
CDA-CO Case No. 97-011.

SO ORDERED.

The CDA filed a motion for reconsideration[17] of the Decision in CA-G.R. SP No. 47933 but it was denied
by the Court of Appeals in its assailed Resolution[18] dated February 9, 1999, thus:

WHEREFORE, the Motion for Reconsideration is hereby DENIED for being patently without merit.

MOREOVER, acting on petitioners Twin Motion, and in view of the Decision in this case dated 09,
September 1998, the tenor of which gives it legal effect nunc pro tunc. We therefore hold the 12 July
1998 election of officers, the resolutions passed during the said assembly, and the subsequent oath-
taking of the officers elected therein, and all actions taken during the said meeting, being in blatant
defiance of a valid restraining order issued by this Court, to be NULL AND VOID AB INITIO AND OF NO
LEGAL FORCE AND EFFECT.

FURTHERMORE, the private respondents are hereby given thirty (30) days from receipt of this
Resolution within which to explain in writing why they should not be held in contempt of this Court for
having openly defied the restraining order dated 10 July 1998. The Hon. Jose C. Medina of the CDA is
given a like period to explain in writing why he should not be cited in contempt for having administered
the oath of the Board of Officers pending the effectivity of the restraining order. The respondent Arcadio
S. Lozada, Administrator of the CDA, is likewise given the same period to explain why he should not be
held in contempt for issuing a resolution on 21 July 1998 validating the proceedings of the assembly, and
another resolution on 28 August 1998 confirming the election of the officers thereof.

SO ORDERED.

Hence, the instant petition[19] for review which raises the following assignments of error:

THE HONORABLE COURT OF APPEALS, IN NULLIFYING THE ORDERS AND RESOLUTIONS OF THE
COOPERATIVE DEVELOPMENT AUTHORITY IN CDA CO CASE NO. 97-011, DECIDED A QUESTION OF
SUBSTANCE THAT IS NOT IN ACCORD WITH LAW AND APPLICABLE DECISIONS OF THE SUPREME COURT.

II

THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING THE RULE ON FORUM-SHOPPING.

III

THE HONORABLE COURT OF APPEALS ERRED IN RENDERING A DECISION ON THE BASIS OF PURE
CONJECTURES AND SURMISES AND HAS DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF
JUDICIAL PROCEEDINGS WHICH CALL FOR AN EXERCISE OF THIS HONORABLE COURTS SUPERVISION.

Petitioner CDA claims that it is vested with quasi-judicial authority to adjudicate cooperative disputes in
view of its powers, functions and responsibilities under Section 3 of Republic Act No. 6939.[20] The
quasi-judicial nature of its powers and functions was confirmed by the Department of Justice, through
the then Acting Secretary of Justice Demetrio G. Demetria, in DOJ Opinion No. 10, Series of 1995, which
was issued in response to a query of the then Chairman Edna E. Aberina of the CDA, to wit:
Applying the foregoing, the express powers of the CDA to cancel certificates of registration of
cooperatives for non-compliance with administrative requirements or in cases of voluntary dissolution
under Section 3(g), and to mandate and conciliate disputes within a cooperative or between
cooperatives under Section 8 of R.A. No. 6939, may be deemed quasi-judicial in nature.

The reason is that in the performance of its functions such as cancellation of certificate of registration, it
is necessary to establish non-compliance or violation of administrative requirement. To do so, there
arises an indispensable need to hold hearings, investigate or ascertain facts that possibly constitute non-
compliance or violation and, based on the facts investigated or ascertained, it becomes incumbent upon
the CDA to use its official discretion whether or not to cancel a cooperatives certificate of registration,
thus, clearly revealing the quasi-judicial nature of the said function. When the CDA acts as a conciliatory
body pursuant to Section 8 of R.A. No. 6939, it in effect performs the functions of an arbitrator.
Arbitrators are by the nature of their functions act in quasi-judicial capacity xxx.

The quasi-judicial nature of the foregoing functions is bolstered by the provisions of Sections 3(o) of R.A.
No. 6939 which grants CDA on (sic) the exercise of other functions as may be necessary to implement
the provisions of cooperative laws, the power to summarily punish for direct contempt any person guilty
of misconduct in the presence thereof who seriously interrupts any hearing or inquiry with a fine or
imprisonment prescribed therein, a power usually granted to make effective the exercise of quasi-
judicial functions.[21]

Likewise, the Office of the President, through the then Deputy Executive Secretary, Hon. Leonardo A.
Quisumbing, espoused the same view in the case of Alberto Ang, et al. v. The Board of Directors, Metro
Valenzuela Transport Services Cooperative, Inc., O.P. Case No. 51111, when it declared and ruled that:

