1. VICTORIAS MILLING COMPANY, INC., petitioner-appellant, vs.

SOCIAL SECURITY COMMISSION,

respondent-appellee. No. L-16704. March 17, 1962.

Statutory construction; Distinction between an administrative rule and an administrative interpretation

of law; Nature of administrative rules and regulations.—When an administrative agency promulgated
rules and regulations, it "makes" a new law with the force and effect of a valid law, while when it
renders an opinion or gives a statement of policy, it merely interprets a pre-existing law (Parker,
Administrative Law, p. 197; Davis, Administrative Law, p. 194). Rules and regulations when promulgated
in pursuance of the procedure or authority conferred upon the administrative agency by law, partake of
the nature of a statute, and compliance therewith may be enforced by a penal sanction provided in the
law. This is so because statutes are usually couched in general terms, after expressing the policy,
purposes, objectives, remedies and sanctions intended by the legislature. The details and the manner of
carrying out the law are often times left to the administrative agency entrusted with its enforcement.

Same; Same; Binding effect of administrative rules on courts; Requisites.—A rule is binding on the courts
so long as the procedure fixed for its promulgation is followed, and its scope is within the statutory
authority granted by the legislature, even if the courts are not in agreement with the policy stated
therein or its innate wisdom (Davis, op. cit., pp. 195-197). On the other hand, administrative
interpretation of the law is at best merely advisory, for it is the courts that finally determine what the
law means.

Same; Same; Circular No. 22 of the Social Security Commission merely an advisory opinion and need not
be approved by the President.—Circular No. 22 of the Social Security Commission purports merely to
advise employers-members of the System of what, in the light of the amendment of the law, they
should include in determining the monthly compensation of their employees upon which the social
security contributions should be based. It did not add any duty or detail that was not already in the law
as amended. It merely stated and circularized the opinion of the Commission as to how the law should
be construed. Such circular, therefore, did not require presidential approval and publication in the
Official Gazette for its effectivity.

Same; Interpretation of terms or words; Rule when a term or word is specifically defined in a statute.—
While the rule is that terms or words are to be interpreted in accordance with their well-accepted
meaning in law, nevertheless, when such term or word is specifically defined in a particular law, such
interpretation must be adopted in enforcing that particular law, for it can not be gainsaid that a
particular phrase or term may have one meaning for one purpose and another meaning for some other
purpose.

APPEAL from a resolution of the Social Security Commission.

The facts are stated in the opinion of the Court.

On October 15, 1958, the Social Security Commission issued its Circular No. 22 of the following tenor:

"Effective November 1, 1958, all Employers in computing the premiums due the System, will take into
consideration and include in the Employee's remuneration all bonuses and overtime pay, as well as the
cash value of other media of remuneration. All these will comprise the Employee's remuneration or
earnings, upon which the 3-1/2% and 2-1/2% contributions will be based, up to a maximum of P500 for
any one month."
Upon receipt of a copy thereof, petitioner Victorias Milling Company, Inc., through counsel, wrote the
Social Security Commission in effect protesting against the circular as contradictory to a previous
Circular No. 7, dated October 7, 1957 expressly excluding overtime pay and bonus in the computation of
the employers' and employees' respective monthly premium contributions, and submitting, "In order to
assist your System in arriving at a proper interpretation of the term 'compensation' for the purposes of"
such computation, their observations on Republic Act 1161 and its amendment and on the general
interpretation of the words "compensation", "remuneration" and "wages", Counsel further questioned
the validity of the circular for lack of authority on the part of the Social Security Commission to
promulgate it without the approval of the President and for lack of publication in the Official Gazette.

Overruling these objections, the Social Security Commission ruled that Circular No. 22 is not a rule or
regulation that needed the approval of the President and publication in the Official Gazette to be
effective, but a mere administrative interpretation of the statute, a mere statement of general policy or
opinion as to how the law should be construed.

Not satisfied with this ruling, petitioner comes to this Court on appeal.

The single issue involved in this appeal is whether or not Circular No. 22 is a rule or regulation, as
contemplated in Section 4(a) of Republic Act 1161 empowering the Social Security Commission "to
adopt, amend and repeal subject to the approval of the President such rules and regulations as may be
necessary to carry out the provisions and purposes of this Act."

There can be no doubt that there is a distinction between an administrative rule or regulation and an
administrative interpretation of a law whose enforcement is entrusted to an administrative body.
When an administrative agency promulgates rules and regulations, it "makes" a new law with the force
and effect of a valid law, while when it renders an opinion or gives a statement of policy, it merely
interprets a pre-existing law (Parker, Administrative Law, p. 197; Davis, Administrative Law, p. 194).
Rules and regulations when promulgated in pursuance of the procedure or authority conferred upon
the administrative agency by law, partake of the nature of a statute, and compliance therewith may be
enforced by a penal sanction provided in the law. This is so because statutes are usually couched in
general terms, after expressing the policy, purposes, objectives, remedies and sanctions intended by the
legislature. The details and the manner of carrying out the law are often times left to the
administrative agency entrusted with its enforcement. In this sense, it has been said that rules and
regulations are the product of a delegated power to create new or additional legal provisions that
have the effect of law. (Davis, op. cit., p. 194.)

A rule is binding on the courts so long as the procedure fixed for its promulgation is followed and its
scope is within the statutory authority granted by the legislature, even if the courts are not in
agreement with the policy stated therein or its innate wisdom (Davis, op. cit.. 195-197). On the other
hand, administrative interpretation of the law is at best merely advisory, for it is the courts that finally
determine what the law means.

Circular No. 22 in question was issued by the Social Security Commission, in view of the amendment of
the provisions of the Social Security Law defining the term "compensation" contained in Section 8 (f ) of
Republic Act No. 1161 which, before its amendment, reads as follows:
"(f) Compensation—A remuneration for employment include the cash value of any remuneration paid in
any medium other than cash except (1) that part of the remuneration in excess of P500 received during
the month; (2) bonuses, allowances or overtime pay; and (3) dismissal and all other payments which the
employer may make, although not legally required to do so."

Republic Act No. 1792 changed the definition of "compensation" to:

"(f) Compensation—All remuneration for employment include the cash value of any remuneration paid
in any medium other than cash except that part of the remuneration in excess or P500.00 received
during the month."

It will thus be seen that whereas prior to the amendment, bonuses, allowances, and overtime pay given
in addition to the regular or base pay were -expressly excluded, or exempted from the definition of the
term "compensation", such exemption or exclusion was deleted by the amendatory law. It thus became
necessary for the Social Security Commission to interpret the effect of such deletion or elimination.
Circular No. 22 was, therefore, issued to apprise those concerned of the interpretation or understanding
of the Commission, of the law as amended, which it was its duty to enforce. It did not add any duty or
detail that was not already in the law as amended. It merely stated and circularized the opinion of the
Commission as to how the law should be construed.

The case of People v. Jolliffe (G.R. No. L-9553, promulgated on May 30, 1959) cited by appellant, does
not support its contention that the circular in question is a rule or regulation. What was there said was
merely that a regulation may be incorporated in the form of a circular. Such statement simply meant
that the substance and not the form of a regulation is decisive in determining its nature. It does not lay
down a general proposition of law that any circular, regardless of its substance and even if it is only
interpretative, constitutes a rule or regulation which must be published in the Official Gazette before it
could take effect.

The case of People v. Que Po Lay (50 O.G. 2850) also cited by appellant is not applicable to the present
case.

because the penalty that may be incurred by employers and employees if they refuse to pay the
corresponding premiums on bonus, overtime pay, etc. which the employer pays to his employees, is not
by reason of non-compliance with Circular No. 22, but for violation of the specific legal provisions
contained in Section 27 (c) and (f) of Republic Act No. 1161.

We find, therefore, that Circular No. 22 purports merely to advise employers-members of the System
of what, in the light of the amendment of the law, they should include in determining the monthly
compensation of their employees upon which the social security contributions should be based, and
that such circular did not require presidential approval and publication in the Official Gazette for its
effectivity.

It hardly need be said that the Commission's interpretation of the amendment embodied in its Circular
No. 22, is correct. The express elimination among the exemptions excluded in the old law, of all bonuses,
allowances and overtime pay in the determination of the "compensation" paid to employees makes it
imperative that such bonuses and overtime pay must now be included in the employee's remuneration
in pursuance of the amendatory law. It is true that in previous cases, this Court has held that bonus is
not demandable because it is not part of the wage, salary, or compensation of the employee. But the
question in the instant case is not whether bonus is demandable or not as part of compensation, but
whether, after the employer does, in fact, give or pay bonus to his employees, such bonuses shall be
considered compensation under the Social Security Act after they have been received by the employees.
While it is true that terms or words are to be interpreted in accordance with their well-accepted
meaning in law, nevertheless, when such term or word is specifically defined in a particular law, such
interpretation must be adopted in enforcing that particular law, for it can not be gainsaid that a
particular phrase or term may have one meaning for one purpose and another meaning for some other
purpose. Such is the case that is now before us. Republic Act 1161 specifically defined what
"compensation" should mean "For the purposes of this Act". Republic Act 1792 amended such definition
by deleting same exemptions authorized in the original Act. By virtue of this express substantial change
in the phraseology of the law, whatever prior executive or judicial construction may have been given to
the phrase in question should give way to the clear mandate of the new law.

IN VIEW OF THE FOREGOING, the Resolution appealed from is hereby affirmed, with costs against
appellant. So ordered.

Resolution affirmed.

2. WALTER E. OLSEN Co., INC., petitioner, vs. VICENTE ALDANESE, as Insular Collector of Customs, and
W. TRINIDAD, as Collector of Internal Revenue, respondents. 43 Phil. 259

Dispositive Portion: The petition states a cause of action, all the material allegations of which are
admitted by the defendants' plea. The demurrer is overruled. Five days will be allowed from the
promulgation of this opinion in which to file an answer, and, for any failure to do so, the peremptory
writ will be issued as prayed for in the petition.

1.PRESUMPTION.—There is a legal presumption that any law enacted by the Legislature is valid.

2.DUTY OF COURT.—It is the duty of the court to sustain the constitutionality of a legislative act when it
can be done without violating some express provision of the Organic Law.

3.GENERAL RULE.—As a general rule, the courts will not pass upon the constitutionality of a law unless it
is necessary to the decision.

4.LIMITATION OF POWER.—Under clause (a), section 6, of Act No. 2613, of the Philippine Legislature,
the authority of the Collector of Internal Revenue to make rules and regulations is specified and defined
to the making of rules and regulations for the classification, marking and packing of leaf or
manufactured tobacco of good quality and the handling of it under sanitary conditions.

5.STANDARD NOT DEFINED.—The act in question does not define the standard or the type of leaf or
manufactured tobacco which may be exported to the United States, or how or upon what basis the
Collector of Internal Revenue should fix or determine the standard.

6.POWER CONFERRED.—The authority to make rules and regulations is limited and defined by the
legislative act to the making of general and local rules for the classification, marking, packing, and the
type of tobacco which may be exported to the United States, and it is not confined or limited to tobacco
produced in the provinces of Cagayan, Isabela, Nueva Vizcaya, or any other province.
7.CANNOT DISCRIMINATE.—Neither the Collector of Internal Revenue nor the Legislature has any power
to discriminate in favor of one province against another in the production of tobacco, or any other
province.

8.TEST OF CONSTITUTIONALITY.—The constitutionality of a law is not tested by what has been done, but
it is tested by what can or may be done under the law.

ORIGINAL ACTION in the Supreme Court. Mandamus.

The facts are stated in the opinion of the court.

STATEMENT

The plaintiff is a duly licensed domestic corporation with its principal office and place of business in the
city of Manila and engaged in the manufacture and export of cigars made of tobacco grown in the
Philippine Islands.

The defendant, Vicente Aldanese, is the Insular Collector of Customs, and the defendant, W. Trinidad, is
the Collector of Internal Revenue of the Philippine Islands.

As grounds for its petition, plaintiff alleges that, under the law of Congress of October 3, 1913, known as
the Tariff Act, it had the legal right to export from the Philippine Islands into the United States cigars
which it manufactured from tobacco grown in the Philippine Islands, quoting paragraph C of section 4,
and paragraph F of subsection 1 of the Act. That on February 4, 1916, the Philippine Legislature enacted
Law No. 2613 entitled "An Act to improve the methods of production and the quality of tobacco in the
Philippines and to develop the 'export trade therein," quoting sections 6, 7, and 11 of the Act. It is then
alleged that on March 1, 1918, the Collector of Internal Revenue promulgated Administrative Order No.
35, known as "Tobacco Inspection Regulations," quoting section 9. The petition then quotes sections 1
and 8 of article 1 of the Constitution of the United States, and section 10 of the Act of Congress of
August 29,1916, known as "The Jones Law," which provides as follows:

"That while this Act provides that the Philippine Government shall have the authority to enact a Tariff
Law the trade relations between the Islands and the United States shall continue to be governed
exclusively by laws of the Congress of the United States."

It is also alleged "that large quantities of tobacco are grown in the provinces of La Union, Pangasinan,
and other provinces of the Philippine Islands which are manufactured by the petitioner and by other
cigar factories of the Philippines into wholesome and sanitary long filler and short filler cigars, and that
machine made short filler cigars of sanitary, wholesome and excellent quality are manufactured by
petitioner from a blend of tobacco grown in the provinces of Cagayan, Isabela, Nueva Vizcaya, La Union,
and Pangasinan."

It is further alleged that so much of clause B of section 6 of Act No. 2613 as empowers the Collector of
Internal Revenue to establish rules defining the standard and the type of leaf and manufactured tobacco
which may be exported into the United States, and that portion of section 7 of said Act which provides:
"No leaf tobacco or manufactured tobacco shall be exported from the Philippine Islands to the United
States until it shall have been inspected by the Collector of Internal Revenue, etc.," and all that portion
of section 11 of the Act, which requires the certificate of origin of the Collector of Internal Revenue to
show that the tobacco to be exported is standard, and which limits the required certificate of origin to
be standard, and that portion of section 9 of Administrative Order No. 35, which limits the exportation
into the United States of Philippine cigars to those manufactured from long filler tobacco exclusively
the product of the provinces of Cagayan, Isabela, or Nueva Vizcaya, are unconstitutional and void, for
six different specified reasons.

It is further alleged that, after the elimination of such provisions, Act No. 2613 specially enjoins it as a
duty devolving upon the Internal Revenue Collector to certify to the Insular Collector that any tobacco or
cigars offered for export to the United States, which comply with the Act of Congress of October 3, 1913,
and the growth and product of the Philippine Islands, to issue a certificate of origin which will insure the
speedy admission of such cigars into the United States free of customs duty, and to permit the
exportation to the United States of all cigars manufactured of material and tobacco, 80 per cent or more
of which is the growth and product of the Philippine Islands.

That on February 6, 1922, the petitioner applied to the Collector of Internal Revenue for such a
certificate to the Insular Collector of Customs for a consignment of 10,000 cigars manufactured by it
from tobacco grown and produced in the Philippine Islands, which was then and there offered for export
to the United States, and was submitted for inspection and the issuance of the proper certificate of
origin. That the consignment was packed and stamped as required by the regulations contained in
Administrative Order No. 35, and in all things and respects complied with the requirements of the Act of
Congress of October 3, 1913, and with the Act No. 2613 of the Philippine Legislature, after the
elimination of the void portions of Act No. 2613 and of the Administrative Order.

That the Collector of Internal Revenue wrongfully and unlawfully refused to issue such certificate of
origin "on the ground that said cigars were not manufactured of long filler tobacco produced exclusively
in the provinces of Cagayan, Isabela or Nueva Vizcaya."

That, notwithstanding such refusal, about February 24, 1922, the petitioner applied to the Insular
Collector of Customs for the certificate of origin, and that officer wrongfully and unlawfully refused to
issue such certificate "on the ground that the petitioner had not obtained and presented with the
application the certificate of the said respondent Collector of Internal Revenue."

That, by reason of such refusal, the petitioner was deprived of the right of exporting the cigars to the
United States. That the petitioner has no "other plain, speedy and adequate remedy in the ordinary
course of law," and prays for a peremptory writ of mandamus.

NoteA writ of mandamus may issue in either of 2 situations: 1. When any tribunal, corporation, board,
officer or person unlawfully neglects the performance of an act which the law specifically enjoins as a
duty resulting from an office, trust, or station; 2. When any tribunal, corporation, board, officer or
person unlawfully excludes another from the use and enjoyment of a right to which such other is
entitled.

An order to show cause was made by this court, and on March 4, the Manila Tobacco Association,
through its attorneys, applied for, and was granted, leave to appear as amicus curiæ.

February 6, a demurrer was filed "on the ground that the facts stated in the said petition do not entitle
the petitioner to the relief demanded, in that—
"1.Act No. 2613 and the executive regulations issued in accordance therewith do not contravene any
provision of the fundamental law of the Philippine Islands;

"2.It does not appear from the facts stated in the said petition that the respondents unlawfully
neglected the performance of an act specially enjoined upon them by law as a duty, or unlawfully
exclude the petitioner from the use and enjoyment of a right granted by law."

The case was argued in banc on March 9, 1922.

The defendants [respondents] contend that the portions of Act No. 2613 in question are not in violation
of any constitutional right or any act of Congress; that the Philippine Legislature is empowered to enact
what is known as "inspection laws;" and that they are not in conflict with paragraph 2, section 10 of
article 1 of the Constitution of the United States, which provides:

"No State shall, without the consent of the Congress, lay any imposts or duties on imports or exports,
except what may be absolutely necessary for executing its inspection laws; and the net produce of all
duties and imposts laid by any State on imports or exports, export, shall be for the use of the treasury of
the United States; and all such laws shall be subject to the revision and control of the Congress." And
also that, under its police power, the Legislature has authority to enact such a law, and that it was
enacted in the interest of the public welfare and to promote an important industry, and that it was not a
delegation of legislative power.

JOHNS, J.:

Many important legal questions have been presented in the able and exhaustive briefs of opposing
counsel.

There is a legal presumption that any law enacted by the Legislature is valid, and we must assume that it
was not the intention of the Legislature to enact a void law.

It is also the duty of courts to sustain the constitutionality of a legislative act when it can be done
without violating an express provision of the organic law.

It is also a general rule that regardless of the question whether a law is or is not constitutional, the
courts will not pass upon its constitutionality, unless it is necessary to the decision.

The important question here involved is the construction of sections 6, 7, and 11 of Act No. 2613 of the
Philippine Legislature, and section 9 of the "Tobacco Inspection Regulations," promulgated by
Administrative Order No. 35. It must be conceded that the authority of the Collector of Internal
Revenue to make any rules and regulations must be founded upon some legislative act, and that they
must follow and be within the scope and purview of the act.

Clause A of section 6 of Act No. 2613 provides:

"To establish general and local rules respecting the classification, marking, and packing of tobacco for
domestic sale or for exportation to the United States so far as may be necessary to secure leaf tobacco
of good quality and to secure its handling under sanitary conditions and to the end that leaf tobacco be
not mixed, packed, and marked as of the same quality when it is not of the same class and origin."
It will be noted that the power of the Collector of Internal Revenue to make rules and regulations is
confined to the making of rules and regulations for the classification, marking, and packing of tobacco,
and that such power is further limited to the making of such rules for the classification, marking, and
packing of tobacco as may be necessary to secure leaf tobacco of good quality and its handling under
sanitary conditions. It is for such purpose only that the Collector of Internal Revenue is authorized to
make any rules or regulations. The power is further limited "to the end that leaf tobacco be not mixed,
packed, and marked as of the same quality when it is not of the same class and origin." It is only for such
defined purposes that he is authorized to make any rules or regulations. Hence, it must follow that any
rules or regulations which are not within the scope of the Act are null and void.

Clause B provides:

"To establish from time to time adequate rules defining the standard and the type of leaf and
manufactured tobacco which may be exported to the United States, as well also as the manner in which
standard tobacco for export, whether it be leaf tobacco or manufactured tobacco, shall be packed.
Before establishing the rules above specified, the Collector of Internal Revenue shall give due notice of
the proposed rules or amendments to those interested and shall give them an opportunity to present
their objections to such rules or amendments."

Clause B of section 6 should be construed with, and is limited by, the terms and provisions of clause A.

Here, again, the Legislature has not defined what shall be the standard or the type of leaf or
manufactured tobacco which may be exported to the United States, or even specified how or upon what
basis the Collector of Internal Revenue should fix or determine the standard. All of that power is
delegated to the Collector of Internal Revenue.

Assuming, without deciding, that the Legislature could delegate such power, the "rules and regulations"
promulgated should be confined to, and limited by, the power conferred by the legislative act. Among
other things, section 9 of the rules and regulations, promulgated by Administrative Order No. 35,
provides:

"To be classed as standard, cigars must be manufactured under sanitary conditions from good, clean,
selected tobacco, properly cured and seasoned, of a crop which has been harvested at least six months,
exclusively the product of the provinces of Cagayan, Isabela, or Nueva Vizcaya. The cigars must be well
made, with suitable spiral wrapper and with long filler from which must have been removed all stems,
dust, scraps, or burnt tobacco; net weight of cigars to be not less than five kilograms per thousand * * *.
By color is meant the color of the wrapper and not the filler * * *.

"In passing on the quality of cigars, the article will be required to come up to a high standard as to
workmanship, burn, aroma, and taste. The actual price at which the cigars are sold will also be given due
weight, and when it is found that cigars are sold at such a low price that the cost of production with
materials of the quality required in these regulations leaves no reasonable margin of profits, such fact
may be considered as corroborative evidence in determining whether the cigars in question are
standard."

Analyzing the power conferred, it will be found that the provisions of the legislative act are not
limited to the provinces of Cagayan, Isabela, or Nueva Vizcaya, or to any province, and that there is no
limitation as to the place where the tobacco should be grown in the Philippine Islands. The only power
conferred is to establish general and local rules for the classification, marking, and packing of tobacco
and the standard and the type of tobacco which may be exported to the United States.

Neither the Collector of Internal Revenue nor the Legislature itself has any power to discriminate in
favor of one province against another in the production of tobacco or of any other product of the
lslands. The purpose and intent of the Legislature was that a proper standard of the quality of tobacco
should be fixed and defined, and that all of those who produce tobacco of the same standard should
have equal rights and opportunities. It was never intended that a standard should be fixed which would
limit the manufacture of cigars for export to certain provinces of the Islands, -or that the tobacco
produced in one province should be measured by another and different standard than the tobacco
produced in any other province. That would amount to discrimination and class legislation, which, even
the Legislature, would not have the power to enact. Again, the legislative Act does not say anything
about the "filler," or whether it should be short or long. Neither does it say anything about the weight of
the cigar. It is a matter of common knowledge that standard cigars are of different sizes, weights, and
lengths, and that the purity and standard of the cigar does not depend upon either.

The defendants [respondents] rely upon the case of Buttfield vs. Stranahan (192 U. S., 525), known as
the tea case, where it was held that an act of Congress providing for the inspection of imported tea was
not a delegation of legislative power, a violation of "due process of law or foreign commerce." That case
is good law, but there is a very important distinction between the Act of Congress there and of the
Philippine Legislature here. The Act of Congress is entitled "An Act to prevent the importation of impure
and unwholesome tea," and section 1 provides:

"It shall be unlawful for any person or persons or corporation to import or bring into the United States
any merchandise as tea which is inferior in purity, quality, and fitness for consumption to the standards
provided in section three of this act, and the importation of all such merchandise is hereby prohibited."

Section 2 provides:

"That immediately after the passage of this act, * * * the Secretary of the Treasury shall appoint a board,
to consist of seven members, each of whom shall be an expert in teas, and who shall prepare and submit
to him standard samples of tea, etc."

Section 3 provides:

"That the Secretary of the Treasury, upon the recommendation of the said board, shall fix and establish
uniform standards of purity, quality, and fitness for consumption of all kinds of teas imported into the
United States, etc. All teas, or merchandise described as tea, of inferior purity, quality, and fitness for
consumption to such standards shall be deemed within the prohibition of the first section hereof."

In that case eight packages of "Country green teas," number 7 on the list of standards, were presented.
The tea was rejected as "inferior standard in quality," and the owner applied to the court for mandamus,
to compel its admission. Under the rules and regulations, the "Country green teas" were arranged in
their order of quality, No. 1 being the highest grade, and No. 17 the lowest. The evidence for the plaintiff
tended to show that the tea in controversy was grade No. 7, and that of the Government grade No. 11,
"a tea of a decidedly low grade, * * * a pure tea, but of low quality," and the admission of the tea was
refused. It will be noted that the Act of Congress makes it unlawful to import into the United States any
tea which is inferior "in purity, quality and fitness for consumption to the standards provided in section
three of this act." That after its passage, the Secretary of the Treasury shall appoint a board of seven
members, each of whom shall be expert in teas, and who shall prepare and submit to him standard
samples of tea, etc., and that, upon the recommendation of the said board', he "shall fix and establish
uniform standards of purity, quality and fitness for consumption of all kinds of teas imported into the
United States."

Act No. 2613 does not contain any such provisions. It does not provide the basis for a standard or how
and in what manner it should be ascertained. The Act of Congress prohibits the importation of tea,
"which is inferior tea in purity, quality and fitness for consumption to the standards," and section 3
enacts that the Secretary of the Treasury shall fix and establish uniform standards of purity, quality, and
fitness upon the recommendation of the board of seven members. It specifically prohibits the
importation of tea, which is inferior in purity, quality, and fitness for consumption, based on certain
standards which are to be ascertained and determined by a board of seven members, each of whom
shall prepare and submit standard samples of tea, and based upon the recommendation of the board,
the Secretary of the Treasury shall then fix and establish a uniform standard of purity, quality, and
fitness, etc. The Act of Congress within itself provides the scope and purview of the standards and the
method, how and by whom they shall be ascertained.

The distinguished counsel for the Tobacco Association apparently recognizing this defect in their brief
say:

"The fact that Act No. 2613 creates no such board of experts to fix such standard is completely
immaterial. Moreover, it is to be supposed that the Collector of Internal Revenue acted, as in fact he did,
upon the advice of experts, such as are the tobacco manufacturers, whose opinion was consulted by
that officer as required by the law to such an extent that the conditions fixed by him f or standard cigar
met with the complete approval of said manufacturers."

That may all be true, but the fact remains that there is no such provision in the law, and that the validity
of a law is not tested by what is done under it, but what may be done, a forcible example of which
appears from the record.

Again, one law was enacted by Congress to prohibit the importation of tea into the United States which
is inferior in purity, quality and fitness for consumption by the people of the United States. Act No. 2613
was intended "to improve the methods of production and the quality of tobacco in the Philippines and
to develop the export trade therein," and "to establish general and local rules respecting the
classification, marking, and packing of tobacco for domestic sale or f or exportation to the United
States," and "to establish from time to time adequate rules defining the standard and the type of leaf
and manufactured tobacco which may be exported to the United States." That is to say, that the Act of
Congress was designed to prohibit the importing of inferior tea into the United States, and Act No. 2613
is apparently designed to prevent the exporting of a certain class of cigars from the Philippine Islands
into the United States. The law of Congress was designed to regulate imports to the United States, and
Act No. 2613 was designed to regulate the exporting of tobacco from the Philippine Islands into the
United States.

