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onday, 1uly 6, 2009

Angara vs. Electoral Commission, G.R. No. L-45081,1uly


15, 1936
Republic oI the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-45081 1uly 15, 1936
1OSE A. ANGARA, petitioner,
vs.
THE ELECTORAL COMMISSION, PEDRO YNSUA, MIGUEL
CASTILLO, and DIONISIO C. MAYOR, respondents.
Godofredo Reyes for petitioner.
Office of the Solicitor General Hilado for respondent Electoral
Commission.
Pedro Ynsua in his own behalf.
No appearance for other respondents.
LAUREL,
This is an original action instituted in this court by the petitioner, Jose
A. Angara, Ior the issuance oI a writ oI prohibition to restrain and
prohibit the Electoral Commission, one oI the respondents, Irom
taking Iurther cognizance oI the protest Iiled by Pedro Ynsua, another
respondent, against the election oI said petitioner as member oI the
National Assembly Ior the Iirst assembly district oI the Province oI
Tayabas.
The Iacts oI this case as they appear in the petition and as admitted by
the respondents are as Iollows:
(1) That in the elections oI September 17, 1935, the petitioner,
Jose A. Angara, and the respondents, Pedro Ynsua, Miguel
Castillo and Dionisio Mayor, were candidates voted Ior the
position oI member oI the National Assembly Ior the Iirst
district oI the Province oI Tayabas;
(2) That on October 7, 1935, the provincial board oI
canvassers, proclaimed the petitioner as member-elect oI the
National Assembly Ior the said district, Ior having received the
most number oI votes;
(3) That on November 15, 1935, the petitioner took his oath oI
oIIice;
(4) That on December 3, 1935, the National Assembly in
session assembled, passed the Iollowing resolution:
|No. 8|
RESOLUCION CONFIRMANDO LAS
ACTAS DE AQUELLOS DIPUTADOS
CONTRA QUIENES NO SE HA
PRESENTADO PROTESTA.
Se resuelve. Que las actas de eleccion de los
Diputados contra quienes no se hubiere
presentado debidamente una protesta antes de la
adopcion de la presente resolucion sean, como
por la presente, son aprobadas y conIirmadas.
Adoptada, 3 de diciembre, 1935.
(5) That on December 8, 1935, the herein respondent Pedro
Ynsua Iiled beIore the Electoral Commission a "Motion oI
Protest" against the election oI the herein petitioner, Jose A.
Angara, being the only protest Iiled aIter the passage oI
Resolutions No. 8 aIorequoted, and praying, among other-
things, that said respondent be declared elected member oI the
National Assembly Ior the Iirst district oI Tayabas, or that the
election oI said position be nulliIied;
(6) That on December 9, 1935, the Electoral Commission
adopted a resolution, paragraph 6 oI which provides:
6. La Comision no considerara ninguna protesta que no
se haya presentado en o antes de este dia.
(7) That on December 20, 1935, the herein petitioner, Jose A.
Angara, one oI the respondents in the aIoresaid protest, Iiled
beIore the Electoral Commission a "Motion to Dismiss the
Protest", alleging (a) that Resolution No. 8 oI Dismiss the
Protest", alleging (a) that Resolution No. 8 oI the National
Assembly was adopted in the legitimate exercise oI its
constitutional prerogative to prescribe the period during which
protests against the election oI its members should be
presented; (b) that the aIoresaid resolution has Ior its object,
and is the accepted Iormula Ior, the limitation oI said period;
and (c) that the protest in question was Iiled out oI the
prescribed period;
(8) That on December 27, 1935, the herein respondent, Pedro
Ynsua, Iiled an "Answer to the Motion oI Dismissal" alleging
that there is no legal or constitutional provision barring the
presentation oI a protest against the election oI a member oI the
National Assembly aIter conIirmation;
(9) That on December 31, 1935, the herein petitioner, Jose A.
Angara, Iiled a "Reply" to the aIoresaid "Answer to the Motion
oI Dismissal";
(10) That the case being submitted Ior decision, the Electoral
Commission promulgated a resolution on January 23, 1936,
denying herein petitioner's "Motion to Dismiss the Protest."
The application oI the petitioner sets Iorth the Iollowing grounds Ior
the issuance oI the writ prayed Ior:
(a) That the Constitution conIers exclusive jurisdiction upon
the electoral Commission solely as regards the merits oI
contested elections to the National Assembly;
(b) That the Constitution excludes Irom said jurisdiction the
power to regulate the proceedings oI said election contests,
which power has been reserved to the Legislative Department
oI the Government or the National Assembly;
(c) That like the Supreme Court and other courts created in
pursuance oI the Constitution, whose exclusive jurisdiction
relates solely to deciding the merits oI controversies submitted
to them Ior decision and to matters involving their internal
organization, the Electoral Commission can regulate its
proceedings only iI the National Assembly has not availed oI
its primary power to so regulate such proceedings;
(d) That Resolution No. 8 oI the National Assembly is,
thereIore, valid and should be respected and obeyed;
(e) That under paragraph 13 oI section 1 oI the ordinance
appended to the Constitution and paragraph 6 oI article 7 oI the
Tydings-McDuIIie Law (No. 127 oI the 73rd Congress oI the
United States) as well as under section 1 and 3 (should be
sections 1 and 2) oI article VIII oI the Constitution, this
Supreme Court has jurisdiction to pass upon the Iundamental
question herein raised because it involves an interpretation oI
the Constitution oI the Philippines.
On February 25, 1936, the Solicitor-General appeared and Iiled an
answer in behalI oI the respondent Electoral Commission interposing
the Iollowing special deIenses:
(a) That the Electoral Commission has been created by the
Constitution as an instrumentality oI the Legislative
Department invested with the jurisdiction to decide "all
contests relating to the election, returns, and qualiIications oI
the members oI the National Assembly"; that in adopting its
resolution oI December 9, 1935, Iixing this date as the last day
Ior the presentation oI protests against the election oI any
member oI the National Assembly, it acted within its
jurisdiction and in the legitimate exercise oI the implied
powers granted it by the Constitution to adopt the rules and
regulations essential to carry out the power and Iunctions
conIerred upon the same by the Iundamental law; that in
adopting its resolution oI January 23, 1936, overruling the
motion oI the petitioner to dismiss the election protest in
question, and declaring itselI with jurisdiction to take
cognizance oI said protest, it acted in the legitimate exercise oI
its quasi-judicial Iunctions a an instrumentality oI the
Legislative Department oI the Commonwealth Government,
and hence said act is beyond the judicial cognizance or control
oI the Supreme Court;
(b) That the resolution oI the National Assembly oI December
3, 1935, conIirming the election oI the members oI the
National Assembly against whom no protest had thus Iar been
Iiled, could not and did not deprive the electoral Commission
oI its jurisdiction to take cognizance oI election protests Iiled
within the time that might be set by its own rules:
(c) That the Electoral Commission is a body invested with
quasi-judicial Iunctions, created by the Constitution as an
instrumentality oI the Legislative Department, and is not an
"inIerior tribunal, or corporation, or board, or person" within
the purview oI section 226 and 516 oI the Code oI Civil
Procedure, against which prohibition would lie.
The respondent Pedro Ynsua, in his turn, appeared and Iiled an answer
in his own behalI on March 2, 1936, setting Iorth the Iollowing as his
special deIense:
(a) That at the time oI the approval oI the rules oI the Electoral
Commission on December 9, 1935, there was no existing law
Iixing the period within which protests against the election oI
members oI the National Assembly should be Iiled; that in
Iixing December 9, 1935, as the last day Ior the Iiling oI
protests against the election oI members oI the National
Assembly, the Electoral Commission was exercising a power
impliedly conIerred upon it by the Constitution, by reason oI
its quasi-judicial attributes;
(b) That said respondent presented his motion oI protest beIore
the Electoral Commission on December 9, 1935, the last day
Iixed by paragraph 6 oI the rules oI the said Electoral
Commission;
(c) That thereIore the Electoral Commission acquired
jurisdiction over the protest Iiled by said respondent and over
the parties thereto, and the resolution oI the Electoral
Commission oI January 23, 1936, denying petitioner's motion
to dismiss said protest was an act within the jurisdiction oI the
said commission, and is not reviewable by means oI a writ oI
prohibition;
(d) That neither the law nor the Constitution requires
conIirmation by the National Assembly oI the election oI its
members, and that such conIirmation does not operate to limit
the period within which protests should be Iiled as to deprive
the Electoral Commission oI jurisdiction over protest Iiled
subsequent thereto;
(e) That the Electoral Commission is an independent entity
created by the Constitution, endowed with quasi-judicial
Iunctions, whose decision are Iinal and unappealable;
( f ) That the electoral Commission, as a constitutional creation,
is not an inIerior tribunal, corporation, board or person, within
the terms oI sections 226 and 516 oI the Code oI Civil
Procedure; and that neither under the provisions oI sections 1
and 2 oI article II (should be article VIII) oI the Constitution
and paragraph 13 oI section 1 oI the Ordinance appended
thereto could it be subject in the exercise oI its quasi-judicial
Iunctions to a writ oI prohibition Irom the Supreme Court;
() That paragraph 6 oI article 7 oI the Tydings-McDuIIie Law
(No. 127 oI the 73rd Congress oI the united States) has no
application to the case at bar.
The case was argued beIore us on March 13, 1936. BeIore it was
submitted Ior decision, the petitioner prayed Ior the issuance oI a
preliminary writ oI injunction against the respondent Electoral
Commission which petition was denied "without passing upon the
merits oI the case" by resolution oI this court oI March 21, 1936.
There was no appearance Ior the other respondents.
The issues to be decided in the case at bar may be reduced to the
Iollowing two principal propositions:
1. Has the Supreme Court jurisdiction over the Electoral
Commission and the subject matter oI the controversy upon the
Ioregoing related Iacts, and in the aIIirmative,
2. Has the said Electoral Commission acted without or in
excess oI its jurisdiction in assuming to the cognizance oI the
protest Iiled the election oI the herein petitioner
notwithstanding the previous conIirmation oI such election by
resolution oI the National Assembly?
We could perhaps dispose oI this case by passing directly upon the
merits oI the controversy. However, the question oI jurisdiction having
been presented, we do not Ieel justiIied in evading the issue. Being a
case prim impressionis, it would hardly be consistent with our sense
oI duty to overlook the broader aspect oI the question and leave it
undecided. Neither would we be doing justice to the industry and
vehemence oI counsel were we not to pass upon the question oI
jurisdiction squarely presented to our consideration.
The separation oI powers is a Iundamental principle in our system oI
government. It obtains not through express provision but by actual
division in our Constitution. Each department oI the government has
exclusive cognizance oI matters within its jurisdiction, and is supreme
within its own sphere. But it does not Iollow Irom the Iact that the
three powers are to be kept separate and distinct that the Constitution
intended them to be absolutely unrestrained and independent oI each
other. The Constitution has provided Ior an elaborate system oI checks
and balances to secure coordination in the workings oI the various
departments oI the government. For example, the ChieI Executive
under our Constitution is so Iar made a check on the legislative power
that this assent is required in the enactment oI laws. This, however, is
subject to the Iurther check that a bill may become a law
notwithstanding the reIusal oI the President to approve it, by a vote oI
two-thirds or three-Iourths, as the case may be, oI the National
Assembly. The President has also the right to convene the Assembly in
special session whenever he chooses. On the other hand, the National
Assembly operates as a check on the Executive in the sense that its
consent through its Commission on Appointments is necessary in the
appointments oI certain oIIicers; and the concurrence oI a majority oI
all its members is essential to the conclusion oI treaties. Furthermore,
in its power to determine what courts other than the Supreme Court
shall be established, to deIine their jurisdiction and to appropriate
Iunds Ior their support, the National Assembly controls the judicial
department to a certain extent. The Assembly also exercises the
judicial power oI trying impeachments. And the judiciary in turn, with
the Supreme Court as the Iinal arbiter, eIIectively checks the other
departments in the exercise oI its power to determine the law, and
hence to declare executive and legislative acts void iI violative oI the
Constitution.
But in the main, the Constitution has blocked out with deIt strokes and
in bold lines, allotment oI power to the executive, the legislative and
the judicial departments oI the government. The overlapping and
interlacing oI Iunctions and duties between the several departments,
however, sometimes makes it hard to say just where the one leaves oII
and the other begins. In times oI social disquietude or political
excitement, the great landmarks oI the Constitution are apt to be
Iorgotten or marred, iI not entirely obliterated. In cases oI conIlict, the
judicial department is the only constitutional organ which can be
called upon to determine the proper allocation oI powers between the
several departments and among the integral or constituent units
thereoI.
As any human production, our Constitution is oI course lacking
perIection and perIectibility, but as much as it was within the power oI
our people, acting through their delegates to so provide, that
instrument which is the expression oI their sovereignty however
limited, has established a republican government intended to operate
and Iunction as a harmonious whole, under a system oI checks and
balances, and subject to speciIic limitations and restrictions provided
in the said instrument. The Constitution sets Iorth in no uncertain
language the restrictions and limitations upon governmental powers
and agencies. II these restrictions and limitations are transcended it
would be inconceivable iI the Constitution had not provided Ior a
mechanism by which to direct the course oI government along
constitutional channels, Ior then the distribution oI powers would be
mere verbiage, the bill oI rights mere expressions oI sentiment, and the
principles oI good government mere political apothegms. Certainly,
the limitation and restrictions embodied in our Constitution are real as
they should be in any living constitution. In the United States where no
express constitutional grant is Iound in their constitution, the
possession oI this moderating power oI the courts, not to speak oI its
historical origin and development there, has been set at rest by popular
acquiescence Ior a period oI more than one and a halI centuries. In our
case, this moderating power is granted, iI not expressly, by clear
implication Irom section 2 oI article VIII oI our constitution.
The Constitution is a deIinition oI the powers oI government. Who is
to determine the nature, scope and extent oI such powers? The
Constitution itselI has provided Ior the instrumentality oI the judiciary
as the rational way. And when the judiciary mediates to allocate
constitutional boundaries, it does not assert any superiority over the
other departments; it does not in reality nulliIy or invalidate an act oI
the legislature, but only asserts the solemn and sacred obligation
assigned to it by the Constitution to determine conIlicting claims oI
authority under the Constitution and to establish Ior the parties in an
actual controversy the rights which that instrument secures and
guarantees to them. This is in truth all that is involved in what is
termed "judicial supremacy" which properly is the power oI judicial
review under the Constitution. Even then, this power oI judicial review
is limited to actual cases and controversies to be exercised aIter Iull
opportunity oI argument by the parties, and limited Iurther to the
constitutional question raised or the very lis mota presented. Any
attempt at abstraction could only lead to dialectics and barren legal
questions and to sterile conclusions unrelated to actualities. Narrowed
as its Iunction is in this manner, the judiciary does not pass upon
questions oI wisdom, justice or expediency oI legislation. More than
that, courts accord the presumption oI constitutionality to legislative
enactments, not only because the legislature is presumed to abide by
the Constitution but also because the judiciary in the determination oI
actual cases and controversies must reIlect the wisdom and justice oI
the people as expressed through their representatives in the executive
and legislative departments oI the governments oI the government.
But much as we might postulate on the internal checks oI power
provided in our Constitution, it ought not the less to be remembered
that, in the language oI James Madison, the system itselI is not "the
chieI palladium oI constitutional liberty . . . the people who are authors
oI this blessing must also be its guardians . . . their eyes must be ever
ready to mark, their voice to pronounce . . . aggression on the authority
oI their constitution." In the Last and ultimate analysis, then, must the
success oI our government in the unIolding years to come be tested in
the crucible oI Filipino minds and hearts than in consultation rooms
and court chambers.
In the case at bar, the national Assembly has by resolution (No. 8) oI
December 3, 1935, conIirmed the election oI the herein petitioner to
the said body. On the other hand, the Electoral Commission has by
resolution adopted on December 9, 1935, Iixed said date as the last day
Ior the Iiling oI protests against the election, returns and qualiIications
oI members oI the National Assembly, notwithstanding the previous
conIirmation made by the National Assembly as aIoresaid. II, as
contended by the petitioner, the resolution oI the National Assembly
has the eIIect oI cutting oII the power oI the Electoral Commission to
entertain protests against the election, returns and qualiIications oI
members oI the National Assembly, submitted aIter December 3,
1935, then the resolution oI the Electoral Commission oI December 9,
1935, is mere surplusage and had no eIIect. But, iI, as contended by
the respondents, the Electoral Commission has the sole power oI
regulating its proceedings to the exclusion oI the National Assembly,
then the resolution oI December 9, 1935, by which the Electoral
Commission Iixed said date as the last day Ior Iiling protests against
the election, returns and qualiIications oI members oI the National
Assembly, should be upheld.
Here is then presented an actual controversy involving as it does a
conIlict oI a grave constitutional nature between the National
Assembly on the one hand, and the Electoral Commission on the other.
From the very nature oI the republican government established in our
country in the light oI American experience and oI our own, upon the
judicial department is thrown the solemn and inescapable obligation oI
interpreting the Constitution and deIining constitutional boundaries.
The Electoral Commission, as we shall have occasion to reIer
hereaIter, is a constitutional organ, created Ior a speciIic purpose,
namely to determine all contests relating to the election, returns and
qualiIications oI the members oI the National Assembly. Although the
Electoral Commission may not be interIered with, when and while
acting within the limits oI its authority, it does not Iollow that it is
beyond the reach oI the constitutional mechanism adopted by the
people and that it is not subject to constitutional restrictions. The
Electoral Commission is not a separate department oI the government,
and even iI it were, conIlicting claims oI authority under the
Iundamental law between department powers and agencies oI the
government are necessarily determined by the judiciary in justiIiable
and appropriate cases. Discarding the English type and other European
types oI constitutional government, the Iramers oI our constitution
adopted the American type where the written constitution is
interpreted and given eIIect by the judicial department. In some
countries which have declined to Iollow the American example,
provisions have been inserted in their constitutions prohibiting the
courts Irom exercising the power to interpret the Iundamental law.
This is taken as a recognition oI what otherwise would be the rule that
in the absence oI direct prohibition courts are bound to assume what is
logically their Iunction. For instance, the Constitution oI Poland oI
1921, expressly provides that courts shall have no power to examine
the validity oI statutes (art. 81, chap. IV). The Iormer Austrian
Constitution contained a similar declaration. In countries whose
constitutions are silent in this respect, courts have assumed this power.
This is true in Norway, Greece, Australia and South AIrica. Whereas,
in Czechoslovakia (arts. 2 and 3, Preliminary Law to constitutional
Charter oI the Czechoslovak Republic, February 29, 1920) and Spain
(arts. 121-123, Title IX, Constitutional oI the Republic oI 1931)
especial constitutional courts are established to pass upon the validity
oI ordinary laws. In our case, the nature oI the present controversy
shows the necessity oI a Iinal constitutional arbiter to determine the
conIlict oI authority between two agencies created by the Constitution.
Were we to decline to take cognizance oI the controversy, who will
determine the conIlict? And iI the conIlict were leIt undecided and
undetermined, would not a void be thus created in our constitutional
system which may be in the long run prove destructive oI the entire
Iramework? To ask these questions is to answer them. Natura vacuum
abhorret, so must we avoid exhaustion in our constitutional system.
Upon principle, reason and authority, we are clearly oI the opinion that
upon the admitted Iacts oI the present case, this court has jurisdiction
over the Electoral Commission and the subject mater oI the present
controversy Ior the purpose oI determining the character, scope and
extent oI the constitutional grant to the Electoral Commission as "the
sole judge oI all contests relating to the election, returns and
qualiIications oI the members oI the National Assembly."
Having disposed oI the question oI jurisdiction, we shall now proceed
to pass upon the second proposition and determine whether the
Electoral Commission has acted without or in excess oI its jurisdiction
in adopting its resolution oI December 9, 1935, and in assuming to
take cognizance oI the protest Iiled against the election oI the herein
petitioner notwithstanding the previous conIirmation thereoI by the
National Assembly on December 3, 1935. As able counsel Ior the
petitioner has pointed out, the issue hinges on the interpretation oI
section 4 oI Article VI oI the Constitution which provides:
"SEC. 4. There shall be an Electoral Commission composed oI three
Justice oI the Supreme Court designated by the ChieI Justice, and oI
six Members chosen by the National Assembly, three oI whom shall
be nominated by the party having the largest number oI votes, and
three by the party having the second largest number oI votes therein.
The senior Justice in the Commission shall be its Chairman. The
Electoral Commission shall be the sole judge oI all contests relating to
the election, returns and qualiIications oI the members oI the National
Assembly." It is imperative, thereIore, that we delve into the origin
and history oI this constitutional provision and inquire into the
intention oI its Iramers and the people who adopted it so that we may
properly appreciate its Iull meaning, import and signiIicance.
The original provision regarding this subject in the Act oI Congress oI
July 1, 1902 (sec. 7, par. 5) laying down the rule that "the assembly
shall be the judge oI the elections, returns, and qualiIications oI its
members", was taken Irom clause 1 oI section 5, Article I oI the
Constitution oI the United States providing that "Each House shall be
the Judge oI the Elections, Returns, and QualiIications oI its own
Members, . . . ." The Act oI Congress oI August 29, 1916 (sec. 18, par.
1) modiIied this provision by the insertion oI the word "sole" as
Iollows: "That the Senate and House oI Representatives, respectively,
shall be the sole judges oI the elections, returns, and qualiIications oI
their elective members . . ." apparently in order to emphasize the
exclusive the Legislative over the particular case s therein speciIied.
This court has had occasion to characterize this grant oI power to the
Philippine Senate and House oI Representatives, respectively, as "Iull,
clear and complete" (Veloso vs. Boards oI Canvassers oI Leyte and
Samar |1919|, 39 Phil., 886, 888.)
The Iirst step towards the creation oI an independent tribunal Ior the
purpose oI deciding contested elections to the legislature was taken by
the sub-committee oI Iive appointed by the Committee on
Constitutional Guarantees oI the Constitutional Convention, which
sub-committee submitted a report on August 30, 1934, recommending
the creation oI a Tribunal oI Constitutional Security empowered to
hear legislature but also against the election oI executive oIIicers Ior
whose election the vote oI the whole nation is required, as well as to
initiate impeachment proceedings against speciIied executive and
judicial oIIicer. For the purpose oI hearing legislative protests, the
tribunal was to be composed oI three justices designated by the
Supreme Court and six members oI the house oI the legislature to
which the contest corresponds, three members to be designed by the
majority party and three by the minority, to be presided over by the
Senior Justice unless the ChieI Justice is also a member in which case
the latter shall preside. The Ioregoing proposal was submitted by the
Committee on Constitutional Guarantees to the Convention on
September 15, 1934, with slight modiIications consisting in the
reduction oI the legislative representation to Iour members, that is, two
senators to be designated one each Irom the two major parties in the
Senate and two representatives to be designated one each Irom the two
major parties in the House oI Representatives, and in awarding
representation to the executive department in the persons oI two
representatives to be designated by the President.
Meanwhile, the Committee on Legislative Power was also preparing
its report. As submitted to the Convention on September 24, 1934
subsection 5, section 5, oI the proposed Article on the Legislative
Department, reads as Iollows:
The elections, returns and qualiIications oI the members oI
either house and all cases contesting the election oI any oI their
members shall be judged by an Electoral Commission,
constituted, as to each House, by three members elected by the
members oI the party having the largest number oI votes
therein, three elected by the members oI the party having the
second largest number oI votes, and as to its Chairman, one
Justice oI the Supreme Court designated by the ChieI Justice.
The idea oI creating a Tribunal oI Constitutional Security with
comprehensive jurisdiction as proposed by the Committee on
Constitutional Guarantees which was probably inspired by the Spanish
plan (art. 121, Constitution oI the Spanish Republic oI 1931), was soon
abandoned in Iavor oI the proposition oI the Committee on Legislative
Power to create a similar body with reduced powers and with speciIic
and limited jurisdiction, to be designated as a Electoral Commission.
The Sponsorship Committee modiIied the proposal oI the Committee
on Legislative Power with respect to the composition oI the Electoral
Commission and made Iurther changes in phraseology to suit the
project oI adopting a unicameral instead oI a bicameral legislature.
The draIt as Iinally submitted to the Convention on October 26, 1934,
reads as Iollows:
(6) The elections, returns and qualiIications oI the Members oI
the National Assembly and all cases contesting the election oI
any oI its Members shall be judged by an Electoral
Commission, composed oI three members elected by the party
having the largest number oI votes in the National Assembly,
three elected by the members oI the party having the second
largest number oI votes, and three justices oI the Supreme
Court designated by the ChieI Justice, the Commission to be
presided over by one oI said justices.
During the discussion oI the amendment introduced by Delegates
Labrador, Abordo, and others, proposing to strike out the whole
subsection oI the Ioregoing draIt and inserting in lieu thereoI the
Iollowing: "The National Assembly shall be the soled and exclusive
judge oI the elections, returns, and qualiIications oI the Members", the
Iollowing illuminating remarks were made on the Iloor oI the
Convention in its session oI December 4, 1934, as to the scope oI the
said draIt:
x x x x x x x x x
Mr. VENTURA. Mr. President, we have a doubt here as to the
scope oI the meaning oI the Iirst Iour lines, paragraph 6, page
11 oI the draIt, reading: "The elections, returns and
qualiIications oI the Members oI the National Assembly and all
cases contesting the election oI any oI its Members shall be
judged by an Electoral Commission, . . ." I should like to ask
Irom the gentleman Irom Capiz whether the election and
qualiIication oI the member whose elections is not contested
shall also be judged by the Electoral Commission.
Mr. ROXAS. II there is no question about the election oI the
members, there is nothing to be judged; that is why the word
"judge" is used to indicate a controversy. II there is no question
about the election oI a member, there is nothing to be
submitted to the Electoral Commission and there is nothing to
be determined.
Mr. VENTURA. But does that carry the idea also that the
Electoral Commission shall conIirm also the election oI those
whose election is not contested?
Mr. ROXAS. There is no need oI conIirmation. As the
gentleman knows, the action oI the House oI Representatives
conIirming the election oI its members is just a matter oI the
rules oI the assembly. It is not constitutional. It is not
necessary. AIter a man Iiles his credentials that he has been
elected, that is suIIicient, unless his election is contested.
Mr. VENTURA. But I do not believe that that is suIIicient, as
we have observed that Ior purposes oI the auditor, in the matter
oI election oI a member to a legislative body, because he will
not authorize his pay.
Mr. ROXAS. Well, what is the case with regards to the
municipal president who is elected? What happens with regards
to the councilors oI a municipality? Does anybody conIirm
their election? The municipal council does this: it makes a
canvass and proclaims in this case the municipal council
proclaims who has been elected, and it ends there, unless there
is a contest. It is the same case; there is no need on the part oI
the Electoral Commission unless there is a contest. The Iirst
clause reIers to the case reIerred to by the gentleman Irom
Cavite where one person tries to be elected in place oI another
who was declared elected. From example, in a case when the
residence oI the man who has been elected is in question, or in
case the citizenship oI the man who has been elected is in
question.
However, iI the assembly desires to annul the power oI the
commission, it may do so by certain maneuvers upon its Iirst
meeting when the returns are submitted to the assembly. %he
purpose is to ive to the Electoral Commission all the powers
exercised by the assembly referrin to the elections, returns
and qualifications of the members. When there is no contest,
there is nothing to be judged.
Mr. VENTURA. Then it should be eliminated.
Mr. ROXAS. But that is a diIIerent matter, I think Mr.
Delegate.
Mr. CINCO. Mr. President, I have a similar question as that
propounded by the gentleman Irom Ilocos Norte when I arose a
while ago. However I want to ask more questions Irom the
delegate Irom Capiz. This paragraph 6 on page 11 oI the draIt
cites cases contesting the election as separate Irom the Iirst part
oI the sections which reIers to elections, returns and
qualiIications.
Mr. ROXAS. %hat is merely for the sake of clarity. In fact the
cases of contested elections are already included in the phrase
"the elections, returns and qualifications." %his phrase "and
contested elections" was inserted merely for the sake of clarity.
Mr. CINCO. Under this paragraph, may not the Electoral
Commission, at its own instance, reIuse to conIirm the
elections oI the members."
Mr. ROXAS. I do not think so, unless there is a protest.