Concededly, Section 3(o) of R.A. No. 6939 and Article 35(4) of R.A. 6938, may not be relied upon by the
CDA as authority to resolve internal conflicts of cooperatives, they being general provisions.
Nevertheless, this does not preclude the CDA from resolving the instant case. The assumption of
jurisdiction by the CDA on matters which partake of cooperative disputes is a logical, necessary and
direct consequence of its authority to register cooperatives. Before a cooperative can acquire juridical
personality, registration thereof is a condition sine qua non, and until and unless the CDA issues a
certificate of registration under its official seal, any cooperative for that matter cannot be considered as
having been legally constituted. To our mind, the grant of this power impliedly carries with it the
visitorial power to entertain cooperative conflicts, a lesser power compared to its authority to cancel
registration certificates when, in its opinion, the cooperative fails to comply with some administrative
requirements (Sec. 2(g), R.A. No. 6939). Evidently, respondents-appellants claim that the CDA is limited
to conciliation and mediation proceedings is bereft of legal basis. Simply stated, the CDA, in the exercise
of such other function and in keeping with the mandate of the law, could render the decisions and/or
resolutions as long as they pertain to the internal affairs of the public service cooperative, such as the
rights and privileges of its members, the rules and procedures for meetings of the general assembly,
Board of Directors and committees, election and qualifications of officers, directors and committee
members, and allocation and distribution of surpluses.[22]

The petitioner avers that when an administrative agency is conferred with quasi-judicial powers and
functions, such as the CDA, all controversies relating to the subject matter pertaining to its specialization
are deemed to be covered within the jurisdiction of said administrative agency. The courts will not
interfere in matters which are addressed to the sound discretion of government agencies entrusted with
the regulation of activities undertaken upon their special technical knowledge and training.

The petitioner added that the decision in the case of CANORECO v. Hon. Ruben D. Torres,[23] affirmed
the adjudicatory powers and functions of CDA contrary to the view held by the Court of Appeals, when
the Supreme Court upheld therein the ruling of the CDA annulling the election of therein respondents
Norberto Ochoa, et al. as officers of the Camarines Norte Electric Cooperative.

Petitioner CDA also claims that herein private respondents are guilty of forum-shopping by filing cases in
three (3) different fora seeking the same relief. Petitioner pointed out that private respondents
originally filed a petition with a prayer for preliminary injunction dated December 17, 1997 before the
RTC of Polomolok, South Cotabato which was docketed as SP Civil Case No. 25. Subsequently, the same
private respondents filed another petition with a prayer for preliminary injunction with the Court of
Appeals, 13th Division, docketed as CA-G.R. SP No. 47933. Thereafter, Investa, also represented by the
same counsel of private respondents, Atty. Reni Dublin, filed another case with the RTC of Polomolok,
South Cotabato, docketed as SP Civil Case No. 28, likewise praying, among others, for the issuance of
preliminary injunction and an application for a temporary restraining order. In effect, petitioner was
confronted with three (3) TROs issued in three (3) separate actions enjoining it from enforcing its orders
and resolutions in CDA-CO Case No. 97-011.

In their Comment,[24] private respondents contend that the instant petition for review on certiorari
filed by CDA Administrator Alberto Zingapan should be dismissed and struck down as a mere scrap of
paper for lack of authority to file the same from the Office of the Solicitor General and for having been
filed without approval from the Board of Administrators of CDA.
The private respondents also contend that, contrary to the claim of the petitioner, the powers, functions
and responsibilities of the CDA show that it was merely granted regulatory or supervisory powers over
cooperatives in addition to its authority to mediate and conciliate between parties involving the
settlement of cooperative disputes.

Private respondents denied that they are guilty of forum-shopping. They clarified that the case filed with
the RTC of Polomolok, South Cotabato, Branch 39, docketed as SP Civil Case No. 25, was a petition for
certiorari. On the other hand, the case that they filed with the Court of Appeals, 13th Division, docketed
therein as CA-G.R. SP No. 47933, was a petition for prohibition to stop the holding of a special general
assembly and the election of a new set of DARBCI officers on June 14, 1998 as ordered by the petitioner
CDA on May 26, 1998, which events have not yet occurred at the time the petition for certiorari was
filed by the private respondents with the RTC of Polomolok, South Cotabato, Branch 39.

Private respondents also denied that the filing by Investa of the petition for the declaration of nullity of
the orders and resolutions of petitioner CDA, with a prayer for temporary restraining order with the RTC
of Polomolok, South Cotabato, docketed therein as SP Civil Case No. 28, constituted forum-shopping on
their part. They pointed out that Investa has a separate juridical personality from DARBCI and that,
contrary to the claim of petitioner CDA, the former is not represented by the lawyer of the private
respondents.

By way of reply,[25] petitioner claims that Atty. Rogelio P. Madriaga was properly deputized, among
other lawyers, as Special Attorney by the Office of the Solicitor General to represent the CDA in the
instant petition pursuant to the letter[26] of Assistant Solicitor General Carlos N. Ortega addressed to
CDA Chairman Jose C. Medina, Jr. dated April 8, 1999. Likewise, the filing of the instant petition was an
official act of CDA Administrator Alberto P. Zingapan who was duly appointed by the CDA Board of
Administrators as chairman of the Oversight Committee on Legal Matters per Resolution No. 201, S-
1998.[27]

Meanwhile, on March 26, 1999, certain persons alleging to be incumbent officers and members of the
board of directors of DARBCI filed a motion to intervene in the instant petition which was granted by
this Court per its Resolution dated July 7, 1999.[28] In the same resolution, this Court required both
petitioner CDA and the private respondents in this case to file their respective comments to the petition-
in-intervention within ten (10) days from notice, but both parties failed to comply to do so up to the
present.
We note that the instant petition for review on certiorari suffers from a basic infirmity for lack of the
requisite imprimatur from the Office of the Solicitor General, hence, it is dismissible on that ground. The
general rule is that only the Solicitor General can bring or defend actions on behalf of the Republic of the
Philippines and that actions filed in the name of the Republic, or its agencies and instrumentalities for
that matter, if not initiated by the Solicitor General, will be summarily dismissed.[29]