Under our view of the case, it is not necessary to pass on any other of the important questions so ably
discussed by opposing counsel.
The petition states a cause of action, all the material allegations of which are admitted by the
defendants' plea. The demurrer is overruled. Five days will be allowed from the promulgation of this
opinion in which to file an answer, and, for any failure to do so, the peremptory writ will be issued as
prayed for in the petition.

     Araullo, C. J., Malcolm, Avanceña, Villamor, Ostrand, and Romualdez, JJ., concur.

Demurrer overruled. Walter E. Olsen & Co. vs. Aldanese and Trinidad, 43 Phil. 259, No. 18740 March 29,
1922

3. PHILIPPINE LAWYER'S ASSOCIATION, petitioner, vs. CELEDONIO AGRAVA, in his capacity as Director
of the Philippines Patent Office, respondent. 105 Phil. 173 [No. L-12426. February 16, 1959]

Dispositive Portion: For the foregoing reasons, the petition for prohibition is granted and the
respondent Director is hereby prohibited from requiring members of the Philippine Bar to submit to an
examination or tests and pass the same before being permitted to appear and practice before the
Patent Office. No costs.

1.ATTORNEYS AT LAW; PRACTICE OF LAW; BEFORE PATENT OFFICE.—Practice of law in the Philippines
includes such appearance before the Patent Office, the representation of applicants, oppositors, and
other persons, and the prosecution of their applications for patent, their oppositions thereto or the
enforcement of their rights in patent cases.

2.ID.; ID.; ID.; WITHOUT FURTHER EXAMINATION.—A member of the bar, because of his legal knowledge
and training should be allowed to practice before the Patent Office, without further examination or
other qualification.

3.ID.; ID.; ID.; REASON.—Under the present law, members of the Philippine Bar authorized by the
Supreme Court to practice law, and in good standing, may practice their profession before the Patent
Office, for the reason that much of the business in said office involves the interpretation and
determination of the scope and application of the patent law and other laws applicable as well as the
presentation of evidence to establish facts involved. That part of the functions of the Patent Director are
judicial or quasi-judicial, so much so that appeals from his orders and decision are under the law taken
to the Supreme Court.

ORIGINAL ACTION in the Supreme Court. Prohibition and Injunction with Preliminary Injunction.

The facts are stated in the opinion of the Court.

This is a petition filed by the Philippine Lawyer's Association for prohibition and injunction against
Celedonio Agrava, in his capacity as Director of the Philippines Patent Office.

On May 27, 1957, respondent Director issued a circular announcing that he had scheduled for June 27,
1957 an examination for the purpose of determining who are qualified to practice as patent attorneys
before the Philippines Patent Office, the said examination to cover patent law and jurisprudence and the
rules of practice before said office. According to the circular, members of the Philippine Bar, engineers
and other persons with sufficient scientific and technical training are qualified to take the said
examination. It would appear that heretofore, respondent Director has been holding similar
examinations.

It is the contention of the petitioner Philippine Lawyer's Association that one who has passed the bar
examinations and is licensed by the Supreme Court to practice law in the Philippines and who is in good
standing, is duly qualified to practice before the Philippines Patent Office, and that consequently, the act
of the respondent Director requiring members of the Philippine Bar in good standing to take and pass an
examination given by the Patent Office as a condition precedent to their being allowed to practice
before said office, such as representing applicants in the preparation and prosecution of applications for
patent, is in excess of his jurisdiction and is in violation of the law.

In his answer, respondent Director, through the Solicitor General, maintains that the prosecution of
patent cases "does not involve entirely or purely the practice of law but includes the application of
scientific and technical knowledge and training, so much so that, as a matter of actual practice, the
prosecution of patent cases may be handled not only by lawyers, but also by engineers and other
persons with sufficient scientific and technical training who pass the prescribed examinations as given by
the Patent Office; * * * that the Rules of Court do not prohibit the Patent Office, or any other quasi-
judicial body from requiring further condition or qualification from those who would wish to handle
cases before such bodies, as in the prosecution of patent cases before the Patent Office which, as stated
in the preceding paragraph, requires more of an application of scientific and technical knowledge than
the mere application of provisions of law; * * * that the action taken by the respondent is in
accordance with Republic Act No. 165, otherwise known as the Patent Law of the Philippines, which is
similar to the United States Patent Law, in accordance with which the United States Patent Office has
also prescribed a similar examination as that prescribed by respondent. * * *."

Respondent further contends that just as the Patent Law of the United States of America authorizes the
Commissioner of Patents to prescribe examinations to determine as to Who may practice before the
United States Patent Office, the respondent, is similarly authorized to do so by our Patent Law, Republic
Act; No. 165. Although as already stated, the Director of Patents, in the past, would appear to have been
holding tests or examinations the passing of which was imposed as a required qualification to practice
before the Patent Office, to our knowledge, this is the first time that the right of the Director of Patents
to do so, specially as regards members of the bar, has been questioned formally, or otherwise put in
issue. And we have given it careful thought and consideration.

The Supreme Court has the exclusive and constitutional power with respect to admission to the practice
of law in the Philippines1 and any member of the Philippine Bar in good standing may practice law
anywhere and before any entity, whether judicial or quasi-judicial or administrative, in the Philippines.
Naturally, the question arises as to whether or not appearance before the Patent Office and the
preparation and prosecution of patent applications, etc., constitutes or is included in the practice of
law.

"The practice of law is not limited to the conduct of cases or litigation in court; it embraces the
preparation of pleadings and other papers incident to actions and special proceedings, the management
of such actions and proceedings on behalf of clients before judges and courts, and in addition,
conveying. In general, all advice to clients, and all action taken for them in matters connected with the
law incorporation services, assessment and condemnation services contemplating an appearance before
a judicial body, the foreclosure of a mortgage, enforcement of a creditor's claim in bankruptcy and
insolvency proceedings, and conducting proceedings in attachment, and in matters of estate and
guardianship have been held to constitute law practice, as do the preparation and drafting of legal
instruments, where the work done involves the determination by the trained legal mind of the legal
effect of facts and conditions." (5 Am. Jur. p. 262, 263). (Italics supplied)

"Practice of law under modern conditions consists in no small part of work performed outside of any
court and having no immediate relation to proceedings in court. It embraces conveyancing, the giving of
legal advice on a large variety of subjects, and the preparation and execution of legal instruments
covering an extensive field of business and trust relations and other affairs. Although these transactions
may have no direct connection with court proceedings, they are always subject to become involved in
litigation. They require in many aspects a high degree of legal skill, a wide experience with men and
affairs, and great capacity for adaptation to difficult and complex situations. These customary functions
of an attorney or counselor at law bear an intimate relation to the administration of justice by the
courts. No valid distinction, so far as concerns the question set forth in the order, can be drawn between
that part of the work of the lawyer which involves appearance in court and that part which involves
advice and drafting of instruments in his office. It is of importance to the welfare of the public that these
manifold customary functions be performed by persons possessed of adequate learning and skill, of
sound moral character, and acting at all times under the heavy trust obligations to clients which rests
upon all attorneys." (Moran, Comments on the Rules of Court, Vol. 3 (1953 ed.), p. 665-666, citing In re
Opinion of the Justices (Mass.), 194 N. E. 313, quoted in Rhode Is. Bar Assoc. vs. Automobile Service
Assoc. (R. I.) 179 A. 139, 144). (Italics ours)

In our opinion, the practice of law includes such appearance before the Patent Office, the
representation of applicants, oppositors, and other persons, and the prosecution of their applications
for patent, their oppositions thereto, or the enforcement of their rights in patent cases. In the first
place, although the transaction of business in the Patent Office involves the use and application of
technical and scientific knowledge and training, still, all such business has to be conducted and all orders
and decisions of the Director of Patents have to be rendered in accordance with the Patent Law, as well
as other laws, including the Rules and Regulations promulgated by the Patent Office in accordance with
law. Not only this, but practice before the Patent Office involves the interpretation and application of
other laws and legal principles, as well as the existence of facts to be established in accordance with the
law of evidence and procedure. For instance: Section 8 of our Patent Law provides that an invention
shall not be patentable if it is contrary to public order or morals, or to public health or welfare. Section 9
says that an invention shall not be considered new or patentable if it was known or used by others in the
Philippines before the invention thereof by the inventor named in the application for patent, or if it was
patented or described in any printed publication in the Philippines or any foreign country more than one
year before the application for a patent therefor, or if it had been in public use or on sale in the
Philippines for more than one year before the application for the patent therefor. Section 10 provides
that the right to the patent belongs to the true and actual inventor, his heirs, legal representatives or
assigns, and Section 12 says that an application for a patent may be filed only by the inventor, his heirs,
legal representatives or assigns. Sections 25 and 26 refer to correction of any mistake in a patent.
Section 28 enumerates the grounds for cancellation of a patent; that although any person may apply for
such cancellation. under Section 29, the Solicitor General is authorized to petition for the cancellation of
a patent. Section 30 mentions the requirements of a petition for cancellation. Sections 31 and 32
provide for a notice of hearing of the petition for cancellation of the patent by the Director of Patents in
case the said cancellation is warranted. Under Section 34, at any time after the expiration of three years
from the day the patent was granted, any person may apply for the grant of a license under a particular
patent on several grounds, such as, if the patented invention is not being worked in the Philippines on a
commercial scale, or if the demand for the patented article in the Philippines is not being met to an
adequate extent and reasonable terms, or if by reason of the patentee's refusal to grant a license on
reasonable terms or by reason of the conditions attached by him to the license, purchase, lease or use of
the patented article or working of the patented process or machine of production, the establishment of
a new trade or industry in the Philippines is prevented; or if the patent or invention relates to food or
medicine or is necessary to public health or public safety. All these things involve the application of
laws, legal principles, practice and procedure. They call for legal knowledge, training and experience
for which a member of the bar has been prepared.

In support of the proposition that much of the business and many of the acts, orders and decisions of
the Patent Director involve questions of law or a reasonable and correct evaluation of facts, the very
Patent Law, Republic Act No. 165, Section 61, provides that:

"* * * . The applicant for a patent or for the registration of a design, any party to a proceeding to cancel
a patent or to obtain a compulsory license, and any party to any other proceeding in the Office may
appeal to the Supreme Court from any final order or decision of the Director."

In other words, the appeal is taken to this Tribunal. If the transaction of business in the Patent Office
and the acts, orders and decisions of the Patent Director involved exclusively or mostly technical and
scientific knowledge and training, then logically, the appeal should be taken not to a court or judicial
body, but rather to a board of scientists, engineers or technical men, which is not the case.

Another aspect of the question involves the consideration of the nature of the functions and acts of the
Head of the Patent Office.

"* * *. The Commissioner, in issuing or withholding patents, in reissues, interferences, and extensions,
exercises quasi-judicial functions. Patents are public records, and it is the duty of the Commissioner to
give authenticated copies to any person, on payment of the legal fees." (40 Am. Jur. 537). (Italics
supplied).

"* * *. The Commissioner has the only original initiatory jurisdiction that exists up to the granting and
delivering of a patent, and it is his duty to decide whether the patent is new and whether it is the proper
subject of a patent; and his action in awarding or refusing a patent is a judicial function. In passing on an
application the commissioner should decide not only questions of law, but also questions of fact, as
whether there has been a prior public use or sale of the article invented. * * *." (60 C.J.S. 460). (Italics
supplied).

The Director of Patents, exercising as he does judicial or quasi-judicial functions, it is reasonable to hold
that a member of the bar, because of his legal knowledge and training, should be allowed to practice
before the Patent Office, without further examination or other qualification. Of course, the Director of
Patents, if he deems it advisable or necessary, may require that members of the bar practising before
him enlist the assistance of technical men and scientists in the preparation of papers and documents,
such as, the drawing or technical description of an invention or machine sought to be patented, in the
same way that a lawyer filing an application for the registration of a parcel of land on behalf of his client,
is required to submit a plan and technical description of said land, prepared by a licensed surveyor.

But respondent Director claims that he is expressly authorized by the law to require persons desiring to
practice or to do business before him to submit to an examination, even if they are already members of
the bar. He contends that our Patent Law, Republic Act No. 165, is patterned after the United States
Patent Law; and that the U. S. Patent Office in its Rules of Practice of the United States Patent Office in
Patent Cases prescribes an examination similar to that which he (respondent) has prescribed and
scheduled. He invites our attention to the following pro visions of said Rules of Practice:

"Registration of attorneys and agents.—A register of attorneys and a register of agents are kept in the
Patent Office on which are entered the names of all persons recognized as entitled to represent
applicants before the Patent Office in the preparation and prosecution of applications for patent.
Registration in the Patent Office under the provisions of these rules shall only entitle the person
registered to practice before the Patent Office.

"(a) Attorneys at law.—Any attorney at law in good standing admitted to practice before any United
States Court or the highest court of any State or Territory of the United States who fulfills the
requirements and complied with the provisions of these rules may be admitted to practice before the
Patent Office and have his name entered on the register of attorneys.

*                    *                    *                    *                    *                    *                    *

"(c) Requirement for registration.—No person will be admitted to practice and register unless he shall
apply to the Commissioner of Patents in writing on a prescribed form supplied by the Commissioner and
furnish all requested information and material; and shall establish to the satisfaction of the
Commissioner that he is of good moral character and of good repute and possessed of the legal and
scientific and technical qualifications necessary to enable him to render applicants for patent valuable
service, and is otherwise competent to advise and assist him in the presentation and prosecution of
their application before the Patent Office. In order that the Commissioner may determine whether a
person seeking to have his name placed upon either of the registers has the qualifications specified,
satisfactory proof of good moral character and repute, and of sufficient basic training in scientific and
technical matters must be submitted and an examination which is held from time to time must be taken
and passed. The taking of an examination may be waived in the case of any person who has served for
three years in the examining corps of the Patent Office."

Respondent states that the promulgation of the Rules of Practice of the United States Patent Office in
Patent Cases is authorized by the United States Patent Law itself, which reads as follows:

"The Commissioner of Patents, subject to the approval of the Secretary of Commerce may prescribe
rules and regulations governing the recognition of agents, attorneys, or other persons representing
applicants or other parties before his office, and may require of such persons, agents, or attorneys.,
before being recognized as representatives of applicants or other persons, that they shall show they are
of good moral character and in good repute, are possessed of the necessary qualifications to enable
them to render to applicants or other persons valuable service, and are likewise competent to advise
and assist applicants or other persons in the presentation or prosecution of their applications or other
business before the Office. The Commissioner of Patents may, after notice and opportunity for a
hearing, suspend or exclude, either generally or in any particular case, from further practice before his
office any person, agent, or attorney shown to be incompetent or disreputable, or guilty of gross
misconduct, or who refuses to comply with the said rules and regulations, or who shall, with intent to
defraud in any manner, deceive, mislead, or threaten any applicant or prospective applicant, or other
person having immediate or prospective business before the office, by word, circular, letter, or by
advertising. The reasons for any such suspension or exclusion shall be duly recorded. The action of the
Commissioner may be reviewed upon the petition of the person so refused recognition or so suspended
or excluded by the district court of the United States for the District of Columbia under such conditions
and upon such proceedings as the said court may by its rules determine." (Italics supplied).

Respondent Director concludes that Section 78 of Republic Act No. 165 being similar to the provisions of
law just reproduced, then he is authorized to prescribe the rules and regulations requiring that persons
desiring to practice before him should submit to and pass an examination. We reproduce said Section
78, Republic Act No. 165, for purposes of comparison:

"SEC. 78. Rules and regulations.—The Director subject to the approval of the Secretary of Justice, shall
promulgate the necessary rules and regulations, not inconsistent with law, for the conduct of all
business in the Patent Office."

The above provisions of Section 78 certainly and by far, are different from the provisions of the United
States Patent Law as regards authority to hold examinations to determine the qualifications of those
allowed to practice before the Patent Office. While the U. S. Patent Law authorizes the Commissioner
of Patents to require attorneys to show that they possess the necessary qualifications and
competence to render valuable service to and advise and assist their clients in patent cases, which
showing may take the form of a test or examination to be held by the Commissioner, our Patent Law,
Section 78, is silent on this important point. Our attention has not been called to any express
provision of our Patent Law, giving such authority to determine the qualifications of persons allowed
to practice before the Patent Office.

Section 551 of the Revised Administrative Code authorizes every chief of bureau to prescribe forms and
make regulations or general orders not inconsistent with law, to secure the harmonious and efficient
administration of his branch of the service and to carry into full effect the laws relating to matters within
the jurisdiction of his bureau. Section 608 of Republic Act 1937, known as the Tariff and Customs Code
of the Philippines, provides that the Commissioner of Customs shall, subject to the approval of the
Department Head, make all rules and regulations necessary to enforce the provisions of said code.
Section 338 of the National Internal Revenue Code, Commonwealth Act No. 466 as amended, states that
the Secretary of Finance, upon recommendation of the Collector of Internal Revenue, shall promulgate
all needful rules and regulations for the effective enforcement of the provisions of the code. We
understand that rules and regulations have been promulgated not only for the Bureaus of Customs and
Internal Revenue, but also for other bureaus of the Government, to govern the transaction of business
in and to enforce the law for said bureaus.

Were we to allow the Patent Office, in the absence of an express and clear provision of law giving the
necessary sanction, to require lawyers to submit to and pass on examination prescribed by it before
they are allowed to practice before said Patent Office, then there would be no reason why other
bureaus specially the Bureaus of Internal Revenue and Customs, where the business in the same area
are more or less complicated, such as the presentation of books of accounts, balance sheets, etc.,
assessments exemptions, depreciation, these as regards the Bureau of Internal Revenue, and the
classification of goods, imposition of customs duties, seizures, confiscation, etc., as regards the Bureau
of Customs, may not also require that any lawyer practising before them or otherwise transacting
business with them on behalf of clients, shall first pass an examination to qualify.

In conclusion, we hold that under the present law, members of the Philippine Bar authorized by this
Tribunal to practice law, and in good standing, may practice their profession before the Patent Office,
for the reason that much of the business in said office involves the interpretation and determination
of the scope and application of the Patent Law and other laws applicable, as well as the presentation
of evidence to establish facts involved; that part of the functions of the Patent Director are judicial or
quasijudicial, so much so that appeals from his orders and decisions are, under the law, taken to the
Supreme Court.

For the foregoing reasons, the petition for prohibition is granted and the respondent Director is hereby
prohibited from requiring members of the Philippine Bar to submit to an examination or tests and pass
the same before ore being permitted to appear and practice before the Patent Office. No costs.

Petition granted.

4. COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. FORTUNE TOBACCO CORPORATION,

respondent. G.R. No. 180006. September 28, 2011.*

Taxation; Administrative Law; The proviso in Section 1 of RR 17-99 clearly went beyond the terms of the
law it was supposed to implement, and therefore entitles the taxpayer to claim a refund of the overpaid
excise taxes collected pursuant to this provision.—Except for the tax period and the amounts involved,
the case at bar presents the same issue that the Court already resolved in 2008 in CIR v. Fortune
Tobacco Corporation, 559 SCRA 160 (2008). In the 2008 Fortune Tobacco case, the Court upheld the tax
refund claims of Fortune Tobacco after finding invalid the proviso in Section 1 of RR 17-99. We ruled:
“Section 145 states that during the transition period, i.e., within the next three (3) years from the
effectivity of the Tax Code, the excise tax from any brand of cigarettes shall not be lower than the tax
due from each brand on 1 October 1996. This qualification, however, is conspicuously absent as regards
the 12% increase which is to be applied on cigars and cigarettes packed by machine, among others,
effective on 1 January 2000. Clearly and unmistakably, Section 145 mandates a new rate of excise tax
for cigarettes packed by machine due to the 12% increase effective on 1 January 2000 without regard
to whether the revenue collection starting from this period may turn out to be lower than that
collected prior to this date.” By adding the qualification that the tax due after the 12% increase
becomes effective shall not be lower than the tax actually paid prior to 1 January 2000, Revenue
Regulation No. 17-99 effectively imposes a tax which is the higher amount between the ad valorem
tax being paid at the end of the three (3)-year transition period and the specific tax under paragraph
C, sub-paragraph (1)-(4), as increased by 12%—a situation not supported by the plain wording of
Section 145 of the Tax Code. Following the principle of stare decisis, our ruling in the present case
should no longer come as a surprise. The proviso in Section 1 of RR 17-99 clearly went beyond the terms
of the law it was supposed to implement, and therefore entitles Fortune Tobacco to claim a refund of
the overpaid excise taxes collected pursuant to this provision.

Same; Statutory Construction; That RA 8240 (incorporated as Section 145 of the 1997 Tax Code) was
enacted to raise government revenues is a given fact, but this is not the sole and only objective of the
law—congressional deliberations show that the shift from ad valorem to specific taxes introduced by the
law was also intended to curb the corruption that became endemic to the imposition of ad valorem
taxes.—That RA 8240 (incorporated as Section 145 of the 1997 Tax Code) was enacted to raise
government revenues is a given fact, but this is not the sole and only objective of the law. Congressional
deliberations show that the shift from ad valorem to specific taxes introduced by the law was also
intended to curb the corruption that became endemic to the imposition of ad valorem taxes. Since ad
valorem taxes were based on the value of the goods, the prices of the goods were often manipulated to
yield lesser taxes. The imposition of specific taxes, which are based on the volume of goods produced,
would prevent price manipulation and also cure the unequal tax treatment created by the skewed
valuation of similar goods.

Same; Uniformity in taxation requires that all subjects or objects of taxation, similarly situated, are to be
treated alike both in privileges and liabilities.—The Constitution requires that taxation should be
uniform and equitable. Uniformity in taxation requires that all subjects or objects of taxation, similarly
situated, are to be treated alike both in privileges and liabilities. This requirement, however, is
unwittingly violated when the proviso in Section 1 of RR 17-99 is applied in certain cases.

Same; The omissions of certain tax measures in the 1997 Tax Code’s provisions on excise taxes are
telling indications of the intent of Congress not to adopt the omitted tax measures—they are not simply
unintended lapses in the law’s wording.—The 1997 Tax Code’s provisions on excise taxes have omitted
the adoption of certain tax measures. To our mind, these omissions are telling indications of the intent
of Congress not to adopt the omitted tax measures; they are not simply unintended lapses in the law’s
wording that, as the CIR claims, are nevertheless covered by the spirit of the law. Had the intention of
Congress been solely to increase revenue collection, a provision similar to the third paragraph of Section
145(c) would have been incorporated in Sections 141 and 142 of the 1997 Tax Code. This, however, is
not the case.

PETITION for review on certiorari of the decision and resolution of the Court of Tax Appeals.

   The facts are stated in the opinion of the Court.

Before the Court is a petition for review on certiorari filed under Rule 45 of the Rules of Court by
petitioner Commissioner of Internal Revenue (CIR), assailing the decision dated July 12, 20071 and the
resolution dated October 4, 2007,2 both issued by the Court of Tax Appeals (CTA) en banc in CTA E.B.
No. 228.

Background Facts

Under our tax laws, manufacturers of cigarettes are subject to pay excise taxes on their products. Prior
to January 1, 1997, the excises taxes on these products were in the form of ad valorem taxes, pursuant
to Section 142 of the 1977 National Internal Revenue Code (1977 Tax Code).
Beginning January 1, 1997, Republic Act No. (RA) 82403 took effect and a shift from ad valorem to
specific taxes was made. Section 142(c) of the 1977 Tax Code, as amended by RA 8240, reads in part:

“Sec. 142. Cigars and cigarettes.—x x x.

(c) Cigarettes packed by machine.—There shall be levied, assessed and collected on cigarettes packed
by machine a tax at the rates prescribed below:

(1) If the net retail price (excluding the excise tax and the value-added tax) is above Ten pesos (P10.00)
per pack, the tax shall be Twelve pesos (P12.00) per pack;

(2) If the net retail price (excluding the excise tax and the value-added tax) exceeds Six pesos and fifty
centavos (P6.50) but does not exceed Ten pesos (P10.00) per pack, the tax shall be Eight pesos (P8.00)
per pack;

(3) If the net retail price (excluding the excise tax and the value-added tax) is Five pesos (P5.00) but
does not exceed Six pesos and fifty centavos (P6.50) per pack, the tax shall be Five pesos (P5.00) per
pack;

(4) If the net retail price (excluding the excise tax and the [value]-added tax) is below Five pesos
(P5.00) per pack, the tax shall be One peso (P1.00) per pack.

xxxx

The specific tax from any brand of cigarettes within the next three (3) years of effectivity of this Act shall
not be lower than the tax [which] is due from each brand on October 1, 1996: Provided, however, That
in cases where the specific tax rates imposed in paragraphs (1), (2), (3) and (4) hereinabove will result in
an increase in excise tax of more than seventy percent (70%), for a brand of cigarette, the increase shall
take effect in two tranches: fifty percent (50%) of the increase shall be effective in 1997 and one
hundred percent (100%) of the increase shall be effective in 1998.

xxxx

The rates of specific tax on cigars and cigarettes under paragraphs (1), (2), (3) and (4) hereof, shall be
increased by twelve percent (12%) on January 1, 2000.” [emphases ours]

To implement RA 8240 and pursuant to its rule-making powers, the CIR issued Revenue Regulation No.
(RR) 1-97 whose Section 3(c) and (d) echoed the above-quoted portion of Section 142 of the 1977 Tax
Code, as amended.4

The 1977 Tax Code was later repealed by RA 8424, or the National Internal Revenue Code of 1997 (1997
Tax Code), and Section 142, as amended by RA 8240, was renumbered as Section 145.

This time, to implement the 12% increase in specific taxes mandated under Section 145 of the 1997 Tax
Code and again pursuant to its rule-making powers, the CIR issued RR 17-99, which reads:

“Section 1. New Rates of Specific Tax.—The specific tax rates imposed under the following sections
are hereby increased by twelve percent (12%) and the new rates to be levied, assessed, and collected
are as follows:

Section Description of Articles Present Specific Tax New Specific Tax Rates
 Rates (Prior to January (Effective January 1,
1, 2000) 2000)
145 CIGARS and P12.00/pack P13.44/pack
CIGARETTES

B) Cigarettes
Packed by Machine

(1) Net Retail
Price (excluding VAT &
Excise) exceeds P10.00
per pack
(2) Net Retail Price P8.00/pack P8.96/pack
(excluding VAT &
Excise) is P6.51 up to
P10.00 per pack
(3) Net Retail Price P5.00/pack P5.60/pack
(excluding VAT &
Excise) is P5.00 to
P6.50 per pack
(4) Net Retail Price P1.00/pack P1.12/pack
(excluding VAT &
Excise) is below P5.00
per pack

Provided, however, that the new specific tax rate for any existing brand of cigars [and] cigarettes packed
by machine, distilled spirits, wines and fermented liquors shall not be lower than the excise tax that is
actually being paid prior to January 1, 2000. [emphasis ours]

The Facts of the Case

Pursuant to these laws, respondent Fortune Tobacco Corporation (Fortune Tobacco) paid in advance
excise taxes for the year 2003 in the amount of P11.15 billion, and for the period covering January 1 to
May 31, 2004 in the amount of P4.90 billion.5

In June 2004, Fortune Tobacco filed an administrative claim for tax refund with the CIR for erroneously
and/or illegally collected taxes in the amount of P491 million.6 Without waiting for the CIR’s action on
its claim, Fortune Tobacco filed with the CTA a judicial claim for tax refund.7

In its decision dated May 26, 2006, the CTA First Division ruled in favor of Fortune Tobacco and granted
its claim for refund.8 The CTA First Division’s ruling was upheld on appeal by the CTA en banc in its
decision dated July 12, 2007.9 The CIR’s motion for reconsideration of the CTA en banc’s decision was
denied in a resolution dated October 4, 2007.10

The Issue

Fortune Tobacco’s claim for refund of overpaid excise taxes is based primarily on what it considers as an
“unauthorized administrative legislation” on the part of the CIR. Specifically, it assails the proviso in
Section 1 of RR 17-99 that requires the payment of the “excise tax actually being paid prior to January
1, 2000” if this amount is higher than the new specific tax rate, i.e., the rates of specific taxes imposed
in 1997 for each category of cigarette, plus 12%. It claimed that by including the proviso, the CIR went
beyond the language of the law and usurped Congress’ power. As mentioned, the CTA sided with
Fortune Tobacco and allowed the latter to claim the refund.