Mr. LABRADOR. Mr. President, will the gentleman yield?
THE PRESIDENT. The gentleman may yield, iI he so desires.
Mr. ROXAS. Willingly.
Mr. LABRADOR. Does not the gentleman Irom Capiz believe
that unless this power is granted to the assembly, the assembly
on its own motion does not have the right to contest the
election and qualiIication oI its members?
Mr. ROXAS. I have no doubt but that the gentleman is right. II
this draIt is retained as it is, even iI two-thirds oI the assembly
believe that a member has not the qualiIications provided by
law, they cannot remove him Ior that reason.
Mr. LABRADOR. So that the right to remove shall only be
retained by the Electoral Commission.
Mr. ROXAS. By the assembly Ior misconduct.
Mr. LABRADOR. I mean with respect to the qualiIications oI
the members.
Mr. ROXAS. Yes, by the Electoral Commission.
Mr. LABRADOR. So that under this draIt, no member oI the
assembly has the right to question the eligibility oI its
members?
Mr. ROXAS. BeIore a member can question the eligibility, he
must go to the Electoral Commission and make the question
beIore the Electoral Commission.
Mr. LABRADOR. So that the Electoral Commission shall
decide whether the election is contested or not contested.
Mr. ROXAS. Yes, sir. that is the purpose.
Mr. PELAYO. Mr. President, I would like to be inIormed iI the
Electoral Commission has power and authority to pass upon
the qualiIications oI the members oI the National Assembly
even though that question has not been raised.
Mr. ROXAS. I have just said that they have no power, because
they can only judge.
In the same session, the Iirst clause oI the aIoresaid draIt reading "The
election, returns and qualiIications oI the members oI the National
Assembly and" was eliminated by the Sponsorship Committee in
response to an amendment introduced by Delegates Francisco,
Ventura, Vinzons, RaIols, Lim, Mumar and others. In explaining the
diIIerence between the original draIt and the draIt as amended,
Delegate Roxas speaking Ior the Sponsorship Committee said:
x x x x x x x x x
Sr. ROXAS. La diIerencia, seor Presidente, consiste
solamente en obviar la objecion apuntada por varios Delegados
al eIecto de que la primera clausula del draft que dice: "The
elections, returns and qualiIications oI the members oI the
National Assembly" parece que da a la Comision Electoral la
Iacultad de determinar tambien la eleccion de los miembros
que no ha sido protestados y para obviar esa diIicultad,
creemos que la enmienda tien razon en ese sentido, si
enmendamos el draft, de tal modo que se lea como sigue: "All
cases contesting the election", de modo que los jueces de la
Comision Electoral se limitaran solamente a los casos en que
haya habido protesta contra las actas." BeIore the amendment
oI Delegate Labrador was voted upon the Iollowing
interpellation also took place:
El Sr. CONEJERO. Antes de votarse la enmienda, quisiera
El Sr. PRESIDENTE. Que dice el Comite?
El Sr. ROXAS. Con mucho gusto.
El Sr. CONEJERO. Tal como esta el draft, dando tres
miembros a la mayoria, y otros tres a la minoria y tres a la
Corte Suprema, no cree Su Seoria que esto equivale
practicamente a dejar el asunto a los miembros del Tribunal
Supremo?
El Sr. ROXAS. Si y no. Creemos que si el tribunal o la
Commission esta constituido en esa Iorma, tanto los miembros
de la mayoria como los de la minoria asi como los miembros
de la Corte Suprema consideraran la cuestion sobre la base de
sus meritos, sabiendo que el partidismo no es suIiciente para
dar el triunIo.
El Sr. CONEJERO. Cree Su Seoria que en un caso como ese,
podriamos hacer que tanto los de la mayoria como los de la
minoria prescindieran del partidismo?
El Sr. ROXAS. Creo que si, porque el partidismo no les daria
el triunIo.
x x x x x x x x x
The amendment introduced by Delegates Labrador, Abordo and others
seeking to restore the power to decide contests relating to the election,
returns and qualiIications oI members oI the National Assembly to the
National Assembly itselI, was deIeated by a vote oI ninety-eight (98)
against IiIty-six (56).
In the same session oI December 4, 1934, Delegate Cruz (C.) sought to
amend the draIt by reducing the representation oI the minority party
and the Supreme Court in the Electoral Commission to two members
each, so as to accord more representation to the majority party. The
Convention rejected this amendment by a vote oI seventy-six (76)
against Iorty-six (46), thus maintaining the non-partisan character oI
the commission.
As approved on January 31, 1935, the draIt was made to read as
Iollows:
(6) All cases contesting the elections, returns and qualiIications
oI the Members oI the National Assembly shall be judged by
an Electoral Commission, composed oI three members elected
by the party having the largest number oI votes in the National
Assembly, three elected by the members oI the party having
the second largest number oI votes, and three justices oI the
Supreme Court designated by the ChieI Justice, the
Commission to be presided over by one oI said justices.
The Style Committee to which the draIt was submitted revised it as
Iollows:
SEC. 4. There shall be an Electoral Commission composed oI
three Justices oI the Supreme Court designated by the ChieI
Justice, and oI six Members chosen by the National Assembly,
three oI whom shall be nominated by the party having the
largest number oI votes, and three by the party having the
second largest number oI votes therein. The senior Justice in
the Commission shall be its chairman. The Electoral
Commission shall be the sole judge oI the election, returns, and
qualiIications oI the Members oI the National Assembly.
When the Ioregoing draIt was submitted Ior approval on February 8,
1935, the Style Committee, through President Recto, to eIIectuate the
original intention oI the Convention, agreed to insert the phrase "All
contests relating to" between the phrase "judge oI" and the words "the
elections", which was accordingly accepted by the Convention.
The transIer oI the power oI determining the election, returns and
qualiIications oI the members oI the legislature long lodged in the
legislative body, to an independent, impartial and non-partisan
tribunal, is by no means a mere experiment in the science oI
government.
Cushing, in his Law and Practice oI Legislative Assemblies (ninth
edition, chapter VI, pages 57, 58), gives a vivid account oI the
"scandalously notorious" canvassing oI votes by political parties in the
disposition oI contests by the House oI Commons in the Iollowing
passages which are partly quoted by the petitioner in his printed
memorandum oI March 14, 1936:
153. From the time when the commons established their right
to be the exclusive judges oI the elections, returns, and
qualiIications oI their members, until the year 1770, two modes
oI proceeding prevailed, in the determination oI controverted
elections, and rights oI membership. One oI the standing
committees appointed at the commencement oI each session,
was denominated the committee oI privileges and elections,
whose Iunctions was to hear and investigate all questions oI
this description which might be reIerred to them, and to report
their proceedings, with their opinion thereupon, to the house,
Irom time to time. When an election petition was reIerred to
this committee they heard the parties and their witnesses and
other evidence, and made a report oI all the evidence, together
with their opinion thereupon, in the Iorm oI resolutions, which
were considered and agreed or disagreed to by the house. The
other mode oI proceeding was by a hearing at the bar oI the
house itselI. When this court was adopted, the case was heard
and decided by the house, in substantially the same manner as
by a committee. The committee oI privileges and elections
although a select committee. The committee oI privileges and
elections although a select committee was usually what is
called an open one; that is to say, in order to constitute the
committee, a quorum oI the members named was required to
be present, but all the members oI the house were at liberty to
attend the committee and vote iI they pleased.
154. With the growth oI political parties in parliament
questions relating to the right oI membership gradually
assumed a political character; so that Ior many years previous
to the year 1770, controverted elections had been tried and
determined by the house oI commons, as mere party questions,
upon which the strength oI contending Iactions might be tested.
Thus, Ior Example, in 1741, Sir Robert Walpole, aIter repeated
attacks upon his government, resigned his oIIice in
consequence oI an adverse vote upon the Chippenham election.
Mr. Hatsell remarks, oI the trial oI election cases, as conducted
under this system, that "Every principle oI decency and justice
were notoriously and openly prostituted, Irom whence the
younger part oI the house were insensibly, but too successIully,
induced to adopt the same licentious conduct in more serious
matters, and in questions oI higher importance to the public
welIare." Mr. George Grenville, a distinguished member oI the
house oI commons, undertook to propose a remedy Ior the evil,
and, on the 7th oI March, 1770, obtained the unanimous leave
oI the house to bring in a bill, "to regulate the trial oI
controverted elections, or returns oI members to serve in
parliament." In his speech to explain his plan, on the motion Ior
leave, Mr. Grenville alluded to the existing practice in the
Iollowing terms: "Instead oI trusting to the merits oI their
respective causes, the principal dependence oI both parties is
their private interest among us; and it is scandalously notorious
that we are as earnestly canvassed to attend in Iavor oI the
opposite sides, as iI we were wholly selI-elective, and not
bound to act by the principles oI justice, but by the
discretionary impulse oI our own inclinations; nay, it is well
known, that in every contested election, many members oI this
house, who are ultimately to judge in a kind oI judicial capacity
between the competitors, enlist themselves as parties in the
contention, and take upon themselves the partial management
oI the very business, upon which they should determine with
the strictest impartiality."
155. It was to put an end to the practices thus described, that
Mr. Grenville brought in a bill which met with the approbation
oI both houses, and received the royal assent on the 12th oI
April, 1770. This was the celebrated law since known by the
name oI the Grenville Act; oI which Mr. Hatsell declares, that
it "was one oI the nobles works, Ior the honor oI the house oI
commons, and the security oI the constitution, that was ever
devised by any minister or statesman." It is probable, that the
magnitude oI the evil, or the apparent success oI the remedy,
may have led many oI the contemporaries oI the measure to the
inIormation oI a judgement, which was not acquiesced in by
some oI the leading statesmen oI the day, and has not been
entirely conIirmed by subsequent experience. The bill was
objected to by Lord North, Mr. De Grey, aIterwards chieI
justice oI the common pleas, Mr. Ellis, Mr. Dyson, who had
been clerk oI the house, and Mr. Charles James Fox, chieIly on
the ground, that the introduction oI the new system was an
essential alteration oI the constitution oI parliament, and a total
abrogation oI one oI the most important rights and jurisdictions
oI the house oI commons.
As early as 1868, the House oI Commons in England solved the
problem oI insuring the non-partisan settlement oI the controverted
elections oI its members by abdicating its prerogative to two judges oI
the King's Bench oI the High Court oI Justice selected Irom a rota in
accordance with rules oI court made Ior the purpose. Having proved
successIul, the practice has become imbedded in English jurisprudence
(Parliamentary Elections Act, 1868 |31 & 32 Vict. c. 125| as amended
by Parliamentary Elections and Corrupt Practices Act. 1879 |42 & 43
Vict. c. 75|, s. 2; Corrupt and Illegal Practices Preventions Act, 1883
|46 & 47 Vict. c. 51;, s. 70; Expiring Laws Continuance Act, 1911 |1
& 2 Geo. 5, c. 22|; Laws oI England, vol. XII, p. 408, vol. XXI, p.
787). In the Dominion oI Canada, election contests which were
originally heard by the Committee oI the House oI Commons, are
since 1922 tried in the courts. Likewise, in the Commonwealth oI
Australia, election contests which were originally determined by each
house, are since 1922 tried in the High Court. In Hungary, the organic
law provides that all protests against the election oI members oI the
Upper House oI the Diet are to be resolved by the Supreme
Administrative Court (Law 22 oI 1916, chap. 2, art. 37, par. 6). The
Constitution oI Poland oI March 17, 1921 (art. 19) and the
Constitution oI the Free City oI Danzig oI May 13, 1922 (art. 10) vest
the authority to decide contested elections to the Diet or National
Assembly in the Supreme Court. For the purpose oI deciding
legislative contests, the Constitution oI the German Reich oI July 1,
1919 (art. 31), the Constitution oI the Czechoslovak Republic oI
February 29, 1920 (art. 19) and the Constitution oI the Grecian
Republic oI June 2, 1927 (art. 43), all provide Ior an Electoral
Commission.
The creation oI an Electoral Commission whose membership is
recruited both Irom the legislature and the judiciary is by no means
unknown in the United States. In the presidential elections oI 1876
there was a dispute as to the number oI electoral votes received by
each oI the two opposing candidates. As the Constitution made no
adequate provision Ior such a contingency, Congress passed a law on
January 29, 1877 (United States Statutes at Large, vol. 19, chap. 37,
pp. 227-229), creating a special Electoral Commission composed oI
Iive members elected by the Senate, Iive members elected by the
House oI Representatives, and Iive justices oI the Supreme Court, the
IiIth justice to be selected by the Iour designated in the Act. The
decision oI the commission was to be binding unless rejected by the
two houses voting separately. Although there is not much oI a moral
lesson to be derived Irom the experience oI America in this regard,
judging Irom the observations oI Justice Field, who was a member oI
that body on the part oI the Supreme Court (Countryman, the Supreme
Court oI the United States and its Appellate Power under the
Constitution |Albany, 1913| Relentless Partisanship oI Electoral
Commission, p. 25 et seq.), the experiment has at least abiding
historical interest.
The members oI the Constitutional Convention who Iramed our
Iundamental law were in their majority men mature in years and
experience. To be sure, many oI them were Iamiliar with the history
and political development oI other countries oI the world. When ,
thereIore, they deemed it wise to create an Electoral Commission as a
constitutional organ and invested it with the exclusive Iunction oI
passing upon and determining the election, returns and qualiIications
oI the members oI the National Assembly, they must have done so not
only in the light oI their own experience but also having in view the
experience oI other enlightened peoples oI the world. The creation oI
the Electoral Commission was designed to remedy certain evils oI
which the Iramers oI our Constitution were cognizant.
Notwithstanding the vigorous opposition oI some members oI the
Convention to its creation, the plan, as hereinabove stated, was
approved by that body by a vote oI 98 against 58. All that can be said
now is that, upon the approval oI the constitutional the creation oI the
Electoral Commission is the expression oI the wisdom and "ultimate
justice oI the people". (Abraham Lincoln, First Inaugural Address,
March 4, 1861.)
From the deliberations oI our Constitutional Convention it is evident
that the purpose was to transIer in its totality all the powers previously
exercised by the legislature in matters pertaining to contested elections
oI its members, to an independent and impartial tribunal. It was not so
much the knowledge and appreciation oI contemporary constitutional
precedents, however, as the long-Ielt need oI determining legislative
contests devoid oI partisan considerations which prompted the people,
acting through their delegates to the Convention, to provide Ior this
body known as the Electoral Commission. With this end in view, a
composite body in which both the majority and minority parties are
equally represented to oII-set partisan inIluence in its deliberations
was created, and Iurther endowed with judicial temper by including in
its membership three justices oI the Supreme Court.
The Electoral Commission is a constitutional creation, invested with
the necessary authority in the perIormance and execution oI the limited
and speciIic Iunction assigned to it by the Constitution. Although it is
not a power in our tripartite scheme oI government, it is, to all intents
and purposes, when acting within the limits oI its authority, an
independent organ. It is, to be sure, closer to the legislative department
than to any other. The location oI the provision (section 4) creating the
Electoral Commission under Article VI entitled "Legislative
Department" oI our Constitution is very indicative. Its compositions is
also signiIicant in that it is constituted by a majority oI members oI the
legislature. But it is a body separate Irom and independent oI the
legislature.
The grant oI power to the Electoral Commission to judge all contests
relating to the election, returns and qualiIications oI members oI the
National Assembly, is intended to be as complete and unimpaired as iI
it had remained originally in the legislature. The express lodging oI
that power in the Electoral Commission is an implied denial oI the
exercise oI that power by the National Assembly. And this is as
eIIective a restriction upon the legislative power as an express
prohibition in the Constitution (Ex parte Lewis, 45 Tex. Crim. Rep., 1;
State vs. Whisman, 36 S.D., 260; L.R.A., 1917B, 1). II we concede the
power claimed in behalI oI the National Assembly that said body may
regulate the proceedings oI the Electoral Commission and cut oII the
power oI the commission to lay down the period within which protests
should be Iiled, the grant oI power to the commission would be
ineIIective. The Electoral Commission in such case would be invested
with the power to determine contested cases involving the election,
returns and qualiIications oI the members oI the National Assembly
but subject at all times to the regulative power oI the National
Assembly. Not only would the purpose oI the Iramers oI our
Constitution oI totally transIerring this authority Irom the legislative
body be Irustrated, but a dual authority would be created with the
resultant inevitable clash oI powers Irom time to time. A sad spectacle
would then be presented oI the Electoral Commission retaining the
bare authority oI taking cognizance oI cases reIerred to, but in reality
without the necessary means to render that authority eIIective
whenever and whenever the National Assembly has chosen to act, a
situation worse than that intended to be remedied by the Iramers oI our
Constitution. The power to regulate on the part oI the National
Assembly in procedural matters will inevitably lead to the ultimate
control by the Assembly oI the entire proceedings oI the Electoral
Commission, and, by indirection, to the entire abrogation oI the
constitutional grant. It is obvious that this result should not be
permitted.
We are not insensible to the impassioned argument or the learned
counsel Ior the petitioner regarding the importance and necessity oI
respecting the dignity and independence oI the national Assembly as a
coordinate department oI the government and oI according validity to
its acts, to avoid what he characterized would be practically an
unlimited power oI the commission in the admission oI protests
against members oI the National Assembly. But as we have pointed
out hereinabove, the creation oI the Electoral Commission carried with
it ex necesitate rei the power regulative in character to limit the time
with which protests intrusted to its cognizance should be Iiled. It is a
settled rule oI construction that where a general power is conIerred or
duty enjoined, every particular power necessary Ior the exercise oI the
one or the perIormance oI the other is also conIerred (Cooley,
Constitutional Limitations, eight ed., vol. I, pp. 138, 139). In the
absence oI any Iurther constitutional provision relating to the
procedure to be Iollowed in Iiling protests beIore the Electoral
Commission, thereIore, the incidental power to promulgate such rules
necessary Ior the proper exercise oI its exclusive power to judge all
contests relating to the election, returns and qualiIications oI members
oI the National Assembly, must be deemed by necessary implication to
have been lodged also in the Electoral Commission.
It is, indeed, possible that, as suggested by counsel Ior the petitioner,
the Electoral Commission may abuse its regulative authority by
admitting protests beyond any reasonable time, to the disturbance oI
the tranquillity and peace oI mind oI the members oI the National
Assembly. But the possibility oI abuse is not argument against the
concession oI the power as there is no power that is not susceptible oI
abuse. In the second place, iI any mistake has been committed in the
creation oI an Electoral Commission and in investing it with exclusive
jurisdiction in all cases relating to the election, returns, and
qualiIications oI members oI the National Assembly, the remedy is
political, not judicial, and must be sought through the ordinary
processes oI democracy. All the possible abuses oI the government are
not intended to be corrected by the judiciary. We believe, however,
that the people in creating the Electoral Commission reposed as much
conIidence in this body in the exclusive determination oI the speciIied
cases assigned to it, as they have given to the Supreme Court in the
proper cases entrusted to it Ior decision. All the agencies oI the
government were designed by the Constitution to achieve speciIic
purposes, and each constitutional organ working within its own
particular sphere oI discretionary action must be deemed to be
animated with the same zeal and honesty in accomplishing the great
ends Ior which they were created by the sovereign will. That the
actuations oI these constitutional agencies might leave much to be
desired in given instances, is inherent in the perIection oI human
institutions. In the third place, Irom the Iact that the Electoral
Commission may not be interIered with in the exercise oI its legitimate
power, it does not Iollow that its acts, however illegal or
unconstitutional, may not be challenge in appropriate cases over which
the courts may exercise jurisdiction.
But independently oI the legal and constitutional aspects oI the present
case, there are considerations oI equitable character that should not be
overlooked in the appreciation oI the intrinsic merits oI the
controversy. The Commonwealth Government was inaugurated on
November 15, 1935, on which date the Constitution, except as to the
provisions mentioned in section 6 oI Article XV thereoI, went into
eIIect. The new National Assembly convened on November 25th oI
that year, and the resolution conIirming the election oI the petitioner,
Jose A. Angara was approved by that body on December 3, 1935. The
protest by the herein respondent Pedro Ynsua against the election oI
the petitioner was Iiled on December 9 oI the same year. The
pleadings do not show when the Electoral Commission was Iormally
organized but it does appear that on December 9, 1935, the Electoral
Commission met Ior the Iirst time and approved a resolution Iixing
said date as the last day Ior the Iiling oI election protest. When,
thereIore, the National Assembly passed its resolution oI December 3,
1935, conIirming the election oI the petitioner to the National
Assembly, the Electoral Commission had not yet met; neither does it
appear that said body had actually been organized. As a mater oI Iact,
according to certiIied copies oI oIIicial records on Iile in the archives
division oI the National Assembly attached to the record oI this case
upon the petition oI the petitioner, the three justices oI the Supreme
Court the six members oI the National Assembly constituting the
Electoral Commission were respectively designated only on December
4 and 6, 1935. II Resolution No. 8 oI the National Assembly
conIirming non-protested elections oI members oI the National
Assembly had the eIIect oI limiting or tolling the time Ior the
presentation oI protests, the result would be that the National
Assembly on the hypothesis that it still retained the incidental
power oI regulation in such cases had already barred the
presentation oI protests beIore the Electoral Commission had had time
to organize itselI and deliberate on the mode and method to be
Iollowed in a matter entrusted to its exclusive jurisdiction by the
Constitution. This result was not and could not have been
contemplated, and should be avoided.
From another angle, Resolution No. 8 oI the National Assembly
conIirming the election oI members against whom no protests had
been Iiled at the time oI its passage on December 3, 1935, can not be
construed as a limitation upon the time Ior the initiation oI election
contests. While there might have been good reason Ior the legislative
practice oI conIirmation oI the election oI members oI the legislature
at the time when the power to decide election contests was still lodged
in the legislature, conIirmation alone by the legislature cannot be
construed as depriving the Electoral Commission oI the authority
incidental to its constitutional power to be "the sole judge oI all contest
relating to the election, returns, and qualiIications oI the members oI
the National Assembly", to Iix the time Ior the Iiling oI said election
protests. ConIirmation by the National Assembly oI the returns oI its
members against whose election no protests have been Iiled is, to all
legal purposes, unnecessary. As contended by the Electoral
Commission in its resolution oI January 23, 1936, overruling the
motion oI the herein petitioner to dismiss the protest Iiled by the
respondent Pedro Ynsua, conIirmation oI the election oI any member
is not required by the Constitution beIore he can discharge his duties
as such member. As a matter oI Iact, certiIication by the proper
provincial board oI canvassers is suIIicient to entitle a member-elect to
a seat in the national Assembly and to render him eligible to any oIIice
in said body (No. 1, par. 1, Rules oI the National Assembly, adopted
December 6, 1935).
Under the practice prevailing both in the English House oI Commons
and in the Congress oI the United States, conIirmation is neither
necessary in order to entitle a member-elect to take his seat. The return
oI the proper election oIIicers is suIIicient, and the member-elect
presenting such return begins to enjoy the privileges oI a member Irom
the time that he takes his oath oI oIIice (Laws oI England, vol. 12, pp.
331. 332; vol. 21, pp. 694, 695; U. S. C. A., Title 2, secs. 21, 25, 26).
ConIirmation is in order only in cases oI contested elections where the
decision is adverse to the claims oI the protestant. In England, the
judges' decision or report in controverted elections is certiIied to the
Speaker oI the House oI Commons, and the House, upon being
inIormed oI such certiIicate or report by the Speaker, is required to
enter the same upon the Journals, and to give such directions Ior
conIirming or altering the return, or Ior the issue oI a writ Ior a new
election, or Ior carrying into execution the determination as
circumstances may require (31 & 32 Vict., c. 125, sec. 13). In the
United States, it is believed, the order or decision oI the particular
house itselI is generally regarded as suIIicient, without any actual
alternation or amendment oI the return (Cushing, Law and Practice oI
Legislative Assemblies, 9th ed., sec. 166).
Under the practice prevailing when the Jones Law was still in Iorce,
each house oI the Philippine Legislature Iixed the time when protests
against the election oI any oI its members should be Iiled. This was
expressly authorized by section 18 oI the Jones Law making each
house the sole judge oI the election, return and qualiIications oI its
members, as well as by a law (sec. 478, Act No. 3387) empowering
each house to respectively prescribe by resolution the time and manner
oI Iiling contest in the election oI member oI said bodies. As a matter
oI Iormality, aIter the time Iixed by its rules Ior the Iiling oI protests
had already expired, each house passed a resolution conIirming or
approving the returns oI such members against whose election no
protests had been Iiled within the prescribed time. This was interpreted
as cutting oII the Iiling oI Iurther protests against the election oI those
members not theretoIore contested (Amistad vs. Claravall |Isabela|,
Second Philippine Legislature, Record First Period, p. 89; Urguello
vs. Rama |Third District, Cebu|, Sixth Philippine Legislature;
Fetalvero vs. Festin |Romblon|, Sixth Philippine Legislature, Record
First Period, pp. 637-640; Kintanar vs. Aldanese |Fourth District,
Cebu|, Sixth Philippine Legislature, Record First Period, pp. 1121,
1122; Aguilar vs. Corpus |Masbate|, Eighth Philippine Legislature,
Record First Period, vol. III, No. 56, pp. 892, 893). The
Constitution has repealed section 18 oI the Jones Law. Act No. 3387,
section 478, must be deemed to have been impliedly abrogated also,
Ior the reason that with the power to determine all contest relating to
the election, returns and qualiIications oI members oI the National
Assembly, is inseparably linked the authority to prescribe regulations
Ior the exercise oI that power. There was thus no law nor
constitutional provisions which authorized the National Assembly to
Iix, as it is alleged to have Iixed on December 3, 1935, the time Ior the
Iiling oI contests against the election oI its members. And what the
National Assembly could not do directly, it could not do by indirection
through the medium oI conIirmation.
Summarizing, we conclude:
(a) That the government established by the Constitution
Iollows Iundamentally the theory oI separation oI power into
the legislative, the executive and the judicial.
(b) That the system oI checks and balances and the overlapping
oI Iunctions and duties oIten makes diIIicult the delimitation oI
the powers granted.
(c) That in cases oI conIlict between the several departments
and among the agencies thereoI, the judiciary, with the
Supreme Court as the Iinal arbiter, is the only constitutional
mechanism devised Iinally to resolve the conIlict and allocate
constitutional boundaries.
(d) That judicial supremacy is but the power oI judicial review
in actual and appropriate cases and controversies, and is the
power and duty to see that no one branch or agency oI the
government transcends the Constitution, which is the source oI
all authority.
(e) That the Electoral Commission is an independent
constitutional creation with speciIic powers and Iunctions to
execute and perIorm, closer Ior purposes oI classiIication to the
legislative than to any oI the other two departments oI the
governments.
(f ) That the Electoral Commission is the sole judge oI all
contests relating to the election, returns and qualiIications oI
members oI the National Assembly.
() That under the organic law prevailing beIore the present
Constitution went into eIIect, each house oI the legislature was
respectively the sole judge oI the elections, returns, and
qualiIications oI their elective members.
(h) That the present Constitution has transIerred all the powers
previously exercised by the legislature with respect to contests
relating to the elections, returns and qualiIications oI its
members, to the Electoral Commission.
(i) That such transIer oI power Irom the legislature to the
Electoral Commission was Iull, clear and complete, and carried
with it ex necesitate rei the implied power inter alia to
prescribe the rules and regulations as to the time and manner oI
Iiling protests.
( f) That the avowed purpose in creating the Electoral
Commission was to have an independent constitutional organ
pass upon all contests relating to the election, returns and
qualiIications oI members oI the National Assembly, devoid oI
partisan inIluence or consideration, which object would be
Irustrated iI the National Assembly were to retain the power to
prescribe rules and regulations regarding the manner oI
conducting said contests.
(k) That section 4 oI article VI oI the Constitution repealed not
only section 18 oI the Jones Law making each house oI the
Philippine Legislature respectively the sole judge oI the
elections, returns and qualiIications oI its elective members,
but also section 478 oI Act No. 3387 empowering each house
to prescribe by resolution the time and manner oI Iiling
contests against the election oI its members, the time and
manner oI notiIying the adverse party, and bond or bonds, to be
required, iI any, and to Iix the costs and expenses oI contest.
(l) That conIirmation by the National Assembly oI the election
is contested or not, is not essential beIore such member-elect
may discharge the duties and enjoy the privileges oI a member
oI the National Assembly.