The authority of the Office of the Solicitor General to represent the Republic of the Philippines, its
agencies and instrumentalities, is embodied under Section 35(1), Chapter 12, Title III, Book IV of the
Administrative Code of 1987 which provides that:

SEC. 35. Powers and Functions.The Office of the Solicitor General shall represent the Government of the
Philippines, its agencies and intrumentalities and its officials and agents in any litigation, proceeding,
investigation or matter requiring the services of lawyers. When authorized by the President or head of
the office concerned, it shall also represent government owned or controlled corporations. The Office of
the Solicitor General shall constitute the law office of the Government and, as such, shall discharge
duties requiring the services of lawyers. It shall have the following specific powers and functions:

(1) Represent the Government in the Supreme Court and the Court of Appeals in all criminal
proceedings; represent the Government and its officers in the Supreme Court, Court of Appeals, and all
other courts or tribunals in all civil actions and special proceedings in which the Government or any
officer thereof in his official capacity is a party.

The import of the above-quoted provision of the Administrative Code of 1987 is to impose upon the
Office of the Solicitor General the duty to appear as counsel for the Government, its agencies and
instrumentalites and its officials and agents before the Supreme Court, the Court of Appeals, and all
other courts and tribunals in any litigation, proceeding, investigation or matter requiring the services of
a lawyer. Its mandatory character was emphasized by this Court in the case of Gonzales v. Chavez,[30]
thus:

It is patent that the intent of the lawmaker was to give the designated official, the Solicitor General, in
this case, the unequivocal mandate to appear for the government in legal proceedings. Spread out in the
laws creating the office is the discernible intent which may be gathered from the term shall, which is
invariably employed, from Act No. 136 (1901) to the more recent Executive Order No. 292 (1987).
xxx xxx xxx

The decision of this Court as early as 1910 with respect to the duties of the Attorney-General well
applies to the Solicitor General under the facts of the present case. The Court then declared:

In this jurisdiction, it is the duty of the Attorney General to perform the duties imposed upon him by law
and he shall prosecute all causes, civil and criminal, to which the Government of the Philippine Islands,
or any officer thereof, in his official capacity, is a party xxx.

xxx xxx xxx

The Court is firmly convinced that considering the spirit and the letter of the law, there can be no other
logical interpretation of Sec. 35 of the Administrative Code than that it is, indeed, mandatory upon the
OSG to represent the Government of the Philippines, its agencies and instrumentalities and its officials
and agents in any litigation, proceeding, investigation or matter requiring the services of a lawyer.

As an exception to the general rule, the Solicitor General, in providing legal representation for the
government, is empowered under Section 35(8), Chapter 12, Title III, Book IV of the Administrative Code
of 1987 to deputize legal officers of government departments, bureaus, agencies and offices to assist the
Solicitor General and appear or represent the Government in cases involving their respective offices,
brought before the courts and exercise supervision and control over such legal officers with respect to
such cases.

Petitioner claims that its counsel of record, Atty. Rogelio P. Madriaga, was deputized by the Solicitor
General to represent the CDA in the instant petition. To prove its claim, the petitioner attached to its
Reply to the Comment dated January 31, 2000, a photocopy of the alleged deputation letter[31] from
the Office of the Solicitor General signed by Hon. Carlos N. Ortega, Assistant Solicitor General, addressed
to CDA Chairman Jose C. Medina, Jr.

A close scrutiny of the alleged deputation letter from the Office of the Solicitor General shows, however,
that said counsel for the petitioner was only authorized to appear as counsel in all civil cases in the
lower courts (RTCs and MTCs) wherein the CDA is a party-litigant. Likewise, the same letter appears to
be dated April 8, 1999 while the Petition for Review on Certiorari filed by the petitioner was dated
February 26, 1999. Clearly then, when the petition was filed with this Court on March 3, 1999, Atty.
Rogelio P. Madriaga was not yet deputized by the Office of the Solicitor General to represent the CDA.

Even on the assumption that the alleged letter from the Office of the Solicitor General was intended to
validate or ratify the authority of counsel to represent the petitioner in this case, the same contains
certain conditions, one of which is that petitioner shall submit to the Solicitor General, for review,
approval and signature, all important pleadings and motions, including motions to withdraw complaints
or appeals, as well as compromise agreements. Significantly, one of the major pleadings filed
subsequently by the petitioner in this case namely, the Reply to the Respondents Comment on the
Petition dated January 31, 2000, does not have any indication that the same was previously submitted to
the Office of the Solicitor General for review or approval, much less bear the requisite signature of the
Solicitor General as required in the alleged deputation letter.

Nonetheless, in view of the novelty of the main issue raised in this petition concerning the nature and
scope of jurisdiction of the CDA in the settlement of cooperative disputes as well as the long standing
legal battle involving the management of DARBCI between two (2) opposing factions that inevitably
threatens the very existence of one of the countrys major cooperatives, this Court has decided to act on
and determine the merits of the instant petition.