The CIR disagrees with the CTA’s ruling and assails it before this Court through the present petition for
review on certiorari. The CIR posits that the inclusion of the proviso in Section 1 of RR 17-99 was made
to carry into effect the law’s intent and is well within the scope of his delegated legislative authority.11
He claims that the CTA’s strict interpretation of the law ignored Congress’ intent “to increase the
collection of excise taxes by increasing specific tax rates on ‘sin’ products.”12 He cites portions of the
Senate’s deliberation on House Bill No. 7198 (the precursor of RA 8240) that conveyed the legislative
intent to increase the excise taxes being paid.13

The CIR points out that Section 145(c) of the 1997 Tax Code categorically declares that “[t]he excise
tax from any brand of cigarettes within the [three-year transition period from January 1, 1997 to
December 31, 1999] shall not be lower than the tax, which is due from each brand on October 1,
1996.” He posits that there is no plausible reason why the new specific tax rates due beginning
January 1, 2000 should not be subject to the same rule as those due during the transition period. To
the CIR, the adoption of the “higher tax rule” during the transition period unmistakably shows the
intent of Congress not to lessen the excise tax collection. Thus, the CTA should have construed the
ambiguity or omission in Section 145(c) in a manner that would uphold the law’s policy and intent.

Fortune Tobacco argues otherwise. To it, Section 145(c) of the 1997 Tax Code read and interpreted as it
is written; it imposes a 12% increase on the rates of excise taxes provided under sub-paragraphs (1),
(2), (3), and (4) only; it does not say that the tax due during the transition period shall continue to be
collected if the amount is higher than the new specific tax rates. It contends that the “higher tax rule”
applies only to the three-year transition period to offset the burden caused by the shift from ad
valorem to specific taxes.

The Court’s Ruling

Except for the tax period and the amounts involved,14 the case at bar presents the same issue that the
Court already resolved in 2008 in CIR v. Fortune Tobacco Corporation.15 In the 2008 Fortune Tobacco
case, the Court upheld the tax refund claims of Fortune Tobacco after finding invalid the proviso in
Section 1 of RR 17-99. We ruled:

“Section 145 states that during the transition period, i.e., within the next three (3) years from the
effectivity of the Tax Code, the excise tax from any brand of cigarettes shall not be lower than the tax
due from each brand on 1 October 1996. This qualification, however, is conspicuously absent as regards
the 12% increase which is to be applied on cigars and cigarettes packed by machine, among others,
effective on 1 January 2000. Clearly and unmistakably, Section 145 mandates a new rate of excise tax for
cigarettes packed by machine due to the 12% increase effective on 1 January 2000 without regard to
whether the revenue collection starting from this period may turn out to be lower than that collected
prior to this date.”
    By adding the qualification that the tax due after the 12% increase becomes effective shall not be
lower than the tax actually paid prior to 1 January 2000, Revenue Regulation No. 17-99 effectively
imposes a tax which is the higher amount between the ad valorem tax being paid at the end of the three
(3)-year transition period and the specific tax under paragraph C, sub-paragraph (1)-(4), as increased by
12%—a situation not supported by the plain wording of Section 145 of the Tax Code.”16

Following the principle of stare decisis,17 our ruling in the present case should no longer come as a
surprise. The proviso in Section 1 of RR 17-99 clearly went beyond the terms of the law it was
supposed to implement, and therefore entitles Fortune Tobacco to claim a refund of the overpaid
excise taxes collected pursuant to this provision.

The amount involved in the present case and the CIR’s firm insistence of its arguments nonetheless
compel us to take a second look at the issue, but our findings ultimately lead us to the same conclusion.
Indeed, we find more reasons to disagree with the CIR’s construction of the law than those stated in our
2008 Fortune Tobacco ruling, which was largely based on the application of the rules of statutory
construction.

Raising government revenue is not

the sole objective of RA 8240

That RA 8240 (incorporated as Section 145 of the 1997 Tax Code) was enacted to raise government
revenues is a given fact, but this is not the sole and only objective of the law.18 Congressional
deliberations show that the shift from ad valorem to specific taxes introduced by the law was also
intended to curb the corruption that became endemic to the imposition of ad valorem taxes.19 Since ad
valorem taxes were based on the value of the goods, the prices of the goods were often manipulated to
yield lesser taxes. The imposition of specific taxes, which are based on the volume of goods produced,
would prevent price manipulation and also cure the unequal tax treatment created by the skewed
valuation of similar goods.

Rule of uniformity of taxation violated

by the proviso in Section 1, RR 17-99

The Constitution requires that taxation should be uniform and equitable.20 Uniformity in taxation
requires that all subjects or objects of taxation, similarly situated, are to be treated alike both in
privileges and liabilities.21 This requirement, however, is unwittingly violated when the proviso in

Section 1 of RR 17-99 is applied in certain cases. To illustrate this point, we consider three brands of
cigarettes, all classified as lower-priced cigarettes under Section 145(c)(4) of the 1997 Tax Code, since
their net retail price is below P5.00 per pack:

Brand22 Net Retail (A) (B) (C) (D) (E)

Price per
 pack Ad Valorem Specific Tax Specific Tax New New
Tax Due under Due Jan Specific Tax Specific Tax
prior to Jan Section 1997 to Dec imposing Due by Jan
1997 145(C)(4) 1999 12% 2000 per
increase by
Jan 2000 RR 17-99
Camel KS 4.71 5.50 1.00/pack 5.50 1.12/pack 5.50
Champion 4.56 3.30 1.00/pack 3.30 1.12/pack 3.30
M 100
Union 4.64 1.09 1.00/pack 1.09 1.12/pack 1.12
American
Blend

Although the brands all belong to the same category, the proviso in Section 1, RR 17-99 authorized the
imposition of different (and grossly disproportionate) tax rates (see column [D]). It effectively extended
the qualification stated in the third paragraph of Section 145(c) of the 1997 Tax Code that was supposed
to apply only during the transition period:

“The excise tax from any brand of cigarettes within the next three (3) years from the effectivity of R.A.
No. 8240 shall not be lower than the tax, which is due from each brand on October 1, 1996[.]”

In the process, the CIR also perpetuated the unequal tax treatment of similar goods that was supposed
to be cured by the shift from ad valorem to specific taxes.

The omission in the law in fact

reveals the legislative intent not to

adopt the “higher tax rule”

The CIR claims that the proviso in Section 1 of RR 17-99 was patterned after the third paragraph of
Section 145(c) of the 1997 Tax Code. Since the law’s intent was to increase revenue, it found no reason
not to apply the same “higher tax rule” to excise taxes due after the transition period despite the
absence of a similar text in the wording of Section 145(c). What the CIR misses in his argument is that he
applied the rule not only for cigarettes, but also for cigars, distilled spirits, wines and fermented liquors:

“Provided, however, that the new specific tax rate for any existing brand of cigars [and] cigarettes
packed by machine, distilled spirits, wines and fermented liquors shall not be lower than the excise tax
that is actually being paid prior to January 1, 2000.”

When the pertinent provisions of the 1997 Tax Code imposing excise taxes on these products are read,
however, there is nothing similar to the third paragraph of Section 145(c) that can be found in the
provisions imposing excise taxes on distilled spirits (Section 14123) and wines (Section 14224). In fact,
the rule will also not apply to cigars as these products fall under Section 145(a).25

Evidently, the 1997 Tax Code’s provisions on excise taxes have omitted the adoption of certain tax
measures. To our mind, these omissions are telling indications of the intent of Congress not to adopt the
omitted tax measures; they are not simply unintended lapses in the law’s wording that, as the CIR
claims, are nevertheless covered by the spirit of the law. Had the intention of Congress been solely to
increase revenue collection, a provision similar to the third paragraph of Section 145(c) would have been
incorporated in Sections 141 and 142 of the 1997 Tax Code. This, however, is not the case.

We note that Congress was not unaware that the “higher tax rule” is a proviso that should ideally apply
to the increase after the transition period (as the CIR embodied in the proviso in Section 1 of RR 17-99).
During the deliberations for the law amending Section 145 of the 1997 Tax Code (RA 9334), Rep. Jesli
Lapuz adverted to the “higher tax rule” after December 31, 1999 when he stated:

“This bill serves as a catch-up measure as government attempts to collect additional revenues due it
since 2001. Modifications are necessary indeed to capture the loss proceeds and prevent further erosion
in revenue base. x x x. As it is, it plugs a major loophole in the ambiguity of the law as evidenced by
recent disputes resulting in the government being ordered by the courts to refund taxpayers. This bill
clarifies that the excise tax due on the products shall not be lower than the tax due as of the date
immediately prior to the effectivity of the act or the excise tax due as of December 31, 1999.”26

This remark notwithstanding, the final version of the bill that became RA 9334 contained no provision
similar to the proviso in Section 1 of RR 17-99 that imposed the tax due as of December 31, 1999 if this
tax is higher than the new specific tax rates. Thus, it appears that despite its awareness of the need to
protect the increase of excise taxes to increase government revenue, Congress ultimately decided
against adopting the “higher tax rule.

WHEREFORE, in view of the foregoing, the petition is DENIED. The decision dated July 12, 2007 and the
resolution dated October 4, 2007 of the Court of Tax Appeals in CTA E.B. No. 228 are AFFIRMED. No
pronouncement as to costs.

SO ORDERED.

Petition denied, judgment and resolution affirmed.

_______________

14 The 2008 Fortune Tobacco case involved refund of excise taxes amounting to P680,387,025.00 for
the period of January 2000 to December 2001; and P355,385,920 for the period of January to December
2002.

17 Under this doctrine, Courts are “to stand by precedent and not to disturb settled point.” Once the
Court has “laid down a principle of law as applicable to a certain state of facts, it will adhere to that
principle, and apply it to all future cases, where facts are substantially the same; regardless of whether
the parties or property are the same”; In the Matter of the Charges of Plagiarism, etc., Against Associate
Justice Mariano C. del Castillo, A.M. No. 10-7-17-SC, February 8, 2011, 642 SCRA 11. Also, in Ting v.
Velez-Ting, G.R. No. 166562, March 31, 2009, 582 SCRA 694, 704-705, we said that “based on the
principle that once a question of law has been examined and decided, it should be deemed settled and
closed to further argument. Basically, it is a bar to any attempt to relitigate the same issues, necessary
for two simple reasons: economy and stability. In our jurisdiction, the principle is entrenched in Article 8
of the Civil Code.”

18 Senator Enrile’s sponsorship speech, in fact, identifies three objectives for the enactment of RA 8240:
(1) to evolve a tax structure which will promote fair competition among the players in the industries
concerned and generate buoyant and stable revenue for government; (2) to ensure that the tax burden
is equitably distributed; and (3) to simplify the tax administration and compliance with the tax laws.
Transcript of Senate Deliberations on House Bill No. 7198 dated October 15, 1996.

5. PHILIPPINE INTERISLAND SHIPPING ASSOCIATION OF THE PHILIPPINES, CONFERENCE OF

INTERISLAND SHIPOWNERS AND OPERATORS, UNITED PETROLEUM TANKER OPERATORS
ASSOCIATION OF THE PHILIPPINES, LIGHTERAGE ASSOCIATION OF THE PHILIPPINES and PILOTAGE
INTEGRATED SERVICES CORPORATION, petitioners, vs. COURT OF APPEALS, UNITED HARBOR PILOTS’
ASSOCIATION OF THE PHILIPPINES, INC. and MANILA PILOTS’ ASSOCIATION, respondents. G.R. Nos.
103716-17. January 22, 1997.*

HON. PETE NICOMEDES PRADO, in his capacity as Secretary of Transportation and Communications and
the PHILIPPINE PORTS AUTHORITY, petitioners, vs. COURT OF APPEALS, UNITED HARBOR PILOTS’
ASSOCIATION OF THE PHILIPPINES, INC., respondents. G.R. No. 107720. January 22, 1997.*

HON. JESUS B. GARCIA, JR., in his capacity as Secretary of Transportation and Communications and
Chairman of the PHILIPPINE PORTS AUTHORITY, COMMODORE ROGELIO A. DAYAN, in his capacity as
General Manager of the Philippine Ports Authority, and SIMEON T. SILVA, JR., in his capacity as the South
Harbor Manager, Philippine Ports Authority, petitioners, vs. HON. NAPOLEON R. FLOJO, in his capacity as
the Presiding Judge of Branch 2, Regional Trial Court-Manila, UNITED HARBOR PILOTS’ ASSOCIATION OF
THE PHILIPPINES and the MANILA PILOTS’ ASSOCIATION, respondents.

Public Utilities; Ships and Shipping; Pilotage Service; Words and Phrases; Pilotage service consists of
navigating a vessel from a specific point, usually about two (2) miles offshore, to an assigned area at the
pier and vice versa.—Private respondent United Harbor Pilots’ Association of the Philippines, Inc.
(UHPAP) is the umbrella organization of various groups rendering pilotage service in different ports of
the Philippines. The service consists of navigating a vessel from a specific point, usually about two (2)
miles off shore, to an assigned area at the pier and vice versa. When a vessel arrives, a harbor pilot takes
over the ship from its captain to maneuver it to a berth in the port, and when it departs, the harbor pilot
also maneuvers it up to a specific point off shore. The setup is required by the fact that each port has
peculiar topography with which a harbor pilot is presumed to be more familiar than a ship captain.

Same; Same; Same; Same; Administrative Law; Delegation of Powers; Rate-Fixing; The fixing of rates is
essentially a legislative power.—Petitioners contend that E.O. No. 1088 was merely an administrative
issuance of then President Ferdinand E. Marcos and, as such, it could be superseded by an order of the
PPA. They argue that to consider E.O. No. 1088 a statute would be to deprive the PPA of its power under
its charter to fix pilotage rates. The contention has no merit. The fixing of rates is essentially a legislative
power. Indeed, the great battle over the validity of the exercise of this power by administrative agencies
was fought in the 1920s on the issue of undue delegation precisely because the power delegated was
legislative. The growing complexity of modern society, the multiplication of the subjects of
governmental regulations and the increased difficulty of administering the laws made the creation of
administrative agencies and the delegation to them of legislative power necessary.
Same; Same; Same; Same; Same; Same; Same; Rate-fixing orders previously issued by the Philippine
Ports Authority were in the nature of subordinate legislation, promulgated by it in the exercise of
delegated power, and as such these could only be amended or revised by law.—There is no basis for
petitioners’ argument that rate fixing is merely an exercise of administrative power; that if President
Marcos had power to revise the rates previously fixed by the PPA through the issuance of E.O. No. 1088,
the PPA could in turn revise those fixed by the President, as the PPA actually did in A.O. No. 4386, which
fixed lower rates of pilotage fees, and even entirely left the fees to be paid for pilotage to the agreement
of the parties to a contract. The orders previously issued by the PPA were in the nature of subordinate
legislation, promulgated by it in the exercise of delegated power. As such these could only be amended
or revised by law, as the President did by E.O. No. 1088.

Same; Same; Same; Same; Same; Same; Same; Statutes; What determines whether an act is a law or an
administrative issuance is not its form but its nature.—It is not an answer to say that E.O. No. 1088
should not be considered a statute because that would imply the withdrawal of power from the PPA.
What determines whether an act is a law or an administrative issuance is not its form but its nature.
Here, as we have already said, the power to fix the rates of charges for services, including pilotage
service, has always been regarded as legislative in character.

Same; Same; Same; Same; Same; Same; Same; Same; As then President Marcos in the exercise of
legislative powers could delegate the ratemaking power to the PPA, so could he exercise it in specific
instances without thereby withdrawing the power vested by P.D. No. 857.—Nor is there any doubt of
the power of the then President to fix rates. On February 3, 1986, when he issued E.O. No. 1088,
President Marcos was authorized under Amendment No. 6 of the 1973 Constitution to exercise
legislative power, just as he was under the original 1973 Constitution, when he issued P.D. No. 857
which created the PPA, endowing it with the power to regulate pilotage service in Philippine ports.
Although the power to fix rates for pilotage had been delegated to the PPA, it became necessary to
rationalize the rates of charges fixed by it through the imposition of uniform rates. That is what the
President did in promulgating E.O. No. 1088. As the President could delegate the ratemaking power to
the PPA, so could he exercise it in specific instances without thereby withdrawing the power vested by
P.D. No. 857, §20(a) in the PPA “to impose, fix, prescribe, increase or decrease such rates, charges or
fees . . . for the services rendered by the Authority or by any private organization within a Port District.”

Same; Same; Same; Same; Same; Same; Same; Same; It cannot be denied that Congress may intervene
anytime despite the existence of administrative agencies entrusted with wage-fixing powers, by virtue of
the former’s plenary power of legislation, and when Congress does so, the result is not the withdrawal
of the powers delegated to the Wage Boards but cooperative lawmaking in an area where initiative and
expertise are required.—The case presented is similar to the fixing of wages under the Wage
Rationalization Act (R.A. No. 6727) whereby minimum wages are determined by Congress and provided
by law, subject to revision by Wage Boards should later conditions warrant their revision. It cannot be
denied that Congress may intervene anytime despite the existence of administrative agencies entrusted
with wage-fixing powers, by virtue of the former’s plenary power of legislation. When Congress does so,
the result is not the withdrawal of the powers delegated to the Wage Boards but cooperative lawmaking
in an area where initiative and expertise are required.

Same; Same; Same; Same; Same; Same; Same; Same; It is not unusual for lawmakers to have in mind
partisan political consideration in sponsoring legislation, yet that is not a ground for invalidating a
statute.—Petitioners refused to implement E.O. No. 1088 on the ground that it was issued without
notice to the PPA and that it was nothing but a “political gimmick” resorted to by then President
Marcos. This perception obviously stemmed from the fact that E.O. No. 1088 was issued shortly before
the presidential elections in 1986. But lack of notice to the PPA is not proof that the necessary factual
basis for the order was wanting. To the contrary, the presumption is that the President had before him
pertinent data on which he based the rates prescribed in his order. Nor is the fact that the order might
have been issued to curry favor with the voters a reason for the PPA to refuse to enforce the order in
question. It is not unusual for lawmakers to have in mind partisan political consideration in sponsoring
legislation. Yet that is not a ground for invalidating a statute.

Same; Same; Same; Same; Same; Same; Same; Same; Judicial Review; An inquiry into legislative
motivation is not proper since the only relevant question is whether in issuing it the President violated
constitutional and statutory restrictions on his power.—Moreover, an inquiry into legislative motivation
is not proper since the only relevant question is whether in issuing it the President violated
constitutional and statutory restrictions on his power. The PPA did not have any objection to the order
based on constitutional ground. In fact the nearest to a challenge on constitutional grounds was that
mounted not by the PPA but by the intervenors below which claimed that the rates fixed in E.O. No.
1088 were exorbitant and unreasonable. However, both the trial court and the Court of Appeals
overruled the objections and the intervenors apparently accepted the ruling because they did not
appeal further to this Court.

Same; Same; Same; Same; Same; Same; Same; Same; E.O. No. 1088 is a valid statute and that the PPA is
duty bound to comply with its provisions—the PPA cannot refuse to implement E.O. No. 1088 or alter it.
—We conclude that E.O. No. 1088 is a valid statute and that the PPA is duty bound to comply with its
provisions. The PPA may increase the rates but it may not decrease them below those mandated by E.O.
No. 1088. Finally, the PPA cannot refuse to implement E.O. No. 1088 or alter it as it did in promulgating
Memorandum Circular No. 43-86.

Same; Same; Same; Same; Same; Same; Same; Same; The PPA cannot abrogate the rates fixed and leave
the fixing of rates for pilotage service to the contracting parties as this constitutes jettisoning a
government policy and changing it to laissez-faire, something which only the legislature, or whoever is
vested with lawmaking authority, could do.—Much less could the PPA abrogate the rates fixed and leave
the fixing of rates for pilotage service to the contracting parties as it did through A.O. No. 02-88, §3.
Theretofore the policy was one of governmental regulation of the pilotage business. By leaving the
matter to the determination of the parties, the PPA jettisoned this policy and changed it to laissez-faire,
something which only the legislature, or whoever is vested with lawmaking authority, could do.

Actions; Petition for Review; Judgments; It is now settled that the dismissal of a petition for review on
certiorari is an adjudication on the merits of a controversy.—As already stated, from this decision, both
the government and the intervenors separately brought petitions for review to this Court. In G.R. No.
100109, the government’s petition was dismissed for lack of showing that the appellate court
committed reversible error. The dismissal of the government’s petition goes far to sustain the dismissal
of the intervenors’ petition in G.R. No. 100481 for the review of the same decision of the Court of
Appeals. After all, the intervenors’ petition is based on substantially the same grounds as those stated in
the government’s petition.
It is now settled that the dismissal of a petition for review on certiorari is an adjudication on the merits
of a controversy. Such dismissal can only mean that the Supreme Court agrees with the findings and
conclusions of the Court of Appeals or that the decision sought to be reviewed is correct.

Same; Same; Same; Moot and Academic; The question of the validity of an Administrative Order has
become moot and academic where the administrative policy, the validity of which is sought to be
justified by private parties, has already been abandoned by the very administrative agency which
adopted it.—It is significant to note that the Secretary of Transportation and Communications and the
PPA, petitioners in G.R. No. 100109, have conceded the finality of the dismissal of their appeal. Thus, the
administrative policy, the validity of which herein petitioners seek to justify by their appeal, has already
been abandoned by the very administrative agency which adopted it, with the result that the question
of validity of A.O. No. 02-88 is now moot and academic.

Courts; Appeals; Contempt; The appeal transfers the proceedings to the appellate court, and this last
court becomes thereby charged with the authority to deal with contempts committed after perfection of
the appeal.—Still it is argued that the trial court lost jurisdiction over Civil Case No. 887426, upon the
perfection of their appeal from its decision. That is indeed true. “The appeal transfers the proceedings to
the appellate court, and this last court becomes thereby charged with the authority to deal with
contempts committed after perfection of the appeal.” The trial court would have jurisdiction only in the
event of an attempt to block execution of its decision and that would be after the remand of the case to
the trial court. Until then the trial court would have no jurisdiction to deal with alleged contemptuous
acts.

Same; Same; Same; The contention that a party’s complaint for contempt must be the subject of a
separate action would nullify contempt proceedings as means of securing obedience to the lawful
processes of a court—this theory would reward ingenuity and cunning in devising orders which
substantially are the same as the order previously prohibited by the court.—The fly in the ointment,
however, is that by accepting the dismissal of their petition for review in G.R. No. 100109, petitioners
rendered execution of the decision of the trial court superfluous. Any attempt by them, therefore, to
disobey the court’s final injunction as embodied in its decision would be properly subject to punishment
for contempt. Petitioners’ contention that private respondents’ complaint must be the subject of a
separate action would nullify contempt proceedings as means of securing obedience to the lawful
processes of a court. Petitioners’ theory would reward ingenuity and cunning in devising orders which
substantially are the same as the order previously prohibited by the court.

PETITIONS for review of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

Private respondent United Harbor Pilots’ Association of the Philippines, Inc. (UHPAP) is the umbrella
organization of various groups rendering pilotage service in different ports of the Philippines. The service
consists of navigating a vessel from a specific point, usually about two (2) miles off shore, to an assigned
area at the pier and vice versa. When a vessel arrives, a harbor pilot takes over the ship from its captain
to maneuver it to a berth in the port, and when it departs, the harbor pilot also maneuvers it up to a
specific point off shore. The setup is required by the fact that each port has peculiar topography with
which a harbor pilot is presumed to be more familiar than a ship captain.
The Philippine Ports Authority (PPA) is the government agency which regulates pilotage. Pursuant to
Presidential Decree No. 857, it has the power “to supervise, control, regulate . . . such services as are
necessary in the ports vested in, or belonging to the Authority”1 and to “control, regulate and supervise
pilotage and the conduct of pilots in any Port District.”2 It also has the power “to impose, fix, prescribe,
increase or decrease such rates, charges or fees . . . for the services rendered by the Authority or by any
private organization within a Port District.”3

These cases arose out of the efforts of harbor pilots to secure enforcement of Executive Order No. 1088,
which fixes the rates of pilotage service, and the equally determined efforts of the PPA and its officials,
the herein petitioners, to block enforcement of the executive order, even as they promulgated their own
orders which in the beginning fixed lower rates of pilotage and later left the matter to self determination
by parties to a pilotage contract.

I. THE FACTS

G.R. No. 103716

On February 3, 1986, shortly before the presidential elections, President Ferdinand E. Marcos,
responding to the clamor of harbor pilots for an increase in pilotage rates, issued Executive Order No.
1088, PROVIDING FOR UNIFORM AND MODIFIED RATES FOR PILOTAGE SERVICES RENDERED TO
FOREIGN AND COASTWISE VESSELS IN ALL PRIVATE AND PUBLIC PORTS. The executive order increased
substantially the rates of the existing pilotage fees previously fixed by the PPA.

However, the PPA refused to enforce the executive order on the ground that it had been drawn hastily
and without prior consultation; that its enforcement would create disorder in the ports as the operators
and owners of the maritime vessels

had expressed opposition to its implementation; and that the increase in pilotage, as mandated by it,
was exorbitant and detrimental to port operations.4

The UHPAP then announced its intention to implement E.O. No. 1088 effective November 16, 1986. This
in turn drew a warning from the PPA that disciplinary sanctions would be applied to those who would
charge rates under E.O. No. 1088. The PPA instead issued Memorandum Circular No. 43-86, fixing
pilotage fees at rates lower than those provided in E.O. No. 1088.

Consequently, the UHPAP filed on January 7, 1987 a complaint for injunction with the Regional Trial
Court of Manila, against the then Minister of Transportation and Communications, Hernando Perez, and
PPA General Manager, Primitivo S. Solis, Jr. It sought a writ of preliminary mandatory injunction for the
immediate implementation of E.O. No. 1088, as well as a temporary restraining order to stop PPA
officials from imposing disciplinary sanctions against UHPAP members charging rates in accordance with
E.O. No. 1088.

The case, docketed as Civil Case No. 87-38913, was raffled to Branch 28 of the Regional Trial Court of
Manila which issued a temporary restraining order, enjoining the PPA from threatening the UHPAP, its
officers and its members with suspension and other disciplinary action for collecting pilotage fees
pursuant to E.O No. 1088.
On March 16, 1987, the Chamber of Maritime Industries of the Philippines, William Lines, Inc., Loadstar
Shipping Co., Inc. and Delsen Transport Lines, Inc., after obtaining leave, filed a joint answer in
intervention.