(m) That conIirmation by the National Assembly oI the
election oI any member against whom no protest had been Iiled
prior to said conIirmation, does not and cannot deprive the
Electoral Commission oI its incidental power to prescribe the
time within which protests against the election oI any member
oI the National Assembly should be Iiled.
We hold, thereIore, that the Electoral Commission was acting within
the legitimate exercise oI its constitutional prerogative in assuming to
take cognizance oI the protest Iiled by the respondent Pedro Ynsua
against the election oI the herein petitioner Jose A. Angara, and that
the resolution oI the National Assembly oI December 3, 1935 can not
in any manner toll the time Ior Iiling protests against the elections,
returns and qualiIications oI members oI the National Assembly, nor
prevent the Iiling oI a protest within such time as the rules oI the
Electoral Commission might prescribe.
In view oI the conclusion reached by us relative to the character oI the
Electoral Commission as a constitutional creation and as to the scope
and extent oI its authority under the Iacts oI the present controversy,
we deem it unnecessary to determine whether the Electoral
Commission is an inIerior tribunal, corporation, board or person within
the purview oI sections 226 and 516 oI the Code oI Civil Procedure.
The petition Ior a writ oI prohibition against the Electoral Commission
is hereby denied, with costs against the petitioner. So ordered.























E HON. ASST. EXECUTIVE SECRETARY FOR LEGAL
AFFAIRS OF THE OFFICE OF THE PRESIDENT OF THE
PHILIPPINES, THE BOARD OF LIQUIDATORS, AND THE
DIRECTOR OF LANDS, Petitioners, vs. THE HON. COURT OF
APPEALS AND BASILIO MENDOZA, Respondents.

MELENCIO-HERRERA,
The administrative Decisions oI the OIIice oI the President oI the
Philippines, dated 13 May 1969 and 28 September 1971, respectively,
set aside by respondent Court oI Appeals in its judgment, dated 28
November 1986, constitute the nucleus oI the present controversy.chanrob lesvirtualawlib rary chanrob les virtual law lib rary
The antecedent proceedings may be summarized thus:chan robles virtual law librar y
1. On 15 April 1948, Jesus M. Larrabaster applied with the National
Land Settlement Administration (NLSA) Ior a home lot at the Marbel
Settlement District, Cotabato.chanroblesvirtualawlibrary chanr obles virtual law l ibrary
2. On 10 July 1950 Larrabaster's application was granted. Home Lot
No. 336 (later known as Lot No. 355) with an area oI 1,500 square
meters (hereaIter, the Disputed Property) was allocated to him on the
basis oI a report oI the supervisor oI the Settlement District that the
subject lot was vacant and Iree Irom any claim or conIlict.chanroblesvirtualawlib rary chanrobles vi rtual law lib rary
Meanwhile, "Larrabaster leased the lot to private respondent, Basilio
MENDOZA, and tolerated Jorge Geller to squat on the portion
thereoI" (2nd Indorsement, February 10, 1969, OIIice oI the President,
p. 1, Annex "C", Petition).chanroblesvirt ualawlibrary chanrobles virtual law libra ry
3. On 25 November 1952 the Land Settlement and Development
Corporation (LASEDECO) took over the Iunctions oI the NLSA.chanroblesvirtualawlib rary chanr obles virtual law l ibrary
4. On 29 June 1956 Larrabaster and his wiIe assigned their rights and
interests over the Disputed Property to Jose B. PEA.
"Notwithstanding the transIer, PEA allowed Mendoza and Geller to
stay on the lot." (id., p. 2).chanroblesvirtualawlibrary chan robles virtual law librar y
5. On 8 September 1956 a Supplementary Deed oI Sale was executed
by the same parties deIining the boundaries oI the Disputed Property,
thus:
On the North by Bulok creek and a street; on the South
by Bulok creek and the National Highway; on the East
by a street beside the public plaza; and on the West by
Bulok creek, which lot is designated as Iormerly lot No.
336 and now lot No. 355 on the new sketch plan oI the
Townsite oI Marbel, South Cotabato. (2nd Indorsement,
OIIice oI the President, February 10, 1969, p. 2, Annex
"C", Petition).
6. On 18 June 1954 Republic Act No. 1160 transIerred the custody and
administration oI the Marbel Townsite to the National Resettlement
and Rehabilitation Administration (NARRA).chanroblesvirtualawl ibrary chan robles virtual law library
7. On 20 August 1956 PEA requested NARRA to approve the above-
mentioned transIer oI rights but the latter did not act thereon in view oI
Proclamation No. 336, series oI 1956, returning to the Bureau oI Lands
the disposition oI the lots which remained unallocated by the
LASEDECO at the time oI its abolition.chanroblesvirtualawlib rary chanro bles virtual law li brary
8. The Bureau oI Lands did not act on PEA's request either,
prompting him to bring up the matter to the Board oI Liquidators
(BOL), which was created to wind up the aIIairs oI LASEDECO.chanroblesvirtualawlib rary chanrob les virtual law lib rary
Although LASEDECO bad initially denied the request, it subsequently
conIirmed the sale to PEA in its Resolution No. 139, series oI
1964.chanroblesvirtualawlibrary chan robles virtual law librar y
9. PEA must have realized that the Disputed Property contained an
area bigger than 1,500 sq. ms., hence, his request to BOL that the area
be adjusted Irom 1,500 to 3,616.93 sq. ms. to conIorm to its actual
area.chanroblesvirtualawlibra ry chanrobles vir tual law libra ry
10. In its Resolution No. 139, series oI 1964, the BOL denied the
request.chanroblesvirtualawlibrary chanrobles vir tual law lib rary
PEA moved Ior reconsideration stressing that the award should be
Ior 3,616.93 sq. ms., but the BOL again denied the same under its
Resolution No. 439, series oI 1967.chanroblesvirtualawlib rary chanro bles virtual law li brary
11. Feeling aggrieved, PEA appealed to the OIIice oI the
President.chanroblesvirtualawlibrary chan robles virtual law libra ry
12. Requested by that OIIice to comment, the BOL conducted an
investigation and reported (a) that Lot No. 355, as awarded to
Larrabaster, contained only 1,500 sq. ms. but due to accretion, since
the lot was almost surrounded by a creek, the area increased to
3,616.93 sq. ms.; and (b) since home lots had an average area oI 1,500
sq. ms. only, the Bureau oI Lands subdivided the Disputed Property
into three |3| parts, namely: Lot No. 107 with an area oI 1,455 sq. ms.,
was allocated to Basilio Mendoza; Lot No. 108, with an area oI 1,500
sq. ms., was allocated to PEA; and Lot No. 109, with an area oI 661
sq. ms., was allocated to Arturo Roxas. The BOL then recommended
that PEA be awarded Lot No. 108 instead oI the whole oI Iormer Lot
No. 355.chanroblesvirtualawlibrary chanrobles virtual law libra ry
13. Excepting to the above, PEA alleged that the lot transIerred to
him by Larrabaster contains 3,616.93 and not 1,500 sq. ms., this being
the area embraced within the boundaries described in the
Supplementary Deed oI Sale executed between him and Larrabaster on
8 September 1956.chanroblesvirtualawlibrary chanr obles virtual law l ibrary
14. On 10 February 1969 the OIIice oI the President "ordered that the
area oI PEA's lot (Lot No. 108, Iormerly a part oI Lot No. 355) be
maintained at 1,500 sq. ms.. xxx' on the premise that accretion
belonged to the Government.chanroblesvirtualawlibrary chanrob les virtual law lib rary
15. Upon PEA's motion Ior reconsideration, the same OIIice, on 13
ay 1969, modiIied its Decision oI 10 February 1969 and held that
"the award to PEA oI the original Lot No. 355 is hereby maintained"
(p. 9, Annex "D", Petition). It reasoned out that the beneIits oI
accretion, pursuant to Article 457 oI the Civil Code, accrue to the
owner, PEA, and not to the Government. That Decision oI 13 May
1969 is the Iirst judgment assailed in this Petition.chanroblesvirtualawlibra ry chanrobles vir tual law libra ry
16. On 14 May 1969 the BOL approved Resolution No. 236, series oI
1969, directing its LASEDECO Unit to advise PEA accordingly.
And on 3 September 1969 the BOL recommended to the Director oI
Lands the issuance oI a patent in PEA's Iavor.chanroblesvirtualawlibrary chan robles vi rtual law lib rary
17. On 1 August 1969 private respondent MENDOZA addressed a
letter-protest to the BOL, to which the latter in its Resolution No. 488,
dated 6 August 1969, responded by advising MENDOZA to direct its
protest to the OIIice oI the President.chanroblesvirtualawlibrary chanrobles vi rtual law lib rary
18. MENDOZA did so and on 28 September 1971 said OIIice rendered
its letter-decision (the second one challenged herein) aIIirming its
previous Decision oI 13 May 1969, having Iound no cogent reason to
depart thereIrom (Annex "E", Petition).chanroblesvirtualawl ibrary chan robles virtual law librar y
19. In the meantime, on 27 January 1970, and while his protest with
the OIIice oI the President was still pending, MENDOZA resorted to
Civil Case No. 98 Ior certiorari beIore the then Court oI First Instance
oI Cotabato against the petitioners-public oIIicials and PEA.chanroblesvir tualawlibra ry chanrobles vir tual law libra ry
On 23 June 1978, MENDOZA Iollowed up with a Supplemental
Petition to annul the administrative Decision oI 20 September 1971
denying his protest.chanroblesvirtualawlibrary chanrobles vi rtual law lib rary
20. On 10 May 1985 the Trial Court
1
rendered its Decision in Civil
Case No. 98 dismissing MENDOZA's Petition Ior certiorari (Annex
"B", Petition).chanroblesvirtualawlibra ry chanrobles vir tual law lib rary
21. On appeal, respondent Court oI Appeals reversed the Trial Court in
its 28 November 1986 Decision,
2
with the Iollowing disposition:
WHEREFORE, Iinding the appeal oI petitioner Basilio
Mendoza to be meritorious, the Decision oI May 10,
1985 oI the Regional Trial Court, Branch 24, oI
Koronadal, South Cotabato, in Special Civil Case No.
98 is SET ASIDE. The Decisions oI February 10, 1969,
May 13, 1969 and September 28, 1971 oI the OIIice oI
the President in the administrative case are likewise
SET ASIDE, without prejudice to the reopening oI the
administrative case in said OIIice as to accord all
parties concerned, including petitioner, their
constitutional rights to due process oI law.chanroblesvirtualawli brary chan robles virtual law l ibrary
IT IS SO ORDERED. (pp. 23-31, Rollo)
Hence, this Petition Ior Review on certiorari by petitioners-public
oIIicials anchored on the Iollowing submissions:
1. THE COURT OF APPEALS
GRAVELY ERRED IN HOLDING
THAT PRIVATE RESPONDENT
BASILIO MENDOZA HAS BEEN
DENIED DUE PROCESS OF LAW.chanroblesvir tualawlibra ry chanrobles vir tual
law library
2. THE COURT OF APPEALS
GRAVELY ERRED IN HOLDING
THAT THE ADMINISTRATIVE
DECISIONS OF THE OFFICE OF THE
PRESIDENT IN QUESTION ARE NOT
SUPPORTED BY SUBSTANTIAL
EVIDENCE.chanroblesvirtualawlibrary chan robles virtual law library
3. THE COURT OF APPEALS
GRAVELY ERRED IN SETTING
ASIDE THE ASSAILED DECISIONS
OF THE REGIONAL TRIAL COURT
OF SOUTH COTABATO IN CIVIL
CASE NO. 98 DATED MAY 10, 1985
AND OF THE OFFICE OF THE
PRESIDENT DATED FEBRUARY 10,
1969, MAY 13, 1969 AND
SEPTEMBER 28, 1971 AND
IMPLICITLY ORDERING A
REOPENING OF THE
ADMINISTRATIVE CASE IN SAID
OFFICE. (p. 9, Petition, p. 13, Rollo)
We uphold petitioners' submissions.chanroblesvir tualawlibra ry chanrobles vir tual law lib rary
1. In ruling that the Decisions oI the OIIice oI the President were
vitiated by Iailure to accord due process oI law to MENDOZA,
respondent Appellate Court relied on its observations that MENDOZA
was: (1) not made a party to the administrative case; (2) not served
with a copy oI the 10 February 1969 Decision; and (3) not notiIied oI
proceedings beIore the 13 May 1969 Decision nor served a copy
thereoI.chanroblesvirtualawlib rary chanrob les virtual law lib rary
The Ioregoing observations do not justiIy the conclusion arrived at.
AIter the OIIice oI the President had rendered its Decision dated 13
May 1969, MENDOZA Iiled a letter-protest on 1 August 1969 with
the BOL. The latter oIIice directed him to Iile his protest with the
OIIice oI the President, which he did. On 28 September 1971,
MENDOZA's request Ior reconsideration was denied by said OIIice.
So that, even assuming that there was absence oI notice and
opportunity to be present in the administrative proceedings prior to the
rendition oI the 10 February 1969 and 13 May 1969 Decisions by the
OIIice oI the President, such procedural deIect was cured when
MENDOZA elevated his letter protest to the OIIice oI the President,
which subjected the controversy to appellate review but eventually
denied reconsideration. Having thus been given a chance to be heard
with respect to his protest there is suIIicient compliance with the
requirements oI due process.
There is no merit likeness to the point raised by
petitioners that they were not inIormed by respondent
Judge oI the petition by private respondent to set aside
the writ oI execution. The order granting such petition
was the subject oI a motion Ior reconsideration. 'The
motion Ior reconsideration was thereaIter denied. Under
the circumstances, the Iailure to give notice to
petitioners had been cured. That is a well- settled
doctrine. Their complaint was that they were not beard.
They were given the opportunity to Iile a motion Ior
reconsideration. So they did. That was to Iree the order
Irom the alleged inIirmity. Petitioners then cannot be
heard to claim that they were denied procedural due
process.' (Dormitorio v. Fernandez, L-25897, August
21, 1976, 72 SCRA 388, 394-395; Montemayor vs.
Araneta Univ. Foundation, L- 44251, May 31, 1977, 77
SCRA 321 |1977|; also Sumpang v. Inciong, L-50992,
June 19, 1985, 137 SCRA 56 |1985|).
It should also be recalled that MENDOZA Iiled his petition Ior
certiorari beIore the then Court oI First Instance oI Cotabato seeking
to annul the 13 May 1969 Decision. At the time it was presented on 27
January 1970, MENDOZA's request Ior reconsideration with the
OIIice oI the President, involving the same Decision, was still
pending. In Iact, it was only on 28 September 1971 that said OIIice
denied reconsideration. Evidently, MENDOZA had abandoned his
pending administrative request Ior reconsideration in Iavor oI judicial
proceedings. Again, thereIore, MENDOZA cannot justiIiably claim
that he was denied due process.chanroblesvirtualawlib rary chanr obles virtual law l ibrary
2. Substantial Iactual evidence support the questioned administrative
rulings. The OIIice oI the President relied on the Iact-Iinding report oI
the BOL made sometime in 1969 with respect to the Disputed Property
to the eIIect that although the area oI Lot No. 355 awarded to
Larrabaster was 1,500 sq. ms., it was Iound situated along a creek and
that "it had increased in area to 3,616.93 square meters by accretion."chanrobles virtual
law library
The question then which conIronted the OIIice oI the President was
the ownership over the increased area. In its Decision oI 10 February
1969 it initially held, Iollowing the BOL recommendation, that the
accretion belonged to the government and that the excess oI 2,116.93
sq. ms. was an unallocated area which the Bureau oI Lands had
authority to dispose oI so that said Bureau was not remiss in
subdividing the disputed Property into three (3 lots and allocating only
Lot No. 108, with an area oI 1,500 sq. ms., to PEA, Lot No. 107 to
MENDOZA, and Lot No. 109 to Arturo Roxas.chanroblesvirtualawlibra ry chanrobles vir tu al law library
Upon re-study, however, the OIIice oI the President modiIied its
conclusions in its Decision oI 13 May 1969, and rightly so. It took into
account Article 457 oI the Civil Code, which provides:
To the owners oI lands adjoining the banks oI rivers
belong the accretion which they gradually receive Irom
the eIIects oI the current oI the waters.
and opined that "creeks are included within the meaning oI this Civil
Code provision" (Letter-Decision, 13 May 1969, p. 7, Annex 'D',
Petition).chanroblesvirtualawlibrar y chanrobles virt ual law libra ry
And as Iar as the ownership oI the accretion is concerned, the OIIice oI
the President likewise correctly held that "while it may be conceded
that Lot No. 355 technically belongs to the government because it was
bought Irom the latter under an installment plan, it cannot be rightIully
concluded that the beneIits oI accretion must still be retained by the
said seller" (Letter-Decision, 13 May 1969, p. 7, Annex "D", Petition).
In so ruling, that OIIice acted on the authority oI Director of Lands, et
al. vs. Ricardo Ri:al, et al., 87 Phil. 806, at 810, 814 |1950|), reading
in part:
... When the lot bordering on a public stream is sold on
installment basis by the government, said stream is
made the boundary. ... The stream may advance or
recede but it will always constitute the boundary or
boundaries oI the lot, and the purchaser has the right to
insist that the original boundaries be preserved, and all
the area inside said boundaries be considered as
included in the sale.chanroblesvir tualawlibra ry chanrobles vir tual law lib rary
xxx xxx xxxchanrob les virtual law lib rary
... In the sale oI a Iriar land, lot or parcel ordering on
rivers under Act. No. 1120 pending payment in Iull oI
the purchase price, although the government reserves
title thereto, merely Ior its protection, the beneIicial and
equitable title is in the purchaser, and that any accretion
by the lot even beIore payment oI the last installment
belongs to the purchaser thereoI.
Since the Disputed Property no longer belonged to the Government the
subdivision thereoI by the Bureau oI Lands into three lots, as well as
the allocation oI said lots to two other individuals, was beyond the
scope oI its authority. Under Proclamation No. 336, series oI 1956, the
authority oI the Bureau oI Lands to dispose oI lots was limited to
"unallocated areas." As the Letter-Decision oI 28 September 1971
states: "however, it is equally true that the accretions took place aIter
the land had been allocated and assigned to Larrabaster. Clearly,
thereIore, when the accretion started. Larrabaster had already acquired
the beneIicial and equitable title over the Lot No. 355, albeit the
Government still retained the naked title thereto. Consequently, to
Larrabaster and now to his assignee (Pea) belong the accretions to
said lot which may no longer be allocated to others by the
Government." (Letter-Decision), 28 September 1971, Annex "E",
Petition). Having been thus allocated, the area within its original
boundaries belong to the awardee whether the creek advances or
recedes. He is entitled to all the beneIits which may accrue to the land
as well as suIIer the losses that may beIall it.chanroblesvirtualawlib rary chanrob les virtual law lib rary
MENDOZA's Iiling oI a Miscellaneous Sales Application over the
Disputed Property with the Bureau oI Lands on 6 November 1962
must similarly be held to have been inappropriate and without any
legal Iorce and eIIect since the same was no longer public land subject
to disposition by the Government. Contrary to the Iinding oI
respondent Appellate Court, no irregularity may be imputed to the
administrative decisions by reason oI the Iact that allegedly a copy oI
the investigation report oI the BOL was not among those elevated to
the Trial Court or among those marked in evidence. It can be saIely
assumed that the OIIice oI the President could not have relied upon
said report iI the same had not been beIore it when it rendered the
questioned Decisions.chanroblesvir tualawlibra ry chanrobles vir tual law lib rary
3. Finally, invariable is the rule that in reviewing administrative
decisions oI the Executive Branch oI the government, "the Iindings oI
Iact made therein must be respected, as long as they are supported by
substantial evidence, even iI not overwhelming or preponderant (Ang
Tibay vs. Court oI Industrial Relations, 69 Phil. 635 |1940|); that it is
not Ior the reviewing court to weigh the conIlicting evidence,
determine the credibility oI the witnesses, or otherwise substitute its
own judgment Ior that oI the administrative agency on the suIIiciency
oI the evidence (Lao Tang Bun, et al. vs. Fabre, 81 Phil. 682 |1948|);
that the administrative decision in matters within the executive
jurisdiction can only be set aside on prooI oI gross abuse oI discretion,
Iraud, or error oI law (Lovina vs. Moreno L-17821, November 29,
1963, 9 SCRA 557; Timbancaya vs. Vicente, L-19100, December 27,
1963, 9 SCRA 852), which we Iind absent herein.chanroblesvirt ualawlibrary chanrobles virt ual law libra ry
To reopen the case as ordered by the Court oI Appeals would open
wide the doors to a protracted litigation oI a controversy that has been
pending Ior approximately nineteen (19) years now. It is high time that
a Iinish to the case be written.chanroblesvirtualawlibrary chanr obles virtual law l ibrary
WHEREFORE, the Decision oI 28 November 1986 oI respondent
Court oI Appeals is hereby SET ASIDE and the Decision oI 10 May
1985 oI the Regional Trial Court, Branch 24, Koronadal, South
Cotabato, in Civil Case No. 98, is hereby ordered REINSTATED.chanroblesvirtualawlibrary chanrobles vir tual law lib rary
SO ORDERED.











public oI the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 70054 December 11, 1991
BANCO FILIPINO SAVINGS AND MORTGAGE BANK,
Petitioner, vs. THE MONETARY BOARD, CENTRAL BANK OF
THE PHILIPPINES, 1OSE B. FERNANDEZ, CARLOTA P.
VALENZUELA, ARNULFO B. AURELLANO and RAMON V.
TIAOQUI, Respondents.
G.R. No. 68878 December 11, 1991
BANCO FILIPINO SAVINGS AND MORTGAGE BANK,
Petitioner, vs. HON. INTERMEDIATE APPELLATE COURT
and CELESTINA S. PAHIMUNTUNG, assisted by her husband,
Respondents.
G.R. No. 77255-58 December 11, 1991
TOP MANAGEMENT PROGRAMS CORPORATION AND
PILAR DEVELOPMENT CORPORATION, Petitioners, vs. THE
COURT OF APPEALS, The Executive 1udge of the Regional
Trial Court of Cavite, Ex-Officio Sheriff REGALADO E.
EUSEBIO, BANCO FILIPINO SAVINGS AND MORTGAGE
BANK, CARLOTA P. VALENZUELA AND SYCIP, SALAZAR,
HERNANDEZ AND GATMAITAN, Respondents.
G.R. No. 78766 December 11, 1991
EL GRANDE CORPORATION, Petitioner, vs. THE COURT OF
APPEALS, THE EXECUTIVE 1UDGE of The Regional Trial
Court and Ex-Officio Sheriff REGALADO E. EUSEBIO, BANCO
FILIPINO SAVINGS AND MORTGAGE BANK, CARLOTA P.
VALENZUELA AND SYCIP, SALAZAR, FELICIANO AND
HERNANDEZ, Respondents.
G.R. No. 78767 December 11, 1991
METROPOLIS DEVELOPMENT CORPORATION, Petitioner,
vs. COURT OF APPEALS, CENTRAL BANK OF THE
PHILIPPINES, 1OSE B. FERNANDEZ, 1R., CARLOTA P.
VALENZUELA, ARNULFO AURELLANO AND RAMON
TIAOQUI, Respondents.
G.R. No. 78894 December 11, 1991
BANCO FILIPINO SAVINGS AND MORTGAGE BANK,
petitioner
vs.
COURT OF APPEALS, THE CENTRAL BANK OF THE
PHILIPPINES, 1OSE B. FERNANDEZ, 1R., CARLOTA P.
VALENZUELA, ARNULFO B. AURELLANO AND RAMON
TIAOQUI, Respondents.
G.R. No. 81303 December 11, 1991
PILAR DEVELOPMENT CORPORATION, petitioner
vs.
COURT OF APPEALS, HON. MANUEL M. COSICO, in his
capacity as Presiding 1udge of Branch 136 of the Regional Trial
Court of Makati, CENTRAL BANK OF THE PHILIPPINES
AND CARLOTA P. VALENZUELA, Respondents.
G.R. No. 81304 December 11, 1991
BF HOMES DEVELOPMENT CORPORATION, Petitioner, vs.
THE COURT OF APPEALS, CENTRAL BANK AND
CARLOTA P. VALENZUELA, Respondents.
G.R. No. 90473 December 11, 1991
EL GRANDE DEVELOPMENT CORPORATION, Petitioner, vs.
THE COURT OF APPEALS, THE EXECUTIVE 1UDGE of the
Regional Trial Court of Cavite, CLERK OF COURT and Ex-
Officio Sheriff ADORACION VICTA, BANCO FILIPINO
SAVINGS AND MORTGAGE BANK, CARLOTA P.
VALENZUELA AND SYCIP, SALAZAR, HERNANDEZ AND
GATMAITAN, Respondents.

MEDIALDEA,
This reIers to nine (9) consolidated cases concerning the legality oI the
closure and receivership oI petitioner Banco Filipino Savings and
Mortgage Bank (Banco Filipino Ior brevity) pursuant to the order oI
respondent Monetary Board. Six (6) oI these cases, namely, G.R. Nos.
68878, 77255-68, 78766, 81303, 81304 and 90473 involve the
common issue oI whether or not the liquidator appointed by the
respondent Central Bank (CB Ior brevity) has the authority to
prosecute as well as to deIend suits, and to Ioreclose mortgages Ior and
in behalI oI the bank while the issue on the validity oI the receivership
and liquidation oI the latter is pending resolution in G.R. No. 7004.
Corollary to this issue is whether the CB can be sued to IulIill Iinancial
commitments oI a closed bank pursuant to Section 29 oI the Central
Bank Act. On the other hand, the other three (3) cases, namely, G.R.
Nos. 70054, which is the main case, 78767 and 78894 all seek to annul
and set aside M.B. Resolution No. 75 issued by respondents Monetary
Board and Central Bank on January 25, 1985.chanroblesvirtualawlib rary chanrobles vi rtual law lib rary
chanrobles virtual law libra ry
The antecedent Iacts oI each oI the nine (9) cases are as Iollows:
G.R No. 68878
This is a motion Ior reconsideration, Iiled by respondent Celestina
Pahimuntung, oI the decision promulgated by thisCourt on April 8,
1986, granting the petition Ior review on certiorari and reversing the
questioned decision oI respondent appellate court, which annulled the
writ oI possession issued by the trial court in Iavor oI petitioner.chanroblesvirtualawlibra ry chanrobles vir tual law libra ry
The respondent-movant contends that the petitioner has no more
personality to continue prosecuting the instant case considering that
petitioner bank was placed under receivership since January 25, 1985
by the Central Bank pursuant to the resolution oI the Monetary Board.
G.R. Nos. 77255-58
Petitioners Top Management Programs Corporation (Top Management
Ior brevity) and Pilar Development Corporation (Pilar Development
Ior brevity) are corporations engaged in the business oI developing
residential subdivisions.chanroblesvirtualawlib rary chanro bles virtual law l ibrary
Top Management obtained a loan oI P4,836,000 Irom Banco Filipino
as evidenced by a promissory note dated January 7, 1982 payable in
three years Irom date. The loan was secured by real estate mortgage in
its various properties in Cavite. Likewise, Pilar Development obtained
loans Irom Banco Filipino between 1982 and 1983 in the principal
amounts oI P6,000,000, P7,370,000 and P5,300,000 with maturity
dates on December 28, 1984, January 5, 1985 and February 16, 1984,
respectively. To secure the loan, Pilar Development mortgaged to
Banco Filipino various properties in Dasmarias, Cavite.chanroblesvirtualawlib rary chanrobles vi rtual law lib rary
On January 25, 1985, the Monetary Board issued a resolution Iinding
Banco Filipino insolvent and unable to do business without loss to its
creditors and depositors. It placed Banco Filipino under receivership oI
Carlota Valenzuela, Deputy Governor oI the Central Bank.chanroblesvirt ualawlibrary chanrobles virtual law libra ry
On March 22, 1985, the Monetary Board issued another resolution
placing the bank under liquidation and designating Valenzuela as
liquidator. By virtue oI her authority as liquidator, Valenzuela
appointed the law Iirm oI Sycip, Salazar, et al. to represent Banco
Filipino in all litigations.chanroblesvirtualawlib rary chanro bles virtual law li brary
On March 26, 1985, Banco Filipino Iiled the petition Ior certiorari in
G.R. No. 70054 questioning the validity oI the resolutions issued by
the Monetary Board authorizing the receivership and liquidation oI
Banco Filipino.chanroblesvirtualawlib rary chanrob les virtual law lib rary
In a resolution dated August 29, 1985, this Court in G.R. No. 70054
resolved to issue a temporary restraining order, eIIective during the
same period oI 30 days, enjoining the respondents Irom executing
Iurther acts oI liquidation oI the bank; that acts such as receiving
collectibles and receivables or paying oII creditors' claims and other
transactions pertaining to normal operations oI a bank are not
enjoined. The Central Bank is ordered to designate a comptroller Ior
Banco Filipino.chanroblesvirtualawlib rary chanrob les virtual law lib rary
Subsequently, Top Management Iailed to pay its loan on the due date.