Section 3 of R.A. No. 6939 enumerates the powers, functions and responsibilities of the CDA, thus:

SEC. 3. Powers, Functions and Responsibilities.The Authority shall have the following powers, functions
and responsibilities:

(a) Formulate, adopt and implement integrated and comprehensive plans and programs on cooperative
development consistent with the national policy on cooperatives and the overall socio-economic
development plan of the Government;

(b) Develop and conduct management and training programs upon request of cooperatives that will
provide members of cooperatives with the entrepreneurial capabilities, managerial expertise, and
technical skills required for the efficient operation of their cooperatives and inculcate in them the true
spirit of cooperativism and provide, when necessary, technical and professional assistance to ensure the
viability and growth of cooperatives with special concern for agrarian reform, fishery and economically
depressed sectors;
(c) Support the voluntary organization and consensual development of activities that promote
cooperative movements and provide assistance to wards upgrading managerial and technical expertise
upon request of the cooperatives concerned;

(d) Coordinate the effects of the local government units and the private sector in the promotion,
organization, and development of cooperatives;

(e) Register all cooperatives and their federations and unions, including their division, merger,
consolidation, dissolution or liquidation. It shall also register the transfer of all or substantially all of their
assets and liabilities and such other matters as may be required by the Authority;

(f) Require all cooperatives, their federations and unions to submit their annual financial statements,
duly audited by certified public accountants, and general information sheets;

(g) Order the cancellation after due notice and hearing of the cooperatives certificate of registration for
non-compliance with administrative requirements and in cases of voluntary dissolution;

(h) Assist cooperatives in arranging for financial and other forms of assistance under such terms and
conditions as are calculated to strengthen their viability and autonomy;

(i) Establish extension offices as may be necessary and financially viable to implement this Act. Initially,
there shall be extension offices in the Cities of Dagupan, Manila, Naga, Iloilo, Cebu, Cagayan de Oro and
Davao;

(j) Impose and collect reasonable fees and charges in connection with the registration of cooperatives;

(k) Administer all grants and donations coursed through the Government for cooperative development,
without prejudice to the right of cooperatives to directly receive and administer such grants and
donations upon agreement with the grantors and donors thereof;
(l) Formulate and adopt continuing policy initiatives consultation with the cooperative sector through
public hearing;

(m) Adopt rules and regulations for the conduct of its internal operations;

(n) Submit an annual report to the President and Congress on the state of the cooperative movement;

(o) Exercise such other functions as may be necessary to implement the provisions of the cooperative
laws and, in the performance thereof, the Authority may summarily punish for direct contempt any
person guilty of misconduct in the presence of the Authority which seriously interrupts any hearing or
inquiry with a fine of not more than five hundred pesos (P500.00) or imprisonment of not more than ten
(10) days, or both. Acts constituting indirect contempt as defined under Rule 71 of the Rules of Court
shall be punished in accordance with the said Rule.

It is a fundamental rule in statutory construction that when the law speaks in clear and categorical
language, there is no room for interpretation, vacillation or equivocation there is only room for
application.[32] It can be gleaned from the above-quoted provision of R.A. No. 6939 that the authority
of the CDA is to discharge purely administrative functions which consist of policy-making, registration,
fiscal and technical assistance to cooperatives and implementation of cooperative laws. Nowhere in the
said law can it be found any express grant to the CDA of authority to adjudicate cooperative disputes. At
most, Section 8 of the same law provides that upon request of either or both parties, the Authority shall
mediate and conciliate disputes with a cooperative or between cooperatives however, with a restriction
that if no mediation or conciliation succeeds within three (3) months from request thereof, a certificate
of non-resolution shall be issued by the commission prior to the filing of appropriate action before the
proper courts. Being an administrative agency, the CDA has only such powers as are expressly granted to
it by law and those which are necessarily implied in the exercise thereof.[33]

Petitioner CDA, however, insists that its authority to conduct hearings or inquiries and the express grant
to it of contempt powers under Section 3, paragraphs (g) and (o) of R. A. No. 6939, respectively,
necessarily vests upon the CDA quasi-judicial authority to adjudicate cooperative disputes. A review of
the records of the deliberations by both chambers of Congress prior to the enactment of R.A. No. 6939
provides a definitive answer that the CDA is not vested with quasi-judicial authority to adjudicate
cooperative disputes. During the house deliberations on the then House Bill No. 10787, the following
exchange transpired:

MR. AQUINO (A.). The response of the sponsor is not quite clear to this humble Representation. Let me
just point out other provisions under this particular section, which to the mind of this humble
Representation appear to provide this proposed Authority with certain quasi-judicial functions. Would I
be correct in this interpretation of paragraphs (f) and (g) under this section which state that among the
powers of the Authority are:

To administer the dissolution, disposal of assets and settlement of liabilities of any cooperative that has
been found to be inoperable, inactive or defunct.

To make appropriate action on cooperatives found to be in violation of any provision

It appears to the mind of this humble Representation that the proposed Authority may be called upon to
adjudicate in these particular instances. Is it therefore vested with quasi-judicial authority?

MR. ROMUALDO. No, Mr. Speaker. We have to resort to the courts, for instance, for the dissolution of
cooperatives. The Authority only administers once a cooperative is dissolved. It is also the CDA which
initiates actions against any group of persons that may use the name of a cooperative to its advantage,
that is, if the word cooperative is merely used by it in order to advance its intentions, Mr. Speaker.

MR. AQUINO (A.). So, is the sponsor telling us that the adjudication will have to be left to the courts of
law?