On February 26, 1988, while the case was pending, the PPA issued Administrative Order No. 02-88,
entitled IMPLEMENTING GUIDELINES ON OPEN PILOTAGE SERVICE. The PPA announced in its order that
it was leaving to the contracting parties, i.e., the shipping lines and the pilots, the fixing of mutually
acceptable rates for pilotage services, thus abandoning the rates fixed by it (PPA) under Memorandum
Circular No. 43-86, as well as those provided in E.O. No. 1088. The administrative order provided:

Section 3. Terms/Conditions on Pilotage Service.—The shipping line or vessel’s agent/representative and

the harbor pilot/firm chosen by the former shall agree between themselves, among others, on what
pilotage service shall be performed, the use of tugs and their rates, taking into consideration the
circumstances stated in Section 12 of PPA A.O. No. 03-85, and such other conditions designed to ensure
the safe movement of the vessel in pilotage areas/grounds.

The PPA then moved to dismiss the case, contending that the issuance of its order had rendered the
case moot and academic and that consequently E.O. No. 1088 had ceased to be effective. The UHPAP
opposed the motion. Together with the Manila Pilots’ Association (MPA), it filed on May 25, 1988 a
petition for certiorari and prohibition in the RTC-Manila, questioning the validity of A.O. No. 02-88. This
petition was docketed as Civil Case No. 88-44726 (United Harbor Pilots’ Association and Manila Pilots’
Association v. Hon. Rainerio Reyes, as Acting Secretary of the Department of Transportation and
Communications and Chairman of the Philippine Ports Authority (PPA) and Maximo Dumlao, Jr., as
General Manager of the Philippine Ports Authority (PPA, et al.) and raffled to Branch 2 of RTC-Manila.
The factual antecedents of this case are discussed in G.R. No. 100481 below.

Meanwhile, in Civil Case No. 87-38913, the court, without resolving the motion to dismiss filed by the
PPA, rendered a decision5 holding that A.O. No. 02-88 did not render the case moot and academic and
that the PPA was under obligation to comply with E.O. No. 1088 because the order had the force of law
which the PPA could not repeal.

The then Transportation Minister Hernando Perez and the PPA filed a petition for review. The petition
was filed in this Court which later referred the case to the Court of Appeals where it docketed as CA G.R.
SP No. 18072. On the other hand the intervenors appealed to the Court of Appeals where this case was
docketed as CA G.R. No. 21590. The two cases were then consolidated.

In a decision rendered on October 4, 1991, the Twelfth Division6 of the Court of Appeals affirmed the
decision of the trial court, by dismissing CA G.R. No. 21590 and denying CA G.R. SP No. 18072. Hence,
this petition by the Secretary of Transportation and Communications and the PPA. The intervenor
shipping lines did not appeal.

G.R. No. 100481

Meanwhile, in a petition for certiorari filed before RTCManila, Branch 2 (Civil Case No. 88-44726), the
UHPAP and the MPA sought the annulment of A.O. No. 02-88, which in pertinent parts provided:

Section 1. Statement of Policy.—It is hereby declared that the provision of pilotage in

ports/harbors/areas defined as compulsory in Section 8 of PPA Administrative Order No. 03-85, entitled,
“Rules and Regulations Governing Pilotage Services, the Conduct of Pilots and Pilotage Fees in Philippine
Ports” shall be open to all licensed harbor pilots/pilotage firms/associations appointed/accredited by
this authority to perform pilotage service.

Section 2. Persons Authorized to Render Pilotage.—The following individuals, persons or groups shall be
appointed/accredited by this Authority to provide pilotage service:

a.Harbor Pilots of the present Pilotage Associations of the different pilotage districts in the Philippines.
Their probationary training as required under Section 31 of PPA AO No. 03-85 shall be undertaken by
any member of said Association.

b.Members/employees of any partnership/corporation or association, including Filipino

shipmasters/captains of vessel (domestic/foreign) of Philippine Registry and individuals who meet the
minimum qualifications and comply with the requirements prescribed in Sec. 29 of PPA AO No. 03-85,
aforestated, and who are appointed by said firm or association and accredited as harbor pilots by this
authority. New Harbor Pilots who wish to be appointed/accredited by PPA under the open pilotage
system either as an individual pilot or as a member of any Harbor Pilot partnership/association shall be
required to undergo a practical examination, in addition to the written examination given by the
Philippine Coast Guard, prior to their appointment/accreditation by this Authority.

The UHPAP and MPA, as petitioners below, contended (1) that A.O. No. 02-88 was issued without the
benefit of a public hearing; (2) that E.O. No. 1088 had not been repealed by any other Executive Order
or Presidential Decree and, therefore, should be given effect, and (3) that A.O. No. 02-88 contravened
P.D. No. 857.

On August 21, 1989, the Philippine Interisland Shipping Association, Conference of Interisland
Shipowners and Operators, United Petroleum Tanker Operators of the Philippines, Lighterage
Association of the Philippines, and Pilotage Integrated Services Corp., were allowed to intervene.

On September 8, 1989, a writ of preliminary injunction was issued by the court, enjoining the PPA from
implementing A.O. No. 02-88 and, on October 26, 1989, judgment was rendered in favor of the
petitioners therein. The dispositive portion of the court’s decision7 reads:

WHEREFORE, for all of the foregoing, the petition is hereby granted.

1.Respondents are hereby declared to have acted in excess of jurisdiction and with grave abuse of
discretion amounting to lack of jurisdiction in approving Resolution No. 860 and in enacting Philippine
Ports Authority Administrative Order No. 02-88, the subject of which is “Implementing Guidelines on
Open Pilotage Service”;

2.Philippine Ports Authority Administrative Order No. 02-88 is declared null and void;

3.The preliminary injunction issued on September 8, 1989 is made permanent; and

4.Without costs.

SO ORDERED.
Respondents and the intervenors below filed a joint petition for certiorari in the Court of Appeals (CA
G.R. SP No. 19570), assailing the decision of the trial court. But their petition was dismissed for lack of
jurisdiction on the ground that the issue raised was purely legal.

The parties separately filed petitions for review before this Court. The first one, by the PPA and its
officers, was docketed as G.R. No. 100109 (Hon. Pete Nicomedes Prado, Philippine Ports Authority and
Commodore Rogelio Dayan v. United Harbor Pilots’ Association of the Philippines and Manila Pilots’
Association), while the second one, by the intervenors, was docketed as G.R. No. 100481 (Philippine
Interisland Shipping Association of the Philippines, Conference of Interisland Ship Owners and
Operators, United Petroleum Tanker Operators Association of the Philippines, Inc. v. The Court of
Appeals, United Harbor Pilots’ Association of the Philippines and Manila Pilots’ Association.)

The petition filed by the government in G.R. No. 100109 was dismissed for failure of petitioners to show
that the Court of Appeals committed a reversible error.8 On the other hand, the petition of the
intervenors in G.R. No. 100481 was given due course.

G.R. No. 107720

Following the denial of its petition in G.R. No. 100109, the PPA issued on July 31, 1992, Administrative
Order No. 05-92, placing harbor pilots under the control of the PPA with respect to the scheduling and
assignment of service of vessels. The PPA cited as justification “pilotage delays. . . under the set-up
where private respondents (UHPAP & MPA) assign the pilots. Intentionally or otherwise, several vessels
do not receive the pilotage service promptly, causing them operational disruptions and additional
expenses/costs.”9

Private respondents UHPAP and MPA viewed the matter differently. On October 28, 1992, they asked
the RTC-Manila, Branch 2 which heard and decide Civil Case No. 88-44726 to cite PPA officials in
contempt of court. On the same day, the trial court issued an order restraining the herein petitioners
from implementing Administrative Order No. 05-92. However, the PPA proceeded to implement its
order, prompting the UHPAP and MPA to move again to cite petitioners in contempt, even as they
questioned the validity of A.O. No. 05-92. Accordingly the trial court issued another order on November
4, 1992, reiterating its previous order of October 28, 1992 to petitioners to refrain from implementing
A.O. No. 05-92 pending resolution of the petitions.

Making a special appearance, petitioners questioned the jurisdiction of the court and moved for the
dismissal of the petitions for contempt. Allegedly to prevent the disruption of pilotage services,
petitioners created a special team of reserve pilots to take over the pilotage service in the event
members of UHPAP/MPA refused to render pilotage services.

For the third time respondents moved to cite petitioners in contempt of court. Again petitioners
questioned the court’s jurisdiction and manifested that they were adopting their previous motion to
dismiss petitions for contempt filed against them.

On November 17, 1992, the trial court denied the petitioners’ motion and set the contempt petitions for
hearing on November 19, 1992. Hence, this petition, which was docketed as G.R. No. 107720 (Hon. Jesus
B. Garcia, Jr. in his capacity as Secretary of Transportation and Communications and Chairman of the
Philippine Ports Authority, Commodore Rogelio A. Dayan, in his capacity as General Manager of the
Philippine Ports Authority and Simeon T. Silva, Jr., in his capacity as the South Harbor Manager,
Philippine Ports Authority v. Hon. Napoleon Flojo, in his capacity as the Presiding Judge of Branch 2, RTC,
Manila, UHPAP and MPA).

Pending resolution of this case, the Court ordered the parties to maintain the status quo as of October
31, 1992.

II. THE ISSUES AND THEIR DISPOSITION

The issues raised are:

I.WHETHER OR NOT RESPONDENT COURT OF APPEALS ERRED IN AFFIRMING THE CHALLENGED

DECISION OF RTC-MANILA, BRANCH 41, WHICH RULED THAT:

(A)CIVIL CASE NO. 87-38913 HAS NOT BECOME MOOT AND ACADEMIC WITH THE ISSUANCE OF
ADMINISTRATIVE ORDER NO. 02-88; AND

(B)HEREIN PETITIONERS ARE BOUND TO COMPLY WITH E.O. NO. 1088;

II.WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN DISMISSING CA G.R.
SP NO. 19570 FOR LACK OF JURISDICTION?

III.WHETHER OR NOT RESPONDENT JUDGE NAPOLEON FLOJO COMMITTED GRAVE ABUSE OF

DISCRETION IN ASSUMING JURISDICTION OVER THE PETITIONS FOR CONTEMPT FILED BY PRIVATE
RESPONDENTS AS A RESULT OF THE ISSUANCE OF A.O. NO. 05-92?

These issues will be discussed in seriatim.

A. Whether Executive Order No. 1088 is Valid and

Petitioners are Bound to Obey it

(G.R. Nos. 103716-17)

Executive Order No. 1088 reads:

EXECUTIVE ORDER No. 1088

PROVIDING FOR UNIFORM AND MODIFIED RATES FOR PILOTAGE SERVICES RENDERED TO FOREIGN AND
COASTWISE VESSELS IN ALL PRIVATE OR PUBLIC PHILIPPINE PORTS.

WHEREAS, the United Harbor Pilots’ Association of the Philippines has clamored for the rationalization
of pilotage service charges, through the imposition of uniform and adjusted rates for foreign and
coastwise vessels in all Philippine ports, whether public or private;

WHEREAS, the plea of the Association has been echoed by a great number of Members of Parliament
and other persons and groups;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers
vested in me by the Constitution and by law, do hereby direct and order:

SECTION 1. The following shall be the rate of pilotage fees or charges based on tonnage for services
rendered to both foreign and coastwise vessels;
For Foreign Vessels

Rate in US $ or its Peso Equivalent

Less than

500GT

$ 30.00

500GT

to

2,500GT

43.33

2,500GT

to

5,000GT

71.33

5,000GT

to

10,000GT

133.67

10,000GT

to

15,000GT

181.67

15,000GT

to

20,000GT

247.00

20,000GT

to

30,000GT

300.00
30,000GT

to

40,000GT

416.67

40,000GT

to

60,000GT

483.33

60,000GT

to

80,000GT

550.00

80,000GT

to

100,000GT

616.67

100,000GT

to

120,000GT

666.67

120,000GT

to

130,000GT

716.67

130,000GT

to

140,000GT

766.67
Over 140,000 gross tonnage $0.05 or its peso equivalent every excess tonnage. Rate for docking and
undocking anchorage, conduction and shifting other related special services is equal to 100%. Pilotage
services shall be compulsory in government and private wharves or piers,

For Coastwise Vessels:

Regular

100 and under

500 gross tons

P 41.70

500 and under

600 gross tons

55.60

600 and under

1,000 gross tons

69.60

1,000 and under

3,000 gross tons

139.20

3,000 and under

5,000 gross tons

300.00

5,000 and over gross tons

SEC. 2. With respect to foreign vessels, payment of pilotage services shall be made in dollars or in pesos
at the prevailing exchange rate.

SEC. 3. All orders, letters of instruction, rules, regulations and other issuances inconsistent with this
Executive Order are hereby repealed or amended accordingly.

SEC. 4. This Executive Order shall take effect immediately.

Done in the City of Manila, this 3rd day of February, in the year of our Lord, nineteen hundred and
eighty-six.

(Sgd.) FERDINAND E. MARCOS

President of the Philippines

By the President:

(Sgd.) JUAN C. TUVERA

     Presidential Executive Assistant

Petitioners contend that E.O. No. 1088 was merely an administrative issuance of then President
Ferdinand E. Marcos and, as such, it could be superseded by an order of the PPA. They argue that to
consider E.O. No. 1088 a statute would be to deprive the PPA of its power under its charter to fix
pilotage rates.

The contention has no merit. The fixing of rates is essentially a legislative power.10 Indeed, the great
battle over the validity of the exercise of this power by administrative agencies was fought in the 1920s
on the issue of undue delegation precisely because the power delegated was legislative. The growing
complexity of modern society, the multiplication of the subjects of governmental regulations and the
increased difficulty of administering the laws made the creation of administrative agencies and the
delegation to them of legislative power necessary.11

There is no basis for petitioners’ argument that rate fixing is merely an exercise of administrative power;
that if President Marcos had power to revise the rates previously fixed by the PPA through the issuance
of E.O. No. 1088, the PPA could in turn revise those fixed by the President, as the PPA actually did in A.O.
No. 43-86, which fixed lower rates of pilotage fees, and even entirely left the fees to be paid for pilotage
to the agreement of the parties to a contract. The orders previously issued by the PPA were in the
nature of subordinate legislation, promulgated by it in the exercise of delegated power. As such these
could only be amended or revised by law, as the President did by E.O. No. 1088.

It is not an answer to say that E.O. No. 1088 should not be considered a statute because that would
imply the withdrawal of power from the PPA. What determines whether an act is a law or an
administrative issuance is not its form but its nature. Here, as we have already said, the power to fix the
rates of charges for services, including pilotage service, has always been regarded as legislative in
character.

Nor is there any doubt of the power of the then President to fix rates. On February 3, 1986, when he
issued E.O. No. 1088, President Marcos was authorized under Amendment No. 6 of the 1973
Constitution to exercise legislative power, just as he was under the original 1973 Constitution, when he
issued P.D. No. 857 which created the PPA, endowing it with the power to regulate pilotage service in
Philippine ports. Although the power to fix rates for pilotage had been delegated to the PPA, it became
necessary to rationalize the rates of charges fixed by it through the imposition of uniform rates. That is
what the President did in promulgating E.O. No. 1088. As the President could delegate the ratemaking
power to the PPA, so could he exercise it in specific instances without thereby withdrawing the power
vested by P.D. No. 857, §20(a) in the PPA “to impose, fix, prescribe, increase or decrease such rates,
charges or fees . . . for the services rendered by the Authority or by any private organization within a
Port District.”

It is worthy to note that E.O. No. 1088 provides for adjusted pilotage service rates without withdrawing
the power of the PPA to impose, prescribe, increase or decrease rates, charges or fees. The reason is
because E.O. No. 1088 is not meant simply to fix new pilotage rates. Its legislative purpose is the
“rationalization of pilotage service charges, through the imposition of uniform and adjusted rates for
foreign and coastwise vessels in all Philippine ports.”

The case presented is similar to the fixing of wages under the Wage Rationalization Act (R.A. No. 6727)
whereby minimum wages are determined by Congress and provided by law, subject to revision by Wage
Boards should later conditions warrant their revision. It cannot be denied that Congress may intervene
anytime despite the existence of administrative agencies entrusted with wage-fixing powers, by virtue of
the former’s plenary power of legislation. When Congress does so, the result is not the withdrawal of
the powers delegated to the Wage Boards but cooperative lawmaking in an area where initiative and
expertise are required. The Court of Appeals is correct in holding that—

The power of the PPA to fix pilotage rates and its authority to regulate pilotage still remain
notwithstanding the fact that a schedule for pilotage fees has already been prescribed by the
questioned executive order. PPA is at liberty to fix new rates of pilotage subject only to the limitation
that such new rates should not go below the rates fixed under E.O. 1088. The rationale behind the
limitation is no different from what has been previously stated. Being a mere administrative agency, PPA
cannot validly issue orders or regulations that would have the effect of rendering nugatory the
provisions of the legislative issuance such as those of the executive order in question. (emphasis
supplied)

Petitioners refused to implement E.O. No. 1088 on the ground that it was issued without notice to the
PPA and that it was nothing but a “political gimmick” resorted to by then President Marcos. This
perception obviously stemmed from the fact that E.O. No. 1088 was issued shortly before the
presidential elections in 1986.

But lack of notice to the PPA is not proof that the necessary factual basis for the order was wanting. To
the contrary, the presumption is that the President had before him pertinent data on which he based
the rates prescribed in his order. Nor is the fact that the order might have been issued to curry favor
with the voters a reason for the PPA to refuse to enforce the order in question. It is not unusual for
lawmakers to have in mind partisan political consideration in sponsoring legislation. Yet that is not a
ground for invalidating a statute.

Moreover, an inquiry into legislative motivation is not proper since the only relevant question is whether
in issuing it the President violated constitutional and statutory restrictions on his power. The PPA did not
have any objection to the order based on constitutional ground. In fact the nearest to a challenge on
constitutional grounds was that mounted not by the PPA but by the intervenors below which claimed
that the rates fixed in E.O. No. 1088 were exorbitant and unreasonable. However, both the trial court
and the Court of Appeals overruled the objections and the intervenors apparently accepted the ruling
because they did not appeal further to this Court.

There is, therefore, no legal basis for PPA’s intransigence, after failing to get the new administration of
President Aquino to revoke the order by issuing its own order in the form of A.O. No. 02-88. It is
noteworthy that if President Marcos had legislative power under Amendment No. 6 of the 1973
Constitution12 so did President Aquino under the Provisional (Freedom) Constitution13 who could, had
she thought E.O. No. 1088 to be a mere “political gimmick,” have just as easily revoked her
predecessor’s order. It is tempting to ask if the administrative agency would have shown the same act of
defiance of the President’s order had there been no change of administration. What this Court said in La
Perla Cigar and Cigarette Factory v. Capapas,14 mutatis mutandis may be applied to the cases at bar:

Was it within the powers of the then Collector Ang-angco to refuse to collect the duties that must be
paid? That is the crucial point of inquiry. We hold that it was not.

Precisely, he had to give the above legal provisions, quite explicit in character, force and effect. His
obligation was to collect the revenue for the government in accordance with existing legal provisions,
executive agreements and executive orders certainly not excluded. He would not be living up to his
official designation if he were permitted to act otherwise. He was not named Collector of Customs for
nothing. . . .

Certainly, if the President himself were called upon to execute the laws faithfully, a Collector of
Customs, himself a subordinate executive official, cannot be considered as exempt in any wise from such
an obligation of fealty. Similarly, if the President cannot suspend the operation of any law, it would be
presumptuous in the extreme for one in the position of then Collector Ang-angco to consider himself as
possessed of such a prerogative. . . .

We conclude that E.O. No. 1088 is a valid statute and that the PPA is duty bound to comply with its
provisions. The PPA may increase the rates but it may not decrease them below those mandated by E.O.
No. 1088. Finally, the PPA cannot refuse to implement E.O. No. 1088 or alter it as it did in promulgating
Memorandum Circular No. 43-86. Much less could the PPA abrogate the rates fixed and leave the fixing
of rates for pilotage service to the contracting parties as it did through A.O. No. 02-88, §3. Theretofore
the policy was one of governmental regulation of the pilotage business. By leaving the matter to the
determination of the parties, the PPA jettisoned this policy and changed it to laissez-faire, something
which only the legislature, or whoever is vested with lawmaking authority, could do.

B. Whether the Court of Appeals had Jurisdiction over the

Appeal of Intervenors from the Decision of the

Trial Court Invalidating Administrative

Order No. 02-88 of the PPA

(G.R. No. 100481)

The Court of Appeals dismissed the joint appeal of the government and the intervenors from the trial
court’s decision in Civil Case No. 88-44726 on the ground that the issues raised were purely legal
questions.15 The appellate court stated:

After a painstaking review of the records We resolved to dismiss the petition for lack of jurisdiction.

From the facts, it is clear that the main issue proferred by the appellant is whether or not the
respondent Philippine Ports Authority could validly issue rules and regulations adopting the “open
pilotage policy” pursuant to its charter. (P.D. 857).

....

It must be noted that while the court a quo had clearly recognized the intricate legal issue involved, it
nevertheless decided it on the merits which apparently resolved only the procedural aspect that
justified it in declaring the questioned order as null and void. While We recognize the basic
requirements of due process, the same cannot take precedence in the case at bar in lieu of the fact that
the resolution of the present case is purely a legal question.

Moreover, it appears that appellants in the court below had filed a manifestation and motion waiving
their presentation of evidence. Instead, they opted to submit a comprehensive memorandum of the
case on the ground that the pivotal issue raised in the petition below is purely legal in character. (p. 231,
Records)

At this juncture, We are at a loss why appellants had elevated the present action before Us where at the
outset they already noted that the issue is purely legal.

If in the case of Murillo v. Consul (UDK-9748, Resolution en banc, March 1, 1990) the Supreme Court laid
down the rule that “if an appeal by notice of appeal is taken from the Regional Trial Court to the Court
of Appeals, and in the latter Court, the appellant raised naught but issues of law, the appeal should be
dismissed for lack of jurisdiction (page 5, Resolution in Murillo),” then with more reason where as in the
case at bar public-appellants thru the Office of the Solicitor General in their memorandum manifested
that the controversy has reference to the pure legal question of the validity of the questioned
administrative order. Consequently, We have no other recourse but to dismiss the petition on the
strength of these pronouncements.

As already stated, from this decision, both the government and the intervenors separately brought
petitions for review to this Court. In G.R. No. 100109, the government’s petition was dismissed for lack
of showing that the appellate court committed reversible error. The dismissal of the government’s
petition goes far to sustain the dismissal of the intervenors’ petition in G.R. No. 100481 for the review of
the same decision of the Court of Appeals. After all, the intervenors’ petition is based on substantially
the same grounds as those stated in the government’s petition. It is now settled that the dismissal of a
petition for review on certiorari is an adjudication on the merits of a controversy.16 Such dismissal can
only mean that the Supreme Court agrees with the findings and conclusions of the Court of Appeals or
that the decision sought to be reviewed is correct.17

It is significant to note that the Secretary of Transportation and Communications and the PPA,
petitioners in G.R. No. 100109, have conceded the finality of the dismissal of their appeal.18 Thus, the
administrative policy, the validity of which herein petitioners seek to justify by their appeal, has already
been abandoned by the very administrative agency which adopted it, with the result that the question
of validity of A.O. No. 02-88 is now moot and academic.

C. Whether the Trial Court has Jurisdiction to Hear and Decide the Contempt Charges against Petitioners

(G.R. No. 107720)

As already noted, following the dismissal of the government’s appeal in G.R. No. 100109, the PPA
abandoned A.O. No. 02-88 which provided for “Open Pilotage System.” But it subsequently promulgated
Administrative Order No. 05-92, under which the PPA assumed the power of scheduling and assigning
pilots to service vessels, allegedly regardless of whether the pilots assigned are or are not members of
the UHPAP and the MPA which theretofore had been the exclusive agencies rendering pilotage service
in Philippine ports. The UHPAP and the MPA saw the adoption of this system as a return to the “Open
Pilotage System” and, therefore, a violation of the trial court’s decision invalidating the “Open Pilotage
System.” They considered this to be a contempt of the trial court.

Petitioners moved to dismiss the motion for contempt against them. They contend that even if the
motions were filed as incidents of Civil Case No. 88-44726, the RTC-Manila, Branch 2 did not have
jurisdiction to hear them because the main case was no longer before the court and the fact was that
the contempt citation was not an incident of the case, not even of its execution, but a new matter
raising a new cause of action which must be litigated in a separate action, even as petitioners denied
they had committed any contumacious act by the issuance of A.O. No. 05-92.

Private respondents maintained that their petitions were mere incidents of Civil Case No. 88-44726 and
that the trial court has jurisdiction because in fact this Court had not yet remanded the case to the court
a quo for execution of its decision. Private respondents complain that petitioners are trying to
circumvent the final and executory decision of the court in Civil Case No. 88-44726, through the issuance
of A.O. No. 05-92.

As already noted, however, the decision of the trial court in Civil Case No. 88-44726 enjoined petitioners
from implementing the so-called “Open Pilotage System” embodied in A.O. No. 02-88. If, as alleged, A.O.
No. 05-92 is in substance a reenactment of A.O. No. 02-88, then there is basis for private respondents’
invocation of the trial court’s jurisdiction to punish for contempt.

Still it is argued that the trial court lost jurisdiction over Civil Case No. 887426, upon the perfection of
their appeal from its decision. That is indeed true. “The appeal transfers the proceedings to the
appellate court, and this last courtbecomes thereby charged with the authority to deal with contempts
committed after perfection of the appeal.”19 The trial court would have jurisdiction only in the event of
an attempt to block execution of its decision and that would be after the remand of the case to the trial
court.20 Until then the trial court would have no jurisdiction to deal with alleged contemptuous acts.

The fly in the ointment, however, is that by accepting the dismissal of their petition for review in G.R.
No. 100109, petitioners rendered execution of the decision of the trial court superfluous. Any attempt
by them, therefore, to disobey the court’s final injunction as embodied in its decision would be properly
subject to punishment for contempt. Petitioners’ contention that private respondents’ complaint must
be the subject of a separate action would nullify contempt proceedings as means of securing obedience
to the lawful processes of a court. Petitioners’ theory would reward ingenuity and cunning in devising
orders which substantially are the same as the order previously prohibited by the court.

We hold that the trial court has jurisdiction to hear the motions for contempt filed by private
respondent, subject to any valid defense which petitioners may interpose.

III. JUDGMENT

WHEREFORE, the several petitions in these cases are DISMISSED.

SO ORDERED.