Hence, the law Iirm oI Sycip, Salazar, et al. acting as counsel Ior
Banco Filipino under authority oI Valenzuela as liquidator, applied Ior
extra-judicial Ioreclosure oI the mortgage over Top Management's
properties. Thus, the Ex-OIIicio SheriII oI the Regional Trial Court oI
Cavite issued a notice oI extra-judicial Ioreclosure sale oI the
properties on December 16, 1985.chanroblesvirtualawlibrary chanro bles virtual law l ibrary
On December 9, 1985, Top Management Iiled a petition Ior injunction
and prohibition with the respondent appellate court docketed as CA-
G.R. SP No. 07892 seeking to enjoin the Regional Trial Court oI
Cavite, the ex-oIIicio sheriII oI said court and Sycip, Salazar, et al.
Irom proceeding with Ioreclosure sale.chanroblesvirtualawlib rary chanro bles virtual law li brary
Similarly, Pilar Development deIaulted in the payment oI its loans.
The law Iirm oI Sycip, Salazar, et al. Iiled separate applications with
the ex-oIIicio sheriII oI the Regional Trial Court oI Cavite Ior the
extra-judicial Ioreclosure oI mortgage over its properties.chanroblesvir tualawlibra ry chanrobles vir tual law lib rary
Hence, Pilar Development Iiled with the respondent appellate court a
petition Ior prohibition with prayer Ior the issuance oI a writ oI
preliminary injunction docketed as CA-G.R SP Nos. 08962-64 seeking
to enjoin the same respondents Irom enIorcing the Ioreclosure sale oI
its properties. CA-G.R. SP Nos. 07892 and 08962-64 were
consolidated and jointly decided.chanroblesvi rtualawlibra ry chanrobles vir tual law lib rary
On October 30, 1986, the respondent appellate court rendered a
decision dismissing the aIorementioned petitions.chanrob lesvirtuala wlibrary chanro bles virtual law l ibrary
Hence, this petition was Iiled by the petitioners Top Management and
Pilar Development alleging that Carlota Valenzuela, who was
appointed by the Monetary Board as liquidator oI Banco Filipino, has
no authority to proceed with the Ioreclosure sale oI petitioners'
properties on the ground that the resolution oI the issue on the validity
oI the closure and liquidation oI Banco Filipino is still pending with
this Court in G.R. 70054.
G.R. No. 78766
Petitioner El Grande Development Corporation (El Grande Ior brevity)
is engaged in the business oI developing residential subdivisions. It
was extended by respondent Banco Filipino a credit accommodation to
Iinance its housing program. Hence, petitioner was granted a loan in
the amount oI P8,034,130.00 secured by real estate mortgages on its
various estates located in Cavite.chanroblesvirt ualawlibrar y chanrobles virt ual law libra ry
On January 15, 1985, the Monetary Board Iorbade Banco Filipino to
do business, placed it under receivership and designated Deputy
Governor Carlota Valenzuela as receiver. On March 22, 1985, the
Monetary Board conIirmed Banco Filipino's insolvency and
designated the receiver Carlota Valenzuela as liquidator.chanroblesvirtualawlibrary chanro bles virtual law l ibrary
When petitioner El Grande Iailed to pay its indebtedness to Banco
Filipino, the latter thru its liquidator, Carlota Valenzuela, initiated the
Ioreclosure with the Clerk oI Court and Ex-oIIicio sheriII oI RTC
Cavite. Subsequently, on March 31, 1986, the ex-oIIicio sheriII issued
the notice oI extra-judicial sale oI the mortgaged properties oI El
Grande scheduled on April 30, 1986.chanroblesvirtualawlibrary chanrobles vi rtual law lib rary
In order to stop the public auction sale, petitioner El Grande Iiled a
petition Ior prohibition with the Court oI Appeals alleging that
respondent Carlota Valenzuela could not proceed with the Ioreclosure
oI its mortgaged properties on the ground that this Court in G.R. No.
70054 issued a resolution dated August 29, 1985, which restrained
Carlota Valenzuela Irom acting as liquidator and allowed Banco
Filipino to resume banking operations only under a Central Bank
comptroller.chanroblesvirtualawlibra ry chanrobles vir tual law libra ry
On March 2, 1987, the Court oI Appeals rendered a decision
dismissing the petition.chanroblesvirtualawlib rary chanro bles virtual law l ibrary
Hence this petition Ior review on certiorari was Iiled alleging that the
respondent court erred when it held in its decision that although
Carlota P. Valenzuela was restrained by this Honorable Court Irom
exercising acts in liquidation oI Banco Filipino Savings & Mortgage
Bank, she was not legally precluded Irom Ioreclosing the mortgage
over the properties oI the petitioner through counsel retained by her Ior
the purpose.
G.R. No. 81303
On November 8, 1985, petitioner Pilar Development Corporation
(Pilar Development Ior brevity) Iiled an action against Banco Filipino,
the Central Bank and Carlota Valenzuela Ior speciIic perIormance,
docketed as Civil Case No. 12191. It appears that the Iormer
management oI Banco Filipino appointed Quisumbing & Associates as
counsel Ior Banco Filipino. On June 12, 1986 the said law Iirm Iiled
an answer Ior Banco Filipino which conIessed judgment against Banco
Filipino.chanroblesvi rtualawlibra ry chanrobles vir tual law lib rary
On June 17, 1986, petitioner Iiled a second amended complaint. The
Central Bank and Carlota Valenzuela, thru the law Iirm Sycip, Salazar,
Hernandez and Gatmaitan Iiled an answer to the complaint.chanroblesvirtualawlib rary chanro bles virtual law l ibrary
On June 23, 1986, Sycip, et al., acting Ior all the deIendants including
Banco Filipino moved that the answer Iiled by Quisumbing &
Associates Ior deIendant Banco Filipino be expunged Irom the
records. Despite opposition Irom Quisumbing & Associates, the trial
court granted the motion to expunge in an order dated March 17, 1987.
Petitioner Pilar Development moved to reconsider the order but the
motion was denied.chanroblesvirtualawlib rary chanrob les virtual law li brary
Petitioner Pilar Development Iiled with the respondent appellate court
a petition Ior certiorari and mandamus to annul the order oI the trial
court. The Court oI Appeals rendered a decision dismissing the
petition. A petition was Iiled with this Court but was denied in a
resolution dated March 22, 1988. Hence, this instant motion Ior
reconsideration.
G.R. No. 81304
On July 9, 1985, petitioner BF Homes Incorporated (BF Homes Ior
brevity) Iiled an action with the trial court to compel the Central Bank
to restore petitioner's; Iinancing Iacility with Banco Filipino.chanroblesvirtualawli brary chan robles virtual law l ibrary
The Central Bank Iiled a motion to dismiss the action. Petitioner BF
Homes in a supplemental complaint impleaded as deIendant Carlota
Valenzuela as receiver oI Banco Filipino Savings and Mortgage
Bank.chanroblesvirtualawlib rary chanrob les virtual law lib rary
On April 8, 1985, petitioner Iiled a second supplemental complaint to
which respondents Iiled a motion to dismiss.chanroblesvi rtualawlibra ry chanrobles vir tual law lib rary
On July 9, 1985, the trial court granted the motion to dismiss the
supplemental complaint on the grounds (1) that plaintiII has no
contractual relation with the deIendants, and (2) that the Intermediate
Appellate Court in a previous decision in AC-G.R. SP. No. 04609 had
stated that Banco Filipino has been ordered closed and placed under
receivership pending liquidation, and thus, the continuation oI the
Iacility sued Ior by the plaintiII has become legally impossible and the
suit has become moot.chanroblesvirtualawlibrary chanrob les virtual law lib rary
The order oI dismissal was appealed by the petitioner to the Court oI
Appeals. On November 4, 1987, the respondent appellate court
dismissed the appeal and aIIirmed the order oI the trial court.chanroblesvirtualawlibrary chanro bles virtual law l ibrary
Hence, this petition Ior review on certiorari was Iiled, alleging that the
respondent court erred when it Iound that the private respondents
should not be the ones to respond to the cause oI action asserted by the
petitioner and the petitioner did not have any cause oI action against
the respondents Central Bank and Carlota Valenzuela.
G.R. No. 90473
Petitioner El Grande Development Corporation (El Grande Ior brevity)
obtained a loan Irom Banco Filipino in the amount oI P8,034,130.00,
secured by a mortgage over its Iive parcels oI land located in Cavite
which were covered by TransIer CertiIicate oI Title Nos. T-82187, T-
109027, T-132897, T-148377, and T-79371 oI the Registry oI Deeds
oI Cavite.chanroblesvirtualawlib rary chanrob les virtual law li brary
When Banco Filipino was ordered closed and placed under
receivership in 1985, the appointed liquidator oI BF, thru its counsel
Sycip, Salazar, et al. applied with the ex-oIIicio sheriII oI the Regional
Trial Court oI Cavite Ior the extrajudicial Ioreclosure oI the mortgage
constituted over petitioner's properties. On March 24, 1986, the ex-
oIIicio sheriII issued a notice oI extrajudicial Ioreclosure sale oI the
properties oI petitioner.chanroblesvirt ualawlibrary chanrobles virtual law libra ry
Thus, petitioner Iiled with the Court oI Appeals a petition Ior
prohibition with prayer Ior writ oI preliminary injunction to enjoin the
respondents Irom Ioreclosing the mortgage and to nulliIy the notice oI
Ioreclosure.chanroblesvirtualawli brary chan robles virtual law l ibrary
On June 16, 1989, respondent Court oI Appeals rendered a decision
dismissing the petition.chanroblesvirtualawlib rary chanro bles virtual law l ibrary
Not satisIied with the decision, petitioner Iiled the instant petition Ior
review on certiorari.
G.R. No. 70054
Banco Filipino Savings and Mortgage Bank was authorized to operate
as such under M.B. Resolution No. 223 dated February 14, 1963. It
commenced operations on July 9, 1964. It has eighty-nine (89)
operating branches, Iorty-six (46) oI which are in Manila, with more
than three (3) million depositors.chanroblesvirtualawlibra ry chanrobles vir tual law libra ry
As oI July 31, 1984, the list oI stockholders showed the major
stockholders to be: Metropolis Development Corporation, Apex
Mortgage and Loans Corporation, Filipino Business Consultants, Tiu
Family Group, LBH Inc. and Anthony Aguirre.chanroblesvirtualawlib rary chanr obles virtua l law library
Petitioner Bank had an approved emergency advance oI P119.7
million under M.B. Resolution No. 839 dated June 29, 1984. This was
augmented with a P3 billion credit line under M.B. Resolution No. 934
dated July 27, 1984.chanroblesvirtualawlibrary chanrob les virtual law lib rary
On the same date, respondent Board issued M.B. Resolution No. 955
placing petitioner bank under conservatorship oI Basilio Estanislao.
He was later replaced by Gilberto Teodoro as conservator on August
10, 1984. The latter submitted a report dated January 8, 1985 to
respondent Board on the conservatorship oI petitioner bank, which
report shall hereinaIter be reIerred to as the Teodoro report.chanroblesvirtualawlibrary chan robles virtual law l ibrary
Subsequently, another report dated January 23, 1985 was submitted to
the Monetary Board by Ramon Tiaoqui, Special Assistant to the
Governor and Head, SES Department II oI the Central Bank, regarding
the major Iindings oI examination on the Iinancial condition oI
petitioner BF as oI July 31, 1984. The report, which shall be reIerred
to herein as the Tiaoqui Report contained the Iollowing conclusion and
recommendation:
The examination Iindings as oI July 31, 1984, as shown
earlier, indicate one oI insolvency and illiquidity and
Iurther conIirms the above conclusion oI the
Conservator.chanroblesvirtualawlibrary chanrobles vir tual law lib rary
All the Ioregoing provides suIIicient justiIication Ior
Iorbidding the bank Irom engaging in banking.chanroblesvirtualawlib rary chanrob les virtual law li brary
Foregoing considered, the Iollowing are recommended:
1. Forbid the Banco Filipino Savings &
Mortgage Bank to do business in the
Philippines eIIective the beginning oI
oIIice January 1985, pursuant to Sec. 29
oI R.A No. 265, as amended;chanr obles virtual law l ibrary
2. Designate the Head oI the
Conservator Team at the bank, as
Receiver oI Banco Filipino Savings &
Mortgage Bank, to immediately take
charge oI the assets and liabilities, as
expeditiously as possible collect and
gather all the assets and administer the
same Ior the beneIit oI all the creditors,
and exercise all the powers necessary Ior
these purposes including but not limited
to bringing suits and Ioreclosing
mortgages in the name oI the bank.chanroblesvi rtualawlibra ry chanrobles vir tual law lib rary
3. The Board oI Directors and the
principal oIIicers Irom Senior Vice
Presidents, as listed in the attached
Annex "A" be included in the watchlist
oI the Supervision and Examination
Sector until such time that they shall
have cleared themselves.chanroblesvirtualawlib rary chanr obles virtual law l ibrary
4. ReIer to the Central Bank's Legal
Department and OIIice oI Special
Investigation the report on the Iindings
on Banco Filipino Ior investigation and
possible prosecution oI directors,
oIIicers, and employees Ior activities
which led to its insolvent position. (pp-
61-62, Rollo)
On January 25, 1985, the Monetary Board issued the assailed MB
Resolution No. 75 which ordered the closure oI BF and which Iurther
provides:
AIter considering the report dated January 8, 1985 oI
the Conservator Ior Banco Filipino Savings and
Mortgage Bank that the continuance in business oI the
bank would involve probable loss to its depositors and
creditors, and aIter discussing and Iinding to be true the
statements oI the Special Assistant to the Governor and
Head, Supervision and Examination Sector (SES)
Department II as recited in his memorandum dated
January 23, 1985, that the Banco Filipino Savings &
Mortgage Bank is insolvent and that its continuance in
business would involve probable loss to its depositors
and creditors, and in pursuance oI Sec. 29 oI RA 265,
as amended, the Board decided:
1. To Iorbid Banco Filipino Savings and
Mortgage Bank and all its branches to do
business in the Philippines;chanrobles vi rtual law lib rary
2. To designate Mrs. Carlota P.
Valenzuela, Deputy Governor as
Receiver who is hereby directly vested
with jurisdiction and authority to
immediately take charge oI the bank's
assets and liabilities, and as
expeditiously as possible collect and
gather all the assets and administer the
same Ior the beneIit oI its creditors,
exercising all the powers necessary Ior
these purposes including but not limited
to, bringing suits and Ioreclosing
mortgages in the name oI the bank;chan robles virtual law l ibrary
3. To designate Mr. ArnulIo B.
Aurellano, Special Assistant to the
Governor, and Mr. Ramon V. Tiaoqui,
Special Assistant to the Governor and
Head, Supervision and Examination
Sector Department II, as Deputy
Receivers who are likewise hereby
directly vested with jurisdiction and
authority to do all things necessary or
proper to carry out the Iunctions
entrusted to them by the Receiver and
otherwise to assist the Receiver in
carrying out the Iunctions vested in the
Receiver by law or Monetary Board
Resolutions;chanrob les virtual law lib rary
4. To direct and authorize Management
to do all other things and carry out all
other measures necessary or proper to
implement this Resolution and to
saIeguard the interests oI depositors,
creditors and the general public; andchanrobles vi rtual law lib rary
5. In consequence oI the Ioregoing, to
terminate the conservatorship over
Banco Filipino Savings and Mortgage
Bank. (pp. 10-11, Rollo, Vol. I)
On February 2, 1985, petitioner BF Iiled a complaint docketed as Civil
Case No. 9675 with the Regional Trial Court oI Makati to set aside the
action oI the Monetary Board placing BF under receivership.chanrob lesvirtualawlibra ry chanrobles vi rtual law lib rary
On February 28, 1985, petitioner Iiled with this Court the instant
petition Ior certiorari and mandamus under Rule 65 oI the Rules oI
Court seeking to annul the resolution oI January 25, 1985 as made
without or in excess oI jurisdiction or with grave abuse oI discretion,
to order respondents to Iurnish petitioner with the reports oI
examination which led to its closure and to aIIord petitioner BF a
hearing prior to any resolution that may be issued under Section 29 oI
R.A. 265, also known as Central Bank Act.chanroblesvirtualawlibrary chanrob les virtual law lib rary
On March 19, 1985, Carlota Valenzuela, as Receiver and ArnulIo
Aurellano and Ramon Tiaoqui as Deputy Receivers oI Banco Filipino
submitted their report on the receivership oI BF to the Monetary
Board, in compliance with the mandate oI Sec. 29 oI R.A. 265 which
provides that the Monetary Board shall determine within sixty (60)
days Irom date oI receivership oI a bank whether such bank may be
reorganized/permitted to resume business or ordered to be liquidated.
The report contained the Iollowing recommendation:
In view oI the Ioregoing and considering that the
condition oI the banking institution continues to be one
oI insolvency, i.e., its realizable assets are insuIIicient
to meet all its liabilities and that the bank cannot
resume business with saIety to its depositors, other
creditors and the general public, it is recommended
that:
1. Banco Filipino Savings & Mortgage Bank be liquidated pursuant to
paragraph 3, Sec. 29 oI RA No. 265, as amended;chanrobles vir tual law library
2. The Legal Department, through the Solicitor General, be authorized
to Iile in the proper court a petition Ior assistance in th liquidation oI
the Bank;chanrob les virtual law lib rary
3. The Statutory Receiver be designated as the Liquidator oI said bank;
andchanr obles virtual law l ibrary
4. Management be instructed to inIorm the stockholders oI Banco
Filipino Savings & Mortgage Bank oI the Monetary Board's decision
liquidate the Bank. (p. 167, Rollo, Vol. I) chanrobles virtual law library
On July 23, 1985, petitioner Iiled a motion beIore this Court praying
that a restraining order or a writ oI preliminary injunction be issued to
enjoin respondents Irom causing the dismantling oI BF signs in its
main oIIice and 89 branches. This Court issued a resolution on August
8, 1985 ordering the issuance oI the aIoresaid temporary restraining
order.chanroblesvirtualawlibrary chanrobles vi rtual law lib rary
On August 20, 1985, the case was submitted Ior resolution.chanroblesvirt ualawlibrary chanrobles virtual law libra ry
In a resolution dated August 29, 1985, this Court Resolved direct the
respondents Monetary Board and Central Bank hold hearings at which
the petitioner should be heard, and terminate such hearings and submit
its resolution within thirty (30) days. This Court Iurther resolved to
issue a temporary restraining order enjoining the respondents Irom
executing Iurther acts oI liquidation oI a bank. Acts such as receiving
collectibles and receivables or paying oII creditors' claims and other
transactions pertaining to normal operations oI a bank were no
enjoined. The Central Bank was also ordered to designate comptroller
Ior the petitioner BF. This Court also ordered th consolidation oI Civil
Cases Nos. 8108, 9676 and 10183 in Branch 136 oI the Regional Trial
Court oI Makati.chanroblesvirt ualawlibrary chanrobles virtua l law libra ry
However, on September 12, 1985, this Court in the meantime
suspended the hearing it ordered in its resolution oI August 29,
1985.chanroblesvirtualawlibrary chan robles virtual law librar y
On October 8, 1985, this Court submitted a resolution order ing
Branch 136 oI the Regional Trial Court oI Makati the presided over by
Judge Ricardo Francisco to conduct the hear ing contemplated in the
resolution oI August 29, 1985 in the most expeditious manner and to
submit its resolution to this Court.chanroblesvirtualawlibrary chanr obles virtual law l ibrary
In the Court's resolution oI February 19, 1987, the Court stated that the
hearing contemplated in the resolution oI August 29, 1985, which is to
ascertain whether substantial administrative due process had been
observed by the respondent Monetary Board, may be expedited by
Judge Manuel Cosico who now presides the court vacated by Judge
Ricardo Francisco, who was elevated to the Court oI Appeals, there
being no legal impediment or justiIiable reason to bar the Iormer Irom
conducting such hearing. Hence, this Court directed Judge Manuel
Cosico to expedite the hearing and submit his report to this Court.chanroblesvirtualawlibrary chan robles virtual law libra ry
On February 20, 1988, Judge Manuel Cosico submitted his report to
this Court with the recommendation that the resolutions oI respondents
Monetary Board and Central Bank authorizing the closure and
liquidation oI petitioner BP be upheld.chanroblesvirtualawlib rary chanro bles virtual law l ibrary
On October 21, 1988, petitioner BF Iiled an urgent motion to reopen
hearing to which respondents Iiled their comment on December 16,
1988. Petitioner Iiled their reply to respondent's comment oI January
11, 1989. AIter having deliberated on the grounds raised in the
pleadings, this Court in its resolution dated August 3, 1989 declared
that its intention as expressed in its resolution oI August 29, 1985 had
not been IaithIully adhered to by the herein petitioner and respondents.
The aIorementioned resolution had ordered a healing on the reports
that led respondents to order petitioner's closure and its alleged pre-
planned liquidation. This Court noted that during the reIerral hearing
however, a diIIerent scheme was Iollowed. Respondents merely
submitted to the commissioner their Iindings on the examinations
conducted on petitioner, aIIidavits oI the private respondents relative
to the Iindings, their reports to the Monetary Board and several other
documents in support oI their position while petitioner had merely
submitted objections to the Iindings oI respondents, counter-aIIidavits
oI its oIIicers and also documents to prove its claims. Although the
records disclose that both parties had not waived cross-examination oI
their deponents, no such cross-examination has been conducted. The
reception oI evidence in the Iorm oI aIIidavits was Iollowed
throughout, until the commissioner submitted his report and
recommendations to the Court. This Court also held that the
documents pertinent to the resolution oI the instant petition are the
Teodoro Report, Tiaoqui Report, Valenzuela, Aurellano and Tiaoqui
Report and the supporting documents which were made as the bases
by the reporters oI their conclusions contained in their respective
reports. This Court also Resolved in its resolution to re-open the
reIerral hearing that was terminated aIter Judge Cosico had submitted
his report and recommendation with the end in view oI allowing
petitioner to complete its presentation oI evidence and also Ior
respondents to adduce additional evidence, iI so minded, and Ior both
parties to conduct the required cross-examination oI
witnesses/deponents, to be done within a period oI three months. To
obviate all doubts on Judge Cosico's impartiality, this Court designated
a new hearing commissioner in the person oI Iormer Judge Consuelo
Santiago oI the Regional Trial Court, Makati, Branch 149 (now
Associate Justice oI the Court oI Appeals).chanroblesvirt ualawlibrary chanrobles virtual law libra ry
Three motions Ior intervention were Iiled in this case as Iollows: First,
in G.R. No. 70054 Iiled by Eduardo Rodriguez and Fortunate M.
Dizon, stockholders oI petitioner bank Ior and on behalI oI other
stockholders oI petitioner; second, in G.R. No. 78894, Iiled by the
same stockholders, and, third, again in G.R. No. 70054 by BF
Depositors' Association and others similarly situated. This Court, on
March 1, 1990, denied the aIoresaid motions Ior intervention.chanroblesvirtualawlib rary chanro bles virtual law li brary
On January 28, 1991, the hearing commissioner, Justice Consuelo
Santiago oI the Court oI Appeals submitted her report and
recommendation (to be hereinaIter called, "Santiago Report") on the
Iollowing issues stated therein as Iollows:
l) Had the Monetary Board observed the
procedural requirements laid down in
Sec. 29 oI R.A. 265, as amended to
justiIy th closure oI the Banco Filipino
Savings and Mortgage Bank?chanro bles virtual law li brary
2) On the date oI BF's closure (January
25, 1985) was its condition one oI
insolvency or would its continuance in
business involve probable loss to its
depositors or creditors?
The commissioner aIter evaluation oI the evidence presented Iound
and recommended the Iollowing:
1. That the TEODORO and TIAOQUI
reports did not establish in accordance
with See. 29 oI the R.A. 265, as
amended, BF's insolvency as oI July 31,
1984 or that its continuance in business
thereaIter would involve probable loss to
its depositors or creditors. On the
contrary, the evidence indicates that BF
was solvent on July 31, 1984 and that on
January 25, 1985, the day it was closed,
its insolvency was not clearly
established;chanrob les virtual law li brary
2. That consequently, BF's closure on
January 25, 1985, not having satisIied
the requirements prescribed under Sec.
29 oI RA 265, as amended, was null and
void.chanroblesvirtualawli brary chan robles virtual law library
3. That accordingly, by way oI
correction, BF should be allowed to re-
open subject to such laws, rules and
regulations that apply to its situation.
Respondents thereaIter Iiled a motion Ior leave to Iile objections to the
Santiago Report. In the same motion, respondents requested that the
report and recommendation be set Ior oral argument beIore the Court.
On February 7, 1991, this Court denied the request Ior oral argument
oI the parties.chanroblesvirtualawl ibrary chan robles virtual law librar y
On February 25, 1991, respondents Iiled their objections to the
Santiago Report. On March 5, 1991, respondents submitted a motion
Ior oral argument alleging that this Court is conIronted with two
conIlicting reports on the same subject, one upholding on all points the
Monetary Board's closure oI petitioner, (Cosico Report dated February
19, 1988) and the other (Santiago Report dated January 25, 1991)
holding that petitioner's closure was null and void because petitioner's
insolvency was not clearly established beIore its closure; and that such
a hearing on oral argrument will thereIore allow the parties to directly
conIront the issues beIore this Court.chanroblesvirtualawlibrar y chanrobles virt ual law libra ry
On March 12, 1991 petitioner Iiled its opposition to the motion Ior oral
argument. On March 20, 1991, it Iiled its reply to respondents'
objections to the Santiago Report.chanroblesvirtualawlibrary chanrobles vi rtual law lib rary
On June 18, 1991, a hearing was held where both parties were heard
on oral argument beIore this Court. The parties, having submitted their
respective memoranda, the case is now submitted Ior decision.
G.R. No. 78767
On February 2, 1985, Banco Filipino Iiled a complaint with the trial
court docketed as Civil Case No. 9675 to annul the resolution oI the
Monetary Board dated January 25, 1985, which ordered the closure oI
the bank and placed it under receivership.chanroblesvirtualawlib rary chanr obles virtual law l ibrary
On February 14, 1985, the Central Bank and the receivers Iiled a
motion to dismiss the complaint on the ground that the receivers had
not authorized anyone to Iile the action. In a supplemental motion to
dismiss, the Central Bank cited the resolution oI this Court dated
October 15, 1985 in G.R. No. 65723 entitled, "Central Bank et al. v.
Intermediate Appellate Court" whereby We held that a complaint
questioning the validity oI the receivership established by the Central
Bank becomes moot and academic upon the initiation oI liquidation
proceedings.chanroblesvirtualawlib rary chanrob les virtual law lib rary
While the motion to dismiss was pending resolution, petitioner herein
Metropolis Development Corporation (Metropolis Ior brevity) Iiled a
motion to intervene in the aIorestated civil case on the ground that as a
stockholder and creditor oI Banco Filipino, it has an interest in the
subject oI the action.chanroblesvirtualawl ibrary chan robles virtual law librar y
On July 19, 1985, the trial court denied the motion to dismiss and also
denied the motion Ior reconsideration oI the order later Iiled by
Central Bank. On June 5, 1985, the trial court allowed the motion Ior
intervention.chanroblesvirtualawlib rary chanrob les virtual law lib rary
Hence, the Central Bank and the receivers oI Banco Filipino Iiled a
petition Ior certiorari with the respondent appellate court alleging that
the trial court committed grave abuse oI discretion in not dismissing
Civil Case No. 9675.chanroblesvirtualawlibrary chanrobles vir tual law lib rary
On March 17, 1986, the respondent appellate court rendered a decision
annulling and setting aside the questioned orders oI the trial court, and
ordering the dismissal oI the complaint Iiled by Banco Filipino with
the trial court as well as the complaint in intervention oI petitioner
Metropolis Development Corporation.chanroblesvir tualawlibra ry chanrobles vir tual law lib rary
Hence this petition was Iiled by Metropolis Development Corporation
questioning the decision oI the respondent appellate court.