MR. ROMUALDO. To the courts, Mr. Speaker.[34]

xxx xxx xxx

MR. ADASA. One final question, Mr. Speaker. On page 4, line 33, it seems that one of the functions given
to the Cooperative Development Authority is to recommend the filing of legal charges against any officer
or member of a cooperative accused of violating the provisions of this Act, existing laws and cooperative
by-laws and other rules and regulations set forth by the government. Would this not conflict with the
function of the prosecuting fiscal?

MR. ROMUALDO. No, it will be the provincial fiscal that will file the case. The Authority only
recommends the filing of legal charges, that is, of course, after preliminary investigation conducted by
the provincial fiscal or the prosecuting arm of the government.

MR. ADASA. Does the Gentleman mean to say that the Cooperative Development Authority can take the
place of the private complainant or the persons who are the offended party if the latter would not
pursue the case?

MR. ROMULDO. Yes, Mr. Speaker. The Authority can initiate even the filing of the charges as embraced
and defined on line 33 of page 4 of this proposed bill.[35]

xxx xxx xxx

MR. CHIONGBIAN. xxx. Under the same section, line 28, subparagraph (g) says that the Authority can
take appropriate action on cooperatives found to be violating any provision of this Act, existing laws and
cooperative by-laws, and other rules and regulations set forth by the government by way of withdrawal
of Authority assistance, suspension of operation or cancellation of accreditation.

My question is: If a cooperative, whose officers are liable for wrongdoing, is found violating any of the
provisions of this Act, are we going to sacrifice the existence of that cooperative just because some of
the officers have taken advantage of their positions and misused some of the funds? It would be very
unfair for the Authority to withdraw its assistance at the expense of the majority. It is not clear as to
what the liabilities of the members of these cooperatives are.

xxx xxx xxx

MR. ROMUALDO. Mr. Speaker, before this action may be taken by the Authority, there will be due
process. However, this provision is applicable in cases where the cooperative as a whole violated the
provisions of this Act as well as existing laws. In this case, punitive actions may be taken against the
cooperative as a body.

With respect to the officials, if they themselves should be punished, then Section (h) of this chapter
provides that legal charges shall be filed by the Cooperative Development Authority.[36]

In like manner, the deliberations on Senate Bill No. 485, which was the counterpart of House Bill No.
10787, yield the same legislative intent not to grant quasi-judicial authority to the CDA as shown by the
following discussions during the period of amendments:

SEN. ALVAREZ. On page 3, between lines 5 and 6, if I may, insert the following as one of the powers:
CONDUCT INQUIRIES, STUDIES, HEARINGS AND INVESTIGATIONS AND ISSUE ORDERS, DECISIONS AND
CIRCULARS AS MAY BE NECESSARY TO IMPLEMENT ALL LAWS, RULES AND REGULATIONS RELATING TO
COOPERATIVES. THE AGENCY MAY SUMMARILY PUNISH FOR CONTEMPT BY A FINE OF NOT MORE THAN
TWO HUNDRED PESOS (P200.00) OR IMPRISONMENT NOT EXCEEDING TEN (10) DAYS, OR BOTH, ANY
PERSONS GUILTY OF SUCH MISCONDUCT IN THE PRESENCE OF THE AGENCY WHICH SERIOUSLY
INTERRUPTS ANY HEARING OR INVESTIGATION, INCLUDING WILFULL FAILURE OR REFUSAL, WITHOUT
JUST CAUSE, COMPLY WITH A SUMMONS, SUBPOENA, SUBPOENA DUCES TECUM, DECISION OR ORDER,
RULE OR REGULATION, OR, BEING PRESENT AT A HEARING OR INVESTIGATION, REFUSES TO BE SWORN
IN AS A WITNESS OR TO ANSWER QUESTIONS OR TO FURNISH INFORMATION REQUIRED BY THE
AGENCY. THE SHERIFF AND/OR POLICE AGENCIES OF THE PLACE WHERE THE HEARING OR
INVESTIGATION IS CONDUCTED SHALL, UPON REQUEST OF THE AGENCY, ASSIST IT TO ENFORCE THE
PENALTY.

THE PRESIDENT. That is quite a long amendment. Does the Gentleman have a written copy of his
amendment, so that the Members will have an opportunity to go over it and examine its implications?

Anyway, why do we not hold in abeyance the proposed amendment? Do we have that?

xxx xxx xxx

SEN. ALVAREZ. Mr. President, this is almost an inherent power of a registering body. With the
tremendous responsibility that we have assigned to the Authority or the agencyfor it to be able to
function and discharge its mandateit will need this authority.

SEN. AQUINO. Yes, Mr. President, conceptually, we do not like the agency to have quasi-judicial powers.
And, we are afraid that if we empower the agency to conduct inquiries, studies, hearings and
investigations, it might interfere in the autonomous character of cooperatives. So, I am sorry Mr.
President, we dont accept the amendment.[37]

The decision to withhold quasi-judicial powers from the CDA is in accordance with the policy of the
government granting autonomy to cooperatives. It was noted that in the past 75 years cooperativism
failed to flourish in the Philippines. Of the 23,000 cooperatives organized under P.D. No. 175, only 10 to
15 percent remained operational while the rest became dormant. The dismal failure of cooperativism in
the Philippines was attributed mainly to the stifling attitude of the government toward cooperatives.
While the government wished to help, it invariably wanted to control.[38] Also, in its anxious efforts to
push cooperativism, it smothered cooperatives with so much help that they failed to develop self-
reliance. As one cooperative expert put it, The strong embrace of government ends with a kiss of death
for cooperatives.[39]