Petitions dismissed.
Notes.—The authority given by the LTFRB to the provincial bus operators to set a fare range over and
above the authorized existing fare is illegal and invalid as it is tantamount to an undue delegation of
legislative authority. (Kilusang Mayo Uno Labor Center vs. Garcia, Jr., 239 SCRA 386 [1994])

In subordinate, delegated rule-making by administrative agencies, all that may be reasonably demanded
is a showing that the delegated legislation consisting of administrative regulations are germane to the
general purposes projected by the governing or enabling statute. (Rabor vs. Civil Service Commission,
244 SCRA 614 [1995])

——o0o—— Philippine Interisland Shipping Association of the Philippines vs. Court of Appeals, 266 SCRA
489, G.R. No. 100481, G.R. Nos. 103716-17, G.R. No. 107720 January 22, 1997

6. LUPO L. LUPANGCO, RAYMOND S. MUNGKAL, NORMAN A. MESINA, ALEXANDER R. REGUYAL,

JOCELYN P. CATAPANG, ENRICO V. REGALADO, JEROME O. ARCEGA, ERNESTO C. BLAS, JR., ELPIDIO M.
ALMAZAN, KARL CAESAR R. RIMANDO, petitioners, vs. COURT OF APPEALS and PROFESSIONAL
REGULATION COMMISSION, respondents. No. L-77372. April 29, 1988.*

Administrative Law; Courts; Jurisdiction; Orders or resolutions of the Professional Regulations

Commission fall within the general jurisdiction of the Regional Trial Court; Absence of provision in the
law creating the Commission that its orders and resolutions are appealable either to the Court of
Appeals or to the Supreme Court.—Upon the other hand, there is no law providing for the next course
of action for a party who wants to question a ruling or order of the Professional Regulation Commission.
Unlike Commonwealth Act No. 83 and Presidential Decree No. 902-A, there is no provision in
Presidential Decree No. 223, the law creating the Professional Regulation Commission, that orders or
resolutions of the Commission are appealable either to the Court of Appeals or to the Supreme Court.
Consequently, Civil Case No. 86–37950, which was filed in order to enjoin the enforcement of a
resolution of the respondent Professional Regulation Commission alleged to be unconstitutional, should
fall within the general jurisdiction of the Court of First Instance, now the Regional Trial Court.

Same; Same; Same; Same; The Professional Regulations Commission is attached to the Office of the
President, and even acts of the Office of the President may be reviewed by the Court of First Instance,
now Regional Trial Court.—What is clear from Presidential Decree No. 223 is that the Professional
Regulation Commission is attached to the Office of the President for general direction and coordination.
Well settled in our jurisprudence is the view that even acts of the Office of the President may be
reviewed by the Court of First Instance (now the Regional Trial Court).

Same; Same; Same; To invoke the exclusive appellate jurisdiction of the Court of Appeals under BP 129,
there must be a final order or ruling by an administrative body exercising quasi-judicial functions;
Meaning of “quasi-judicial adjudication"—In order to invoke the exclusive appellate jurisdiction of the
Court of Appeals as provided for in Section 9, paragraph 3 of B.P. Blg. 129, there has to be a final order
or ruling which resulted from proceedings wherein the administrative body involved exercised its quasi-
judicial functions. In Black’s Law Dictionary, quasi-judicial is defined as a term applied to the action,
discretion, etc., of public administrative officers or bodies required to investigate facts, or ascertain the
existence of facts, hold hearings, and draw conclusions from them, as a basis for their official action, and
to exercise discretion of a judicial nature. To expound thereon, quasi-judicial adjudication would mean a
determination of rights, privileges and duties resulting in a decision or order which applies to a specific
situation. This does not cover rules and regulations of general applicability issued by the administrative
body to implement its purely administrative policies and functionB like Resolution No. 105 which was
adopted by the respondent PRC as a measure to preserve the integrity of licensure examinations.

Same; Same; Same; Axiom In administrative law that administrative authority should not act arbitrarily
and capriciously in the issuance of rules and regulations.—It is an axiom in administrative law that
administrative authorities should not act arbitrarily and capriciously in the issuance of rules and
regulations. To be valid, such rules and regulations must be reasonable and fairly adapted to secure the
end in view. If shown to bear no reasonable relation to the purposes for which they are authorized to be
issued, then they must be held to be invalid.

Same; Same; Same; Resolution No. 105 prohibiting examinees from attending any review class, briefing
conference conducted by or shall receive any hand-out, review materials or any tip from any school,
college or any university or any review center infringes on the examinees’ right to liberty guaranteed by
the Constitution; Reason.—Resolution No. 105 is not only unreasonable and arbitrary, it also infringes
on the examinees’ right to liberty guaranteed by the Constitution. Respondent PRC has no authority to
dictate on the reviewees as to how they should prepare themselves for the licensure examinations. They
cannot be restrained from taking all the lawful steps needed to assure the fulfillment of their ambition
to become public accountants. They have every right to make use of their faculties in attaining success in
their endeavors. They should be allowed to eDjoy their freedom to acquire useful knowledge that will
promote their personal growth.

Same; Same; Same; Resolution No. 105 violates the academic freedom of the schools concerned.—
Another evident objection to Resolution No. 105 is that it violates the academic freedom of the schools
concerned. Respondent PRC cannot interfere with the conduct of review that review schools and
centers believe would best enable their enrollees to meet the standards required before becoming a
fullfledged public accountant. Unless the means or methods of instruction are clearly found to be
inefficient, impractical, or riddled with corruption, review schools and centers may not be stopped from
helping out their students.

PETITION for certiorari to review the decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

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

The records shows the following undisputed facts:

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

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

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

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

Respondent PRC filed a motion to dismiss on October 21, 1987 on the ground that the lower court had
no jurisdiction to review and to enjoin the enforcement of its resolution. In an Order of October 21,
1987, the lower court declared that it had jurisdiction to try the case and enjoined the respondent
commission from enforcing and giving effect to Resolution No. 105 which it found to be
unconstitutional.

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

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

SO ORDERED. 2

Hence, this petition.

The Court of Appeals, in deciding that the Regional Trial Court of Manila had no jurisdiction to entertain
the case and to enjoin the enforcement of the Resolution No. 105, stated as its basis its conclusion that
the Professional Regulation Commission and the Regional Trial Court are co-equal bodies. Thus it held —

That the petitioner Professional Regulatory Commission is at least a co-equal body with the Regional
Trial Court is beyond question, and co-equal bodies have no power to control each other or interfere
with each other's acts. 3
To strenghten its position, the Court of Appeals relied heavily on National Electrification Administration
vs. Mendoza, 4 which cites Pineda vs. Lantin 5 and Philippine Pacific Fishing, Inc. vs. Luna, 6 where this
Court held that a Court of First Instance cannot interfere with the orders of the Securities and Exchange
Commission, the two being co-equal bodies.

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

We rule in favor of the petitioner.

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

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

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

In so far as jurisdiction of the Court below to review by certiorari decisions and/or resolutions of the Civil
Service Commission and of the residential Executive Asssistant is concerned, there should be no
question but that the power of judicial review should be upheld. The following rulings buttress this
conclusion:
The objection to a judicial review of a Presidential act arises from a failure to recognize the most
important principle in our system of government, i.e., the separation of powers into three co-equal
departments, the executives, the legislative and the judicial, each supreme within its own assigned
powers and duties. When a presidential act is challenged before the courts of justice, it is not to be
implied therefrom that the Executive is being made subject and subordinate to the courts. The legality
of his acts are under judicial review, not because the Executive is inferior to the courts, but because the
law is above the Chief Executive himself, and the courts seek only to interpret, apply or implement it
(the law). A judicial review of the President's decision on a case of an employee decided by the Civil
Service Board of Appeals should be viewed in this light and the bringing of the case to the Courts should
be governed by the same principles as govern the jucucial review of all administrative acts of all
administrative officers. 10

Republic vs. Presiding Judge, CFI of Lanao del Norte, Br. II, 11 is another case in point. Here, "the
Executive Office"' of the Department of Education and Culture issued Memorandum Order No. 93 under
the authority of then Secretary of Education Juan Manuel. As in this case, a complaint for injunction was
filed with the Court of First Instance of Lanao del Norte because, allegedly, the enforcement of the
circular would impair some contracts already entered into by public school teachers. It was the
contention of petitioner therein that "the Court of First Instance is not empowered to amend, reverse
and modify what is otherwise the clear and explicit provision of the memorandum circular issued by the
Executive Office which has the force and effect of law." In resolving the issue, We held:

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

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

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

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

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

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

xxx xxx xxx

(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders, or awards of
Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or commissions, except those
falling within the appellate jurisdiction of the Supreme Court in accordance with the Constitution, the
provisions of this Act, and of subparagraph (1) of the third paragraph and subparagraph (4) of the fourth
paragraph of Section 17 of the Judiciary Act of 1948.

The contention is devoid of merit.

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

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

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

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

xxx xxx xxx

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

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

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

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

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

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

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

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

The unreasonableness is more obvious in that one who is caught committing the prohibited acts even
without any ill motives will be barred from taking future examinations conducted by the respondent
PRC. Furthermore, it is inconceivable how the Commission can manage to have a watchful eye on each
and every examinee during the three days before the examination period.

It is an aixiom in administrative law that administrative authorities should not act arbitrarily and
capriciously in the issuance of rules and regulations. To be valid, such rules and regulations must be
reasonable and fairly adapted to the end in view. If shown to bear no reasonable relation to the
purposes for which they are authorized to be issued, then they must be held to be invalid. 22
Resolution No. 105 is not only unreasonable and arbitrary, it also infringes on the examinees' right to
liberty guaranteed by the Constitution. Respondent PRC has no authority to dictate on the reviewees as
to how they should prepare themselves for the licensure examinations. They cannot be restrained from
taking all the lawful steps needed to assure the fulfillment of their ambition to become public
accountants. They have every right to make use of their faculties in attaining success in their endeavors.
They should be allowed to enjoy their freedom to acquire useful knowledge that will promote their
personal growth. As defined in a decision of the United States Supreme Court:

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

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

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

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

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

SO ORDERED.
7. THE PEOPLE OF THE PHILIPPINES, plaintiff-appellant, vs. HON. MAXIMO A. MACEREN, CFI, Sta. Cruz,
Laguna, JOSE BUENAVENTURA, GODOFREDO REYES, BENJAMIN REYES, NAZARIO AQUINO and
CARLITO DEL ROSARIO, accused-appellees. No. L-32166. October 18, 1977.*

Filling; Jurisdiction; Appeals; An offense punishable with a fine up to P500.00 falls under the concurrent
jurisdiction of a provincial capital town court and the Court of First Instance. The order of the former is
directly appealable to the Supreme Court.—It is obvious that the crime of electro fishing, which is
punishable with a fine up to P500, falls within the concurrent original jurisdiction of the inferior courts
and the Court of First Instance. And since the instant case was filed in the municipal court of Sta. Cruz,
Laguna, a provincial capital, the order of dismissal rendered by that municipal court was directly
appealable to this Court, not the Court of First Instance of Laguna. It results that the Court of First
Instance of Laguna had no appellate jurisdiction over the case. Its order affirming the municipal court’s
order of dismissal is void for lack of jurisdiction. This appeal shall be treated as a direct appeal from the
municipal court to this Court.

Fishing; Administrative law; Fishery Adm. Order No. 84 penalizing electro fishing is null and void because
the Fishery Laws under which it was issued (Act 4003 and R.A. 3512) did not expressly prohibit electro
fishing.—We are of the opinion that the Secretary of Agriculture and Natural Resources and the
Commissioner of Fisheries exceeded their authority in issuing Fisheries Administrative Orders Nos. 84
and 84-1 and that those orders are not warranted under the Fisheries Law, Act No. 4003, and under the
law creating the Fisheries Law does not expressly prohibit electro fishing. As electro fishing is not
banned under that law, the Secretary of Agriculture and Natural Resources and the Commissioner of
Fisheries are powerless to penalize it. In other words, Administrative Orders Nos. 84 and 84-1, in
penalizing electro fishing, are devoid of any legal basis.

Same; Same; Lawmaking body cannot delegate to administrative official the power to declare what act
constitute a criminal offense.—The law making body cannot delegate to an executive official the power
to declare what acts should constitute a criminal offense. It can authorize the issuance of regulations
and the imposition of the penalty provided for in the law itself.

Same; Same; Electro fishing is now punishable by virtue of P.D. 704.—However, at present, there is no
more doubt that electro fishing is punishable under the Fisheries Law and that it cannot be penalized
merely by executive regulation because Presidential Decree No. 704, which is a revision and
consolidation of all laws and decrees affecting fishing and fisheries and which was promulgated on May
16, 1975 (71 O.G. 4269), expressly punishes electro fishing in fresh water and salt water areas.

Same; Same; An administrative regulation must be in harmony with law; it must not amend an act of the
legislature.—Administrative regulations adopted under legislative authority by a particular department
must be in harmony with the provisions of the law, and should be for the sole purpose of carrying into
effect its general provision. By such relations, of course, the law itself cannot be extended. (U.S. vs.
Tupasi Molina, supra). An administrative agency cannot amend an act of Congress. x x x The rule-making
power must be confined to details for regulating the mode or proceeding to carry into effect the law as
it has been enacted. The power cannot be extended to amending or expanding the statutory
requirements or to embrace matters not covered by the statute. Rules that subvert the statute cannot
be sanctioned.

Same; Same; In a prosecution for violation of an administrative order it must clearly appear that the
order falls within the scope of the authority conferred by law.—A penal statute is strictly construed.
While an administrative agency has the right to make rules and regulations to carry into effect a law
already enacted, that power should not be confused with the power to enact a criminal statute. An
administrative agency can have only the administrative or policing powers expressly or by necessary
implication conferred upon it. x x x In a prosecution for a violation of an administrative order, it must
clearly appear that the order is one which falls within the scope of the authority conferred upon the
administrative body, and the order will be scrutinized with special care.

APPEAL from a decision of the Court of First Instance of Laguna.

The facts are stated in the opinion of the Court.

This is a case involving the validity of a 1967 regulation, penalizing electro fishing in fresh water fisheries,
promulgated by the Secretary of Agriculture and Natural Resources and the Commissioner of Fisheries
under the old Fisheries Law and the law creating the Fisheries Commission.

On March 7, 1969 Jose Buenaventura, Godofredo Reyes, Benjamin Reyes, Nazario Aquino and Carlito del
Rosario were charged by a Constabulary investigator in the municipal court of Sta. Cruz, Laguna with
having violated Fisheries Administrative Order No. 84-1.

It was alleged in the complaint that the five accused in the morning of March 1, 1969 resorted to electro
fishing in the waters of Barrio San Pablo Norte, Sta. Cruz by "using their own motor banca, equipped
with motor; with a generator colored green with attached dynamo colored gray or somewhat white; and
electrocuting device locally known as sensored with a somewhat webbed copper wire on the tip or
other end of a bamboo pole with electric wire attachment which was attached to the dynamo direct and
with the use of these devices or equipments catches fish thru electric current, which destroy any aquatic
animals within its cuffed reach, to the detriment and prejudice of the populace" (Criminal Case No.
5429).

Upon motion of the accused, the municipal court quashed the complaint. The prosecution appealed. The
Court of First Instance of Laguna affirmed the order of dismissal (Civil Case No. SC-36). The case is now
before this Court on appeal by the prosecution under Republic Act No. 5440.

The lower court held that electro fishing cannot be penalize because electric current is not an obnoxious
or poisonous substance as contemplated in section I I of the Fisheries Law and that it is not a substance
at all but a form of energy conducted or transmitted by substances. The lower court further held that,
since the law does not clearly prohibit electro fishing, the executive and judicial departments cannot
consider it unlawful.

As legal background, it should be stated that section 11 of the Fisheries Law prohibits "the use of any
obnoxious or poisonous substance" in fishing.

Section 76 of the same law punishes any person who uses an obnoxious or poisonous substance in
fishing with a fine of not more than five hundred pesos nor more than five thousand, and by
imprisonment for not less than six months nor more than five years.
It is noteworthy that the Fisheries Law does not expressly punish .electro fishing." Notwithstanding the
silence of the law, the Secretary of Agriculture and Natural Resources, upon the recommendation of the
Commissioner of Fisheries, promulgated Fisheries Administrative Order No. 84 (62 O.G. 1224),
prohibiting electro fishing in all Philippine waters. The order is quoted below: ñé+.£ªwph!1

SUBJECT: PROHIBITING ELECTRO FISHING IN ALL WATERS OF THE PHILIPPINES.

Pursuant to Section 4 of Act No. 4003, as amended, and Section 4 of R.A. No. 3512, the following rules
and regulations regarding the prohibition of electro fishing in all waters of the Philippines are
promulgated for the information and guidance of all concerned.

SECTION 1. — Definition. — Words and terms used in this Order 11 construed as follows:

(a) Philippine waters or territorial waters of the Philippines' includes all waters of the Philippine
Archipelago, as defined in the t between the United States and Spain, dated respectively the tenth of
December, eighteen hundred ninety eight and the seventh of November, nineteen hundred. For the
purpose of this order, rivers, lakes and other bodies of fresh waters are included.

(b) Electro Fishing. — Electro fishing is the catching of fish with the use of electric current. The
equipment used are of many electrical devices which may be battery or generator-operated and from
and available source of electric current.

(c) 'Persons' includes firm, corporation, association, agent or employee.

(d) 'Fish' includes other aquatic products.

SEC. 2. — Prohibition. — It shall be unlawful for any person to engage in electro fishing or to catch fish
by the use of electric current in any portion of the Philippine waters except for research, educational
and scientific purposes which must be covered by a permit issued by the Secretary of Agriculture and
Natural Resources which shall be carried at all times.

SEC. 3. — Penalty. — Any violation of the provisions of this Administrative Order shall subject the
offender to a fine of not exceeding five hundred pesos (P500.00) or imprisonment of not extending six
(6) months or both at the discretion of the Court.

SEC. 4. — Repealing Provisions. — All administrative orders or parts thereof inconsistent with the
provisions of this Administrative Order are hereby revoked.

SEC. 5. — Effectivity. — This Administrative Order shall take effect six (60) days after its publication in
the Office Gazette.

On June 28, 1967 the Secretary of Agriculture and Natural Resources, upon the recommendation of the
Fisheries Commission, issued Fisheries Administrative Order No. 84-1, amending section 2 of
Administrative Order No. 84, by restricting the ban against electro fishing to fresh water fisheries (63
O.G. 9963).

Thus, the phrase "in any portion of the Philippine waters" found in section 2, was changed by the
amendatory order to read as follows: "in fresh water fisheries in the Philippines, such as rivers, lakes,
swamps, dams, irrigation canals and other bodies of fresh water."
The Court of First Instance and the prosecution (p. 11 of brief) assumed that electro fishing is punishable
under section 83 of the Fisheries Law (not under section 76 thereof), which provides that any other
violation of that law "or of any rules and regulations promulgated thereunder shall subject the offender
to a fine of not more than two hundred pesos (P200), or in t for not more than six months, or both, in
the discretion of the court."

That assumption is incorrect because 3 of the aforequoted Administrative Order No. 84 imposes a fm of
not exceeding P500 on a person engaged in electro fishing, which amount the 83. It seems that the
Department of Fisheries prescribed their own penalty for swift fishing which penalty is less than the
severe penalty imposed in section 76 and which is not Identified to the at penalty imposed in section 83.

Had Administrative Order No. 84 adopted the fighter penalty prescribed in on 83, then the crime of
electro fishing would be within the exclusive original jurisdiction of the inferior court (Sec. 44 [f],
Judiciary Law; People vs. Ragasi, L-28663, September 22,

We have discussed this pre point, not raised in the briefs, because it is obvious that the crime of electro
fishing which is punishable with a sum up to P500, falls within the concurrent original jurisdiction of the
inferior courts and the Court of First instance (People vs. Nazareno, L-40037, April 30, 1976, 70 SCRA 531
and the cases cited therein).

And since the instant case was filed in the municipal court of Sta. Cruz, Laguna, a provincial capital, the
order of d rendered by that municipal court was directly appealable to the Court, not to the Court of
First Instance of Laguna (Sec. 45 and last par. of section 87 of the Judiciary Law; Esperat vs. Avila, L-
25992, June 30, 1967, 20 SCRA 596).

It results that the Court of First Instance of Laguna had no appellate jurisdiction over the case. Its order
affirming the municipal court's order of dismissal is void for lack of motion. This appeal shall be treated
as a direct appeal from the municipal court to this Court. (See People vs. Del Rosario, 97 Phil. 67).

In this appeal, the prosecution argues that Administrative Orders Nos. 84 and 84-1 were not issued
under section 11 of the Fisheries Law which, as indicated above, punishes fishing by means of an
obnoxious or poisonous substance. This contention is not well-taken because, as already stated, the
Penal provision of Administrative Order No. 84 implies that electro fishing is penalized as a form of
fishing by means of an obnoxious or poisonous substance under section 11.

The prosecution cites as the legal sanctions for the prohibition against electro fishing in fresh water
fisheries (1) the rule-making power of the Department Secretary under section 4 of the Fisheries Law;
(2) the function of the Commissioner of Fisheries to enforce the provisions of the Fisheries Law and the
regulations Promulgated thereunder and to execute the rules and regulations consistent with the
purpose for the creation of the Fisheries Commission and for the development of fisheries (Sec. 4[c] and
[h] Republic Act No. 3512; (3) the declared national policy to encourage, Promote and conserve our
fishing resources (Sec. 1, Republic Act No. 3512), and (4) section 83 of the Fisheries Law which provides
that "any other violation of" the Fisheries Law or of any rules and regulations promulgated thereunder
"shall subject the offender to a fine of not more than two hundred pesos, or imprisonment for not more
than six months, or both, in the discretion of the court."
As already pointed out above, the prosecution's reference to section 83 is out of place because the
penalty for electro fishing under Administrative order No. 84 is not the same as the penalty fixed in
section 83.

We are of the opinion that the Secretary of Agriculture and Natural Resources and the Commissioner of
Fisheries exceeded their authority in issuing Fisheries Administrative Orders Nos. 84 and 84-1 and that
those orders are not warranted under the Fisheries Commission, Republic Act No. 3512.

The reason is that the Fisheries Law does not expressly prohibit electro fishing. As electro fishing is not
banned under that law, the Secretary of Agriculture and Natural Resources and the Commissioner of
Fisheries are powerless to penalize it. In other words, Administrative Orders Nos. 84 and 84-1, in
penalizing electro fishing, are devoid of any legal basis.

Had the lawmaking body intended to punish electro fishing, a penal provision to that effect could have
been easily embodied in the old Fisheries Law.

That law punishes (1) the use of obnoxious or poisonous substance, or explosive in fishing; (2) unlawful
fishing in deepsea fisheries; (3) unlawful taking of marine molusca, (4) illegal taking of sponges; (5)
failure of licensed fishermen to report the kind and quantity of fish caught, and (6) other violations.

Nowhere in that law is electro fishing specifically punished. Administrative Order No. 84, in punishing
electro fishing, does not contemplate that such an offense fails within the category of "other violations"
because, as already shown, the penalty for electro fishing is the penalty next lower to the penalty for
fishing with the use of obnoxious or poisonous substances, fixed in section 76, and is not the same as
the penalty for "other violations" of the law and regulations fixed in section 83 of the Fisheries Law.

The lawmaking body cannot delegate to an executive official the power to declare what acts should
constitute an offense. It can authorize the issuance of regulations and the imposition of the penalty
provided for in the law itself. (People vs. Exconde 101 Phil. 11 25, citing 11 Am. Jur. 965 on p. 11 32).

Originally, Administrative Order No. 84 punished electro fishing in all waters. Later, the ban against
electro fishing was confined to fresh water fisheries. The amendment created the impression that
electro fishing is not condemnable per se. It could be tolerated in marine waters. That circumstances
strengthens the view that the old law does not eschew all forms of electro fishing.

However, at present, there is no more doubt that electro fishing is punishable under the Fisheries Law
and that it cannot be penalized merely by executive revolution because Presidential Decree No. 704,
which is a revision and consolidation of all laws and decrees affecting fishing and fisheries and which was
promulgated on May 16, 1975 (71 O.G. 4269), expressly punishes electro fishing in fresh water and salt
water areas.

That decree provides:

SEC. 33. — Illegal fishing, dealing in illegally caught fish or fishery/aquatic products. — It shall he
unlawful for any person to catch, take or gather or cause to be caught, taken or gathered fish or
fishery/aquatic products in Philippine waters with the use of explosives, obnoxious or poisonous
substance, or by the use of electricity as defined in paragraphs (1), (m) and (d), respectively, of Section 3
hereof: ...
The decree Act No. 4003, as amended, Republic Acts Nos. 428, 3048, 3512 and 3586, Presidential
Decrees Nos. 43, 534 and 553, and all , Acts, Executive Orders, rules and regulations or parts thereof
inconsistent with it (Sec. 49, P. D. No. 704).

The inclusion in that decree of provisions defining and penalizing electro fishing is a clear recognition of
the deficiency or silence on that point of the old Fisheries Law. It is an admission that a mere executive
regulation is not legally adequate to penalize electro fishing.

Note that the definition of electro fishing, which is found in section 1 (c) of Fisheries Administrative
Order No. 84 and which is not provided for the old Fisheries Law, is now found in section 3(d) of the
decree. Note further that the decree penalty electro fishing by "imprisonment from two (2) to four (4)
years", a punishment which is more severe than the penalty of a time of not excluding P500 or
imprisonment of not more than six months or both fixed in section 3 of Fisheries Administrative Order
No. 84.

An examination of the rule-making power of executive officials and administrative agencies and, in
particular, of the Secretary of Agriculture and Natural Resources (now Secretary of Natural Resources)
under the Fisheries Law sustains the view that he ex his authority in penalizing electro fishing by means
of an administrative order.

Administrative agent are clothed with rule-making powers because the lawmaking body finds it
impracticable, if not impossible, to anticipate and provide for the multifarious and complex situations
that may be encountered in enforcing the law. All that is required is that the regulation should be
germane to the defects and purposes of the law and that it should conform to the standards that the
law prescribes (People vs. Exconde 101 Phil. 1125; Director of Forestry vs. Muñ;oz, L-24796, June 28,
1968, 23 SCRA 1183, 1198; Geukeko vs. Araneta, 102 Phil. 706, 712).

The lawmaking body cannot possibly provide for all the details in the enforcement of a particular statute
(U.S. vs. Tupasi Molina, 29 Phil. 119, 125, citing U.S. vs. Grimaud 220 U.S. 506; Interprovincial Autobus
Co., Inc. vs. Coll. of Internal Revenue, 98 Phil. 290, 295-6).

The grant of the rule-making power to administrative agencies is a relaxation of the principle of
separation of powers and is an exception to the nondeleption of legislative, powers. Administrative
regulations or "subordinate legislation calculated to promote the public interest are necessary because
of "the growing complexity of modem life, the multiplication of the subjects of governmental
regulations, and the increased difficulty of administering the law" Calalang vs. Williams, 70 Phil. 726;
People vs. Rosenthal and Osmeñ;a, 68 Phil. 328).

Administrative regulations adopted under legislative authority by a particular department must be in

harmony with the provisions of the law, and should be for the sole purpose of carrying into effect its
general provisions. By such regulations, of course, the law itself cannot be extended. (U.S. vs. Tupasi
Molina, supra). An administrative agency cannot amend an act of Congress (Santos vs. Estenzo, 109 Phil.
419, 422; Teoxon vs. Members of the d of Administrators, L-25619, June 30, 1970, 33 SCRA 585; Manuel
vs. General Auditing Office, L-28952, December 29, 1971, 42 SCRA 660; Deluao vs. Casteel, L-21906,
August 29, 1969, 29 SCRA 350).

The rule-making power must be confined to details for regulating the mode or proceeding to carry into
effect the law as it his been enacted. The power cannot be extended to amending or expanding the
statutory requirements or to embrace matters not covered by the statute. Rules that subvert the statute
cannot be sanctioned. (University of Santo Tomas vs. Board of Tax A 93 Phil. 376, 382, citing 12 C.J. 845-
46. As to invalid regulations, see of Internal Revenue vs. Villaflor 69 Phil. 319, Wise & Co. vs. Meer, 78
Phil. 655, 676; Del March vs. Phil. Veterans Administrative, L-27299, June 27, 1973, 51 SCRA 340, 349).