G.R. No. 78894
On February 2, 1985, a complaint was Iiled with the trial court in the
name oI Banco Filipino to annul the resolution o the Monetary Board
dated January 25, 1985 which ordered the closure oI Banco Filipino
and placed it under receivership. The receivers appointed by the
Monetary Board were Carlota Valenzuela, ArnulIo Aurellano and
Ramon Tiaoqui.chanroblesvi rtualawlibra ry chanrobles vi rtual law lib rary
On February 14, 1985, the Central Bank and the receiver Iiled a
motion to dismiss the complaint on the ground that the receiver had
not authorized anyone to Iile the action.chanroblesvirtualawl ibrary chan robles virtual law librar y
On March 22, 1985, the Monetary Board placed the bank under
liquidation and designated Valenzuela as liquidator and Aurellano and
Tiaoqui as deputy liquidators.chanroblesvirtualawlibrary chanrob les virtual law lib rary
The Central Bank Iiled a supplemental motion to dismiss which was
denied. Hence, the latter Iiled a petition Ior certiorari with the
respondent appellate court to set aside the order oI the trial court
denying the motion to dismiss. On March 17, 1986, the respondent
appellate court granted the petition and dismissed the complaint oI
Banco Filipino with the trial court.chanroblesvirtualawlibrary chanro bles virtual law l ibrary
Thus, this petition Ior certiorari was Iiled with the petitioner
contending that a bank which has been closed and placed under
receivership by the Central Bank under Section 29 oI RA 265 could
Iile suit in court in its name to contest such acts oI the Central Bank,
without the authorization oI the CB-appointed receiver.chanroblesvirtualawlib rary chanro bles virtual law l ibrary
AIter deliberating on the pleadings in the Iollowing cases:
1. In G.R. No. 68878, the respondent's
motion Ior reconsideration;chanrob les virtual law lib rary
2. In G.R. Nos. 77255-58, the petition,
comment, reply, rejoinder and sur-
rejoinder;chan robles virtual law librar y
2. In G.R. No. 78766, the petition,
comment, reply and rejoinder;chan robles virtual law library
3. In G.R. No. 81303, the petitioner's
motion Ior reconsideration;chanrob les virtual law lib rary
4. In G.R.No. 81304, the petition,
comment and reply; chanrobles vi rtual law lib rary
5. Finally, in G.R. No. 90473, the
petition comment and reply.
We Iind the motions Ior reconsideration in G.R. Nos. 68878 and 81303
and the petitions in G.R. Nos. 77255-58, 78766, 81304 and 90473
devoid oI merit.chanroblesvirtualawlibra ry chanrobles virt ual law libra ry
Section 29 oI the Republic Act No. 265, as amended known as the
Central Bank Act, provides that when a bank is forbidden to do
business in the Philippines and placed under receivership, the person
desinated as receiver shall immediately take chare of the banks
assets and liabilities, as expeditiously as possible, collect and ather
all the assets and administer the same for the benefit of its creditors,
and represent the bank personally or throuh counsel as he may retain
in all actions or proceedins for or aainst the institution, exercising
all the powers necessary Ior these purposes including, but not limited
to, brinin and foreclosin mortaes in the name of the bank. II the
Monetary Board shall later determine and conIirm that banking
institution is insolvent or cannot resume business saIety to depositors,
creditors and the general public, it shall, public interest requires, order
its liquidation and appoint a liquidator who shall take over and
continue the functions of receiver previously appointed by onetary
Board. The liquid Ior may, in the name oI the bank and with the
assistance counsel as he may retain, institute such actions as may
necessary in the appropriate court to collect and recover a counts and
assets oI such institution or deIend any action It against the
institution.chanroblesvirtualawlib rary chanr obles virtual law l ibrary
When the issue on the validity oI the closure and receivership oI
Banco Filipino bank was raised in G.R. No. 70054, pendency oI the
case did not diminish the powers and authority oI the designated
liquidator to eIIectuate and carry on the a ministration oI the bank. In
Iact when We adopted a resolute on August 25, 1985 and issued a
restraining order to respondents Monetary Board and Central Bank,
We enjoined me Iurther acts oI liquidation. Such acts oI liquidation, as
explained in Sec. 29 oI the Central Bank Act are those which
constitute the conversion oI the assets oI the banking institution to
money or the sale, assignment or disposition oI the s to creditors and
other parties Ior the purpose oI paying debts oI such institution. We
did not prohibit however acts a as receiving collectibles and
receivables or paying oII credits claims and other transactions
pertainin to normal operate of a bank. There is no doubt that the
prosecution oI suits collection and the Ioreclosure oI mortgages
against debtors the bank by the liquidator are among the usual and
ordinary transactions pertaining to the administration oI a bank. their
did Our order in the same resolution dated August 25, 1985 Ior the
designation by the Central Bank oI a comptroller Banco Filipino alter
the powers and Iunctions; oI the liquid insoIar as the management oI
the assets oI the bank is concerned. The mere duty oI the comptroller
is to supervise counts and Iinances undertaken by the liquidator and to
d mine the propriety oI the latter's expenditures incurred behalI oI the
bank. Notwithstanding this, the liquidator is empowered under the law
to continue the Iunctions oI receiver is preserving and keeping intact
the assets oI the bank in substitution oI its Iormer management, and to
prevent the dissipation oI its assets to the detriment oI the creditors oI
the bank. These powers and Iunctions oI the liquidator in directing the
operations oI the bank in place oI the Iormer management or Iormer
oIIicials oI the bank include the retaining oI counsel oI his choice in
actions and proceedings Ior purposes oI administration.chanroblesvirtualawlib rary chanr obles virtual law l ibrary
Clearly, in G.R. Nos. 68878, 77255-58, 78766 and 90473, the
liquidator by himselI or through counsel has the authority to bring
actions Ior Ioreclosure oI mortgages executed by debtors in Iavor oI
the bank. In G.R. No. 81303, the liquidator is likewise authorized to
resist or deIend suits instituted against the bank by debtors and
creditors oI the bank and by other private persons. Similarly, in G.R.
No. 81304, due to the aIorestated reasons, the Central Bank cannot be
compelled to IulIill Iinancial transactions entered into by Banco
Filipino when the operations oI the latter were suspended by reason oI
its closure. The Central Bank possesses those powers and Iunctions
only as provided Ior in Sec. 29 oI the Central Bank Act.chanroblesvirtualawlibrary chanro bles virtual law li brary
While We recognize the actual closure oI Banco Filipino and the
consequent legal eIIects thereoI on its operations, We cannot uphold
the legality oI its closure and thus, Iind the petitions in G.R. Nos.
70054, 78767 and 78894 impressed with merit. We hold that the
closure and receivership oI petitioner bank, which was ordered by
respondent Monetary Board on January 25, 1985, is null and void.chanroblesvirtualawlib rary chanr obles virtual law l ibrary
It is a well-recognized principle that administrative and discretionary
Iunctions may not be interIered with by the courts. In general, courts
have no supervising power over the proceedings and actions oI the
administrative departments oI the government. This is generally true
with respect to acts involving the exercise oI judgment or discretion,
and Iindings oI Iact. But when there is a grave abuse oI discretion
which is equivalent to a capricious and whimsical exercise oI
judgment or where the power is exercised in an arbitrary or despotic
manner, then there is a justiIication Ior the courts to set aside the
administrative determination reached (Lim, Sr. v. Secretary oI
Agriculture and Natural Resources, L-26990, August 31, 1970, 34
SCRA 751) chanrobles virtual law lib rary
The jurisdiction oI this Court is called upon, once again, through these
petitions, to undertake the delicate task oI ascertaining whether or not
an administrative agency oI the government, like the Central Bank oI
the Philippines and the Monetary Board, has committed grave abuse oI
discretion or has acted without or in excess oI jurisdiction in issuing
the assailed order. Coupled with this task is the duty oI this Court not
only to strike down acts which violate constitutional protections or to
nulliIy administrative decisions contrary to legal mandates but also to
prevent acts in excess oI authority or jurisdiction, as well as to correct
maniIest abuses oI discretion committed by the oIIicer or tribunal
involved.chanroblesvirtualawl ibrary chan robles virtual law librar y
The law applicable in the determination oI these issues is Section 29 oI
Republic Act No. 265, as amended, also known as the Central Bank
Act, which provides:
SEC. 29. Proceedins upon insolvency. - Whenever,
upon examination by the head oI the appropriate
supervising or examining department or his examiners
or agents into the condition oI any bank or non-bank
Iinancial intermediary perIorming quasi-banking
Iunctions, it shall be disclosed that the condition oI the
same is one oI insolvency, or that its continuance in
business would involve probable loss to its depositors
or creditors, it shall be the duty oI the department head
concerned Iorthwith, in writing, to inIorm the Monetary
Board oI the Iacts. The Board may, upon Iinding the
statements oI the department head to be true, Iorbid the
institution to do business in the Philippines and
designate an oIIicial oI the Central Bank or a person oI
recognized competence in banking or Iinance, as
receiver to immediately take charge oI its assets and
liabilities, as expeditiously as possible collect and
gather all the assets and administer the same Ior the
beneIit's oI its creditors, and represent the bank
personally or through counsel as he may retain in all
actions or proceedings Ior or against the institution,
exercising all the powers necessary Ior these purposes
including, but not limited to, bringing and Ioreclosing
mortgages in the name oI the bank or non-bank
Iinancial intermediary perIorming quasi-banking
Iunctions.chanroblesvirtualawl ibrary chan robles virtual law libra ry
The Monetary Board shall thereupon determine within
sixty days whether the institution may be reorganized or
otherwise placed in such a condition so that it may be
permitted to resume business with saIety to its
depositors and creditors and the general public and shall
prescribe the conditions under which such resumption
oI business shall take place as well as the time Ior
IulIillment oI such conditions. In such case, the
expenses and Iees in the collection and administration
oI the assets oI the institution shall be determined by
the Board and shall be paid to the Central Bank out oI
the assets oI such institution.chanroblesvirtualawlib rary chanr obles virtual law l ibrary
II the Monetary Board shall determine and conIirm
within the said period that the bank or non-bank
Iinancial intermediary perIorming quasi-banking
Iunctions is insolvent or cannot resume business with
saIety to its depositors, creditors, and the general
public, it shall, iI the public interest requires, order its
liquidation, indicate the manner oI its liquidation and
approve a liquidation plan which may, when warranted,
involve disposition oI any or all assets in consideration
Ior the assumption oI equivalent liabilities. The
liquidator designated as hereunder provided shall, by
the Solicitor General, Iile a petition in the regional trial
court reciting the proceedings which have been taken
and praying the assistance oI the court in the liquidation
oI such institutions. The court shall have jurisdiction in
the same proceedings to assist in the adjudication oI the
disputed claims against the bank or non-bank Iinancial
intermediary perIorming quasi-banking Iunctions and in
the enIorcement oI individual liabilities oI the
stockholders and do all that is necessary to preserve the
assets oI such institutions and to implement the
liquidation plan approved by the Monetary Board. The
Monetary Board shall designate an oIIicial oI the
Central bank or a person oI recognized competence in
banking or Iinance, as liquidator who shall take over
and continue the Iunctions oI the receiver previously
appointed by the Monetary Board under this Section.
The liquidator shall, with all convenient speed, convert
the assets oI the banking institutions or non-bank
Iinancial intermediary perIorming quasi-banking
Iunction to money or sell, assign or otherwise dispose
oI the same to creditors and other parties Ior the
purpose oI paying the debts oI such institution and he
may, in the name oI the bank or non-bank Iinancial
intermediary perIorming quasi-banking Iunctions and
with the assistance oI counsel as he may retain, institute
such actions as may be necessary in the appropriate
court to collect and recover accounts and assets oI such
institution or deIend any action Iiled against the
institution: Provided, However, That aIter having
reasonably established all claims against the institution,
the liquidator may, with the approval oI the court, eIIect
partial payments oI such claims Ior assets oI the
institution in accordance with their legal priority.chanroblesvirtualawl ibra ry chanrobles virtual law libra ry
The assets oI an institution under receivership or
liquidation shall be deemed in custodia leis in the
hands oI the receiver or liquidator and shall Irom the
moment oI such receivership or liquidation, be exempt
Irom any order oI garnishment, levy, attachment,
orexecution.chanroblesvirtualawl ibrary chan robles virtual law librar y
The provisions oI any law to the contrary
notwithstanding, the actions oI the Monetary Board
under this Section, Section 28-A, an the second
paragraph oI Section 34 oI this Act shall be Iinal an
executory, and can be set aside by a court only iI there
is convince prooI, aIter hearing, that the action is
plainly arbitrary and made in bad Iaith: Provided, That
the same is raised in an appropriate pleading Iiled by
the stockholders oI record representing the majority oI
th capital stock within ten (10) days Irom the date the
receiver take charge oI the assets and liabilities oI the
bank or non-bank Iinancial intermediary perIorming
quasi-banking Iunctions or, in case oI conservatorship
or liquidation, within ten (10) days Irom receipt oI
notice by the said majority stockholders oI said bank or
non-bank Iinancial intermediary oI the order oI its
placement under conservatorship o liquidation. No
restraining order or injunction shall be issued by an
court enjoining the Central Bank Irom implementing its
actions under this Section and the second paragraph oI
Section 34 oI this Act in th absence oI any convincing
prooI that the action oI the Monetary Board is plainly
arbitrary and made in bad Iaith and the petitioner or
plaintiII Iiles a bond, executed in Iavor oI the Central
Bank, in an amount be Iixed by the court. The
restraining order or injunction shall be reIused or, iI
granted, shall be dissolved upon Iiling by the Central
Bank oI a bond, which shall be in the Iorm oI cash or
Central Bank cashier's check, in an amount twice the
amount oI the bond oI th petitioner or plaintiII
conditioned that it will pay the damages which the
petitioner or plaintiII may suIIer by the reIusal or the
dissolution oI the injunction. The provisions oI Rule 58
oI the New Rules oI Court insoIar as they are applicable
and not inconsistent with the provision oI this Section
shall govern the issuance and dissolution oI the re
straining order or injunction contemplated in this
Section.
xxx xxx xxx
Based on the aIorequoted provision, the Monetary Board may order
the cessation oI operations oI a bank in the Philippine and place it
under receivership upon a Iinding oI insolvency or when its
continuance in business would involve probable loss its depositors or
creditors. II the Monetary Board shall determine and conIirm within
sixty (60) days that the bank is insolvent or can no longer resume
business with saIety to its depositors, creditors and the general public,
it shall, iI public interest will be served, order its liquidation.chanroblesvirtualawli brary chan robles virtual law l ibrary
SpeciIically, the basic question to be resolved in G.R. Nos. 70054,
78767 and 78894 is whether or not the Central Bank and the Monetary
Board acted arbitrarily and in bad Iaith in Iinding and thereaIter
concluding that petitioner bank is insolvent, and in ordering its closure
on January 25, 1985.chanroblesvirtualawlibra ry chanrobles vi rtual law lib rary
As We have stated in Our resolution dated August 3, 1989, the
documents pertinent to the resolution oI these petitions are the
Teodoro Report, Tiaoqui Report, and the Valenzuela, Aurellano and
Tiaoqui Report and the supporting documents made as bases by the
supporters oI their conclusions contained in their respective reports.
We will Iocus Our study and discussion however on the Tiaoqui
Report and the Valenzuela, Aurellano and Tiaoqui Report. The Iormer
recommended the closure and receivership oI petitioner bank while the
latter report made the recommendation to eventually place the
petitioner bank under liquidation. This Court shall likewise take into
consideration the Iindings contained in the reports oI the two
commissioners who were appointed by this Court to hold the reIerral
hearings, namely the report by Judge Manuel Cosico submitted
February 20, 1988 and the report submitted by Justice Consuelo
Santiago on January 28, 1991.chanroblesvirtualawlibrary chan robles virtual law library
There is no question that under Section 29 oI the Central Bank Act, the
Iollowing are the mandatory requirements to be complied with beIore
a bank Iound to be insolvent is ordered closed and Iorbidden to do
business in the Philippines: Firstly, an examination shall be conducted
by the head oI the appropriate supervising or examining department or
his examiners or agents into the condition oI the bank; secondly, it
shall be disclosed in the examination that the condition oI the bank is
one oI insolvency, or that its continuance in business would involve
probable loss to its depositors or creditors; thirdly, the department
head concerned shall inIorm the Monetary Board in writing, oI the
Iacts; and lastly, the Monetary Board shall Iind the statements oI the
department head to be true.chanroblesvirtualawlibrary chan robles virtual law libra ry
Anent the Iirst requirement, the Tiaoqui report, submitted on January
23, 1985, revealed that the Iinding oI insolvency oI petitioner was
based on the partial list oI exceptions and Iindings on the regular
examination oI the bank as oI July 31, 1984 conducted by the
Supervision and Examination Sector II oI the Central Bank oI the
PhilippinesCentral Bank (p. 1, Tiaoqui Report).chanroblesvirtualawlibrary chan robles virt ual law library
On December 17, 1984, this list oI exceptions and Iinding was
submitted to the petitioner bank (p. 6, Tiaoqui Report) This was
attached to the letter dated December 17, 1984, oI examiner-in-charge
Dionisio Domingo oI SES Department II oI the Central Bank to
Teodoro Arcenas, president oI petitione bank, which disclosed that the
examination oI the petitioner bank as to its Iinancial condition as oI
July 31, 1984 was not yet completed or Iinished on December 17,
1984 when the Central Bank submitted the partial list oI Iindings oI
examination to th petitioner bank. The letter reads:
In connection with the regular examination oI your
institution a oI July 31, 1984, we are submittin
herewith a partial list of our exceptions/findins for
your comments.
Please be inIormed that we have not yet officially
terminated our examination (tentatively scheduled last
December 7, 1984) and that we are still awaitin for
the unsubmitted replies to our previous letters requests.
oreover, other findins/ observations are still bein
summari:ed includin the classification of loans and
other risk assets. These shall be submitted to you in due
time (p. 810, Rollo, Vol. III; emphasis ours).
It is worthy to note that a conIerence was held on January 21, 1985 at
the Central Bank between the oIIicials oI the latter an oI petitioner
bank. What transpired and what was agreed upon during the
conIerence was explained in the Tiaoqui report.
... The discussion centered on the substantial exposure
oI the bank to the various entities which would have a
relationship with the bank; the manner by which some
bank Iunds were made indirectly available to several
entities within the group; and the unhealth Iinancial
status oI these Iirms in which the bank was additionally
exposed through new Iunds or reIinancing
accommodation including accrued interest.chanroblesvirtualawlibrar y chanrobles virt ual law libra ry
Queried in the impact oI these clean loans, on the bank
solvency Mr. Dizon (BF Executive Vice President)
intimated that, collectively these corporations have
large undeveloped real estate properties in the suburbs
which can be made answerable Ior the unsecured loans
a well as the Central Bank's credit accommodations.
formal reply of the bank would still be forthcomin.
(pp. 58-59, Rollo, Vol. I; emphasis ours)
Clearly, Tiaoqui based his report on an incomplete examination oI
petitioner bank and outrightly concluded therein that the latter's
Iinancial status was one oI insolvency or illiquidity. He arrived at the
said conclusion Irom the Iollowing Iacts: that as oI July 31, 1984, total
capital accounts consisting oI paid-in capital and other capital accounts
such as surplus, surplus reserves and undivided proIits aggregated
P351.8 million; that capital adjustments, however, wiped out the
capital accounts and placed the bank with a capital deIiciency
amounting to P334.956 million; that the biggest adjustment which
contributed to the deIicit is the provision Ior estimated losses on
accounts classiIied as doubtIul and loss which was computed at P600.4
million pursuant to the examination. This provision is also known as
valuation reserves which was set up or deducted against the capital
accounts oI the bank in arriving at the latter's Iinancial condition.chanrob lesvirtualawlib rary chanrobles vi rtual law lib rary
Tiaoqui however admits the insuIIiciency and unreliability oI the
Iindings oI the examiner as to the setting up oI recommended
valuation reserves Irom the assets oI petitioner bank. He stated:
%he recommended valuation reserves as bases for
determinin the financial status of the bank would need
to be discussed with the bank, consistent with standard
examination procedure, for which the bank would in
turn reply. lso, the examination has not been officially
terminated. (p. 7. Tiaoqui report; p. 59, Rollo, Vol. I)
In his testimony in the second reIerral hearing beIore Justice Santiago,
Tiaoqui testiIied that on January 21, 1985, he met with oIIicers oI
petitioner bank to discuss the advanced Iindings and exceptions made
by Mr. Dionisio Domingo which covered 70-80 oI the bank's loan
portIolio; that at that meeting, Fortunato Dizon (BF's Executive Vice
President) said that as regards the unsecured loans granted to various
corporations, said corporations had large undeveloped real estate
properties which could be answerable Ior the said unsecured loans and
that a reply Irom BF was Iorthcoming, that he (Tiaoqui) however
prepared his report despite the absence oI such reply; that he believed,
as in Iact it is stated in his report, that despite the meeting on January
21, 1985, there was still a need to discuss the recommended valuation
reserves oI petitioner bank and; that he however, did not wait anymore
Ior a discussion oI the recommended valuation reserves and instead
prepared his report two days aIter January 21, 1985 (pp. 3313-3314,
Rollo).chanroblesvirtualawlibrary chan robles virtual law librar y
Records Iurther show that the examination oI petitioner bank was
oIIicially terminated only when Central Bank Examination-charge
Dionisio Domingo submitted his Iinal report oI examination on March
4,1985.chanroblesvirtualawlibrary chanrobles vi rtual law lib rary
It is evident Irom the Ioregoing circumstances that the examination
contemplated in Sec. 29 oI the CB Act as a mandatory requirement
was not completely and Iully complied with. Despite the existence oI
the partial list oI Iindings in the examination oI the bank, there were
still highly signiIicant items to be weighed and determined such as the
matter oI valuation reserves, beIore these can be considered in the
Iinancial condition oI the bank. It would be a drastic move to conclude
prematurely that a bank is insolvent iI the basis Ior such conclusion is
lacking and insuIIicient, especially iI doubt exists as to whether such
bases or Iindings IaithIully represent the real Iinancial status oI the
bank.chanroblesvir tualawlibrar y chanrobles virt ual law libra ry
The actuation oI the Monetary Board in closing petitioner bank on
January 25, 1985 barely Iour days aIter a conIerence with the latter on
the examiners' partial Iindings on its Iinancial position is also violative
oI what was provided in the CB Manual oI Examination Procedures.
Said manual provides that only aIter the examination is concluded,
should a pre-closing conIerence led by the examiner-in-charge be held
with the oIIicers/representatives oI the institution on the
Iindings/exception, and a copy oI the summary oI the
Iindings/violations should be Iurnished the institution examined so that
corrective action may be taken by them as soon as possible (Manual oI
Examination Procedures, General Instruction, p. 14). It is hard to
understand how a period oI Iour days aIter the conIerence could be a
reasonable opportunity Ior a bank to undertake a responsive and
corrective action on the partial list oI Iindings oI the examiner-in-
charge.chanroblesvir tualawlibra ry chanrobles vir tual law libra ry
We recognize the Iact that it is the responsibility oI the Central Bank
oI the Philippines to administer the monetary, banking and credit
system oI the country and that its powers and Iunctions shall be
exercised by the Monetary Board pursuant to Rep. Act No. 265,
known as the Central Bank Act. Consequently, the power and
authority oI the Monetary Board to close banks and liquidate them
thereaIter when public interest so requires is an exercise oI the police
power oI the state. Police power, however, may not be done arbitratrily
or unreasonably and could be set aside iI it is either capricious,
discriminatory, whimsical, arbitrary, unjust or is tantamount to a denial
oI due process and equal protection clauses oI the Constitution
(Central Bank v. Court oI Appeals, Nos. L-50031-32, July 27, 1981,
106 SCRA 143).chanroblesvirtualawlibra ry chanrobles vir tual law libra ry
In the instant case, the basic standards oI substantial due process were
not observed. Time and again, We have held in several cases, that the
procedure oI administrative tribunals must satisIy the Iundamentals oI
Iair play and that their judgment should express a well-supported
conclusion.chanroblesvirtualawlib rary chanrob les virtual law lib rary
In the celebrated case oI n %ibay v. Court of Industrial Relations, 69
Phil. 635, this Court laid down several cardinal primary rights which
must be respected in a proceeding beIore an administrative body.chanroblesvirtualawlib rary chanrob les virtual law lib rary
However, as to the requirement oI notice and hearing, Sec. 29 oI RA
265 does not require a previous hearing beIore the Monetary Board
implements the closure oI a bank, since its action is subject to judicial
scrutiny as provided Ior under the same law (Rural Bank oI Bato v.
IAC, G.R. No. 65642, October 15, 1984, Rural Bank v. Court oI
Appeals, G.R. 61689, June 20, 1988,162 SCRA 288).chanroblesvirtualawlibrary chanrob les virtual law li brary
Notwithstanding the Ioregoing, administrative due process does not
mean that the other important principles may be dispensed with,
namely: the decision oI the administrative body must have something
to support itselI and the evidence must be substantial. Substantial
evidence is more than a mere scintilla. It means such relevant evidence
as a reasonable mind might accept as adequate to support a conclusion
(Ang Tibay vs. CIR, supra). Hence, where the decision is merely
based upon pieces oI documentary evidence that are not suIIiciently
substantial and probative Ior the purpose and conclusion they are
presented, the standard oI Iairness mandated in the due process clause
is not met. In the case at bar, the conclusion arrived at by the
respondent Board that the petitioner bank is in an illiquid Iinancial
position on January 23, 1985, as to justiIy its closure on January 25,
1985 cannot be given weight and Iinality as the report itselI admits the
inadequacy oI its basis to support its conclusion.chanroblesvirtualawlib rary chan robles virtual law l ibrary
The second requirement provided in Section 29, R.A. 265 beIore a
bank may be closed is that the examination should disclose that the
condition oI the bank is one oI insolvency.chan roblesvirtualawl ibrary chan robles virtual law librar y
As to the concept oI whether the bank is solvent or not, the
respondents contend that under the Central Bank Manual oI
Examination Procedures, Central Bank examiners must recommend
valuation reserves, when warranted, to be set up or deducted against
the corresponding asset account to determine the bank's true condition
or net worth. In the case oI loan accounts, to which practically all the
questioned valuation reserves reIer, the manual provides that: chanrobles virtual law library
1. For doubtIul loans, or loans the ultimate collection oI which is
doubtIul and in which a substantial loss is probable but not yet
deIinitely ascertainable as to extent, valuation reserves oI IiIty per cent
(50) oI the accounts should be recommended to be set up.chanroblesvirtualawlibrary chanro bles virtual law l ibrary
2. For loans classiIied as loss, or loans regarded by the examiner as
absolutely uncollectible or worthless, valuation reserves oI one
hundred percent (100) oI the accounts should be recommended to be
set up (p. 8, Objections to Santiago report).chanroblesvirtualawlibrary chanrobles virtual law libra ry
The Ioregoing criteria used by respondents in determining the Iinancial
condition oI the bank is based on Section 5 oI RA 337, known as the
General Banking Act which states:
Sec. 5. The Iollowing terms shall be held to be
synonymous and interchangeable: chan robles virtual law library
... I. Unimpaired Capital and Surplus, "Combined
capital accounts," and "Net worth," which terms shall
mean Ior the purposes oI this Act, the total oI the
"unimpaired paid-in capital, surplus, and undivided
proIits net oI such valuation reserves as may be
required by the Central Bank."