But then, acknowledging the role of cooperatives as instruments of national development, the framers
of the 1987 Constitution directed Congress under Article XII, Section 15 thereof to create a centralized
agency that shall promote the viability and growth of cooperatives. Pursuant to this constitutional
mandate, the Congress approved on March 10, 1990 Republic Act No. 6939 which is the organic law
creating the Cooperative Development Authority. Apparently cognizant of the errors in the past,
Congress declared in an unequivocal language that the state shall maintain the policy of non-
interference in the management and operation of cooperatives.[40]

After ascertaining the clear legislative intent underlying R.A. No. 6939, effect should be given to it by the
judiciary.[41] Consequently, we hold and rule that the CDA is devoid of any quasi-judicial authority to
adjudicate intra-cooperative disputes and more particularly disputes as regards the election of the
members of the Board of Directors and officers of cooperatives. The authority to conduct hearings or
inquiries and the power to hold any person in contempt may be exercised by the CDA only in the
performance of its administrative functions under R.A. No. 6939.
The petitioners reliance on the case of CANORECO is misplaced for the reason that the central issue
raised therein was whether or not the Office of the President has the authority to supplant or reverse
the resolution of an administrative agency, specifically the CDA, that had long became final and on
which issue we ruled in the negative. In fact, this Court declared in the said case that the CDA has no
jurisdiction to adjudicate intra-cooperative disputes thus:[42]

xxx xxx xxx

Obviously there was a clear case of intra-cooperative dispute. Article 121 of the Cooperative Code is
explicit on how the dispute should be resolved; thus:

ART. 121. Settlement of Disputes. Disputes among members, officers, directors, and committee
members, and intra-cooperative disputes shall, as far as practicable, be settled amicably in accordance
with the conciliation or mediation mechanisms embodied in the by-laws of the cooperative, and in
applicable laws.

Should such a conciliation/mediation proceeding fail, the matter shall be settled in a court of competent
jurisdiction.

Complementing this Article is Section 8 of R.A. No. 6939, which provides:

SEC. 8. Mediation and Conciliation. Upon request of either or both or both parties, the [CDA] shall
mediate and conciliate disputes with the cooperative or between cooperatives: Provided, That if no
mediation or conciliation succeeds within three (3) months from request thereof, a certificate of non-
resolution shall be issued by the request thereof, a certificate of non-resolution shall be issued by the
commission prior to the filing of appropriate action before the proper courts.

Likewise, we do not find any merit in the allegation of forum-shopping against the private respondents.
Forum-shopping exists where the elements of litis pendentia are present or where a final judgment in
one case will amount to res judicata in the other.[43] The requisites for the existence of litis pendentia,
in turn, are (1) identity of parties or at least such representing the same interest in both actions; (2)
identity of rights asserted as prayed for, the relief being founded on the same facts; and (3) the identity
in both cases is such that the judgment that may be rendered in the pending case, regardless of which
party is successful, would amount to res judicata to the other case.[44]

While there may be identity of parties between SP Civil Case No. 25 filed with the RTC of Polomolok,
South Cotabato, Branch 39, and CA-G.R. SP No. 47933 before the Court of Appeals, 13th Division, the
two (2) other requisites are not present. The Court of Appeals correctly observed that the case filed with
the RTC of Polomolok, South Cotabato was a petition for certiorari assailing the orders of therein
respondent CDA for having been allegedly issued without or in excess of jurisdiction. On the other hand,
the case filed with the Court of Appeals was a petition for prohibition seeking to restrain therein
respondent from further proceeding with the hearing of the case. Besides, the filing of the petition for
prohibition with the Court of Appeals was necessary after the CDA issued the Order dated May 26, 1998
which directed the holding of a special general assembly for purposes of conducting elections of officers
and members of the board of DARBCI after the Court of Appeals, 12th Division, in CA-G.R. SP No. 47318
issued a temporary restraining order enjoining the proceedings in Special Civil Case No. 25 and for the
parties therein to maintain the status quo. Under the circumstances, the private respondents could not
seek immediate relief before the trial court and hence, they had to seek recourse before the Court of
Appeals via a petition for prohibition with a prayer for preliminary injunction to forestall the impending
damage and injury to them in view of the order issued by the petitioner on May 26, 1998.

The filing of Special Civil Case No. 28 with the RTC of Polomolok, South Cotabato does not also
constitute forum-shopping on the part of the private respondents. Therein petitioner Investa, which
claims to have a subsisting lease agreement and a joint venture with DARBCI, is an entity whose juridical
personality is separate and distinct from that of private respondent cooperative or herein individual
private respondents and that they have totally different interests in the subject matter of the case.
Moreover, it was incorrect for the petitioner to charge the private respondents with forum-shopping
partly based on its erroneous claim that DARBCI and Investa were both represented by the same
counsel. A charge of forum-shopping may not be anchored simply on the fact that the counsel for
different petitioners in two (2) cases is one and the same.[45] Besides, a review of the records of this
case shows that the counsel of record of Investa in Special Civil Case No. 28 is a certain Atty. Ignacio D.
Debuque, Jr. and not the same counsel representing the private respondents.[46]