There is no question that the Secretary of Agriculture and Natural Resources has rule-making powers.
Section 4 of the Fisheries law provides that the Secretary "shall from time to time issue instructions,
orders, and regulations consistent" with that law, "as may be and proper to carry into effect the
provisions thereof." That power is now vested in the Secretary of Natural Resources by on 7 of the
Revised Fisheries law, Presidential December No. 704.

Section 4(h) of Republic Act No. 3512 empower the Co of Fisheries "to prepare and execute upon the
approval of the Secretary of Agriculture and Natural Resources, forms instructions, rules and regulations
consistent with the purpose" of that enactment "and for the development of fisheries."

Section 79(B) of the Revised Administrative Code provides that "the Department Head shall have the
power to promulgate, whenever he may see fit do so, all rules, regulates, orders, memorandums, and
other instructions, not contrary to law, to regulate the proper working and harmonious and efficient
administration of each and all of the offices and dependencies of his Department, and for the strict
enforcement and proper execution of the laws relative to matters under the jurisdiction of said
Department; but none of said rules or orders shall prescribe penalties for the violation thereof, except as
expressly authorized by law."

Administrative regulations issued by a Department Head in conformity with law have the force of law
(Valerie vs. Secretary of culture and Natural Resources, 117 Phil. 729, 733; Antique Sawmills, Inc. vs.
Zayco, L- 20051, May 30, 1966, 17 SCRA 316). As he exercises the rule-making power by delegation of
the lawmaking body, it is a requisite that he should not transcend the bound demarcated by the statute
for the exercise of that power; otherwise, he would be improperly exercising legislative power in his
own right and not as a surrogate of the lawmaking body.

Article 7 of the Civil Code embodies the basic principle that administrative or executive acts, orders and
regulations shall be valid only when they are not contrary to the laws or the Constitution."

As noted by Justice Fernando, "except for constitutional officials who can trace their competence to act
to the fundamental law itself, a public office must be in the statute relied upon a grant of power before
he can exercise it." "department zeal may not be permitted to outrun the authority conferred by
statute." (Radio Communications of the Philippines, Inc. vs. Santiago, L-29236, August 21, 1974, 58 SCRA
493, 496-8).

"Rules and regulations when promulgated in pursuance of the procedure or authority conferred upon
the administrative agency by law, partake of the nature of a statute, and compliance therewith may be
enforced by a penal sanction provided in the law. This is so because statutes are usually couched in
general terms, after expressing the policy, purposes, objectives, remedies and sanctions intended by the
legislature. The details and the manner of carrying out the law are oftentimes left to the administrative
agency entrusted with its enforcement. In this sense, it has been said that rules and regulations are the
product of a delegated power to create new or additional legal provisions that have the effect of law."
The rule or regulation should be within the scope of the statutory authority granted by the legislature to
the administrative agency. (Davis, Administrative Law, p. 194, 197, cited in Victories Milling Co., Inc. vs.
Social Security Commission, 114 Phil. 555, 558).

In case of discrepancy between the basic law and a rule or regulation issued to implement said law, the
basic law prevails because said rule or regulation cannot go beyond the terms and provisions of the
basic law (People vs. Lim, 108 Phil. 1091).

This Court in its decision in the Lim case, supra, promulgated on July 26, 1960, called the attention of
technical men in the executive departments, who draft rules and regulations, to the importance and
necessity of closely following the legal provisions which they intend to implement so as to avoid any
possible misunderstanding or confusion.

The rule is that the violation of a regulation prescribed by an executive officer of the government in
conformity with and based upon a statute authorizing such regulation constitutes an offense and
renders the offender liable to punishment in accordance with the provisions of the law (U.S. vs. Tupasi
Molina, 29 Phil. 119, 124).

In other words, a violation or infringement of a rule or regulation validly issued can constitute a crime
punishable as provided in the authorizing statute and by virtue of the latter (People vs. Exconde 101
Phil. 1125, 1132).

It has been held that "to declare what shall constitute a crime and how it shall be punished is a power
vested exclusively in the legislature, and it may not be delegated to any other body or agency" (1 Am.
Jur. 2nd, sec. 127, p. 938; Texas Co. vs. Montgomery, 73 F. Supp. 527).

In the instant case the regulation penalizing electro fishing is not strictly in accordance with the Fisheries
Law, under which the regulation was issued, because the law itself does not expressly punish electro
fishing.

The instant case is similar to People vs. Santos, 63 Phil. 300. The Santos case involves section 28 of Fish
and Game Administrative Order No. 2 issued by the Secretary of Agriculture and Natural Resources
pursuant to the aforementioned section 4 of the Fisheries Law.

Section 28 contains the proviso that a fishing boat not licensed under the Fisheries Law and under the
said administrative order may fish within three kilometers of the shoreline of islands and reservations
over which jurisdiction is exercised by naval and military reservations authorities of the United States
only upon receiving written permission therefor, which permission may be granted by the Secretary
upon recommendation of the military or naval authorities concerned. A violation of the proviso may be
proceeded against under section 45 of the Federal Penal Code.

Augusto A. Santos was prosecuted under that provision in the Court of First Instance of Cavite for having
caused his two fishing boats to fish, loiter and anchor without permission from the Secretary within
three kilometers from the shoreline of Corrigidor Island.

This Court held that the Fisheries Law does not prohibit boats not subject to license from fishing within
three kilometers of the shoreline of islands and reservations over which jurisdiction is exercised by naval
and military authorities of the United States, without permission from the Secretary of Agriculture and
Natural Resources upon recommendation of the military and naval authorities concerned.
As the said law does not penalize the act mentioned in section 28 of the administrative order, the
promulgation of that provision by the Secretary "is equivalent to legislating on the matter, a power
which has not been and cannot be delegated to him, it being expressly reserved" to the lawmaking
body. "Such an act constitutes not only an excess of the regulatory power conferred upon the Secretary
but also an exercise of a legislative power which he does not have, and therefore" the said provision "is
null and void and without effect". Hence, the charge against Santos was dismiss.

A penal statute is strictly construed. While an administrative agency has the right to make ranks and
regulations to carry into effect a law already enacted, that power should not be confused with the
power to enact a criminal statute. An administrative agency can have only the administrative or policing
powers expressly or by necessary implication conferred upon it. (Glustrom vs. State, 206 Ga. 734, 58
Second 2d 534; See 2 Am. Jr. 2nd 129-130).

Where the legislature has delegated to executive or administrative officers and boards authority to
promulgate rules to carry out an express legislative purpose, the rules of administrative officers and
boards, which have the effect of extending, or which conflict with the authority granting statute, do not
represent a valid precise of the rule-making power but constitute an attempt by an administrative body
to legislate (State vs. Miles, Wash. 2nd 322, 105 Pac. 2nd 51).

In a prosecution for a violation of an administrative order, it must clearly appear that the order is one
which falls within the scope of the authority conferred upon the administrative body, and the order will
be scrutinized with special care. (State vs. Miles supra).

The Miles case involved a statute which authorized the State Game Commission "to adopt, promulgate,
amend and/or repeal, and enforce reasonable rules and regulations governing and/or prohibiting the
taking of the various classes of game.

Under that statute, the Game Commission promulgated a rule that "it shall be unlawful to offer, pay or
receive any reward, prize or compensation for the hunting, pursuing, taking, killing or displaying of any
game animal, game bird or game fish or any part thereof."

Beryl S. Miles, the owner of a sporting goods store, regularly offered a ten-down cash prize to the
person displaying the largest deer in his store during the open for hunting such game animals. For that
act, he was charged with a violation of the rule Promulgated by the State Game Commission.

It was held that there was no statute penalizing the display of game. What the statute penalized was the
taking of game. If the lawmaking body desired to prohibit the display of game, it could have readily said
so. It was not lawful for the administrative board to extend or modify the statute. Hence, the indictment
against Miles was quashed. The Miles case is similar to this case.

WHEREFORE, the lower court's decision of June 9, 1970 is set aside for lack of appellate jurisdiction and
the order of dismissal rendered by the municipal court of Sta. Cruz, Laguna in Criminal Case No. 5429 is
affirmed. Costs de oficio.

SO ORDERED.
8. THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. QUE PO LAY, defendant-appellant. G.R. No.
L-6791 March 29, 1954

1.CRIMINAL LAW; PENAL LAWS AND REGULATIONS IMPOSING PENALTIES, NEED BE PUBLISHED IN THE
OFFICIAL GAZETTE BEFORE IT MAY BECOME EFFECTIVE.—Circulars and regulations, especially like
Circular No. 20 of the Central Bank which prescribes a penalty for its violation, should be published
before becoming effective. Before the public may be bound by its contents, especially its penal
provisions, a law, regulation or circular must be published and the people officially and specifically
informed of said contents and its penalties.

2.ID.; JURISDICTION; APPEALS; QUESTIONS THAT MAY BE RAISED FOR THE FIRST TiME ON APPEAL.—If as
a matter of fact Circular No. 20 had not been published as required by law before its violation, then in
the eyes of the law there was no such circular to be violated and consequently the accused committed
no violation of the circular, and the trial court may be said to have no jurisdiction. This question may be
raised at any stage of the proceeding whether or not raised in the court below.

APPEAL from a judgment of the Court of First Instance of Manila.

Que Po Lay is appealing from the decision of the Court of First Instance of Manila, finding him guilty of
violating Central Bank Circular No. 20 in connection with section 34 of Republic Act No. 265, and
sentencing him to suffer six months imprisonment, to pay a fine of P1,000 with subsidiary imprisonment
in case of insolvency, and to pay the costs.

The charge was that the appellant who was in possession of foreign exchange consisting of U.S. dollars,
U.S. checks and U.S. money orders amounting to about $7,000 failed to sell the same to the Central
Bank through its agents within one day following the receipt of such foreign exchange as required by
Circular No. 20. the appeal is based on the claim that said circular No. 20 was not published in the
Official Gazette prior to the act or omission imputed to the appellant, and that consequently, said
circular had no force and effect. It is contended that Commonwealth Act. No., 638 and Act 2930 both
require said circular to be published in the Official Gazette, it being an order or notice of general
applicability. The Solicitor General answering this contention says that Commonwealth Act. No. 638 and
2930 do not require the publication in the Official Gazette of said circular issued for the implementation
of a law in order to have force and effect.

We agree with the Solicitor General that the laws in question do not require the publication of the
circulars, regulations and notices therein mentioned in order to become binding and effective. All that
said two laws provide is that laws, resolutions, decisions of the Supreme Court and Court of Appeals,
notices and documents required by law to be of no force and effect. In other words, said two Acts
merely enumerate and make a list of what should be published in the Official Gazette, presumably, for
the guidance of the different branches of the Government issuing same, and of the Bureau of Printing.

However, section 11 of the Revised Administrative Code provides that statutes passed by Congress shall,
in the absence of special provision, take effect at the beginning of the fifteenth day after the completion
of the publication of the statute in the Official Gazette. Article 2 of the new Civil Code (Republic Act No.
386) equally provides that laws shall take effect after fifteen days following the completion of their
publication in the Official Gazette, unless it is otherwise provided. It is true that Circular No. 20 of the
Central Bank is not a statute or law but being issued for the implementation of the law authorizing its
issuance, it has the force and effect of law according to settled jurisprudence. (See U.S. vs. Tupasi
Molina, 29 Phil., 119 and authorities cited therein.) Moreover, as a rule, circulars and regulations
especially like the Circular No. 20 of the Central Bank in question which prescribes a penalty for its
violation should be published before becoming effective, this, on the general principle and theory that
before the public is bound by its contents, especially its penal provisions, a law, regulation or circular
must first be published and the people officially and specifically informed of said contents and its
penalties.

Our Old Civil code, ( Spanish Civil Code of 1889) has a similar provision about the effectivity of laws,
(Article 1 thereof), namely, that laws shall be binding twenty days after their promulgation, and that
their promulgation shall be understood as made on the day of the termination of the publication of the
laws in the Gazette. Manresa, commenting on this article is of the opinion that the word "laws" include
regulations and circulars issued in accordance with the same. He says:

El Tribunal Supremo, ha interpretado el articulo 1. del codigo Civil en Sentencia de 22 de Junio de 1910,
en el sentido de que bajo la denominacion generica de leyes, se comprenden tambien los Reglamentos,
Reales decretos, Instrucciones, Circulares y Reales ordenes dictadas de conformidad con las mismas por
el Gobierno en uso de su potestad. Tambien el poder ejecutivo lo ha venido entendiendo asi, como lo
prueba el hecho de que muchas de sus disposiciones contienen la advertencia de que empiezan a regir
el mismo dia de su publicacion en la Gaceta, advertencia que seria perfectamente inutil si no fuera de
aplicacion al caso el articulo 1.o del Codigo Civil. (Manresa, Codigo Civil Español, Vol. I. p. 52).

In the present case, although circular No. 20 of the Central Bank was issued in the year 1949, it was not
published until November 1951, that is, about 3 months after appellant's conviction of its violation. It is
clear that said circular, particularly its penal provision, did not have any legal effect and bound no one
until its publication in the Official Gazzette or after November 1951. In other words, appellant could not
be held liable for its violation, for it was not binding at the time he was found to have failed to sell the
foreign exchange in his possession thereof.

But the Solicitor General also contends that this question of non-publication of the Circular is being
raised for the first time on appeal in this Court, which cannot be done by appellant. Ordinarily, one may
raise on appeal any question of law or fact that has been raised in the court below and which is within
the issues made by the parties in their pleadings. (Section 19, Rule 48 of the Rules of Court). But the
question of non-publication is fundamental and decisive. If as a matter of fact Circular No. 20 had not
been published as required by law before its violation, then in the eyes of the law there was no such
circular to be violated and consequently appellant committed no violation of the circular or committed
any offense, and the trial court may be said to have had no jurisdiction. This question may be raised at
any stage of the proceeding whether or not raised in the court below.

In view of the foregoing, we reverse the decision appealed from and acquit the appellant, with costs de
oficio.

9. EASTERN SHIPPING LINES, INC., petitioner, vs. COURT OF APPEALS and DAVAO PILOTS
ASSOCIATION, respondents. G.R. No. 116356. June 29, 1998.*
Administrative Law; Statutes; Public Utilities; Rate Fixing; Ships and Shipping; The power to fix the rates
of charges for services, including pilotage service, has always been regarded as legislative in character;
Executive Order No. 1088 is a valid statute and the Philippine Ports Authority is duty bound to comply
with its provisions.—In Philippine Interisland Shipping Association of the Philippines vs. Court of
Appeals, the Supreme Court, through Mr. Justice Vicente V. Mendoza, upheld the validity and
constitutionality of Executive Order 1088 in no uncertain terms. We aptly iterate our pronouncement in
said case, viz.: “It is not an answer to say that E.O. No. 1088 should not be considered a statute because
that would imply the withdrawal of power from the PPA. What determines whether an act is a law or an
administrative issuance is not its form but its nature. Here as we have already said, the power to fix the
rates of charges for services, including pilotage service, has always been regarded as legislative in
character. x x x x x x x x x It is worthy to note that E.O. No. 1088 provides for adjusted pilotage service
rates without withdrawing the power of the PPA to impose, prescribe, increase or decrease rates,
charges or fees. The reason is because E.O. No. 1088 is not meant simply to fix new pilotage rates. Its
legislative purpose is the “rationalization of pilotage service charges, through the imposition of uniform
and adjusted rates for foreign and coastwise vessels in all Philippine ports. x x x x x x x x x We conclude
that E.O. No. 1088 is a valid statute and that the PPA is duty bound to comply with its provisions. The
PPA may increase the rates but it may not decrease them below those mandated by E.O. No. 1088. x x
x.”

Same; Same; Statutory Construction; Administrative or executive acts, orders and regulations shall be
valid only when they are not contrary to the laws or the Constitution.—We see no reason to depart from
this ruling. The Court’s holding clearly debunks petitioner’s insistence on paying its pilotage fees based
on memorandum circulars issued by the PPA. Because the PPA circulars are inconsistent with EO 1088,
they are void and ineffective. “Administrative or executive acts, orders and regulations shall be valid
only when they are not contrary to the laws or the Constitution.”

Same; Same; It is axiomatic that an administrative agency has no discretion whether to implement the
law or not—its duty is to enforce it.—As stated by this Court in Land Bank of the Philippines vs. Court of
Appeals, “[t]he conclusive effect of administrative construction is not absolute. Action of an
administrative agency may be disturbed or set aside by the judicial department if there is an error of
law, a grave abuse of power or lack of jurisdiction, or grave abuse of discretion clearly conflicting with
either the letter or spirit of the law.” It is axiomatic that an administrative agency, like the PPA, has no
discretion whether to implement the law or not. Its duty is to enforce it. Unarguably, therefore, if there
is any conflict between the PPA circular and a law, such as EO 1088, the latter prevails.

Same; Same; Statutory Construction; Executive Order 1088 leaves no room for interpretation.—Based
on the foregoing, petitioner has no legal basis to refuse payment of pilotage fees to private respondent,
as computed according to the rates set by EO 1088. Private respondent cannot be faulted for relying on
the clear and unmistakable provisions of EO 1088. In fact, EO 1088 leaves no room for interpretation,
thereby unmistakably showing the duplicity of petitioner’s query: “Is the private respondent vested with
power to interpret Executive Order No. 1088?”

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

In Philippine Interisland Shipping Association of the Philippines vs. Court of Appeals,1 the Court, en
banc, ruled that Executive Order 10882 was not unconstitutional. We adhere to said ruling in this case.

The Case

This is a petition for certiorari under Rule 45, assailing the Decision3 of the Court of Appeals4 in CA-GR
CV No. 34487 promulgated on July 18, 1994, the dispositive portion of which reads:

“WHEREFORE, finding no reversible error in the decision appealed from, the same is hereby AFFIRMED
in toto. With costs against defendant-appellant.”

The Decision affirmed by Respondent Court disposed as follows:

“WHEREFORE, judgment is rendered directing the defendant:

1.To pay plaintiff the sum of P602,710.04 with legal rate of interest commencing from the filing of the
complaint representing unpaid pilotage fees;

2.To pay attorney’s fees in the sum of P50,000.00;

3.And costs.

SO ORDERED.”

Hence, this appeal.5

The Facts

As found by the trial court, these are the undisputed facts:

“On September 25, 1989, plaintiff [herein private respondent] elevated a complaint against defendant
[herein petitioner] for sum of money and attorney’s fees alleging that plaintiff had rendered pilotage
services to defendant between January 14, 1987 to July 22, 1989 with total unpaid fees of P703,290.18.
Despite repeated demands, defendant failed to pay and prays that the latter be directed to pay
P703,290.18 with legal rate of interest from the filing of the complaint; attorney’s fees equivalent to
25% of the principal obligation and such other relief.

On November 18, 1989 defendant answered vigorously disputing the claims of plaintiff. It assailed the
constitutionality of the Executive Order 1088 upon which plaintiff bases its claims; alleged that there is a
pending case before the Court of Appeals elevated by the United Harbor Pilots Association of the
Philippines of which plaintiff is a member[;] whereas defendant is a member of the Chamber of
Maritime Industries of the Philippine[s] which is an Intervenor in CA-G.R. SP No. 18072; that there
therefore is lis pendens by Section 1 (e), Rule 16 of the Rules; that the subject of the complaint falls
within the scope and authority of the Philippine Ports Authority by virtue of PD No. 857 dated December
23, 1975; that Executive Order No. 1088 is an unwarranted repeal or modification of the Philippine Ports
Authority Charter; that the fees charged by plaintiff are arbitrary and confiscatory; and the basis of the
Executive Order 1088 is offensive, sourced from Amendment No. 6 of the 1973 Constitution and
rendered inoperative by the Freedom Constitution of March 25, 1986 and the present Constitution; and
that the only agency vested by law to prescribe such rates, charges or fees for services rendered by any
private organization like the plaintiff within a Port District is governed by Section 20 of PD 857. As
regular patron of plaintiff, defendant has never been remiss in paying plaintiff’s claim for pilotage fees
and the present complaint under the foregoing circumstances is without legal foundation. Defendant
prays that plaintiff be advised to await the final outcome of the identical issues already elevated to and
pending before the Court of Appeals as CA-G.R. SP No. 18072. Defendant prays for an award of
damages, attorney’s fees, litigation expense and costs.

At the Pre-Trial Conference, the only issue raised by plaintiff is whether the defendant is liable to the
plaintiff for the money claims alleged in the complaint.

The defendant on the other hand raised the following issues:

1.Whether or not Executive Order 1088 is constitutional;

2.Whether or not Executive Order 1088 is illegal;

3.Whether or not the plaintiff may motu proprio and independently of the Public Estates Authority
enforce Executive Order 1088 and collect the pilotage fees prescribed thereunder;

4.Assuming Executive Order 1088 is constitutional, valid and self-executory, whether or not the
defendant is liable; and if so, to what extent and for what particular items; and

5.Whether or not the plaintiff is liable under the counterclaims (p. 102, Expediente).

On September 5, 1990, plaintiff presented witness Capt. Felix N. Galope, in the course of which
testimony identified among others EXHIBITS “B” to “E-2” and “J” to “I-2” consisting of documents
related to the collection of the unpaid pilotage fees; basis for such computations; Statement of
Accounts; demand letter and official receipts of payment made.

On September 6, 1990, Simplicio Barao, plaintiff’s Billing Clerk testified among others on the records of
plaintiff’s Captain’s Certificate/Pilotage Chits and Bills/Statements of Accounts on the claims against
defendant (EXHIBITS “G” to “H-48-A”) and the details of the outstanding accounts in favor of plaintiff.
The records show defendant raised no objection thereto and by virtue of which all of plaintiff’s
documentary exhibits were admitted. (Order dated January 14, 1991, p. 277, Expediente).

On March 14, 1991, defendant presented Celso Occidental, employee of defendant shipping company,
in the course of which testimony submitted EXHIBITS “1” to “1-D” which is plaintiff’s Billing Rate, both
old and new with a payment of P79,585.64; and “2” to “2-G” representing plane ticket paid for by
defendant for transportation expenses of its counsel and cost of stenographic transcripts.

Defendant’s last witness, Capt. Jose Dubouzet, Jr. and a Harbor Pilot was briefly presented.”6

After due trial, the trial court rendered its ruling, viz.:

“Plaintiff’s evidence as to the unpaid pilotage services due from defendant duly supported by
voluminous documentary exhibits has not been refuted nor rebutted by defendant. On the contrary,
when plaintiff’s documentary exhibits were formally offered, defendant did not raise any objection
thereby leaving the documents unchallenged and undisputed.

Upon the other hand, while the records show that defendant raised no less than five (5) issues the
evidence fails to show any proof to sustain defendant’s posture. On the contrary, neither of defendant’s
two witnesses appear to have even grazed the outer peripheries of what could have been interesting
issues with far-reaching consequences if resolved.”7
The factual antecedents of the controversy are simple. Petitioner insists on paying pilotage fees
prescribed under PPA circulars. Because EO 1088 sets a higher rate, petitioner now assails its
constitutionality.

Public Respondent’s Ruling

As stated earlier, Respondent Court of Appeals affirmed the trial court’s decision. Respondent Court
pointed out that petitioner, during the pre-trial, limited the issues to whether: (1) EO 1088 is
unconstitutional; (2) EO 1088 is illegal; (3) private respondent itself may enforce and collect fees under
EO 1088; and (4) petitioner is liable and, if EO 1088 is legal, to what extent. It then affirmed the factual
findings and conclusion of the trial court that petitioner “fail[ed] to show any proof” to support its
position. Parenthetically, Respondent Court also noted two other cases decided by the Court of Appeals,
upholding the constitutionality of EO 1088.8

The Issue

In sum, petitioner raises this main issue: whether Executive Order 1088 is unconstitutional.9

The Court’s Ruling

The petition is unmeritorious.

EO 1088 Is Valid

Petitioner contends that EO 108810 is unconstitutional, because (1) its interpretation and application
are left to private respondent, a private person,11 and (2) it constitutes an undue delegation of powers.
Petitioner insists that it should pay pilotage fees in accordance with and on the basis of the
memorandum circulars issued by the PPA, the administrative body vested under PD 85712 with the
power to regulate and prescribe pilotage fees. In assailing the constitutionality of EO 1088, the
petitioner repeatedly asks: “Is the private respondent vested with power to interpret Executive Order
No. 1088?”13

The Court is not persuaded. The pertinent provisions of EO 1088 read:

“SECTION 1. The following shall be the rate of pilotage fees or charges based on tonnage for services
rendered to both foreign and coastwise vessels:

For Foreign Vessels Rate in US$ &/or its

Peso Equivalent
Less than 500GT $ 30.00

500GT to 2,500GT 43.33

2,500GT to 5,000GT 71.33

5,000GT to 10,000GT 133.67

10,000GT to 15,000GT 181.67

15,000GT to 20,000GT 247.00

20,000GT to 30,000GT 300.00

 30,000GT to 40,000GT 416.67

40,000GT to 60,000GT 483.33

60,000GT to 80,000GT 550.00

80,000GT to 100,000GT 616.67

100,000GT to 120,000GT 666.67

120,000GT to 130,000GT 716.67

130,000GT to 140,000GT 766.67

Over 140,000 gross tonnage $0.05 or its peso equivalent every excess tonnage. Rate for docking and
undocking anchorage, conduction and shifting other related special services is equal to 100%. Pilotage
services shall be compulsory in government and private wharves or piers.

For Coastwise Vessels Regular

100 and under 500 gross tons P 41.70

500 and under 600 gross tons 55.60

600 and under 1,000 gross tons 69.60

1,000 and under 3,000 gross tons 139.20

3,000 and under 5,000 gross tons 300.00

5,000 and over gross tons

SEC. 2. With respect to foreign vessels, payment of pilotage services shall be made in dollars or in pesos
at the prevailing exchange rate.

SEC. 3. All orders, letters of instructions, rules, regulations and other issuances inconsistent with this
Executive Order are hereby repealed or amended accordingly.

SEC. 4. This Executive Order shall take effect immediately.”