There is no doubt that the Central Bank Act vests authority upon the
Central Bank and Monetary Board to take charge and administer the
monetary and banking system oI the country and this authority
includes the power to examine and determine the Iinancial condition oI
banks Ior purposes provided Ior by law, such as Ior the purpose oI
closure on the ground oI insolvency stated in Section 29 oI the Central
Bank Act. But express grants oI power to public oIIicers should be
subjected to a strict interpretation, and will be construed as conIerring
those powers which are expressly imposed or necessarily implied
(Floyd Mechem, Treatise on the Law oI Public OIIices and OIIicers, p.
335).chanroblesvirtualawlibrary chanrob les virtual law li brary
In this case, there can be no clearer explanation oI the concept oI
insolvency than what the law itselI states. Sec. 29 oI the Central Bank
Act provides that insolvency under the Act, shall be understood to
mean that "the reali:able assets of a bank or a non-bank Iinancial
intermediary perIorming quasi-banking Iunctions as determined by the
Central Bank are insufficient to meet its liabilities."chanrobles virtual law libra ry
Hence, the contention oI the Central Bank that a bank's true Iinancial
condition is synonymous with the terms "unimpaired capital and
surplus," "combined capital accounts" and net worth aIter deducting
valuation reserves Irom the capital, surplus and unretained earnings,
citing Sec. 5 oI RA 337 is misplaced.chanroblesvirt ualawlibrary chanrobles virtual law libra ry
Firstly, it is clear Irom the law that a solvent bank is one in which its
assets exceed its liabilities. It is a basic accounting principle that assets
are composed oI liabilities and capital. The term "assets" includes
capital and surplus" (Exley v. Harris, 267 p. 970, 973, 126 Kan., 302).
On the other hand, the term "capital" includes common and preIerred
stock, surplus reserves, surplus and undivided proIits. (Manual oI
Examination Procedures, Report oI Examination on Department oI
Commercial and Savings Banks, p. 3-C). II valuation reserves would
be deducted Irom these items, the result would merely be the networth
or the unimpaired capital and surplus oI the bank applying Sec. 5 oI
RA 337 but not the total Iinancial condition oI the bank.chanroblesvir tualawlibrar y chanrobles virt ual law libra ry
Secondly, the statement oI assets and liabilities is used in balance
sheets. Banks use statements oI condition to reIlect the amounts,
nature and changes in the assets and liabilities. The Central Bank
Manual oI Examination Procedures provides a Iormat or checklist oI a
statement oI condition to be used by examiners as guide in the
examination oI banks. The Iormat enumerates the items which will
compose the assets and liabilities oI a bank. Assets include cash and
those due Irom banks, loans, discounts and advances, Iixed assets and
other property owned or acquired and other miscellaneous assets. The
amount oI loans, discounts and advances to be stated in the statement
oI condition as provided Ior in the manual is computed aIter deducting
valuation reserves when deemed necessary. On the other hand,
liabilities are composed oI demand deposits, time and savings
deposits, cashier's, manager's and certiIied checks, borrowings, due to
head oIIice, branches; and agencies, other liabilities and deIerred
credits (Manual oI Examination Procedure, p. 9). The amounts stated
in the balance sheets or statements oI condition including the
computation oI valuation reserves when justiIied, are based however,
on the assumption that the bank or company will continue in business
indeIinitely, and thereIore, the networth shown in the statement is in
no sense an indication oI the amount that might be realized iI the bank
or company were to be liquidated immediately (Prentice Hall
Encyclopedic Dictionary oI Business Finance, p. 48). Further, based
on respondents' submissions, the allowance Ior probable losses on
loans and discounts represents the amount set up aainst current
operations to provide Ior possible losses arising Irom non-collection oI
loans and advances, and this account is also reIerred to as valuation
reserve (p. 9, Objections to Santiago report). Clearly, the statement oI
condition which contains a provision Ior recommended valuation
reserves should not be used as the ultimate basis to determine the
solvency oI an institution Ior the purpose oI termination oI its
operations.chanroblesvir tualawlibra ry chanrobles vir tual law lib rary
Respondents acknowledge that under the said CB manual, CB
examiners must recommend valuation reserves, when warranted, to be
set up against the corresponding asset account (p. 8, Objections to
Santiago report). Tiaoqui himselI, as author oI the report
recommending the closure oI petitioner bank admits that the valuation
reserves should still be discussed with the petitioner bank in
compliance with standard examination procedure. Hence, Ior the
Monetary Board to unilaterally deduct an uncertain amount as
valuation reserves Irom the assets oI a bank and to conclude thereIrom
without suIIicient basis that the bank is insolvent, would be totally
unjust and unIair.chanroblesvirtualawlib rary chanr obles virtual law l ibrary
The test oI insolvency laid down in Section 29 oI the Central Bank Act
is measured by determining whether the realizable assets oI a bank are
leas than its liabilities. Hence, a bank is solvent iI the Iair cash value oI
all its assets, realizable within a reasonable time by a reasonable
prudent person, would equal or exceed its total liabilities exclusive oI
stock liability; but iI such Iair cash value so realizable is not suIIicient
to pay such liabilities within a reasonable time, the bank is insolvent.
(Gillian v. State, 194 N.E. 360, 363, 207 Ind. 661). Stated in other
words, the insolvency oI a bank occurs when the actual cash market
value oI its assets is insuIIicient to pay its liabilities, not considering
capital stock and surplus which are not liabilities Ior such purpose
(Exley v. Harris, 267 p. 970, 973,126 Kan. 302; Alexander v.
Llewellyn, Mo. App., 70 S.W. 2n 115,117).chanroblesvirtualawlibrary chanrobles vir tual law lib rary
In arriving at the computation oI realizable assets oI petitioner bank,
respondents used its books which undoubtedly are not reIlective oI the
actual cash or Iair market value oI its assets. This is not the proper
procedure contemplated in Sec. 29 oI the Central Bank Act. Even the
CB Manual oI Examination Procedures does not conIine examination
oI a bank solely with the determination oI the books oI the bank. The
latter is part oI auditing which should not be conIused with
examination. Examination appraises the soundness of the institutions
assets, the quality and character of manaement and determines the
institutions compliance with laws, rules and reulations. Audit is a
detailed inspection oI the institution's books, accounts, vouchers,
ledgers, etc. to determine the recording oI all assets and liabilities.
Hence, examination concerns itselI with review and appraisal, while
audit concerns itselI with veriIication (CB Manual oI Examination
Procedures, General Instructions, p. 5). This Court however, is not in
the position to determine how much cash or market value shall be
assigned to each oI the assets and liabilities oI the bank to determine
their total realizable value. The proper determination oI these matters
by using the actual cash value criteria belongs to the Iield oI Iact-
Iinding expertise oI the Central Bank and the Monetary Board.
Notwithstanding the Iact that the Iigures arrived at by the respondent
Board as to assets and liabilities do not truly indicate their realizable
value as they were merely based on book value, We will however, take
a look at the Iigures presented by the Tiaoqui Report in concluding
insolvency as oI July 31, 1984 and at the Iigures presented by the CB
authorized deputy receiver and by the Valenzuela, Aurellano and
Tiaoqui Report which recommended the liquidation oI the bank by
reason oI insolvency as o January 25,1985.chanroblesvirtualawlibra ry chanrobles vir tual law lib rary
The Tiaoqui report dated January 23, 1985, which was based on partial
examination Iindings on the bank's condition as oI July 31, 1984,
states that total liabilities oI P5,282.1 million exceeds total assets oI
P4,947.2 million aIter deducting Irom the assets valuation reserves oI
P612.2 million. Since, as We have explained in our previous
discussion that valuation reserves can not be legally deducted as there
was no truthIul and complete evaluation thereoI as admitted by the
Tiaoqui report itselI, then an adjustment oI the Iigures win show that
the liabilities oI P5,282.1 million will not exceed the total assets which
will amount to P5,559.4 iI the 612.2 million allotted to valuation
reserves will not be deducted Irom the assets. There can be no basis
thereIore Ior both the conclusion oI insolvency and Ior the decision oI
the respondent Board to close petitioner bank and place it under
receivership.chanroblesvir tualawlibra ry chanrobles vir tual law lib rary
Concerning the Iinancial position oI the bank as oI January 25, 1985,
the date oI the closure oI the bank, the consolidated statement oI
condition thereoI as oI the aIoresaid date shown in the Valenzuela,
Aurellano and Tiaoqui report on the receivership oI petitioner bank,
dated March 19, 1985, indicates that total liabilities oI 4,540.84
million does not exceed the total assets oI 4,981.53 million. Likewise,
the consolidated statement oI condition oI petitioner bank as oI
January 25, 1985 prepared by the Central Bank Authorized Deputy
Receiver Artemio Cruz shows that total assets amounting to
P4,981,522,996.22 even exceeds total liabilities amounting to
P4,540,836,834.15. Based on the Ioregoing, there was no valid reason
Ior the Valenzuela, Aurellano and Tiaoqui report to Iinally recommend
the liquidation oI petitioner bank instead oI its rehabilitation.chanroblesvirtualawlib rary chanro bles virtual law li brary
We take note oI the exhaustive study and Iindings oI the Cosico report
on the petitioner bank's having engaged in unsaIe, unsound and
Iraudulent banking practices by the granting oI huge unsecured loans
to several subsidiaries and related companies. We do not see, however,
that this has any material bearing on the validity oI the closure. Section
34 oI the RA 265, Central Bank Act empowers the Monetary Board to
take action under Section 29 oI the Central Bank Act when a bank
"persists in carrying on its business in an unlawIul or unsaIe manner."
There was no showing whatsoever that the bank had persisted in
committing unlawIul banking practices and that the respondent Board
had attempted to take eIIective action on the bank's alleged activities.
During the period Irom July 27, 1984 up to January 25, 1985, when
petitioner bank was under conservatorship no oIIicial oI the bank was
ever prosecuted, suspended or removed Ior any participation in unsaIe
and unsound banking practices, and neither was the entire management
oI the bank replaced or substituted. In Iact, in her testimony during the
second reIerral hearing, Carlota Valenzuela, CB Deputy Governor,
testiIied that the reason Ior petitioner bank's closure was not unsound,
unsaIe and Iraudulent banking practices but the alleged insolvency
position oI the bank (TSN, August 3, 1990, p. 3316, Rollo, Vol.
VIII).chanroblesvirtualawlibrary chanro bles virtual law li brary
Finally, another circumstance which point to the solvency oI petitioner
bank is the granting by the Monetary Board in Iavor oI the Iormer a
credit line in the amount oI P3 billion along with the placing oI
petitioner bank under conservatorship by virtue oI M.B. Resolution
No. 955 dated July 27, 1984. This paved the way Ior the reopening oI
the bank on August 1, 1984 aIter a selI-imposed bank holiday on July
23, 1984.chanroblesvirtualawlibrary chan robles virtual law librar y
On emergency loans and advances, Section 90 oI RA 265 provides two
types oI emergency loans that can be granted by the Central Bank to a
Iinancially distressed bank:
Sec. 90. ... In periods of emerency or of imminent
financial panic which directly threaten monetary and
banking stability, the Central Bank may grant banking
institutions extraordinary advances secured by any
assets which are deIined as acceptable by by a
concurrent vote oI at least Iive members oI the
Monetary Board. While such advances are outstanding,
the debtor institution may not expand the total volume
oI its loans or investments without the prior
authorization oI the Monetary Board.chanroblesvirtualawlibrary chan robles virtual law librar y
The Central Bank may, at its discretion, likewise grant
advances to banking institutions, even during normal
periods, Ior the purpose oI assisting a bank in a
precarious Iinancial condition or under serious Iinancial
pressures brought about by unIoreseen events, or events
which, though Ioreseeable, could not be prevented by
the bank concerned. Provided, however, That the
Monetary Board has ascertained that the bank is not
insolvent and has clearly realizable assets to secure the
advances. Provided, Iurther, That a concurrent vote oI
at least Iive members oI the Monetary Board is
obtained. (Emphasis ours)
The Iirst paragraph oI the aIorequoted provision contemplates a
situation where the whole banking community is conIronted with
Iinancial and economic crisis giving rise to serious and widespread
conIusion among the public, which may eventually threaten and
gravely prejudice the stability oI the banking system. Here, the
emergency or Iinancial conIusion involves the whole banking
community and not one bank or institution only. The second situation
on the other hand, provides Ior a situation where the Central Bank
grants a loan to a bank with uncertain Iinancial condition but not
insolvent.chanroblesvirtualawlibra ry chanrobles vir tual law lib rary
As alleged by the respondents, the Iollowing are the reasons oI the
Central Bank in approving the resolution granting the P3 billion loan
to petitioner bank and the latter's reopening aIter a brieI selI-imposed
banking holiday:
WHEREAS, the closure by Banco Filipino Savings and
Mortgage Bank oI its Banking oIIices on its own
initiative has worked serious hardships on its depositors
and has aIIected conIidence levels in the banking
system resulting in a Ieeling oI apprehension among
depositors and unnecessary deposit withdrawals; chanrobles vir tual law lib rar y
WHEREAS, the Central Bank is charged with the
Iunction oI administering the banking system;chanrobles virt ual law libra ry
WHEREAS, the reopening oI Banco Filipino would
require additional credit resources Irom the Central
Bank as well as an independent management acceptable
to the Central Bank;chanrob les virtual law li brary
WHEREAS, it is the desire oI the Central Bank to
rapidly diIIuse the uncertainty that presently exists;chanrob les virtual law lib rary
... (M.B. Min. No. 35 dated July 27, 1984 cited in
Respondents' Objections to Santiago Report, p. 26; p.
3387, Rollo, Vol. IX; Emphasis ours).
A perusal oI the Ioregoing "Whereas" clauses unmistakably show that
the clear reason Ior the decision to grant the emergency loan to
petitioner bank was that the latter was suIIering Irom Iinancial distress
and severe bank "run" as a result oI which it closed on July 23, 1984
and that the release oI the said amount is in accordance with the
Central Bank's Iull support to meet Banco Filipino's depositors'
withdrawal requirements (Excerpts oI minutes oI meeting on MB Min.
No. 35, p. 25, Rollo, Vol. IX). Nothing therein shows that an
extraordinary emergency situation exists aIIecting most banks, not
only as regards petitioner bank. This Court thereby Iinds that the grant
oI the said emergency loan was intended Irom the beginning to Iall
under the second paragraph oI Section 90 oI the Central Bank Act,
which could not have occurred iI the petitioner bank was not solvent.
Where notwithstanding knowledge oI the irregularities and unsaIe
banking practices allegedly committed by the petitioner bank, the
Central Bank even granted Iinancial support to the latter and placed it
under conservatorship, such actuation means that petitioner bank could
still be saved Irom its Iinancial distress by adequate aid and
management reIorm, which was required by Central Bank's duty to
maintain the stability oI the banking system and the preservation oI
public conIidence in it (Ramos v. Central Bank, No. L-29352, October
4, 1971, 41 SCRA 565).chanroblesvirtualawlibrar y chanrobles virt ual law libra ry
In view oI the Ioregoing premises, We believe that the closure oI the
petitioner bank was arbitrary and committed with grave abuse oI
discretion. Granting in ratia arumenti that the closure was based on
justiIied grounds to protect the public, the Iact that petitioner bank was
suIIering Irom serious Iinancial problems should not automatically
lead to its liquidation. Section 29 oI the Central Bank provides that a
closed bank may be reorganized or otherwise placed in such a
condition that it may be permitted to resume business with saIety to its
depositors, creditors and the general public.chanroblesvirtualawlib rary chanro bles virtual law l ibrary
We are aware oI the Central Bank's concern Ior the saIety oI Banco
Filipino's depositors as well as its creditors including itselI which had
granted substantial Iinancial assistance up to the time oI the latter's
closure. But there are alternatives to permanent closure and liquidation
to saIeguard those interests as well as those oI the general public Ior
the Iailure oI Banco Filipino or any bank Ior that matter may be
viewed as an irreversible decline oI the country's entire banking
system and ultimately, it may reIlect on the Central Bank's own
viability. For one thing, the Central Bank and the Monetary Board
should exercise strict supervision over Banco Filipino. They should
take all the necessary steps not violative oI the laws that will Iully
secure the repayment oI the total Iinancial assistance that the Central
Bank had already granted or would grant in the Iuture.chanroblesvirtualawlibrary chan robles virtual law l ibrary
ACCORDINGLY, decision is hereby rendered as Iollows: chan robles virtual law l ibrary
1. The motion Ior reconsideration in G.R. Nos. 68878 and 81303, and
the petitions in G.R. Nos. 77255-58, 78766, 81304 and 90473 are
DENIED;chanrobles virtual law lib rary
2. The petitions in G.R. No. 70054, 78767 and 78894 are GRANTED
and the assailed order oI the Central Bank and the Monetary Board
dated January 25, 1985 is hereby ANNULLED AND SET ASIDE.
The Central Bank and the Monetary Board are ordered to reorganize
petitioner Banco Filipino Savings and Mortgage Bank and allow the
latter to resume business in the Philippines under the comptrollership
oI both the Central Bank and the Monetary Board and under such
conditions as may be prescribed by the latter in connection with its
reorganization until such time that petitioner bank can continue in
business with saIety to its creditors, depositors and the general
public.chanroblesvirtualawl ibrary chan robles virtual law librar y
SO ORDERED.
Narvasa, C.J., Gutierre:, Jr., Cru:, Bidin and Realado, JJ., concur.chanroblesvirtualawlibrary
chanrobles virtual law library
Paras, Feliciano, Padilla, Davide, Jr. and Nocon, JJ., took no part.
chanrobles virtual law libra ry

Separate Opinions

MELENCIO-HERRERA, dissenting: chanrobles virt ual law libra ry
I join Mme. Justice Carolina G. Aquino in her dissent and vote to deny
the prayer, in G.R. No. 70054, to annul Monetary Board Resolution
No. 75 placing Banco Filipino (BF) under receivership.chanroblesvi rtualawlibra ry chanrobles vir tual law lib rary
Even assuming that the BF was not, as alleged, in a literal state oI
insolvency at the time oI the passage oI said Resolution, there was a
Iinding in the Teodoro report that, based on that Bank's illiquidity, to
have allowed it to continue in operation would have meant probable
loss to depositors and creditors. That is also a ground Ior placing the
bank under receivership, as a Iirst step, pursuant to Section 29 oI the
Central Bank Act (Rep. Act No. 265, as amended). The closure oI BF,
thereIore, can not be said to have been arbitrary or made in bad Iaith.
There was suIIicient justiIication, considering its inability to meet the
heavy withdrawals by its depositors and to pay its liabilities as they
Iell due, to Iorbid the bank Irom Iurther engaging in banking.chanroblesvirtualawlib rary chanrob les virtual law lib rary
The matter oI reopening, reorganization or rehabilitation oI BF is not
within the competence oI this Court to ordain but is better addressed to
the Monetary Board and the Central Bank considering the latter's
enormous inIusion oI capital into BF to the tune oI approximately P3.5
Billion in total accommodations, aIter a thorough assessment oI
whether or not BF is, indeed, possessed, as it stoutly contends, oI
suIIicient assets and capabilities with which to repay such huge
indebtedness, and can operate without loss to its many depositors and
creditors.chanroblesvirtualawlibrary chan robles virtual law library

GRIO-AQUINO, dissenting: chanrobles vir tual law lib rary
Although these nine (9) Banco Filipino (BF) cases have been
consolidated under one ponencia, all oI them except one, raise issues
unrelated to the receivership and liquidation oI said bank. In Iact, two
oI these cases (G.R. No. 68878 and 81303) have already been decided
by this Court and are only awaiting the resolution oI the motions Ior
reconsideration Iiled therein. Only G.R. No. 70054 "Banco Filipino
Savings and Mortgage Bank (BF) vs. the Monetary Board (MB),
Central Bank oI the Philippines (CB), et al.," is an original action Ior
mandamus and certiorari Iiled in this Court by Iormer oIIicials oI BF
to annul the Monetary Board Resolution No. 75 dated January 25,
1985 (ordering the closure oI Banco Filipino |BF| and appointing
Carlota Valenzuela as receiver oI the bank) on the ground that the
resolution was issued "without aIIording BF a hearing on the reports"
on which the Monetary Board based its decision to close the bank,
hence, without "administrative due process.", The prayer oI the
petition reads:
WHEREFORE, petitioner respectIully prays that a writ
oI mandamus be issued commanding respondents
immediately to Iurnish it copies oI the reports oI
examination oI BF employed by respondent Monetary
Board to support its Resolution oI January 25, 1985 and
thereaIter to aIIord it a hearing prior to any resolution
that may be issued under Section 29 oI R.A. 265,
meanwhile annulling said Resolution oI January 25,
1985 by writ oI certiorari as made without or in excess
oIjurisdiction or with grave abuse oI discretion.chanroblesvirtualawlib rary chanrobles vi rt ual law library
So as to expedite proceedings, petitioner prays that the
assessment oI the damages respondents should pay it be
deIerred and reIerred to commissioners.chanroblesvirtualawlib rary chanrob les virtual law li brary
Petitioner prays Ior such other remedy as the Court may
deem just and equitable in the premises.chanroblesvirtualawlib rary chanrob les virtual law lib rary
Quezon City Ior Manila, February 28, 1985. (p. 8, Rollo
I-)
and the prayer oI the Supplement to Petition reads:
WHEREFORE, in addition to its prayer Ior mandamus
and certiorari contained in its original petition,
petitioner respectIully prays that Sections 28-A and 29
oI the Central Bank charter (R.A. 265) including its
amendatory Presidential Decrees Nos. 72, 1771, 1827
and 1937 be annulled as unconstitutional.chan roblesvirtualawlib rary chanr obles virtual law l ibrary
Quezon City Ior Manila, March 4, 1985. (p. 11-G, Rollo
I.)
The other eight (8) cases merely involve transactions oI BF with third
persons and certain "related" corporations which had deIaulted on their
loans and sought to prohibit the extrajudicial Ioreclosure oI the
mortgages on their properties by the receiver oI BF. These eight (8)
cases are: chanrob les virtual law lib rary
1. G.R. No. 68878 "BF vs. Intermediate ppellate Court and Celestina
Pahimutan" involves the repossession by BF oI a house and lot
which the buyer (Pahimutang) claimed to have completely paid Ior on
the installment plan. The appellate court's judgment Ior the buyer was
reversed by this Court. The buyer's motion Ior reconsideration is
awaiting resolution by this Court;chanrobles virtual law li brary
2. G.R. Nos. 77255-58, "%op anaement Prorams Corporation and
Pilar Development Corporation vs. Court of appeals, et al." (CA-G.R.
SP No. 07892) and "Pilar Development Corporation vs. Executive
Jude, R%C, Cavite" (CA-G.R. SP Nos. 0896264) is a consolidated
petition Ior review oI the Court oI Appeals' joint decision dismissing
the petitions Ior prohibition in which the petitioners seek to prevent the
receiver/liquidator oI BF Irom extrajudicially Ioreclosing the P4.8
million mortgage on Top Management's properties and the P18-67
million mortgage on Pilar Development properties. The Court oI
Appeals dismissed the petitions on October 30, 1986 on the ground
that "the Iunctions oI the liquidator, as receiver under Section 29 (R.A.
265), include taking charge oI the insolvent's assets and administering
the same Ior the beneIit oI its creditors and oI bringing suits and
Ioreclosing mortgages in the name oI the bank;"chanrob les virtual law li brary
3. G.R. No. 78766, "El Grande Corporation vs. Court of ppeals, et
al.," is an appeal Irom the Court oI Appeals' decision in CA-G.R. SP
No. 08809 dismissing El Grande's petition Ior prohibition to prevent
the Ioreclosure oI BF's P8 million mortgage on El Grande's properties;
chanrobles virtual law lib rary
4. G.R. No. 78894, "Banco Filipino Savins and ortae Bank vs.
Court of ppeals, et al." is an appeal oI BFs old management (using
the name oI BF) Irom the decision oI the Court oI Appeals in CA-G.R.
SP No. 07503 entitled, "Central Bank, et al. vs. Judge Zoilo
Aguinaldo, et al" dismissing the complaint oI "BF" to annul the
receivership, Ior no suit may be brought or deIended in the name oI the
bank except by its receiver;chanrobles vir tual law lib rary
5. G.R. No. 87867, "etropolis Development Corporation vs. Court of
ppeals" (Iormerly AC-G.R. No. 07503, "Central Bank, et al. vs.
Honorable Zoilo Aguinaldo, et al.') is an appeal oI the intervenor
(Metropolis) Irom the same Court oI Appeals' decision subject oI G.R.
No. 78894, which also dismissed Metropolis' complaint in intervention
on the ground that a stockholder (Metropolis) may not bring suit in the
name oI BF while the latter is under receivership, without the authority
oI the receiver;chanrobles virt ual law libra ry
6. G.R. No. 81303, "Pilar Development Corporation vs. Court of
ppeals, et al." is an appeal Irom the decision dated October 22, 1987
oI the Court oI Appeals in CA-G.R. SP No. 12368, "Pilar
Development Corporation, et al. vs. Honorable Manuel Cosico, et al.,"
dismissing the petition Ior certiorari against Judge Manuel Cosico, Br.
136, RTC, Makati, who dismissed the complaint Iiled by Pilar
Development Corporation against BF, Ior speciIic perIormance oI
certain developer contracts. An answer Iiled by Norberto Quisumbing
and Associates, as BF's supposed counsel, virtually conIessed
judgment in Iavor oI Pilar Development. On motion oI the receiver,
the answer was expunged and the complaint was dismissed. On a
petition Ior certiorari in this Court, we held that: "As liquidator oI BF
by virtue oI a valid appointment Irom the Central Bank, private
respondent Carlota Valenzuela has the authority to direct the operation
oI the bank in substitution oI the Iormer management, which authority
includes the retainer oI counsel to represent it in bringing or resisting
suits in connection with such liquidation and, in the case at bar, to take
the proper steps to prevent collusion, to the prejudice oI the legitimate
creditors, between BF and the petitioners herein which appear to be
owned and controlled by the same interest controlling BF" (p. 49,
Rollo). The petitioners' motion Ior reconsideration oI that decision is
pending resolution.chanroblesvirtualawlib rary chanrobles vi rtual law lib rary
7. G.R. No. 81304, "BF Homes Development Corporation vs. Court of
ppeals, et al." is an appeal Irom the decision dated November 4, 1987
oI the Court oI Appeals in CA-G.R. CV No. 08565 aIIirming the trial
court's order dismissing BF Homes' action to compel the Central Bank
to restore the Iinancing Iacilities oI BF, because the plaintiII (BF
Homes) has no cause oI action against the CB.chanroblesvirtualawlibrary chan robles virtual law libra ry
8. G.R. No. 90473, "El Grande Development Corporation vs. Court of
ppeals, et al.," is a petition to review the decision dated June 6, 1989
in CA-G.R. SP No. 08676 dismissing El Grande's petition Ior
prohibition to stop Ioreclosure proceedings against it by the receiver oI
BF.chanroblesvirt ualawlibrar y chanrobles virt ual law libra ry
As previously stated, G.R. No. 70054 "BF vs. onetary Board, et al.,"
is an original special civil action Ior certiorari and mandamus Iiled in
this Court by the old management oI BF, through their counsel, N.J.
Quisumbing & Associates, using the name oI the bank and praying Ior
the annulment oI MB Resolution No. 75 which ordered the closure oI
BF and placed it under receivership. It is a "Iorum-shopping" case
because it was Iiled here on February 28, 1985 three weeks aIter they
had Iiled on February 2, 1985 Civil Case No. 9675 "Banco Filipino vs.
Monetary Board, et al." in the Regional Trial Court oI Makati, Br. 143
(presided over by Judge Zoilo Aguinaldo) Ior the same purpose oI
securing a declaration oI the nullity oI MB Resolution No. 75 dated
January 25, 1985.chanroblesvirtualawlibrary chan robles virtual law librar y
On August 25, 1985, this Court ordered the transIer and consolidation
oI Civil Case No. 9676 (to annul the receivership) Irom Br. 143 to Br.
136 (Judge Manuel Cosico) oI the Makati Regional Trial Court where
Civil Case No. 8108 (to annul the conservatorship) and Civil Case No.
10183 (to annul the liquidation) oI BF were and are still pending. All
these three (3) cases were archived on June 30, 1988 by Judge Cosico
pending the resolution oI G.R. No. 70054 by this Court.chanroblesvirtualawlibrary chan robles virtual law library
Because oI my previous participation, as a Iormer member oI the
Court oI Appeals, in the disposition oI AC-G.R. No. 02617 (now G.R.