Anent the petition-in-intervention, the intervenors aver that the Resolution of the Court of Appeals
dated February 9, 1999 in CA-G.R. SP No. 47933 denying the motion for reconsideration of herein
petitioner CDA also invalidated the election of officers and members of the board of directors of DARBCI
held during the special general assembly on July 12, 1998, thus adversely affecting their substantial
rights including their right to due process. They claim that the object of the order issued by the appellate
court on June 10, 1998 was to restrain the holding of the general assembly of DARBCI as directed in the
order of CDA Administrator Arcadio Lozada dated May 26, 1998. In compliance with the said order of
the Court of Appeals, no general assembly was held on June 14, 1998. However, due to the grave
concern over the alleged tyrannical administration and unmitigated abuses of herein private
respondents, the majority of the members of DARBCI, on their own initiative and in the exercise of their
inherent right to assembly under the law and the 1987 Constitution, convened a general assembly on
July 12, 1998. On the said occasion, the majority of the members of DARBCI unanimously elected herein
petitioners-in-intervention as new officers and members of the board of directors of DARBCI,[47] and
thereby resulting in the removal of the private respondents from their positions in DARBCI.

Petitioners-in-intervention pointed out that the validity of the general assembly held on July 12, 1998
was never raised as an issue in CA-G.R. SP No. 47933. The petitioners-in-intervention were not even
ordered by the Court of Appeals to file their comment on the Twin Motions For Contempt of Court and
to Nullify Proceedings filed by the private respondents on July 29, 1998.

As earlier noted, the Court of Appeals issued a temporary restraining order[48] in CA-G.R. SP No. 47933
on June 10, 1998, the pertinent portion of which reads:

Meanwhile, respondents or any and all persons acting in their behalf and stead are temporarily
restrained from proceeding with the election of officers and members of the board of directors of the
Dolefil Agrarian Reform Beneficiaries Cooperative, Inc. scheduled on June 14, 1998 and or any other
date thereafter.

It was also noted that as a consequence of the temporary restraining order issued by the appellate
court, the general assembly and the election of officers and members of the board of directors of
DARBCI, pursuant to the resolution issued by CDA Administrator Arcadio S. Lozada, did not take place as
scheduled on June 14, 1998. However, on July 12, 1998 the majority of the members of DARBCI, at their
own initiative, held a general assembly and elected a new set of officers and members of the board of
directors of the cooperative which resulted in the ouster of the private respondents from their posts in
the said cooperative.

The incident on July 12, 1998 prompted herein private respondents to file their Twin Motions for
Contempt of Court and to Nullify Proceedings on July 26, 1998. The twin motions prayed, among others,
that after due notice and hearing, certain personalities, including the petitioners-in-intervention, be
cited in indirect contempt for their participation in the subject incident and for the nullification of the
election on July 12, 1998 for being illegal, contrary to the by-laws of the cooperative and in defiance of
the injunctive processes of the appellate court.
On September 9, 1998, the Court of Appeals, 13th Division, rendered a Decision in CA-G.R. SP No. 47933
which declared the CDA devoid of quasi-judicial jurisdiction to settle the dispute in CDA-CO Case No. 97-
011 without however, taking any action on the Twin Motions for Contempt of Court and to Nullify
Proceedings filed by the private respondents. As it turned out, it was only in its Resolution dated
February 9, 1999 denying petitioners motion for reconsideration of the Decision in CA-G.R. SP No. 47933
that the Court of Appeals, 13th Division, acted on the Twin Motions for Contempt of Court and to Nullify
Proceedings by declaring as null and void the election of the petitioners-in-intervention on July 12, 1998
as officers and members of the board of directors of DARBCI.

We find, however, that the action taken by the Court of Appeals, 13th Division, on the Twin Motions for
Contempt of Court and to Nullify Proceedings insofar as it nullified the election of the officers and
members of the Board of Directors of DARBCI, violated the constitutional right of the petitioners-in-
intervention to due process. The requirement of due process is satisfied if the following conditions are
present, namely: (1) there must be a court or tribunal clothed with judicial power to hear and determine
the matter before it; (2) jurisdiction must be lawfully acquired over the person of the defendant or over
the property which is the subject of the proceedings; (3) the defendant must be given an opportunity to
be heard; and (4) judgment must be rendered upon lawful hearing.[49] The appellate court should have
first required the petitioners-in-intervention to file their comment or opposition to the said Twin
Motions For Contempt Of Court And to Nullify Proceedings which also refers to the elections held during
the general assembly on July 12, 1998. It was precipitate for the appellate court to render judgment
against the petitioners-in-intervention in its Resolution dated February 9, 1999 without due notice and
opportunity to be heard. Besides, the validity of the general assembly held on July 12, 1998 was not
raised as an issue in CA-G.R. SP No. 47933.

WHEREFORE, judgment is hereby rendered as follows:

1. The petition for review on certiorari is hereby DENIED for lack of merit. The orders, resolutions,
memoranda and any other acts rendered by petitioner Cooperative Development Authority in CDA-CO
Case No. 97-011 are hereby declared null and void ab initio for lack of quasi-judicial authority of
petitioner to adjudicate intra-cooperative disputes; and the petitioner is hereby ordered to cease and
desist from taking any further proceedings therein; and

2. In the interest of justice, the dispositive portion of the Resolution of the Court of Appeals, dated
February 9, 1999, in CA-G.R. SP No. 47933, insofar as it nullified the elections of the members of the
Board of Directors and Officers of DARBCI held during the general assembly of the DARBCI members on
July 12, 1998, is hereby SET ASIDE.