In Philippine Interisland Shipping Association of the Philippines vs. Court of Appeals,14 the Supreme
Court, through Mr. Justice Vicente V. Mendoza, upheld the validity and constitutionality of Executive
Order 1088 in no uncertain terms. We aptly iterate our pronouncement in said case, viz.:

“It is not an answer to say that E.O. No. 1088 should not be considered a statute because that would
imply the withdrawal of power from the PPA. What determines whether an act is a law or an
administrative issuance is not its form but its nature. Here as we have already said, the power to fix the
rates of charges for services, including pilotage service, has always been regarded as legislative in
character.

x x x      x x x      x x x

It is worthy to note that E.O. No. 1088 provides for adjusted pilotage service rates without withdrawing
the power of the PPA to impose, prescribe, increase or decrease rates, charges or fees. The reason is
because E.O. No. 1088 is not meant simply to fix new pilotage rates. Its legislative purpose is the
“rationalization of pilotage service charges, through the imposition of uniform and adjusted rates for
foreign and coastwise vessels in all Philippine ports.

x x x      x x x      x x x

We conclude that E.O. No. 1088 is a valid statute and that the PPA is duty bound to comply with its
provisions. The PPA may increase the rates but it may not decrease them below those mandated by E.O.
No. 1088. x x x.”15

We see no reason to depart from this ruling. The Court’s holding clearly debunks petitioner’s insistence
on paying its pilotage fees based on memorandum circulars issued by the

PPA.16 Because the PPA circulars are inconsistent with EO 1088, they are void and ineffective.
“Administrative or executive acts, orders and regulations shall be valid only when they are not contrary
to the laws or the Constitution.”17 As stated by this Court in Land Bank of the Philippines vs. Court of
Appeals,18 “[t]he conclusive effect of administrative construction is not absolute. Action of an
administrative agency may be disturbed or set aside by the judicial department if there is an error of
law, a grave abuse of power or lack of jurisdiction, or grave abuse of discretion clearly conflicting with
either the letter or spirit of the law.”19 It is axiomatic that an administrative agency, like the PPA, has no
discretion whether to implement the law or not. Its duty is to enforce it. Unarguably, therefore, if there
is any conflict between the PPA circular and a law, such as EO 1088, the latter prevails.20

Based on the foregoing, petitioner has no legal basis to refuse payment of pilotage fees to private
respondent, as computed according to the rates set by EO 1088. Private respondent cannot be faulted
for relying on the clear and unmistakable provisions of EO 1088. In fact, EO 1088 leaves no room for
interpretation, thereby unmistakably showing the duplicity of petitioner’s query: “Is the private
respondent vested with power to interpret Executive Order No. 1088?”

WHEREFORE, the petition is hereby DENIED and the assailed Decision of the Court of Appeals is
AFFIRMED. Costs against petitioner.

SO ORDERED.

Petition denied, judgment affirmed.

Notes.—The DOTC Secretary can not initially investigate PPA personnel below the rank of Assistant
Manager. (Carlos vs. Civil Service Commission, 228 SCRA 262 [1993])

An administrative agency cannot amend an act of Congress. (Boie-Takeda Chemicals, Inc. vs. De la Serna,
228 SCRA 329 [1993])
Great weight accorded to interpretation or construction of a statute by the government agency called
upon to implement the same. (Enrique vs. Court of Appeals, 229 SCRA 180 [1994])

10. PHILEX MINING CORPORATION, petitioner, vs. LUZ M. ZALDIVIA and THE SECRETARY OF
AGRICULTURE AND NATURAL RESOURCES, respondents. No. L-29669. February 29, 1972.

Mining law; Director of Mines without real judicial power.—There is nothing in sections 61 and 73 of the
Mining Law that indicates a legislative intent to confer real judicial power upon the Director of Mines.
The very terms of section 73 thereof, as amended by R.A. 4388, in requiring that the adverse claim must
“state in full detail the nature, boundaries and extent of the adverse claim” show that the conflicts to be
decided by reason of such adverse claim refer primarily to questions of fact. The controversies to be
submitted and resolved by the Director of Mines under the said sections therefore refer only to the
overlapping of claims, and administrative matters incidental thereto.

Same; Where adverse claim not within authority of Director of Mines.—As the petitioner’s adverse claim
is not one grounded on overlapping of claims nor is it a mining conflict arising out of mining locations
(there being only one involved) but one originating from the alleged fiduciary or contractual relationship
between the petitioner mining corporation and the locator and his transferees, the adverse claim is not
within the executive or administrative authority of the mining director to resolve, but in that of the
courts. (See Bspinosa vs. Makalintal, 79 Phil. 134)

PETITION to review and set aside the decision of the Secretary of Agriculture and Natural Resources.

The facts are stated in the opinion of the Court.

Petition to review and set aside the decision of the Secretary of Agriculture and Natural Resources,
upholding, on appeal, the Director of Mines as being without junsdiction to adjudicate an adverse claim
filed by herein petitioner Philex Mining Corporation against the lode lease application recorded in the
name of herein private respondent Luz M. Zaldivia to a mining claim, known as “George Claim”, located
in Tuba, Benguet, Mt. Province.

The records of the Bureau of Mines disclosed that, by a registered deed of assignment, dated 24
September 1955, George T. Scholey, as locator of the aforesaid mining claim, sold, transferred and
assigned all his rights, title and interest therein to Milagros Yrastorza; on 7 December 1959, Yrastorza
filed Lode Lease Application No. V-4671 covering the said mining claim, but on 15 October 1963, she
sold, transferred and conveyed all her rights and interest in the claim to herein respondent Luz Zaldivia.
The transfer was approved by the Director of Mines on 29 December 1966; hence, Lode Lease
Application No. V-4671 was recorded in Zaldivia’s name and given due course.

Upon publication of the lease application, herein petitioner Philex Mining Corporation interposed an
adverse claim to the lease application, alleging that it is the beneficial and equitable owner of the min
ing claim; that it was located on 9 December 1955 by the petitioner corporation’s then general manager
for the benefit of the corporation; that when Scholey tran sferred the claim to Yrastorza, Scholey was
still th e general manager, while Yrastorza was also employed by the company; and that Yrastorza and
respondent Zaldivia, who had also been an employee of the corporation, merely acted as agents of
Scholey, so that, despite the transfers, petitioner remained the equitable owner.

Respondent Zaldivia moved to dismiss the adverse claim on three (3) grounds, namely: late filing of the
adverse claim, lack of jurisdiction of the Director of Mines to resolve the question of ownership raised by
herein petitioner, and the alleged defect of the adverse claim for non-compliance with certain
requirements of the Mining Act, as amended. In the course of an oral argument on the motion to
dismiss, only the question of jurisdiction was submitted for resolution.

In an order issued on 2 April 1968, the Director of Mines dismissed the adverse claim on the ground that
the Bureau had no jurisdiction to resolve the question of ownership, because the question was judicial
in character and should be ventilated before the courts. Petitioner appealed to the Secretary of
Agriculture and Natural Resources but, in a decision rendered on 24 September 1968, the Secretary
affirmed the order of the Director of Mines.

Petitioner Philex Mining Corporation filed the present petition on the sole issue of jurisdiction of the
Director of Mines over the controverted issues.

Petitioner relies upon amendments introduced by Republic Act No. 4388 to the Mining Act
(Commonwealth Act No. 137), arguing that, before said amendments, conflicts and disputes arising out
of mining location were determined by the Director of Mines, whose decision might be appealed to the
Department Secretary, and the latter’s decision in turn was reviewable by a competent court, as
provided in the original Section 61 of Commonwealth Act 137, as follows:

“Sec. 61. Conflicts and disputes arising out of mining locations may be submitted to the Director of the
Bureau of Mines for decision; Provided, that such decision may be appealed to the Secretary of
Agriculture and Commerce within ninety day s from the date of its entry. In case any one of the
interested parties should disagree from the decision of the Director of the Bureau of Mines or of the
Secretary of Agriculture and Commerce, the matter may be taken to the court of competent jurisdiction
within ninety day s after notice of such decision, after which time without the institution of such action
the said decision shall be final and binding upon the parties concerned.”—

and that an adverse claim to a lease application may be filed with the Director and upon such filing, all
proceedings, except the publication of notice of the application and the making and filing of the proper
affidavit, shall be stayed until the controversy is settled by a competent court, as provided for in the
original Section 73 of Commonwealth Act 137, as follows:

“Sec. 73. At any time during the period of publication, any adverse claim may be filed under oath with
the Director of the Bureau of Mines, and shall state in full detail the nature, boundaries, and extent of
the adverse claim, and shall be accompanied by all plans, documents, and agreements upon which such
adverse claim is based. Upon the filing of any adverse claim all proceedings except the publication of
notice of application for lease and the making and filing of the affidavits in connection therewith, as
herein prescribed, shall be stayed until the controversy shall have been settled or decided by a court of
competent jurisdiction, or the adverse claim waived. . . . .”

but that Congress realized that the two sections were defective in the sense that great delays were
incurred and so, Congress amended the two sections through Republic Act 4388, as follows:
“Sec. 61. Conflicts and disputes arising out of mining locations shall be submitted to the Director of
Mines for decision; Provided, That the decision or order of the Director of Mines may be appealed to the
Secretary of Agriculture and Natural Resources within thirty days from receipt, of such decision or order.
In case any one of the parties should disagree from the decision or order of the Secretary of Agriculture
and Natural Resources, the matter may be taken to the Court of Appeals or the Supreme Court, as the
case may be, within thirty day s from the receipt of such decision or order, otherwise the said decision
or order shall be final and binding upon the parties concerned. Findings of facts in the decision or order
of the Director of Mines when affirmed by the Secretary of Agriculture and Natural Resources shall be
final and conclusive, and the aggrieved party or parties desiring to appeal from such decision or order
shall file in the Supreme Court petition for review wherein only questions of law may be raised.”

“Sec. 73. At any time during the period of publication, any adverse claim may be filed under oath with
the Director of Mines, and shall state in full detail the nature, boundaries, and extent of the adverse
claim, and shall be accompanied by all plans, documents, and agreements upon which such adverse
claim is based; Provided, however, That no adverse claim from any person, association, partnership or
corporation, whose protest filed under Section sixty-one of this Act has already been finally decided by
the Director of Mines and/or the Secretary of Agriculture and Natural Resources, shall be entertained.
Upon the filing of the adverse claim all proceedings except, the publication of notice of application for
patent or lease and the making and filing of the affidavit in connection therewith, as herein prescribed
shall be stayed until the controversy shall have been settled or decided in accordance with Section sixty-
one of this Act or the adverse claim waived.”

—with the expressed intention embodied in the explanatory note to the bill that became Republic Act
4388, as follows:

“Sections 61 and 73, which refer to overlapping of claims are amended to expedite the resolution of
mining conflicts which constitute one of the impediments to the mining industry. Profitable mining
properties are left idle due to delays in litigations over conflicting claims. The decision of the Director of
Mines when affirmed by the Secretary of Agriculture and Natural Resources shall be final and conclusive
and appealable only to the Court of Appeals or to the Supreme Court, as the case may be. As
contemplated in the proposed amendment to Section 73, adverse claims shall be decided by the
Director of Mines in accordance with Section 61 of the Mining Act, instead of leaving the matter to the
Court of First Instance. Due to the thousands of cases, it takes years before the court can decide a case.”
(Congressional Record, Proceedings and Debates of the Fifth Congress. Second Regular Session, Vol. II,
Part II, No. 66, Page 1346)

It is thus made clear, according to the petitioner, that courts have been divested of original jurisdiction
to adjudicate adverse claims which, by the amendments, was transferred to the Director of Mines,
whose decision may be appealed to the Secretary; and the latter’s decision, in turn, may be reviewed by
the Court of Appeals or the Supreme Court, as the case may be, so that, in the present case, the
Secretary erred in affirming the dismissal by the Director of petitioner’s adverse claim.

We can not agree with petitioner’s contention. The sole issue raised by it is a pure question of law, to
wit, whether Scholey, during the period of his management of appellant’s affairs, could lawfully locate
mining claims for his sole and exclusive benefit, and transfer to others the rights thus acquired. There is
here no question of fact nor matters requiring technological knowledge and experience. The issue is one
to be resolved in conformity with legal rules and standards governing the powers of an agent, and the
law’s restrictions upon the latter’s right to act for his own exclusive benefit while the agency is in force.
Decision of such questions involves the interpretation and application of the laws and norms of justice
established by society and constitutes essentially an exercise of the judicial power which under the
Constitution is exclusively allocated to the Supreme Court, and such courts as the Legislature may
establish, and one that mining officials are ill-equipped to deal with.

We see nothing in sections 61 and 73 of the Mining Law that indicates a legislative intent to confer real
judicial power upon the Director of Mines. The very terms of section 73 of the Mining Law, as amended
by Republic Act No. 4388, in requiring that the adverse claim mu st “state in full detail the nature,
boundaries and extent of the adverse claim snow that the conflicts to be decided by reason of such
adverse claim refer primarily to questions of fact. This is made even clearer by the explanatory note to
House Bill No. 2522, later to become Republic Act 4388, that “sections 61 and 73 that refer to the
overlapping of claims are amended to expedite resolutions of mining conflicts. . .” The controversies to
be submitted and resolved by the Director of Mines under the sections refer therefore only to the
overlapping of claims, and administrative matters incapital thereto.

As already shown, petitioner’s adverse claim is not one grounded on overlapping of claims nor is it a
mining conflict arising out of mining locations (there being only one involved) but one originating from
the alleged fiduciary or contractual relationship between petitioner and locator Scholey and his
transferees Yrastorza and respondent Zaldivia. As such, the adverse claim is not within the executive or
administrative authority of the mining director to solve, but in that of the courts, as it has been correctly
held, on the basis of the doctrine stated in Espinosa vs. Makalintal, 79 Phil. 134. This ruling,
notwithstanding the amendments introduced by Republic Act 4388, is still applicable to the case at bar.
The doctrine was stated thus:

“. . . The powers granted to the Secretary of Agriculture and Commerce by the pertinent provisions of
law invoked by petitioners are all of executive and administrative nature, such as granting of licenses,
permits, lease, and contracts, or approving, rejecting, reinstating, or cancelling applications, or deciding
conflicting applications. The controversies between the parties, as raised in the pleadings in case No.
200 of the Court of First Instance of Iloilo appear to have arisen upon disagreements in civil or
contractual relations between the litigants to which the legal provisions invoked by petitioner are not
and cannot be applicable. It should be far-fetched to recognize in the Secretary of Agriculture and
Commerce the power of determining whether or not, as alleged by Paranpan, he has been deprived by
defendants of the possession of the fishpond in question and of the legal effects of such deprivation, or
upon the nature of the two contracts of mortgage in the form of sale with right to repurchase between
Sason and Paranpan, as alleged by the defendants, or whether Paranpan has charged Sason with
usurious interests. These are questions judicial in nature and only courts of justice can decide them.”

But petitioner claims th at the Espinosa-Makalintal case cannot be invoked in the present case because
there the parcel of land involved was already the object of a lease agreement between the government
and the lessee, while here, the “George Claim” has not yet been leased to respondent Zaldivia and,
therefore, the mining claim has not passed from the administrative control of the Director of Mines. The
objection is without merit, since the question presented in the petitioner’s adverse claim is judicial in
nature, not a mining conflict, and it is immaterial whether the mining claim in question has or has not
passed out of administrative control of the Director of Mines.
WHEREFORE, the petition for review is hereby dismissed and the executive decision under review is
affirmed, with costs against petitioner Philex Mining Corporation.

Petition for review dismissed and executive decision under review affirmed.

Notes.—Purely administrative and discretionary functions may not be interfered with by the courts
(Coloso v. Board of Accountancy, 92 Phil. 938). In Dumagnin vs. Reynolds (L-3572, Sept. 30, 1952 , 92
Phil. 66), the Court ruled that a mere employee may n ot stake a mining claim for himself and, if he does
so, he may be compelled to transfer the same to the employer.

11. ANTIPOLO REALTY CORPORATION, petitioner, vs. THE NATIONAL HOUSING AUTHORITY, HON. G.V.
TOBIAS, in his capacity as General Manager of the National Housing Authority, THE HON. JACOBO C.
CLAVE, in his capacity as Presidential Executive Assistant and VIRGILIO A. YUSON, respondents. No. L-
50444. August 31, 1987.*

Government Corporations; Limited delegation of judicial or quasi-judicial authority to administrative

agencies well recognized in our jurisdiction.—It is by now commonplace learning that many
administrative agencies exercise and perform adjudicatory powers and functions, though to a limited
extent only. Limited delegation of judicial or quasi-judicial authority to administrative agencies (e.g., the
Securities and Exchange Commission and the National Labor Relations Commission) is well recognized in
our jurisdiction, basically because the need for special competence and experience has been recognized
as essential in the resolution of questions of complex or specialized character and because of a
companion recognition that the dockets of our regular courts have remained crowded and clogged.

Same; Same; Extent of exercise of judicial or quasi-judicial powers of administrative entity depends on
provisions of the statute creating such agency.—In general, the quantum of judicial or quasijudicial
powers which an administrative agency may exercise is defined in the enabling act of such agency. In
other words, the extent to which an administrative entity may exercise such powers depends largely, if
not wholly, on the provisions of the statute creating or empowering such agency. In the exercise of such
powers, the agency concerned must commonly interpret and apply contracts and determine the rights
of private parties under such contracts. One thrust of the multiplication of administrative agencies is
that the interpretation of contracts and the determination of private rights thereunder is no longer a
uniquely judicial function, exercisable only by our regular courts. Thus, the extent to which the NHA has
been vested with quasi-judicial authority must be determined by referring to the terms of Presidential
Decree No. 957, known as "The Subdivision and Condominium Buyers' Decree." Section 3 of this statute
provides as follows: "National Housing Authority.—The National Housing Authority shall have exclusive
jurisdiction to regulate the real estate trade and business in accordance with the provisions of this
decree."

Same; Same; Same; Petitioner not entitled to exercise its options under clause 7 of the contract.—
Having failed to comply with its contractual obligation to complete certain specified improvements in
the subdivision within the specified period of two years from the date of the execution of the Contract
to Sell, petitioner was not entitled to exercise its options under Clause 7 of the Contract. Hence,
petitioner could neither rescind the Contract to Sell nor treat the installment payments made by the
private respondent as forfeited in its favor. Indeed, under the general Civil Law, in view of petitioner's
breach of its contract with private respondent, it is the latter who is vested with the option either to
rescind the contract and receive reimbursement of all installment payments (with legal interest) made
for the purchase of the subdivision lot in question, or to suspend payment of further purchase
installments until such time as the petitioner had fulfilled its obligations to the buyer. The NHA was
therefore correct in holding that private respondent's prior installment payments could not be forfeited
in favor of petitioner.

Same; Same; Same; Same; Due Process; What the fundamental law abhors is not the absence of
previous notice but rather the absolute lack of opportunity to be heard.—We turn to petitioner's
assertion that it had been denied the right to due process. This assertion lacks substance. The record
shows that a copy of the order denying the Motion to Dismiss and scheduling the hearing of the
complaint for the morning of 6 March 1978, was duly served on counsel for petitioner, as evidenced by
the annotation appearing at the bottom of said copy indicating that such service had been effected. But
even if it be assumed, arguendo, that such notice had not been served on the petitioner, nevertheless
the latter was not deprived of due process, for what the fundamental law abhors is not the absence of
previous notice but rather the absolute lack of opportunity to be heard. In the instant case, petitioner
was given ample opportunity to present its side and to be heard on a motion for reconsideration as well,
and not just on a motion to dismiss; the claim of denial of due process must hence sound even more
hollow.

PETITION for certiorari to review the decision of the National Housing Authority:

The facts are stated in the opinion of the Court.

By virtue of a Contract to Sell dated 18 August 1970, Jose Hernando acquired prospective and beneficial
ownership over Lot. No. 15, Block IV of the Ponderosa Heights Subdivision in Antipolo, Rizal, from the
petitioner Antipolo Realty Corporation.

On 28 August 1974, Mr. Hernando transferred his rights over Lot No. 15 to private respondent Virgilio
Yuson. The transfer was embodied in a Deed of Assignment and Substitution of Obligor (Delegación),
executed with the consent of Antipolo Realty, in which Mr. Yuson assumed the performance of the
vendee's obligations under the original contract, including payment of his predecessor's installments in
arrears. However, for failure of Antipolo Realty to develop the subdivision project in accordance with its
undertaking under Clause 17 of the Contract to Sell, Mr. Yuson paid only the arrearages pertaining to
the period up to, and including, the month of August 1972 and stopped all monthly installment

payments falling due thereafter Clause 17 reads:

"Clause 17.—SUBDIVISION BEAUTIFICATION. To insure the beauty of the subdivision in line with the
modern trend of urban development, the SELLER hereby obligates itself to provide the subdivision with:

a)Concrete curbs and gutters

b)Underground drainage system

c)Asphalt paved roads

d)Independent water system

e)Electrical installation with concrete posts.

f)Landscaping and concrete sidewalks

g)Developed park or amphitheatre

h)24-hour security guard service.

These improvements shall be complete within a period of two (2) years from date of this contract.
Failure by the SELLER shall permit the BUYER to suspend his monthly installments without any penalties
or interest charges until such time that such improvements shall have been completed. "1

On 14 October 1976, the president of Antipolo Realty sent a notice to private respondent Yuson advising
that the required improvements in the subdivision had already been completed, and requesting
resumption of payment of the monthly installments on Lot No. 15. For his part, Mr. Yuson replied that
he would conform with the request as soon as he was able to verify the truth of the representation in
the notice.

In a second letter dated 27 November 1976, Antipolo Realty reiterated its request that Mr. Yuson
resume payment of his monthly installments, citing the decision rendered by the National Housing
Authority (NHA) on 25 October 1976 in Case No. 252 (entitled "Jose B. Viado Jr., complainant vs.
Conrado S. Reyes, respondent") declaring Antipolo Realty to have "substantially complied with its
commitment to the lot buyers pursuant to the Contract to Sell, executed by and between the lot buyers
and the respondent." In addition, a formal demand was made for full and immediate payment of the
amount of P16,994.73, representing installments which, Antipolo Realty alleged, had accrued during the
period while the improvements were being completed—i.e., between September 1972 and October
1976.

Mr. Yuson refused to pay the September 1972—October 1976 monthly installments but agreed to pay
the post October 1976 installments. Antipolo Realty responded by rescinding the Contract to Sell, and
claiming the forfeiture of all installment payments previously made by Mr. Yuson.

Aggrieved by the rescission of the Contract to Sell, Mr. Yuson brought his dispute with Antipolo Realty
before public respondent NHA through a letter-complaint dated 10 May 1977 which complaint was
docketed in NHA as Case No. 2123.

Antipolo Realty filed a Motion to Dismiss which was heard on 2 September 1977. Antipolo Realty,
without presenting any evidence, moved for the consolidation of Case No. 2123 with several other cases
filed against it by other subdivision lot buyers, then pending before the NHA. In an Order issued on 7
February 1978, the NHA denied the motion to dismiss and scheduled Case No. 2123 for hearing.

After hearing, the NHA rendered a decision on 9 March 1978 ordering the reinstatement of the Contract
to Sell under the following conditions:

"1)Antipolo Realty Corporation shall sent [sic] to Virgilio Yuzon a statement of account for the monthly
amortizations from November 1976 to the present;

2)No penalty interest shall be charged for the period from November 1976 to the date of the statement
of account; and
3)Virgilio Yuzon shall be given sixty (60) days to pay the arrears shown in the statement of account."2

Antipolo Realty filed a Motion for Reconsideration asserting: (a) that it had been denied due process of
law since it had not been served with notice of the scheduled hearing; and (b) that the jurisdiction to
hear and decide Mr. Yuson's complaint was lodged in the regular courts, not in the NHA, since that
complaint involved the interpretation and application of the Contract to Sell.

The motion for reconsideration was denied on 28 June 1978 by respondent NHA General Manager G.V.
Tobias, who sustained the jurisdiction of the NHA to hear and decide the Yuson complaint. He also
found that Antipolo Realty had in its counsel had failed to attend the hearing.3 The case was submitted
for decision, and eventually decided, solely on the e vidence presented by the complainant.

On 2 October 1978, Antipolo Realty came to this Court with a Petition for Certiorari and Prohibition with
Writ of Preliminary Injunction, which was docketed as G.R. No. L49051. Once more, the jurisdiction of
the NHA was assailed. Petitioner further asserted that, under Clause 7 of the Contract to Sell, it could
validly terminate its agreement with Mr. Yuson and, as a consequence thereof, retain all the prior
installment payments made by the latter.4

This Court denied certiorari in a minute resolution issued on 11 December 1978, "without prejudice to
petitioner's pursuing the administrative remedy."5 A motion for reconsideration was denied on 29
January 1979.

Thereafter, petitioner interposed an appeal from the NHA decision with the Office of the President
which, on 9 March 1979, dismissed the same through public respondent Presidential Executive Assistant
Jacobo C. Clave.6

In the present petition, Antipolo Realty again asserts that, in hearing the complaint of private
respondent Yuson and in ordering the reinstatement of the Contract to Sell between the parties, the
NHA had not only acted on a matter beyond its competence, but had also, in effect, assumed the
performance of judicial or quasi-judicial functions which the NHA was not authorized to perform.

We find the petitioner's arguments lacking in merit.

It is by now commonplace learning that many administrative agencies exercise and perform adjudicatory
powers and functions, though to a limited extent only. Limited delegation of judicial or quasi-judicial
authority to administrative agencies (e.g., the Securities and Exchange Commission and the National
Labor Relations Commission) is well recognized in our jurisdiction,7 basically because the need for
special competence and experience has been recognized as essential in the resolution of questions of
complex or specialized character and because of a companion recognition that the dockets of our
regular courts have remained crowded and clogged. In Spouses Jose Abejo and Aurora Abejo, et al. vs.
Hon. Rafael dela Cruz, etc., et al.,8 the Court, through Mr, Chief Justice Teehankee, said:

"In the fifties, the Court taking cognizance of the move to vest jurisdiction in administrative commissions
and boards the power to resolve specialized disputes in the field of labor (as in corporations, public
transportation and public utilities) ruled that Congress in requiring the Industrial Court's intervention in
the resolution of labormanagement controversies likely to cause strikes or lockouts meant such
jurisdiction to be exclusive, although it did not so expressly state in the law. The Court held that under
the 'sense-making and expeditious doctrine of primary jurisdiction . . . the courts cannot or will not
determine a controversy involving a question which is within the jurisdiction of an administrative
tribunal, where the question demands the exercise of sound administrative discretion requiring the
special knowledge, experience, and services of the administrative tribunal to determine technical and
intricate matters of fact, and a uniformity of ruling is essential to comply with the purposes of the
regulatory statute administered' (Pambujan Sur United Mine Workers v. Samar Mining Co., Inc., 94 Phil.
932, 941 [1954]).

In this era of clogged court dockets, the need for specialized administrative boards or commissions with
the special knowledge, experience and capability to hear and determine promptly disputes on technical
matters or essentially factual matters, subject to judicial review in case of grave abuse of discretion, has
become well nigh indispensable. Thus, in 1984, the Court noted that 'between the power lodged in an
administrative body and a court, the unmistakeable trend has been to refer it to the former.
"Increasingly, this Court has been committed to the view that unless the law speaks clearly and
unequivocably, the choice should fall on [an administrative agency]" ' (NFL v. Eisma, 127 SCRA 419, 428,
citing precedents). The Court in the earlier case of Ebon vs. De Guzman (113 SCRA 52, 56 [1982]), noted
that the lawmaking authority, in restoring to the labor arbiters and the NLRC their jurisdiction to award
all kinds of damages in labor cases, as against the previous P.D. amendment splitting their jurisdiction
with the regular courts, 'evidently, . . . had second thoughts about depriving the Labor Arbiters and the
NLRC of the jurisdiction to award damages in labor cases because that setup would mean duplicity of
suits, splitting the cause of action and possible conflicting findings and conclusions by two tribunals on
one and the same claim.' "

In an even more recent case, Tropical Homes, Inc. vs. National Housing Authority, et al.,9 Mr. Justice
Gutierrez, speaking for the Court, observed that:

"There is no question that a statute may vest exclusive original jurisdiction in an administrative agency
over certain disputes and controversies falling within the agency's special expertise. The very definition
of an administrative agency includes its being vested with quasi-judicial powers. The ever increasing
variety of powers and functions given to administrative agencies recognizes the need for the active
intervention of administrative agencies in matters calling for technical knowledge and speed in countless
controversies which cannot possibly be handled by regular courts."