No. 68878) and AC-G.R. SP No. 07503 (now G.R. Nos. 78767 and
78894), I am taking no part in G.R. Nos. 68878, 78767 and 78894. It
may be mentioned in this connection that neither in AC-G.R. SP No.
02617, nor in AC-G.R. SP No. 07503, did the Court oI Appeals rule on
the constitutionality oI Sections 28-A and 29 oI Republic Act 265
(Central Bank Act), as amended, and the validity oI MB Resolution
No. 75, Ior those issues were not raised in the Court oI Appeals.chanroblesvirtualawl ibrary chan robles virtual law librar y
I concur with the ponencia insoIar as it denies the motion Ior
reconsideration in G.R. No. 81303, and dismisses the petitions Ior
review in G.R. Nos. 77255-58, 78766, 81304, and 90473.chanroblesvirtualawlibrary chan robles virtual law librar y
I respectIully dissent Irom the majority opinion in G.R. No. 70054
annulling and setting aside MB Resolution No. 75 and ordering the
respondents, Central Bank oI the Philippines and the Monetary Board -
to reorganize petitioner Banco Filipino Savings and
Mortgage Bank, and allow the latter to resume business
in the Philippines under the comptrollership oI both the
Central Bank and the Monetary Board and under such
conditions as may be prescribed by the latter until such
time that petitioner bank can continue in business with
saIety to its creditors, depositors and the general public.
Ior I believe that this Court has neither the authority nor the
competence to determine whether or not, and under what conditions,
BF should be reorganized and reopened. That decision should be made
by the Central Bank and the Monetary Board, not by this Court.chanroblesvirtualawlibrary chanrobles virtual law libra ry
All that we may determine in this case is whether the actions oI the
Central Bank and the Monetary Board in closing BF and placing it
under receivership were "plainly arbitrary and made in bad Iaith.chanroblesvi rtualawlibra ry chanrobles vir tual law lib rary
Section 29 oI Republic Act No. 265 provides:
Section 29. Proceedings upon insolvency. - Whenever,
upon examination by the head of the appropriate
supervisin and examinin department or his examiners
or aents into the condition of any bankin institution,
it shall be disclosed that the condition of the same is
one of insolvency, or that its continuance in business
would involve probable loss to its depositors or
creditors, it shall be the duty oI the department head
concerned Iorthwith, in writing, to inIorm the Monetary
Board oI the Iacts, and the Board may, upon Iinding the
statements oI the department head to be true, Iorbid the
institution to do business in the Philippines and shall
designate an oIIicial oI the Central Bank as receiver to
immediately take charge oI its assets and liabilities, as
expeditiously as possible collect and gather all the
assets and administer the same Ior the beneIit oI its
creditors, exercising all the powers necessary Ior these
purposes including, but not limited to, bringing suits
and Ioreclosing mortgages in the name oI the banking
institution.chanroblesvirtualawlib rary chanr obles virtual law l ibrary
The Monetary Board shall thereupon determine within
sixty days whether the institution may be reorganized or
otherwise placed in such a condition so that it may be
permitted to resume business with saIety to its
depositors and creditors and the eneral public and
shall prescribe the conditions under which such
resumption oI business shall take place as well as the
time Ior IulIillment oI such conditions. In such case, the
expenses and Iees in the collection and administration
oI the assets oI the institution shall be determined by
the Board and shall be paid to the Central Bank out oI
the assets oI such banking institution.chanroblesvir tualawlibra ry chanrobles vir tual law lib rary
II the Monetary Board shall determine and conIirm
within the said period that the banking institution is
insolvent or cannot resume business with saIety to its
depositors, creditors and the general public, it shall, iI
the public interest requires, order its liquidation,
indicate the manner oI its liquidation and approve a
liquidation plan. The Central Bank shall, by the
Solicitor General, Iile a petition in the Court oI First
Instance, reciting the proceedings which have been
taken and praying the assistance oI the court in the
liquidation oI the banking institutions. The court shall
have jurisdiction in the same proceedings to adjudicate
disputed claims against the bank and enIorce individual
liabilities oI the stockholders and do all that is
necessary to preserve the assets oI the banking
institution and to implement the liquidation plan
approved by the Monetary Board. The Monetary Board
shall designate an oIIicial oI the Central Bank as
liquidator who shall take over the Iunctions oI the
receiver previously appointed by the Monetary Board
under this section. The liquidator shall, with all
convenient speed, convert the assets oI the banking
institution to money or sell, assign or otherwise dispose
oI the same to creditors and other parties Ior the
purpose oI paying the debts oI such bank and he may,
in the name oI the banking institution, institute such
actions as may be necessary in the appropriate court to
collect and recover accounts and assets oI the banking
institution.chanroblesvirtualawlib rary chanr obles virtual law l ibrary
The provisions oI any law to the contrary
notwithstanding, the actions of the onetary Board
under this section and the second paragraph oI Section
34 oI this Act shall be final and executory, and can be
set aside by the court only if there is convincin proof
that theaction is plainly arbitrary and made in bad
faith. No restraining order or injunction shall be issued
by the court enjoining the Central Bank Irom
implementing its actions under this section and the
second paragraph oI Section 34 oI this Act, unless there
is convincing prooI that the action oI the Monetary
Board is plainly arbitrary and made in bad Iaith and the
petitioner or plaintiII Iiles with the clerk or judge oI the
court in which the action is pending a bond executed in
Iavor oI the Central Bank, in an amount to be Iixed by
the court. The restraining order or injunction shall be
reIused or, iI granted, shall be dissolved upon Iiling by
the Central Bank oI a bond, which shall be in the Iorm
oI cash or Central Bank cashier's check, in an amount
twice the amount oI the bond oI the petitioner or
plaintiII, conditioned that it will paythe which the
petitioner or plaintiII may suIIer by the reIusalor the
dissolution oI the injunction. The provisions oI Rule 58
oI the new Rules oI Court insoIar as they are applicable
and not inconsistent with the provisions oI this section
shall govern the issuance and dissolution oI the
restraining order or injunction contemplated in this
section.
Insolvency, under this ct, shall be understood to mean
the inability of a bankin institution to pay its liabilities
as they fall due in the usual and ordinary course of
business, provided, however, that this shall not include
the inability to pay oI an otherwise non-insolvent bank
caused by extra-ordinary demands induced by Iinancial
panic commonly evidenced by a run on the banks in the
banking community.
The determinative Iactor in the closure, receivership, and liquidation
oI a bank is the Iinding, upon examination by the SES oI the Central
Bank, that its condition "is one oI insolvency, or that its continuance in
business would involve probable loss to its depositors and creditors."
(Sec. 29, R.A. 265.) It should be pointed out that insolvency is not the
only statutory ground Ior the closure oI a bank. The other ground is
when "its continuance in business would involve probable loss to its
depositors and creditors.chanroblesvirtualawlibrary chanrob les virtual law lib rary
Was BF insolvent i.e., unable to pay its liabilities as they Iell due in
the usual and ordinary course oI business, on and Ior some time beIore
January 25, 1985 when the Monetary Board issued Resolution No. 75
closing the bank and placing it under receivership? Would its
continued operation involve probable loss to its depositors and
creditors?chanro bles virtual law l ibrary
The answer to both questions is yes. Both the conservator Gilberts
Teodoro and the head oI the SES (Supervision and Examination
Sector) Ramon V. Tiaoqui opined that BF's continuance in business
would cause probable loss to depositors and creditors. Tiaoqui Iurther
categorically Iound that BF was insolvent. Why was this so?chanrobles virt ual law libra ry
The Teodoro and Tiaoqui reports as well as the report oI the receivers,
Carlota Valenzuela, ArnulIo B. Aurellano and Ramon V. Tiaoqui,
showed that since the end oI November 1983 BF had already been
incurring "chronic reserve deIiciencies' and experiencing severe
liquidity problems. So much so, that it had become "a substantial
borrower in the call loans market" and in June 1984 it obtained a P30
million emergency loan Irom the Central Bank. (p. 2, Receiver's
Report.) Additional emergencyt loans (a total oI P119.7 millions) were
extended by the Central Bank to BF that month (MB Res. No. 839
dated June 29,1984). On July 12, 1984, BFs chairman, Anthony
Aguirre, oIIered to "turn over the administration oI the aIIairs oI the
bank" to the Central Bank (Aguirre's letter to Governor Jose
Fernandez, Annex 7 oI ManiIestation dated May 3,1991). On July
23,1984, unable to meet heavy deposit withdrawals, BF's management
motu proprio, without obtaining the conIormity oI the Central Bank,
closed the bank and declared a bank holiday. On July 27, 1984, the
CB, responding to BFs pleas Ior additional Iinancial assistance,
granted BF a P3 billion credit line (MB Res. No. 934 oI July 27, 1984)
to enable it to reopen and resume business on August 1, 1984. P2.3601
billions oI the credit line were availed oI by the end oI 1984 exclusive
oI an overdraIt oI P932.4 millions (p. 2, Tiaoqui Report). Total
accommodations granted to BF amounted to P3.4122 billions (p. 19,
Cosico Report).chanroblesvirtualawlibrary chanrobles virtual law libra ry
Presumably to assure that the Iinancial assistance would be properly
used, the MB appointed Basilio Estanislao as conservator oI the bank.
A conservatorship team oI 78 examiners and accountants was assigned
at the bank to keep track oI its activities and ascertain its Iinancial
condition (p. 8, Tiaoqui Report).chanroblesvirtualawlibrary chanro bles virtual law li brary
Estanislao resigned aIter two weeks Ior health reasons. He was
succeeded by Gilberto Teodoro as conservator in August, 1984 up to
January 8, 1985.chanroblesvirtualawlibrary chan robles virtual law librar y
Besides the conservatorship team, Teodoro hired Iinancial consultants
Messrs. Tirso G. Santillan, Jr. and Plorido P. Casuela to make an
analysis oI BF's Iinancial condition. Teodoro also engaged the
accounting Iirm oI Sycip, Gorres, Velayo and Company to make an
asset evaluation. The Philippine Appraisal Company (PAC) appraised
BFs real estate properties, acquired assets, and collaterals held. On
January 9, 1985, Teodoro submitted his Report. Three weeks later, on
January 23, 1985, Tiaoqui also submitted his Report. Both reports
showedthat, in violation oI Section 37 oI the General Banking Act
(R.A.337): 2
1. BF had been continually deIicient in
liquidity reserves (Teodoro Report). The
bank had been experiencing a severe
drop in liquidity levels. %he ratio of
liquid assets to deposits and borrowins
pluned from about 20 at end-1983, to
about 8.6 by end-ay 1984, much
below the statutory requirements oI 24
Ior demand deposits/deposit substitutes
and 14 Ior savings and time deposits.
(p. 2, Tiaoqui Report.) chanrobles virtual law library
2. DeIiciencies in average daily legal
reserves rose Irom P63.0 million during
the week oI November 21-25, 1983 to a
high oI P435.9 million during the week
oI June 11-15, 1984 (pp. 2-3, Tiaoqui
Report). Accumulated penalties on
reserve deIiciencies amounted to P37.4
million by July 31, and rose to P48
million by the end oI 1984. (Tiaoqui
Report.) chanrobles virtual law library
3. Deposit levels, which were at P3,845
million at end-May l984 (its last
"normal" month), dropped to P935
million at the end oI November 1984 or
a loss oI P2,910 million. This
represented an average monthly loss oI
P485 million vs. an average monthly
gain oI P26 million during the Iirst 5
months oI 1984. (pp. 2-3, Tiaoqui
Report.) chanrobles virtual law library
4. Deposits had declined at the rate oI
P20 million during the month oI
December 1984, but expenses oI about
P17 million per month were required to
maintain the bank's operation. (p. 6,
Teodoro Report.) chanrobles virtual law library
5. Based on the projected outlook, the
Bank's average yield on assets oI 16.3
p.a., was insuIIicient to meet the average
cost oI Iunds oI 19.5 p.a. and operating
expenses oI 4.8 p.a. (p. 5 Teodoro
Report.) chanrobles virtual law library
6. An imprudently large proportion oI
assets were locked into long-term
applications. (Teodoro Report.) chanrobles virtual law library
7. BF overextended itselI in lending to
the real estate industry, committing as
much as 52 oI its peso deposits to its
aIIiliates or "related accounts" to which
it continued lending even when it was
already suIIering Irom liquidity stresses.
(Teodoro Report.) This was done in
violation oI Section 38 oI the General
Banking Act (R.A. 337). 3
8. During the period oI marked decline
in liquidity levels the loan portIolio rew
by P417.3 million in the Iirst Iive
months oI 1984 - and by another P105.l
million in the next two months. (pp. 2-3,
Tiaoqui Report.) chanrobles virtual law library
9. The loan portIolio stood at P3.679
billion at the end oI July 1984, 56.2 oI
it channeled to companies whose
stockholders, directors and oIIicers were
related to the oIIicers, directors, and
some stockholders oI BF. (p. 8, Tiaoqui
Report.) Here again BF violated the
General Banking Act (R.A. 337). 4
10. Some oI the loans were used to
acquire preIerred stocks oI BF. Between
September 17, 1983 and February 10,
1984, P49.9 million oI preIerred non-
convertible stocks were issued. About
85 or P42.4 million was paid out oI the
proceeds oI loans to stockholders/
borrowers with relationship to the bank
(Annex D). Around P18.8 million were
issued in the name oI an entity other than
the purchaser oI the stocks. (Tiaoqui
Report.) chanrobles virtual law library
11. Loans amounting to some P69.3
million were granted simply to pay-oII
old loans including accrued interest, as
an accommodation Ior the direct
maturing loans oI some Iirms and as a
way oI paying-oII loans oI other
borrower Iirms which have their own
credit lines with the bank. These helped
to make otherwise delinquent loans
appear "current" and deceptively
"improved" the quality oI the loan
portIolio. (Tiaoqui Report.) chanrobles virtual law library
12. Examination oI the collaterals Ior the
loan accounts oI 63 major borrowers and
32 other selected borrowers as oI July
31, 1984, showed that:
(a) 2,658 TCT's which BF
evaluated to be worth
P1,487 million were
appraised by PAC to be
worth only P1,196
million, hence, deIicient
by P291 million.chanroblesvir tualawlibra ry chanrobles vir tual law libra ry
(b) Other properties
(collaterals) supposedly
worth P711 million could
not be evaluated by PAC
because the details
submitted by the bank
were insuIIicient;chanr obles virtual law l ibrary
(c) While P674 million in
loans were supposedly
guaranteed by the Home
Financing Corporation
(HFIC), the latter
conIirmed only P427
million. P247 million in
loans were not guaranteed
by HFC. (Teodoro
Report.) chanrobles virtual law library
(d) Per SGV's report,
loans totalling P1.882
million including accrued
interest, were secured by
collateral worth only
Pl.54 billion. Hence, BFs
unsecured exposure
amounted to P586.2
million. BF Homes, Inc.,
a related company which
has Iiled with the SEC a
petition Ior suspension oI
payments, owes P502
million to BF.
13. BF had been suIIering heavy losses.
-
a) For the eleven (11)
months ended November
30, 1984, the estimated
net loss was P372.6
illion;chanrobles virtual law li brary
b) For the twelve (12)
months Irom November
1984, the projected net
loss would be P390.7
illion and would
continue unabated; (p. 2,
Teodoro Report) chanrobles virtual law libra ry
c) Around 71.7 oI the
total accommodations oI
P2.0677 billions to the
related/linked entities
were adversely classiIied.
Close to 33.7 or P697.1
millions were clean loans
or against PNs
(promissory notes) oI
these entities. OI the
latter, 52.6 were
classiIied as loss." (P. 5,
Tiaoqui Report.) chanrobles virtual law library
d) %he banks financial
condition as of date of
examination, aIter setting
up the additional
valuation reserves oI
P612.2 millions and
accumulated net loss oI
P48.2 millions, indicates
one of insolvency. Total
liabilities oI P5,282.1
million exceeds total
assets oI P4,947.2 million
by 6.8. Total capital
account oI P334.9
million) is deIicient by
P322.7 million against the
minimum capital required
oI P657.6 million (Annex
F). Capital to risk assets
ratio is negative
10.38.chanroblesvirtualawlibrar y chanrobles virt ual law libra ry
e) Total loans and
investment portIolio
amounted to P3,914.3
millions (gross), oI which
P194.0 millions or 5.0
were past due and
P1,657.1 millions or
42.3 were adversely
classiIied (Substandard -
P1,011.4 millions;
DoubtIul - P274.6
millions and Loss -
P371.1 millions).
Accounts adversely
classiIied included
unmatured loan oI
Pl,482.0 million to
entities related with each
other and to the bank,
several oI which showed
distressed conditions. (p.
7, Tiaoqui Report.)
Teodoro's conclusion was that "the continuance oI the bank in business
would involve probable loss to its depositors and creditors." He
recommended "that the Monetary Board take a more eIIective and
responsible action to protect the depositors and creditors ... in the light
oI the bank's worsening condition." (p. 5, Teodoro Report.) chanrobles virtual law library
On January 23, 1985, Tiaoqui submitted his report to the Monetary
Board, Like Teodoro, Tiaoqui believed that the principal cause oI the
bank's Iailure was that in violation oI the General Banking Law and
CB rules and regulations, BF's major stockholders, directors and
oIIicers, through their "related" companies: (i.e. companies owned or
controlled by them oI their relatives) had been "borrowing" huge
chunks oI the money oI the depositors. His Conclusion and
Recommendations were:
The Conservator, in his report to the Monetary Board
dated January 8, 1985, has stated that the continuance
of the bank in business would involve probable loss to
its depositors and creditors. It has recommended that a
more eIIective action be taken to protect depositors and
creditors.chanroblesvirtualawlibrary chan robles virtual law library
The examination Iindings as oI July 31, 1984 as shown
earlier, indicate one oI insolvency and illiquidity and
Iurther conIirms the above conclusion oI the
Conservator.
ll the foreoin provides sufficient fustification for
forbiddin the bank from further enain in
bankin.chanroblesvirtualawlibrary chan robles virtual law libra ry
Foregoing considered, the Iollowing are recommended:
1. Forbid the Banco
Filipino Savings &
Mortgage Bank to do
business in the
Philippines eIIective the
beginning oI oIIice on
January, 1985, pursuant
to Sec. 29 oI R.A. No.
265, as amended;chan robles virtual law libra ry
2. Designate the Head oI
the Conservator Team at
the bank, as Receiver oI
Banco Filipino Savings &
Mortgage Bank, to
immediately take charge
oI the assets and
liabilities, as
expeditiously as possible
collect and gather all the
assets and administer the
same Ior the beneIit oI all
the creditors, and exercise
all the powers necessary
Ior these purposes
including but not limited
to bringing suits and
Ioreclosing mortgages in
the name oI the bank.chanroblesvir tualawlibra ry chanrobles vir tual law
library
3. The Board oI directors
and the principal oIIicers
Irom Senior Vice
President, as listed in the
attached Annex "A" be
included in the watchlist
oI the Supervision and
Examination Sector until
such time that they shall
have cleared
themselves.chanroblesvirt ualawlibrar y chanrobles virt ual law libra ry
4. ReIer to the Central
Banles Legal Department
and OIIice oI Special
Investigation the report
on the Iindings on Banco
Filipino Ior investigation
and possible prosecution
oI directors, oIIicers and
employees Ior activities
which led to its insolvent
position." (pp. 9-10,
Tiaoqui Report.)
On January 25, 1985 or two days aIter the submission oI Tiaoqui's
Report, and three weeks aIter it received Teodoro's Report, the
Monetary Board, then composed oI:
Chairman: Jose B. Fernandez, Jr.
CB Governor
Members:
1. Cesar E.A. Virata, Prime Minister &
Concurrently Minister oI Financechanrobles virt ual law libra ry
2. Roberto V. Ongpin, Minister oI Trade
& Industry & Chairman oI Board oI
Investment chanrobles virtual law l ibrary
3. Vicente B. Valdepeas, Jr., Minister
oI Economic Planning & Director
General oI NEDAchanrobles vir tual law lib rary
4. Cesar A. Buenaventura, President oI
Filipinas Shell Petroleum Corp. (p. 37,
Annual Report 1985)
issued Resolution No. 75 closing BF and placing it under receivership.
The MB Resolution reads as Iollows:
AIter considering the report dated January 8, 1985 oI
the Conservator Ior Banco Filipino Savings and
Mortgage Bank that the continuance in business oI the
bank would involve probable loss to its depositors and
creditors, and aIter discussing and Iinding to be true the
statements oI the Special Assistant to the Governor and
Head, Supervision and Examination Sector (SES)
Department II, as recited in his memorandum dated
January 23, 1985. that the Banco Filipino Savings and
Mortgage Bank is insolvent and that its continuance in
business would involve probable loss to its depositors
and creditors, and in pursuance oI Section 29 oI R.A.
No. 265, as amended, the Board decided:
1. To Iorbid Banco
Filipino Savings and
Mortgage Bank and all its
branches to do business in
the Philippines;chan robles virtual law libra ry
2. To designate Mrs.
Carlota P. Valenzuela,
Deputy Governor, as
Receiver who is hereby
directly vested with
jurisdiction and authority
to immediately take
charge oI the bank's
assets and liabilities, and
as expeditiously as
possible collect and
gather all the assets and
administer the same Ior
the beneIit oI its
creditors, exercising all
the- powers necessary Ior
these purposes including,
but not limited to,
bringing suits and
Ioreclosing mortgages in
the name oI the bank;chanro bles virtual law l ibrary
3. To designate Mr.
ArnulIo B. Aurellano,
Special Assistant to the
Governor, and Mr.
Ramon V. Tiaoqui,
Special Assistant to the
Governor and Head,
Supervision and
Examination Sector
Department II. as Deputy
Receivers who are
likewise hereby directly
vested with jurisdiction
and authority to do all
things necessary or
proper to carry out the
Iunctions entrusted to
them by the Receiver and
otherwise to assist the
Receiver in carrying out
the Iunctions vested in the
Receiver by law or
Monetary Board
resolutions;chan robles virtual law library
4. To direct and authorize
Management to do all
other things and carry out
all other measures
necessary or proper to
implement this
Resolution and to
saIeguard the interests oI
depositors/credition and
the general public; andchanrobles vir tual law lib rary
5. In consequence oI the
Ioregoing, to terminate
the conservatorship over
Banco Filipino Savings
and Mortgage Bank. (pp.
126-127, Rollo I.)
On March 19,1985, the receiver, Carlota Valenzuela, and the deputy
receivers, ArnulIo B. Aurellano and Ramon V. Tiaoqui, submitted a
report to the Monetary Board as required in Section 29, 2nd paragraph
oI R.A. 265 which provides that within sixty (60) days Irom date oI
the receivership, the Monetary Board shall determine whether the bank
may be reorganized and permitted to resume business, or be liquidated.
The receivers recommended that BF be placed under litigation. For,
among other things, they Iound that: chanrobles virtual law libra ry
1. BF had been suIIering a capital deIiciency oI P336.5 million as oI
July 31, 1984 (pp. 2 and 4, Receivers' Report).chanroblesvirtualawlibrary chanrobles vi rtual law lib ra ry
2. The bank's weekly reserve deIiciencies averaged P146.67 million
Irom November 25, 1983 up to March 16, 1984, rising to a peak oI
P338.09 million until July 27, 1984. Its reserve deIiciencies against
deposits and deposit substitutes began on the week ending June 15,
1984 up to December 7, 1984, with average daily reserve deIiciencies
oI P2.98 million.chanroblesvi rtualawlibra ry chanrobles vi rtual law lib rary
3. Estimated losses or "unhooked valuation reserves" Ior loans to
entities with relationships to certain stockholder/directors and oIIicers
oI the bank amounted to P600.5 million. Combined with other
adjustments in the amount oI P73.2 million, they will entirely wipe out
the bank's entire capital account and leave a capital deIiciency oI
P336.5 million. The bank was already insolvent on July 31, 1984. The
capital deIiciency increased to P908.4 million as oI January 26, 1985
on account oI unhooked penalties Ior deIiciencies in legal reserves
(P49.07 million), unhooked interest on overdrawings, emergency
advance oI P569.49 million Irom Central Bank, and additional
valuation reserves oI P124.5 million. (pp. 3-4, Receivers' Report.) chanrobles virtual law library
The Receivers Iurther noted that -
AIter BF was closed as oI January 25, 1985, there were
no collections Irom loans granted to Iirms related to
each other and to BF classiIied as "doubtIul" or "loss,"
there were no substantial improvements on other loans
classiIied "doubtIul"or "loss;" there was no Iurther
increase in the value oI assets owned/acquired
supported by new appraisals and there was no inIusion
oI additional capital such that the estimated realizable
assets oI BF remained at P3,909.23, (millions) while
the total liabilities amounted to P5,159.44 (millions).
Thus, BF remains insolvent with estimated deIiciency
to creditors oI Pl,250.21 (millions).chanroblesvirtualawlibra ry chanrobles vir tual law lib rary
Moreover, there were no eIIorts on the part oI the
stockholders oI the bank to improve its Iinancial
condition and the possibility oI rehabilitation has
become more remote. (P. 8, Receivers' Report.)
In the light oI the results oI the examination oI BF by the Teodoro and
Tiaoqui teams, I do not Iind that the CB's Resolution No. 75 ordering
BF to cease banking operations and placing it under receivership was
"plainly arbitrary and made in bad Iaith." The receivership was
justiIied because BF was insolvent and its continuance in business
would cause loss to its depositors and creditors. Insolvency, as deIined
in Rep. Act 265, means 'the inability oI a banking institution to pay its
liabilities as they Iall due in the usual and ordinary course oI business.