No pronouncement as to costs.

SO ORDERED.

Bellosillo, (Chairman), Mendoza, Quisumbing, and Corona, JJ., concur.

[1] Petition, Annex A, Rollo, pp. 53-64. Penned by Associate Justice Romeo A Brawner and concurred in
by Associate Justices Angelina Sandoval-Gutierrez (now Associate Justice of the Supreme Court) and
Martin S. Villarama.

[2] Petition, Annex C. Rollo, pp. 84-90.

[3] Comment, Annex 1, Rollo, p. 661.

[4] Comment, Annex 3, Rollo, pp. 663-664.

[5] Petition, Annex D, Rollo, pp. 91-97.

[6] Petition, Annex E, Rollo, pp. 98-103.

[7] A supplemental order was issued by CDA Administrator Alberto P. Zingapan on March 3, 1998
changing the composition of the DARBCI management committee, Petition, Annex E-1, Rollo, p. 104.
[8] Petition, Annexes G; G-1, Rollo, pp. 117-120; 121-126.

[9] Petition, Annex H, Rollo, pp. 127-128.

[10] Petition, Annex J, Rollo, pp. 137-142.

[11] Petition, Annex K, Rollo, PP. 143-163.

[12] Petition, Annex L, Rollo, p. 164.

[13] Petition, Annex M, Rollo, pp. 165-185.

[14] Petition, Annex N, Rollo, pp. 186-188.

[15] C. A. Rollo, pp. 160-181.

[16] See Note No. 1.

[17] Petition, Annex B, Rollo, pp. 65-82.

[18] See Note No. 2.

[19] Rollo, pp. 3-51.

[20] Entitled: AN ACT CREATING THE COOPERATIVE DEVELOPMENT AUTHORITY TO PROMOTE THE
VIABILITY AND GROWTH OF COOPERATIVES AS INSTRUMENTS OF EQUITY, SOCIAL JUSTICE AND
ECONOMIC DEVELOPMENT, DEFINING ITS POWERS, FUNCTIONS AND RESPONSIBILITIES, RATIONALIZING
GOVERNMENT POLICIES AND AGENCIES WITH COOPERATIVE FUNCTIONS, SUPPORTING COOPERATIVE
DEVELOPMENT, TRANSFERRING THE REGISTRATION AND REGULATION FUNCTIONS OF EXISTING
GOVERNMENT AGENCIES ON COOPERATIVES AS SUCH AND CONSOLIDATING THE SAME WITH THE
AUTHORITY, APPROPRIATING FUNDS THEREFOR, AND FOR OTHER PURPOSES.

[21] Rollo, pp. 15-16.

[22] Rollo, pp. 23-24.

[23] 286 SCRA 666 (1998).

[24] Rollo, pp. 622-660.

[25] Rollo, pp. 714-719.

[26] Reply, Annex A, Rollo, p. 720-721.

[27] Reply, Annex B, Rollo, pp. 722-723.

[28] Rollo, p. 610.

[29] Republic, et al. v. Partisala, et al., 118 SCRA 370, 373 (1982); People v. Nano, 205 SCRA 155,159
(1992).

[30] 205 SCRA 816, 836-837, 846 (1992).

[31] See Note No. 25.

[32] Director of Lands v. CA, 276 SCRA 276, 287 (1997) citing Cebu Portland Cement Company v.
Municipality of Naga, Cebu, 24 SCRA 708,712 (1968).

[33] Laguna Lake Development Authority v. CA, 231 SCRA 292,306 (1994) citing Guerzon v. CA, 164 SCRA
182, 189 (1988); Republic v. CA, 200 SCRA 226, 237 (1991).

[34] Journal and Record of the House of Representatives, Second Regular Session, 1988-1989, Vol. I, p.
243.

[35] Id., p. 246.

[36] Id., p. 286.

[37] Record of the Senate, Third Regular Session, Vol. II, Nos. 29-53, pp. 433-434.

[38] Record of the Senate, Third Regular Session, Vol. I, Nos. 1-28, p. 77

[39] Record of the Senate, Third Regular Session, Vol. IV, Nos. 107-143, p. 985

[40] Section 1 of R.A. No. 6939.

[41] Cecilleville Realty and Service Corporation v. CA, 278 SCRA 819, 824 (1997); Globe-Mackay Cable
and Radio Corp. v. NLRC, 206 SCRA 701, 711 (1992).

[42] CANORECO v. Hon. Ruben D. Torres, supra, p 680.

[43] First Philippine International Bank v. CA, 252 SCRA 259, 283 (1996); Philippine Womans Christian
Temperance Union, Inc. v. Abiertas House of Friendship, Inc. 292 SCRA 785, 791 (1998).

[44] Atienza v. CA, 232 SCRA 737, 741 (1994); Sempio v. CA, 284 SCRA 580, 586 (1998); Casil v. CA, 285
SCRA 264, 270 (1998).

[45] Alejandrino v. CA, 295 SCRA 536, 554-555 (1998).

[46] See Note No. 13.

[47] Petition-In-Intervention, Annex G. Rollo, p. 472.

[48] See Note No. 12.

[49] Banco Espaol Filipino v. Palanca, 37 Phil. 921, 943 (1918).