In general, the quantum of judicial or quasi-judicial powers which an administrative agency may exercise
is defined in the enabling act of such agency. In other words, the extent to which an administrative
entity may exercise such powers depends largely, if not wholly, on the provisions of the statute creating
or empowering such agency.10 In the exercise of such powers, the agency concerned must commonly
interpret and apply contracts and determine the rights of private parties under such contracts. One
thrust of the multiplication of administrative agencies is that the interpretation of contracts and the
determination of private rights thereunder is no longer a uniquely judicial function, exercisable only by
our regular courts.

Thus, the extent to which the NHA has been vested with quasi-judicial authority must be determined by
referring to the terms of Presidential Decree No. 957, known as 'The Subdivision and Condominium
Decree."11 Section 3 of this statute provides as follows:
"National Housing Authority.—The National Housing Authority shall have exclusive jurisdiction to
regulate the real estate trade and business in accordance with the provisions of this decree." (Italics
supplied)

The need for and therefore the scope of the regulatory authority thus lodged in the NHA are indicated in
the second and third preambular paragraphs of the statute which provide:

"WHEREAS, numerous reports reveal that many real estate subdivision owners, developers, operators,
and/or sellers have reneged on their representations and obligations to provide and maintain properly
subdivision roads, drainage, sewerage, water systems, lighting systems and other similar basic
requirements, thus endangering the health and safety of home and lot buyers;

WHEREAS, reports of alarming magnitude also show cases of swindling and fraudulent manipulations
perpetrated by unscrupulous subdivision and condominium sellers and operators, such as failure to
deliver titles to the buyers or titles free from liens and encumbrances, and to pay real estate taxes, and
fraudulent sales of the same subdivision lots to different innocent purchasers for value—." (Italics
supplied)

Presidential Decree No. 134412 clarified and spelled out the quasi-judicial dimensions of the grant of
regulatory authority to the NH A in the following quite specific terms:

"SECTION 1. In the exercise of its functions to regulate the real estate trade and business and in addition
to its powers provided for in Presidential Decree No. 957, the National Housing Authority shall have
exclusive jurisdiction to hear and decide cases of the following nature:

A. Unsound real estate business practices:

B. Claims involving refund and any other claims filed by subdivision lot or condominium unit buyer
against the project owner, developer, dealer, broker or salesman; and

C. Cases involving specific performance of contractual and statutory obligations filed by buyers of
subdivision lots or condominium units against the owner, developer, dealer, broker or salesman." (Italics
supplied.)

The substantive provisions being applied and enforced by the NHA in the instant case are found in
Section 23 of Presidential Decree No. 957 which reads:

"Sec. 23. Non-Forfeiture of Payments.—No installment payment made by a buyer in a subdivision or

condominium project for the lot or unit he contracted to buy shall be forfeited in favor of the owner or
developer when the buyer, after due notice to the owner or developer, desists from further payment
due to the failure of the owner or developer to develop the subdivision or condominium project
according to the approved plans and within the time limit for complying with the same. Such buyer may,
at his option, be reimbursed the total amount paid including amortization and interests but excluding
delinquency interests, with interest thereon at the legal rate." (Italics supplied.)

Having failed to comply with its contractual obligation to complete certain specified improvements in
the subdivision within the specified period of two years from the date of the execution of the Contract
to Sell, petitioner was not entitled to exercise its options under Clause 7 of the Contract. Hence,
petitioner could neither rescind the Contract to Sell nor treat the installment payments made by the
private respondent as forfeited in its favor. Indeed, under the general Civil Law,13 in view of petitioner's
breach of its contract with private respondent, it is the latter who is vested with the option either to
rescind the contract and receive reimbursement of all installment payments (with legal interest) made
for the purchase of the subdivision lot in question, or to suspend payment of further purchase
installments until such time as the petitioner had fulfilled its obligations to the buyer. The NHA was
therefore correct in holding that private respondent's prior installment payments could not be forfeited
in favor of petitioner.

Neither did the NHA commit any abuse, let alone a grave abuse of discretion or act in excess of its
jurisdiction when it ordered the reinstatement of the Contract to Sell between the parties. Such
reinstatement is no more than a logical consequence of the NHA's correct ruling, just noted, that the
petitioner was not entitled to rescind the Contract to Sell. There is, in any case, no question that under
Presidential Decree No. 957, the NHA was legally empowered to determine and protect the rights of
contracting parties under the law administered by it and under the respective agreements, as well as to
ensure that their obligations thereunder are faithfully performed.

We turn to petitioner's assertion that it had been denied the right to due process. This assertion lacks
substance. The record shows that a copy of the order denying the Motion to Dismiss and scheduling the
hearing of the complaint for the morning of 6 March 1978, was duly served on counsel for petitioner, as
evidenced by the annotation appearing at the bottom of said copy indicating that such service had been
effected.14 But even if it be assumed, arguendo, that such notice had not been served on the petitioner,
nevertheless the latter was not deprived of due process, for what the fundamental law abhors is not the
absence of previous notice but rather the absolute lack of opportunity to be heard.15 In the instant
case, petitioner was given ample opportunity to present its side and to be heard on a motion for
reconsideration as well, and not just on a motion to dismiss; the claim of denial of due process must
hence sound even more hollow.16

We turn finally to the question of the amount of P16,994.73 which petitioner insists had accrued during
the period from September 1972 to October 1976, when private respondent had suspended payment of
his monthly installments on his chosen subdivision lot. The NHA in its 9 March 1978 resolution ruled that
the regular monthly installments under the Contract to Sell did not accrue during the September 1972—
October 1976 period:

"[R]espondent allowed the complainant to suspend payment of his monthly installments until the
improvements in the subdivision shall have been completed. Respondent informed complainant on
November 1976 that the improvements have been completed. Monthly installments during the period
of suspension of payment did not become due and demandable. Neither did they accrue. Such must be
the case, otherwise, there is no sense in suspending payments. If the suspension is lifted the debtor shall
resume payments but never did he incur any arrears.

Such being the case, the demand of respondent for complainant to pay the arrears due during the
period of suspension of payment is null and void. Consequently, the notice of cancellation based on the
refusal to pay the arrears that were not due and demandable is also null and void."17

The NHA resolution is probably too terse and in need of clarification and amplification. The NHA
correctly held that no installment payments should be considered as having accrued during the period of
suspension of payments. Clearly, the critical issue is what happens to the installment payments which
would have accrued and fallen due during the period of suspension had no default on the part of the
petitioner intervened. To our mind, the NHA resolution is most appropriately read as directing that the
original period of payment in the Contract to Sell must be deemed extended by a period of time equal to
the period of suspension (i.e., by four (4) years and two (2) months) during which extended time (tacked
on to the original contract period) private respondent buyer must continue to pay the monthly
installment payments until the entire original contract price shall have been paid We think that such is
the intent of the NHA resolution which directed that "[i]f the suspension is lifted, the debtor shall
resume payments" and that such is the most equitable and just reading that may be given to the NHA
resolution. To permit Antipolo Realty to collect the disputed amount in a lump sum after it had
defaulted on its obligations to its lot buyers, would tend to defeat the purpose of the authorization
(under Sec. 23 of Presidential Decree No. 957, supra) to lot buyers to suspend installment payments. As
the NHA resolution pointed out, "[s]uch must be the case, otherwise, there is no sense in suspending
payments." Upon the other hand, to condone the entire amount that would have become due would be
an excessively harsh penalty upon the petitioner and would result in the unjust enrichment of the
private respondent at the expense of the petitioner. It should be recalled that the latter had already
fulfilled, albeit tardily, its obligations to its lot buyers under their Contracts to Sell. At the same time, the
lot buyer should not be regarded as delinquent and as such charged penalty interest. The suspension of
installment payments was attributable to the petitioner, not the private respondent. The tacking on of
the period of suspension to the end of the original period precisely prevents default on the part of the
lot buyer. In the words of the NHA resolution, "never would [the buyer] incur any arrears.''

WHEREFORE, the Petition for Certiorari is DISMISSED. The NHA decision appealed from is hereby
AFFIRMED and clarified as providing for the lengthening of the original contract period for payment of
installments under the Contract to Sell by four (4) years and two (2) months, during which extended
time private respondent shall continue to pay the regular monthly installment payments until the entire
original contract price shall have been paid. No pronouncement as to costs.

SO ORDERED.

Petition dismissed Decision affirmed.

Notes:

4 Clause 7 provides: "In case the BUYER fails to satisfy any monthly installments, or any other payments
herein agreed upon, he is granted a month of grace within which to make the retarded payment, it is
understood, however, that should the month of grace herein granted to the BUYER expire, without the
payments corresponding to both months having been satisfied, an interest of 12% per annum will be
charged on the amounts he should have paid; it is understood further, that should a period of 60 days
elapse, to begin from the expiration of the month of grace herein mentioned, and the BUYER has not
paid all the amounts he should have paid, with the corresponding interest, up to that date, the SELLER
has the right to declare this contract cancelled, ex parte, and of no effect, and as consequence thereof,
the SELLER may dispose of the parcel or parcels of land covered by this contract, without notice to the
BUYER, in favor of other persons, as if this contract had never been entered into. In case of such
cancellation of this contract, all the amounts paid in accordance with this agreement, together with all
and charges paid for the use and occupation of the above-mentioned premises, and as payment for the
damages suffered by failure of the BUYER to fulfill his part of this agreement, and the BUYER hereby
renounces all his right to demand or reclaim the return of the same and obliges himself to peacefully
and immediately vacate the premises and deliver the same to the SELLER without delay."

12. PEDRO W. GUERZON, petitioner, vs. COURT OF APPEALS, BUREAU OF ENERGY UTILIZATION, F. C.
CAASI, JR., and PILIPINAS SHELL PETROLEUM CORPORATION, respondents. No. L-77707. August 8,
1988.*

Administrative Law; Administrative Agencies; Powers of; An administrative agency has only such powers
as are expressly granted to it by law and those that are necessarily implied in the exercise thereof.—As it
is, jurisdiction to order a lessee to vacate the leased premises is vested in the civil courts in an
appropriate case for unlawful detainer or accion publiciana [Secs. 19(2) and 33(2), B.P. Blg. 129, as
amended.] There is nothing in P.D. No. 1206, as amended, that would suggest that the same or similar
jurisdiction has been granted to the Bureau of Energy Utilization. It is a fundamental rule that an
administrative agency has only such powers as are expressly granted to it by law and those that are
necessarily implied in the exercise thereof [Makati Stock Exchange, Inc. v. Securities and Exchange
Commission, G.R. No. L-23004, June 30, 1965, 14 SCRA 620; Sy v. Central Bank, G.R. No. L-41480, April
30, 1976, 70 SCRA 570.] That issuing the order to vacate was the most effective way of stopping any
illegal trading in petroleum products is no excuse for a deviation from this rule. Otherwise, adherence to
the rule of law would be rendered meaningless.

Same; Same; Same; Bureau of Energy Utilization; The BEU has no power to decide contractual disputes
between gasoline dealers and oil companies in the absence of an express provision of law granting to it
such power.—Moreover, contrary to the Solicitor General’s theory, the text of the assailed order leaves
no room for doubt that it was issued in connection with an adjudication of the contractual dispute
between respondent Shell and petitioner. But then the Bureau of Energy Utilization, like its predecessor,
the defunct Oil Industry Commission, has no power to decide contractual disputes between gasoline
dealers and oil companies, in the absence of an express provision of law granting to it such power [see
Pilipinas Shell Petroleum Corp. v. Oil Industry Commission, G.R. No. L-41315, November 13, 1986, 155
SCRA 433.] As explicitly stated in the law, in connection with the exercise of quasi-judicial powers, the
Bureau’s jurisdiction is limited to cases involving violation or non-compliance with any term or condition
of any certificate, license or permit issued by it or of any of its orders, decisions, rules or regulations.

Same; Same; Same; Due Process; PD 1206 requires that notice of hearing and opportunity to be heard
be given to the offender before any administrative penalty provided under Sec. 7(e) may be imposed.—
Even if the issuance of the order to vacate was within the authority of respondent Caasi, Jr., still its
nullity is apparent because of the failure to comply with the requirement of notice and hearing. That
P.D. No. 1206, as amended, requires notice and hearing before any administrative penalty provided in
Sec. 7(e) may be imposed is patent. Sec. 7(e) provides for a gradation of penalties of which the
imposition of a fine in an amount not exceeding P1,000.00 is the least severe, and requires that even
before a fine is imposed notice and an opportunity to be heard be given to the offender.

PETITION to review the decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

Raised by petitioner to this Court is the issue of whether or not the Bureau of Energy Utilization, the
agency charged with regulating the operations and trade practices of the petroleum industry, has the
power to order a service station operator-lessee to vacate the service station and to turn over its
possession to the oil company-lessor upon the expiration of the dealership and lease agreements.

The facts, as found by the Court of Appeals, are as follows:

Basic antecedent facts show that on January 9, 1981 petitioner Pedro Guerzon executed with Basic
Landoil Energy Corporation, which was later acquired by respondent Pilipinas Shell Petroleum
Corporation, a contract denominated as “Service Station Lease” for the use and operation of respondent
SHELL’S properties, facilities and equipment, which included four (4) pieces of fuel dispensing pumps
and one (1) piece air compressor, for a period of five (5) years from January 15, 1981 and ending on
January 14, 1986. On January 7, 1981 petitioner likewise executed with the same Corporation a
“Dealer’s Sales Contract” for the sale by petitioner of respondent SHELL’S petroleum and other products
in the leased service station which contract expired April 12, 1986. On April 13, 1981, respondent
Bureau of Energy Utilization (BEU) approved the Dealer’s Sales Contract pursuant to which petitioner
was appointed dealer of SHELL’S gasoline and other petroleum products which he was to sell at the
gasoline station located at Cagayan de Oro City. On the same day, respondent BEU issued a certificate of
authority in petitioner’s favor, which had a 5-year period of validity, in line with the terms of the
contract.

Paragraph 9 of the Service Station Lease Contract provides:

The cancellation or termination of the Dealer’s Sales Contract executed between the COMPANY and the
LESSEE on January 7, 1981 shall automatically cancel this Lease.

As early as January 2, 1986 respondent SHELL through its District Manager—Reseller Mindanao wrote to
petitioner informing him that the Company was not renewing the Dealer’s Sales Contract which was to
expire on April 12, 1986 together with the service station lease and reminding him to take appropriate
steps to wind up his business activities at the station and, on the appropriate date to hand over the
station with all its facilities and equipment to the representative of respondent. A copy of this letter was
furnished respondent BEU, through the latter’s Mindanao Division Office. On April 12, 1986, respondent
SHELL wrote petitioner reiterating the decision not to extend the Dealer’s Sales Contract, demanding the
surrender of the station premises and all company owned equipment to the respondent’s
representative.

On April 15, 1986 respondent BEU, through respondent Caasi, Jr., officer-in-charge of its Mindanao
Division Office, issued the assailed order directing the petitioner as follows:

(1)immediately vacate the service station abovementioned and turn it over to Pilipinas Shell Petroleum
Corporation; and

(2)show cause in writing, under oath within ten (10) days from receipt hereof why no administrative
and/or criminal proceedings shall be instituted against you for the aforesaid violation.

The order directed that a copy of the same be furnished the PC-INP Commander of Cagayan de Oro City,
requesting prompt and effective enforcement of the directive and submitting to the BEU of the result of
the action taken thereon.
On April 22, 1986, pursuant to the order of April 15, 1986, respondent SHELL, accompanied by law
enforcement officers, was able to secure possession of the gasoline station in question together with the
requisite equipments and accessories, and turned them over to the control of the personnel of
respondent SHELL who accompanied them.

On May 9, 1986, petitioner filed with the Regional Trial Court of Misamis Oriental a complaint for
certiorari, injunction and damages with preliminary mandatory injunction (Civil Case No. 10619) to annul
the disputed order dated April 15, 1986 of respondent F.C. Caasi, Jr., but on September 18, 1986 this
complaint was dismissed for lack of jurisdiction to annul the order of a quasi-judicial body of equivalent
category as the Regional Trial Court. [Rollo, pp. 37-39.]

Thus, petitioner filed in the Court of Appeals a petition for certiorari with a prayer for preliminary
mandatory injunction against Filipinas Shell Petroleum Corporation, F.C. Caasi, Jr. and the Bureau of
Energy Utilization seeking the annulment of respondent Caasi, Jr.’s order dated April 15, 1986 and the
restoration to petitioner of possession of the service station and the equipment removed therefrom.

In a decision promulgated on February 10, 1987, the Court of Appeals denied due course and dismissed
the petition after holding the disputed order valid and the proceedings undertaken to implement the
same sanctioned by Presidential Decree No. 1206, as amended.

Hence, petitioner’s recourse to this Court.

In his petition for review, petitioner ascribed the following errors to the Court of Appeals:

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT RESPONDENT BUREAU OF ENERGY
UTILIZATION HAS JURISDICTION TO EJECT THE PETITIONER FROM THE GASOLINE SERVICE STATION
LEASED.

II

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THERE IS NO NECESSITY OF ANY NOTICE
AND HEARING PRIOR TO THE ISSUANCE OF THE DISPUTED ORDER ISSUED BY RESPONDENT BUREAU OF
ENERGY UTILIZATION ORDERING THE PETITIONER TO VACATE THE LEASED PREMISES. [Rollo, p. 13]

The controversy revolves around the assailed order issued by respondent F.C. Caasi, Jr., Officer-in-
Charge of the Mindanao Division Office of the Bureau of Energy Utilization, which reads:

15 April 1986

Mr. Pedro W. Guerzon

Corner Velez-Recto Streets

Cagayan de Oro City

Sir:

We were officially informed by Pilipinas Shell Petroleum Corporation that you refused to vacate its
company-owned service station at the above address despite the fact that you were advised by Shell in
its letter of January 02, 1986 that it will not renew the Dealer’s Sales Contract between yourself and the
company upon its expiration on April 12, 1986.

Your continued occupancy of the service station is not only considered a violation of BEU laws, rules and
regulations but is also detrimental to the interests of the parties concerned and the public.

In view thereof, you are hereby directed to:

(1)immediately vacate the service station abovementioned and turn it over to Pilipinas Shell Petroleum
Corporation; and

(2)show cause in writing, under oath within ten (10) days from receipt hereof why no administrative
and/or criminal proceedings shall be instituted against you for the aforesaid violation.

Let a copy of this directive be furnished the PC-INP Commander of Cagayan de Oro City, who is hereby
requested to cause the prompt and effective enforcement hereof and to submit to this Bureau the
result/s of the action/s taken thereon.

Very truly yours,

(Sgd.) F.C. CAASI, JR.

Officer-in-Charge

cc: PC/INP Commander

Cagayan de Oro City

Pilipinas Shell Petroleum Corporation

Sasa, Davao City/Cagayan de Oro City

BEU-Manila

As stated at the outset, whether or not it is within the jurisdiction of the Bureau of Energy Utilization to
issue the above order is the primary issue to be resolved.

The Solicitor General contends that since petitioner’s license to sell petroleum products expired on April
12, 1986, when his dealership and lease contracts expired, as of the following day, April 13, 1986 he was
engaged in illegal trading in petroleum products in violation of Batas Pambansa Blg. 33 [Rollo, pp. 100-
101.] The pertinent provisions of B.P. No. 33 state:

Sec. 2. Prohibited Acts.—The following acts are prohibited and penalized:

(a) Illegal trading in petroleum and/or petroleum products

x     x     x

Sec. 3. Definition of terms.—For the purposes of this Act, the following terms shall be understood to
mean:

Illegal trading in petroleum and/or petroleum products—the sale or distribution of petroleum products
for profit without license or authority from the Government; non-issuance of receipts by licensed
traders; misrepresentation as to quality and/or quantity; and sale by oil companies, distributors and/or
dealers violative of government rules and regulations.

x     x     x

Thus, concludes the Solicitor General, the Bureau of Energy Utilization had the power to issue, and was
justified in issuing, the order to vacate pursuant to Presidential Decree No. 1206, as amended, the
pertinent portion of which provides:

Sec. 7. Bureau of Energy Utilization.—There is created in the Department a Bureau of Energy Utilization,
hereafter referred to in this Section as the Bureau, which shall have the following powers and functions,
among others:

x     x     x

e. After due notice and hearing, impose and collect a fine not exceeding One Thousand Pesos, for every
violation or non-compliance with any term or condition of any certificate, license, or permit issued by
the Bureau or of any of its orders, decisions, rules and regulations.

The fine so imposed shall be paid to the Bureau, and failure to pay the fine within the time specified in
the order or decision of the Bureau or failure to cease and discontinue the violation or noncompliance
shall be deemed good and sufficient reason for the suspension, closure or stoppage of operations of the
establishment of the person guilty of the violation or non-compliance. In case the violation or default is
committed by a corporation or association, the manager or person who has charge of the management
of the corporation or association and the officers or directors thereof who have ordered or authorized
the violation or default shall be solidarity liable for the payment of the fine.

The Bureau shall have the power and authority to issue corresponding writs of execution directing the
City Sheriff or provincial Sheriff or other peace officers whom it may appoint to enforce the fine or the
order of closure, suspension or stoppage of operations. Payment may also be enforced by appropriate
action brought in a court of competent jurisdiction. The remedy provided herein shall not be a bar to or
affect any other remedy under existing laws, but shall be cumulative and additional to such remedies;

x     x     x

However, the Solicitor General’s line of reasoning is fatally flawed by the failure of the facts to support
it. From a cursory reading of the assailed order, it is readily apparent that the order is premised on
petitioner’s refusal to vacate the service station in spite of the expiration and non-renewal of his
dealership and lease agreements with respondent Shell. Nowhere in the order is it stated that petitioner
had engaged in illegal trading in petroleum products or had committed any other violation of B.P. Blg.
33. The order merely makes a vague reference to a “violation of BEU laws, rules and regulations,”
without stating the specific provision violated. That petitioner had engaged in illegal trading in
petroleum products cannot even be implied from the wording of the assailed order.

But then, even if petitioner was indeed engaged in illegal trading in petroleum products, there was no
basis under B.P. Blg. 33 to order him to vacate the service station and to turn it over to respondent Shell.
Illegal trading in petroleum products is a criminal act wherein the injured party is the State. Respondent
Shell is not even alleged by the Solicitor General as a private party prejudiced and, therefore, it can claim
no relief if a criminal case is instituted.**
Even on the assumption that petitioner’s continued occupancy and operation of the service station
constituted a violation of a law or regulation, still the Court has no recourse but to rule against the
legality of the order, the Bureau of Energy Utilization not being empowered to issue it. Section 7 of P.D.
No. 1206, as amended, is very clear as to the courses of action that the Bureau of Energy Utilization may
take in case of a violation or non-compliance with any term or condition of any certificate, license or
permit issued by the Bureau or any of its orders, decisions, rules or regulations. The Bureau may: (1)
impose a fine not exceeding P1,000.00; and (2) in case of failure to pay the fine imposed or to cease and
discontinue the violation or non-compliance, order the suspension, closure or stoppage of operations of
the establishment of the guilty party. Its authority is limited to these two (2) options. It can do no more,
as there is nothing in P.D. No. 1206, as amended, which empowers the Bureau to issue an order to
vacate in case of a violation.

As it is, jurisdiction to order a lessee to vacate the leased premises is vested in the civil courts in an
appropriate case for unlawful detainer or accion publiciana [Secs. 19(2) and 33(2), B.P. Blg. 129, as
amended.] There is nothing in P.D. No. 1206, as amended, that would suggest that the same or similar
jurisdiction has been granted to the Bureau of Energy Utilization. It is a fundamental rule that an
administrative agency has only such powers as are expressly granted to it by law and those that are
necessarily implied in the exercise thereof [Makati Stock Exchange, Inc. v. Securities and Exchange
Commission, G.R. No. L-23004, June 30, 1965, 14 SCRA 620; Sy v. Central Bank, G.R. No. L-41480, April
30, 1976, 70 SCRA 570.] That issuing the order to vacate was the most effective way of stopping any
illegal trading in petroleum products is no excuse for a deviation from this rule. Otherwise, adherence to
the rule of law would be rendered meaningless.

Moreover, contrary to the Solicitor General’s theory, the text of the assailed order leaves no room for
doubt that it was issued in connection with an adjudication of the contractual dispute between
respondent Shell and petitioner. But then the Bureau of Energy Utilization, like its predecessor, the
defunct Oil Industry Commission, has no power to decide contractual disputes between gasoline dealers
and oil companies, in the absence of an express provision of law granting to it such power [see Pilipinas
Shell Petroleum Corp. v. Oil Industry Commission, G.R. No. L-41315, November 13, 1986, 145 SCRA 433.]
As explicitly stated in the law, in connection with the exercise of quasi-judicial powers, the Bureau’s
jurisdiction is limited to cases involving violation or non-compliance with any term or condition of any
certificate, license or permit issued by it or of any of its orders, decisions, rules or regulations.

Viewed from any angle, respondent F.C. Caasi, Jr., in issuing the assailed order, acted beyond his
authority and overstepped the powers granted by P.D. No. 1206, as amended. The assailed order was,
therefore, null and void.

Even if the issuance of the order to vacate was within the authority of respondent Caasi, Jr., still its
nullity is apparent because of the failure to comply with the requirement of notice and hearing. That
P.D. No. 1206, as amended, requires notice and hearing before any administrative penalty provided in
Sec. 7(e) may be imposed is patent. Sec. 7(e) provides for a gradation of penalties of which the
imposition of a fine in an amount not exceeding P1,000.00 is the least severe, and requires that even
before a fine is imposed notice and an opportunity to be heard be given to the offender.

While the order dated April 15, 1986 is null and void, the Court, however, finds itself unable to issue the
writ of mandatory injunction prayed for ordering respondent Shell to restore possession of the service
station and the equipment and facilities therein to petitioner. Petitioner himself had admitted in his
petition that his dealership and lease agreements with respondent Shell had already expired.
Recognized the validity of the termination of the agreements, he requested for their renewal. However,
this request was denied. [Rollo, p. 91 Undeniably, after April 12, 1986, any right petitioner had to
possess the service station and the equipment and facilities therein had been extinguished. No basis for
an affirmative relief therefore exists.

WHEREFORE, in view of the foregoing, the Decision of the Court of Appeals dated February 10, 1987 is
REVERSED and the Order dated April 15, 1986 issued by respondent Caasi, Jr. of the Bureau of Energy
Utilization is ANNULLED and SET ASIDE.

However, the right of petitioner to the possession of the service station and the equipment and facilities
having been extinguished, the prayer for the issuance of a writ of mandatory injunction is DENIED.

SO ORDERED.

Decision reversed.

Note.—View that an administrative regulation not properly delegated is null and void. However, it may
be considered as expressing the executive view is entitled to great weight. (National Federation of Sugar
Workers (NFSW) vs. Ovejera, 114 SCRA 354.)

** B.P. Blg. 33 penalizes a person guilty of illegal trading in petroleum products with a fine of not less
than P2,000.00 but not more than P10,000.00, or imprisonment of at least 2 months but not more than
1 year, or both, in the discretion of the court. Furthermore, the petroleum products subject of the
offense shall be forfeited in favor of the Government, provided that if the products have already been
delivered and paid the payment shall be the subject of the forfeiture, and if the seller who has not yet
delivered has been fully paid, he shall return the payment received to the buyer. If the offender is a
trader his license shall also be cancelled. [Sec. 7]