Since June 1984, BF had been unable to meet the heavy cash
withdrawals oI its depositors and pay its liabilities to its creditors, the
biggest oI them being the Central Bank, hence, the Monetary Board
correctly Iound its condition to be one oI insolvency.chan roblesvirtualawl ibrary chan robles virtual law librar y
All the discussion in the Santiago Report concerning the bank's assets
and liabilities as determinants oI BF's solvency or insolvency is
irrelevant and inconsequential, Ior under Section 29 oI Rep. Act. 265,
a bank's insolvency is not determined by its excess oI liabilities over
assets, but by its "inability to pay its liabilities as they Iall due in the
ordinary course oI business" and it was abundantly shown that BF was
unable to pay its liabilities to depositors Ior over a six-month-period
beIore it was placed under receivership.chanroblesvir tualawlibra ry chanrobles vir tual law libra ry
Even iI assets and liabilities were to be Iactored into a Iormula Ior
determining whether or not BF was already insolvent on or beIore
January 25, 1985, the result would be no diIIerent. The bank's assets as
oI the end oI 1984 amounted to P4.891 billions (not P6 billions)
according to the Report signed and submitted to the CB by BF's own
president, and its total liabilities were P4.478 billions (p. 58, Cosico
Report). While Aguirre's Report showed BF ahead with a net worth oI
P412.961 millions, said report did not make any provision Ior
estimated valuation reserves amounting to P600.5 millions, (50 oI
Iace value oI doubtful loans and 100 oI Iace value oI loss accounts)
which BF had granted to its related/linked companies. The estimated
valuation reserves oI P600.5 millions plus BF's admitted liabilities oI
P4.478 billions, put together, would wipe out BFs realizable assets oI
P4.891 billions and conIirm its insolvent condition to the tune oI
P187.538 millions.chanroblesvirtualawlib rary chanro bles virtual law li brary
BF's and Judge (now CA Justice) Consuelo Y. Santiago's argument
that valuation reserves should not be considered because the matter
was not discussed by Tiaoqui with BF oIIicials is not well taken Ior: chanrobles virtual law lib rary
(1) The records oI the deIaulting debtors were in the possession oI
BF.chanroblesvirt ualawlibrar y chanrobles virt ual law libra ry
(2) The "adversely classiIied" loans were in Iact included in the List oI
Exceptions and Findings (oI irregularities and violations oI laws and
CB rules and regulations) prepared by the SES, a copy oI which was
Iurnished BF on December 1 7, 1984; chanrobles virtual law library
(3) A conIerence on the matter washeld on January 2l, 1985 with
senior oIIicials oI BF headed by EVP F. Dizon,. (pp. 14-15, Cosico
Report.) BF did not Iormally protest against the CBs estimate oI
valuation reserves. The CB could not wait Iorever Ior BF to respond
Ior the CB had to act with reasonable promptness to protect the
depositors and creditors oI BF because the bank continued to
operate.chanroblesvirtualawlibrary chanrobles virtual law libra ry
(4) Subsequent events proved correct the SES classiIication oI the loan
accounts as "doubtIul" or "loss' because as oI January 25, 1985 none oI
the loans, except three, had been paid either partially or in Iull, even iI
they had already matured (p. 53, Cosico Report).chanroblesvirtualawlibrary chanrobles virtual law lib rary
The recommended provision Ior valuation reserves oI P600.5 millions
Ior "doubtIul" and "loss" accounts was a proper Iactor to consider in
the capital adjustments oI BF and was in accordance with accounting
rules. For, iI the uncollectible loan accounts would be entered in the
assets column as "receivables," without a corresponding entry in the
liabilities column Ior estimated losses or valuation reserves arising
Irom their uncollectability, the result would be a gravely distorted
picture oI the Iinancial condition oI BF.chanroblesvirtualawl ibrary chan robles virtual law libra ry
BF's strange argument that it was not insolvent Ior otherwise the CB
would not have given it Iinancial assistance does not merit serious
consideration Ior precisely BF needed Iinancial assistance because it
was insolvent.chanroblesvirtualawlibrary chanrob les virtual law lib rary
Tiaoqui's admission that the examination oI BF had "not yet been
oIIicially terminated" when he submitted his report on January 23,
1985 did not make the action oI the Monetary Board oI closing the
bank and appointing receivers Ior it, 'plainly arbitrary and in bad
Iaith." For what had been examined by the SES was more than enough
to warrant a Iinding that the bank was "insolvent and could not
continue in business without probable loss to its depositors or
creditors," and what had not been examined was negligible and would
not have materially altered the result. In any event, the oIIicial
termination oI the examination with the submission by the ChieI
Examiner oI his report to the Monetary Board in March 1985, did not
contradict, but in Iact conIirmed, the Iindings in the Tiaoqui Report.chanroblesvirtualawlibrary
chanrobles virtual law lib rary
The responsibility oI administering the Philippine monetary and
banking systems is vested by law in the Central Bank whose duty it is
to use the powers granted to it under the law to achieve the objective,
among others, oI maintaining monetary stability in the country (Sec. 2,
Rep. Act 265). I do not think it would be proper and advisable Ior this
Court to interIere with the CB's exercise oI its prerogative and duty to
discipline banks which have persistently engaged in illegal, unsaIe,
unsound and Iraudulent banking practices causing tremendous losses
and unimaginable anxiety and prejudice to depositors and creditors
and generating widespread distrust and loss oI conIidence in the
banking system. The damage to the banking system and to the
depositing public is bigger when the bank, like Banco Filipino, is big.
With 89 branches nationwide, 46 oI them in Metro Manila alone,
pumping the hard-earned savings oI 3 million depositors into the bank,
BF had no reason to go bankrupt iI it were properly managed. The
Central Bank had to inIuse almost P3.5 billions into the bank in its
endeavor to save it. But even this Iinancial assistance was misused, Ior
instead oI satisIying the depositors' demands Ior the withdrawal oI
their money, BF channeled and diverted a substantial portion oI the
Iinds into the coIIers oI its related/linked companies. Up to this time,
its oIIicers, directors and major stockholders have neither repaid the
Central Bank's P3.6 billion Iinancial assistance, nor put up adequate
collaterals thereIor, nor submitted a credible plan Ior the rehabilitation
oI the bank. What authority has this Court to require the Central Bank
to reopen and rehabilitate the bank, and in eIIect risk more oI the
Government's money in the moribund bank? I respectIully submit that
decision is Ior the Central Bank, not Ior this Court, to make.chanroblesvirt ualawlibrar y chanrobles virt ual law libra ry
WHEREFORE, I vote to dismiss the petition Ior certiorari and
mandamus in G.R. No. 70054 Ior lack oI merit.
Romero, J., concurs.


























Republic oI the Philipppines
SUPREME COURT
Manila
EN BANC
[G.R. No. 127838. January 21, 1999]
CIVIL SERVICE COMMISSION, Petitioner, vs. JOSE J. LUCAS,
respondent.
D E C I S I O N
PARDO, J.: chanroblesvirtualawlibrary
The petition Ior review on certiorari beIore the Court assails the
decision oI the Court oI Appeals|1| which set aside the resolution oI
the Civil Service Commission|2| and reinstated that oI the Board oI
Personnel Inquiry (BOPI Ior brevity), OIIice oI the Secretary,
Department oI Agriculture,|3| suspending respondent Ior one month,
Ior simple misconduct. chanroblesvirtualawlibrary
To provide a Iactual backdrop oI the case, a recital oI the Iacts is
necessary. chanroblesvirtualawlib rary
On May 26, 1992, Raquel P. Linatok, an assistant inIormation oIIicer
at the Agricultural InIormation Division, Department oI Agriculture
(DA Ior brevity), Iiled with the oIIice oI the Secretary, DA, an
aIIidavit-complaint against respondent Jose J. Lucas, a photographer
oI the same agency, Ior misconduct. chanroblesvirtualawlibrary
Raquel described the incident in the Iollowing manner: chanroblesvirtualawlib rary
While standing beIore a mirror, near the oIIice door oI Jose J. Lucas,
Raquel noticed a chair at her right side which Mr. Jose Lucas, at that
very instant used to sit upon. ThereaIter, Mr. Lucas bent to reach Ior
his shoe. At that moment she Ielt Mr. Lucas hand touching her thigh
and running down his palm up to her ankle. She was shocked and
suddenly Iaced Mr. Lucas and admonished him not to do it again or
she will kick him. But Lucas touched her again and so she hit Mr.
Lucas. Suddenly Mr. Lucas shouted at her saying lumabas ka na at
huwag na huwag ka nang papasok dito kahit kailan A verbal exchange
then ensued and respondent Lucas grabbed Raquel by the arm and
shoved her towards the door causing her to stumble, her both hands
protected her Iace Irom smashing upon the door.chanroblesvirtualawlibrary
Mr. Lucas, bent on literally throwing the aIIiant out oI the oIIice,
grabbed her the second time while she attempted to regain her posture
aIter being pushed the Iirst time. x x x while doing all this, Mr. Lucas
shouted at the aIIiant, saying, labas, huwag ka nang papasok dito kahit
kailan.|4| chanroblesvirtualawlibrary
On June 8, 1992, the Board oI Personnel Inquiry, DA, issued a
summons requiring respondent to answer the complaint, not to Iile a
motion to dismiss, within Iive (5) days Irom receipt. On June 17, 1992,
respondent Lucas submitted a letter to Jose P. Nitullano, assistant
head, BOPI, denying the charges. According to Lucas, he did not
touch the thigh oI complainant Linatok, that what transpired was that
he accidentally brushed Linatoks leg when he reached Ior his shoes
and that the same was merely accidental and he did not intend nor was
there malice when his hand got in contact with Linatoks leg. chanroblesvirtualawlib rary
On May 31, 1993, aIter a Iormal investigation by the BOPI, DA, the
board issued a resolution Iinding respondent guilty oI simple
misconduct|5| and recommending a penalty oI suspension Ior one (1)
month and one (1) day. The Secretary oI Agriculture approved the
recommendation. chanroblesvirtualawlibra ry
In due time, respondent appealed the decision to the Civil Service
Commission (CSC). On July 7, 1994, the CSC issued a resolution
Iinding respondent guilty oI grave misconduct and imposing on him
the penalty oI dismissal Irom the service.|6| Respondent moved Ior
reconsideration but the CSC denied the motion. chanroblesvirtualawlibrary
Then, respondent appealed to the Court oI Appeals. On October 29,
1996, the Court oI Appeals promulgated its decision setting aside the
resolution oI the CSC and reinstating the resolution oI the BOPI, DA,
stating thus: It is true that the Civil Service Act does not deIine grave
and simple misconduct. There is, however, no question that these
oIIenses Iall under diIIerent categories. This is clear Irom a perusal oI
memorandum circular No. 49-89 dated August 3, 1989 (also known as
the guidelines in the application oI penalties in administrative cases)
itselI which classiIies administrative oIIenses into three: grave, less
grave and light oIIenses. The charge oI grave misconduct Ialls under
the classiIication oI grave oIIenses while simple misconduct is
classiIied as a less grave oIIense. The Iormer is punishable by
dismissal while the latter is punishable either by suspension (one
month and one day to six months), iI it is the Iirst oIIense; or by
dismissal, iI it is the second. Thus, they should be treated as separate
and distinct oIIenses.|7| chanroblesvirtualawlibrary
The Court oI Appeals Iurther ruled that a basic requirement oI due
process on the other hand is that a person must be duly inIormed oI the
charges against him (Felicito Sajonas vs. National Labor Relations
Commission, 183 SCRA 182). In the instant case however, Lucas
came to know oI the modiIication oI the charge against him only when
he received notice oI the resolution dismissing him Irom the service.|8|
chanroblesvirtualawlib rary
Hence, this petition. chanroblesvirtualawlib rary
The issues are (a) whether respondent Lucas was denied due process
when the CSC Iound him guilty oI grave misconduct on a charge oI
simple misconduct, and (b) whether the act complained oI constitutes
grave misconduct. chanroblesvirtualawlibrary
Petitioner anchors its position on the view that the Iormal charge
against a respondent in an administrative case need not be draIted with
the precision oI an inIormation in a criminal prosecution. It is
suIIicient that he is apprised oI the substance oI the charge against
him; what is controlling is the allegation oI the acts complained oI, and
not the designation oI the oIIense.|9| chanroblesvirtualawlibrary
We deny the petition. chanroblesvirtualawlibra ry
As well stated by the Court oI Appeals, there is an existing guideline
oI the CSC distinguishing simple and grave misconduct. In the case oI
Landrito vs. Civil Service Commission, we held that in grave
misconduct as distinguished Irom simple misconduct, the elements oI
corruption, clear intent to violate the law or Ilagrant disregard oI
established rule, must be maniIest,|10| which is obviously lacking in
respondents case. Respondent maintains that as he was charged with
simple misconduct, the CSC deprived him oI his right to due process
by convicting him oI grave misconduct. chanroblesvirtualawlibrary
We sustain the ruling oI the Court oI Appeals|11| that: (a) a basic
requirement oI due process is that a person must be duly inIormed oI
the charges against him|12| and that (b) a person can not be convicted
oI a crime with which he was not charged.|13| chanroblesvirtualawlibrary
Administrative proceedings are not exempt Irom basic and
Iundamental procedural principles, such as the right to due process in
investigations and hearings.|14| chanroblesvirtualawlibrary
The right to substantive and procedural due process is applicable in
administrative proceedings.|15| chanroblesvirtualawlibrary
OI course, we do not in any way condone respondents act. Even in
jest, he had no right to touch complainants leg. However, under the
circumstances, such act is not constitutive oI grave misconduct, in the
absence oI prooI that respondent was maliciously motivated. We note
that respondent has been in the service Ior twenty (20) years and this is
his Iirst oIIense. chanroblesvirtualawlib rary
IN VIEW WHEREOF, the Court hereby DENIES the petition Ior
review on certiorari and AFFIRMS the decision oI the Court oI
Appeals in CA-G. R. SP No. 37137. chanroblesvirtualawlibrary
No costs. chanroblesvirtualawlibrary
SO ORDERED. chanroblesvirtualawlibrary
avide r C Romero Bellosillo Melo Puno Jitug Kapunan
Mendoza Panganiban Martinez Quisumbing Purisima Buena
and Conzaga-Reyes concur
Republic oI the Philipppines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 145389. 1uly 31, 2001]
Ombudsman ANIANO A. DESIERTO, Customs Commissioner
RENATO A. AMPIL and Captain DOMINGO S. DOCTOR, 1R.,
petitioners vs. RONNIE C. SILVESTRE, respondent.
D E C I S I O N
PARDO, .:
The Case chanroblesvirtuallawlibrary
The petition is one Ior review on certiorari |1| seeking to set aside (a)
the decision oI the Court oI Appeals |2| nulliIying the preventive
suspension order issued by petitioner Ombudsman; and (b) the
resolution |3| denying petitioners motion Ior reconsideration.
chanroblesvirtuallawlibrary
The Ombudsman issued an order oI preventive suspension |4| in
connection with the administrative charges Ior grave misconduct,
dishonesty and conduct prejudicial to the best interest oI the service
that Task Force Aduana Iiled with the OIIice oI the Ombudsman
against respondent Ronnie C. Silvestre and Atty. Redempto Somera.
chanroblesvirtuallawlibrary
On February 14, 2000, respondent Iiled with the Ombudsman a motion
Ior the liIting oI the order oI preventive suspension. However, on April
03, 2000, the Ombudsman denied the motion. chanroblesvirtuallawlibrary
On May 31, 2000, respondent Iiled with the Court oI Appeals |5| a
petition Ior certiorari and prohibition with temporary restraining order
and writ oI preliminary injunction questioning the order oI preventive
suspension issued by petitioner Ombudsman. chanroblesvirtuallawlibrary
AIter due proceedings, on August 14, 2000, the Court oI Appeals
promulgated its decision |6| annulling and setting aside the order oI
preventive suspension against respondent Ior having been issued by
the Ombudsman in grave abuse oI discretion. chanroblesvirtuallawlibrary
On October 06, 2000, the Court oI Appeals denied a motion Ior
reconsideration Iiled by the Solicitor General. chanroblesvirtuallawlibrary
Hence, this petition. |7|
The Facts chanroblesvirtuallawlibrary
On January 26, 2000, elements oI Task Force Aduana headed by
petitioner Doctor conducted an entrapment operation in a case oI
bribery involving Atty. Redempto C. Somera, Hearing OIIicer, Law
Division, Bureau oI Customs, Manila, and Indian nationals who had
pending cases oI seizure with the Iormer. chanroblesvirtuallawlibrary
AIter the pay-oII materialized, petitioner Doctor announced the
entrapment and then arrested Atty. Somera and two (2) Indian
nationals, namely, Murli Tejoomal Mohrani and Kumar Rupchand
Khiatani, Ior violation oI Article 210 oI the Revised Penal Code. As a
consequence, the Task Force Iiled with the Regional Trial Court,
Manila, charges oI bribery, violation oI R. A. No. 3019, and corruption
oI public oIIicials against them. chanroblesvirtuallawlibrary
Likewise, the Task Force Iiled with the Ombudsman administrative
charges Ior grave misconduct, dishonesty and conduct prejudicial to
the best interest oI the service against respondent Ronnie C. Silvestre
and Atty. Somera.
The Issue chanroblesvirtuallawlibrary
The issue is whether the Ombudsman has authority to suspend Irom
oIIice respondent Ronnie C. Silvestre indeIinitely on the basis oI the
administrative complaint Iiled with his oIIice showing that evidence oI
guilt is strong.
The Courts Ruling chanroblesvirtuallawlibrary
We need not resolve the issue presented. We dismiss the petition. It
has become moot. chanroblesvirtuallawlibrary
On February 14, 2001, the Ombudsman dismissed the administrative
charges against respondent. In dismissing the charges, the Ombudsman
categorically ruled as Iollows: chanroblesvirtuallawlibrary
It is another story, however, as regards respondent SILVESTRE. In
implicating respondent SILVESTRE in the instant case, Atty.
DOCTOR stated in his AFFIDAVIT OF ARREST AND
COMPLAINT, the Iollowing:chanroblesvirtuallawlibrary
6. That aIter the hearing oI the case (S.I. No. 00-005) on January 20,
2000, ATTY. SOMERA approached me and invited me to the room oI
ATTY. RONNIE SILVESTRE (herein petitioner), Head oI the Law
Department oI the Port oI Manila wherein the duo convinced me to
cooperate with them in the withdrawal oI the complaint and its
eventual dismissal;chanroblesvirtuallawlibrary
7. That I did not commit myselI to their proposition to drop the case
but I just continued talking with them with the plan in mind to report
the same to LT. GEN. JOSE T. CALIMLIM, Task Force Commander
oI Presidential Anti-Smuggling Task Force
ADUANA;chanroblesvirtuallawlibrary
Except this bare allegation oI the complainant, however, practically no
other evidence was ever presented to substantiate the charge against
respondent SILVESTRE. At this point, it may be noted that well
settled is the rule that within the Iield oI administrative law, while
strict rules oI evidence are not applicable to quasi-judicial proceedings,
nevertheless, in adducing evidence constitutive oI substantial
evidence, the basic rule that mere allegation is not evidence cannot be
disregarded.chanroblesvirtuallawlibrary
We are, thereIore inclined to believe the deIense oI respondent
SILVESTRE, that what was discussed between him, respondent
SOMERA and Atty. DOCTOR on January 20, 2000, was the legal
issue on the continued detention oI some kitchen wares which were
not covered by the Warrant oI Seizure and Detention (WSD). This, in
light oI subsequent Order oI the District Collector oI the Port oI
Manila dated March 2, 2000, releasing the said kitchen wares which
were indeed, not covered by the Warrant oI Seizure and Detention
(WSD) x x xchanroblesvirtuallawlibrary
Worthy oI note also is the DECISION oI the Court oI Appeals in CA-
G. R. SP No. 58958 dated August 14, 2000 entitled RONNIE C.
SILVESTRE vs. OMBUDSMAN ANIANO A. DESIERTO, (pages
253 to 254, Records) where in granting the petition Ior certiorari and
prohibition involving the preventive suspension order on respondent
SILVESTRE, the said appellate court stated, thus:
xxx xxx xxx chanroblesvirtuallawlibrary
While the above DECISION may not necessarily be controlling in the
resolution oI the merits oI the instant case insoIar as it pertains to
respondent SILVESTRE, we cannot help but note its relevancy
inasmuch as practically no other evidence was presented by the
complainant, other than his AFFIDAVIT OF ARREST AND
COMPLAINT to support the charge against respondent SILVESTRE.
Needless to state, this is also the very same and only evidence
presented beIore the Court oI Appeals which rendered the aIorequoted
DECISION.chanroblesvirtuallawlibrary
WHEREFORE, the Court hereby DISMISSES the petition Ior
mootness. chanroblesvirtuallawlibrary
No costs. chanroblesvirtuallawlibrary
SO ORDERED. chanroblesvirtuallawlibrary
Puno Kapunan and Ynares-Santiago concur
chanroblesvirtuallawlibrary
avide r C (Chairman) on official business


SECOND DIVISION
LAND BANK OF THE
PHILIPPINES,
Petitioner,
- versus -
CONRADO O. COLARINA,
Respondent.
G.R. No. 176410
Present:
CARPIO, J.,
Chairperson,
NACHURA,
BERSAMIN,*
ABAD, and
MENDOZA, JJ.
Promulgated:
September 1, 2010
x---------------------------------------------------------
x

DECISION
NACHURA, J.:
Before us is a petition for review on certiorari assailing
the Decision of the Court of Appeals (CA) in CA-G.R. CV
No. 68476,[1] which affirmed the decision of the
Regional Trial Court (RTC), Branch 3, Legazpi City,
Albay, sitting as a Special Agrarian Court (SAC) in
Agrarian Case No. 95-01.[2]
The facts are simple.
Respondent Conrado O. Colarina is the registered owner
of three (3) parcels of agricultural land which he
acquired from their former owner, Damiana Arcega. The
parcels of land have a total area of 972,047 square
meters with the following description:
TRANSFER
CERTIFICATE OF
TITLE (TCT) No.
AREA (hectares) LOCATION
T-86402 12.5718 Herrera, Ligao,
Albay
T-86448 48.3062 Herrera, Ligao,
Albay
T-86449 36.3267 Amtic, Ligao,
Albay
Upon acquisition thereof, respondent manifested his
voluntary offer to sell the properties to the Department
of Agrarian Reform (DAR) for coverage under Republic
Act (R.A.) No. 6657, the Comprehensive Agrarian
Reform Law (CARL). Respondents assessment value of
the properties was P45,000.00 per hectare.
The DAR, through petitioner Land Bank of the
Philippines (LBP), assessed the properties and offered
to purchase only 57.2047 hectares out of the 97.2047
hectares voluntarily offered for sale by respondent. The
excluded area (40 hectares) fell under the exemptions
and exclusions provided in Section 10[3] of the CARL,
i.e., all lands with eighteen percent (18%) slope and
over. In addition, the LBP assigned the following values
to the properties:
TCT No. Covered
Area
Excluded
Area
Value
T-86402 6.5718 6 P 46,045.60
T-86448 28.3062 20 P 208,144.33
T-86449 22.3267 14 P 154,394.22
As the LBPs assessment and valuation of the properties
was unacceptable to, and rejected by, respondent, he
elevated the determination of just compensation of the
properties to the Provincial Agrarian Reform Adjudicator
(PARAD). Unfortunately for respondent, the PARAD
affirmed the valuation set forth by the LBP.
Disappointed with the low valuation by petitioner and
the DAR, respondent filed a Complaint[4] before the
RTC, Branch 3, Legazpi, Albay, for the judicial
determination of just compensation.
In refutation, petitioner filed its Answer,[5] denied the
material allegations in the Complaint, and alleged that it
had correctly assessed and valuated the subject
properties consistent with R.A. No. 6657 and DAR
Administrative Order (AO) No. 6, Series of 1992.
During pre-trial, LBP manifested that the subject
properties may be reassessed and revaluated based on
the new guidelines set forth in DAR A.O. No. 11, Series
of 1994. Intent on finding a common ground between
petitioner and respondent and to amicably settle the
case, the SAC ordered the revaluation. The new
valuations of the LBP were:
TCT No. Old Valuation New Valuation
T-86402 P 46,045.60 P51,762.90 at
P7,876.5178/ha.
T-86448 P208,144.33 P259,525.41 at
P9,168.50/ha.
T-86449 P154,394.22 P217,223.60 at
P9,729.3196/ha.[6]
The foregoing valuation was still rejected by
respondent. Hence, trial ensued. To support his
Complaint and valuation of the subject properties,
respondent presented in evidence his own testimony
and that of Carlito M. Oliva (Oliva), then Assistant
Provincial Assessor of Camarines Sur and President of
the Camarines Chapter of the National Real Estate
Association.
As for petitioner, it presented the testimonies of Armel
Alcantara (Alcantara), Chief of the Landowners
Assistance Division of the LBP, and Melchor Balmaceda,
officer of LBP, Sipocot Branch.
The SAC summarized the testimonies of the witnesses
as follows:
Second witness Carlito M. Oliva, x x x testified that in
several instances, he was deputized by the Honorable
Court under RTC BR. 26 to chair the commission in the
determination of the fair market value of properties
subject for payment by the government. That the
properties involved in this case is composed of three
parcels. [T-86402] is situated at Barangay Herrera,
Ligao, Albay which contains an area of 12.5718 has.;
[T-86449] is also situated in the same Barangay with an
area of 36.3267 has.; [a]nd [T-86448] is situated at
Barangay Amtic, Ligao, Albay with an area of 48.3062
has or a total of 97.2047 has. Upon Mr. Colarinas
request, he conducted an investigation and ocular
inspection on the subject properties and made a
narrative report relative thereto. That his
recommendation as the reasonable market value of the
properties is at P49,201.148/ha or a total of
P4,788,415.20 using the productivity approach since
the subject property is mostly agricultural. That the
actual area planted to coconuts is about 43.84%;
banana plants is 7.79%; corn land is 1.14%; homelots
is 0.50% and 4.97% cogonal, while 5% is non-arable.
x x x x
Armel Alcantara testified that x x x before, he was the
Division Chief of the Claim, Processing and Payment
Division (CPPD) [of the LBP]. As such, he conducts
review of claim folders covered by P.D. No. 27, E.O. No.
228 and R.A. No. 6657, most specifically the claim
folders under voluntary offer to sell and compulsory
acquisition claim folders. That he valued the subject
lands owned by [respondent] based on AO No. 11 S. of
1996. Pursuant to the Hon. Courts order dated
November 14, 1996. For TCT No. 86448, the area
covered is 28.3062 has. [o]ut of 48.3062 has. Because
some portion of the property is hilly and mountainous
and underdeveloped which exceeded the 18% limit set
forth under Sec. 10 of RA 6657. This lot is planted to
corn, peanut and cogonal. The corn land is 13 has.,
peanut land is .25 has., cogonal is 15.0562 has.; the
excluded portion which is mountainous and about 25%
slope totals 20 has. The factor considered by Land Bank
is under Formula No. 2 which is the Capitalized Net
Income (CNI) x 90% and the market value per Tax
declaration wherein they get the remaining 10%. The
CNI was taken from the average gross production based
on the field investigation report multiplied by the selling
price from the Department of Agriculture municipal
data, arriving at a total CNI of P10,291.67 per ha. The
market value per Tax declaration was based on the
third classification as furnished to Land Bank by the
Municipal Assessors office. The total MVPT as computed
by Land Bank is P14,193.22, so, 10% of which is
P1,419.32. After computing the CNI and the MVPT, he
applied the applicable formula which is CNI x 90% and
the MVPT x 10%. The CNI total is P9,262.5 and the MV
is P1,419.32. Summing up the total amount of the two
factors, the value per ha. Arrived at for corn land is
P10,681.82 per ha. Multiply it by 13 has. For corn land,
the total amount is P3,535.66. For peanut land, the
total amount is P3,535.66 and for cogonal where they
used the market value per tax declaration multiplied by
2. the total is P117,126.09. Therefore, the total
valuation of this 28.3062 has. portion of the property
acquired by the government is P259,525.41.
For Title No. 86449, 22.3267 has. out of 36.3267 has.
[i]s carpable. The 14 has. [w]as excluded because this
falls under the hilly and mountainous portion which is
about 18% slope. Applying the same rules and
regulations, the total valuation for this property is
P217,223.60.
For Title No. 86402, the area covered is 6.5718 has.
[o]ut of 12.5718 has. The area of 6 has. is excluded for
it falls above 18% slope. Applying again the same rules
and regulations, the total valuation for the 6.5718 has.
[a]cquired by the government is P51,762.90.
That there are several valuations/formulas provided for
under RA 6657 and the Land Bank follows the applicable
formula as reflected in the field investigation report.
Therefore, their basis in determining which factors will
be applied are the result of the field investigation
report. After determining the existence of the property,
the DAR, Land Bank and the other agencies concerned
conducted an ocular inspection of the property being
offered for sale under CARP or covered by the CARP.
The data in-put were gathered in the field including the
number of fruit bearing trees also determined. The
production data was also taken and a survey was being
conducted in the field on adjacent properties. Said data
were compared with the record of the Municipal
agriculturist and other officers. That the valuation of the
property was based under AO No. 11 existing at the
time of the valuation of the property as of November
19, 1996.
Melchor Balmaceda testified that at present he is an
officer of Land Bank of the Philippines, Sipocot Branch
but before, he was connected with Land Bank VO,
Legazpi City Branch as Agrarian Affairs Specialist. As
such, he conducts ocular inspection on the properties
covered by the CARP, and gathers information relative
to land valuation. That sometime in 1991, he together
with DAR personnel and BARC Chairman and caretakers
of the property conducted an ocular inspection in
question in the name of Damian Arcega, the former
owner of the property, which property consisted of 3
parcels. That in connection thereto, they made a written
report that the property is generally mountainous and
majority is planted to coconut. A portion is planted to
corn and minimal portion is planted to peanut and there
is also a portion which is cogonal where there is no
product. That all the areas are carpable. That they
gather data information from government agencies and
they compute the net income of the properties based on
the produce.[7]

Thereafter, the SAC rendered a decision reconciling the
conflicting evidence of the parties. The SAC followed the
formula of the LBP and its land use classification of the
subject properties; the appraisal report on the valuation
thereof. It disposed of the case, to wit:
To reconcile the conflicting figures both prayed for by
[respondent] and [petitioner] Land Bank as the
computation of the value of the properties to be paid to
the [respondent], taking into account all the factors in
determining just compensation and considering that the
taking of private agricultural properties under Agrarian
Reform Law is a special kind of eminent domain which
is revolutionary in character, the primary goal of which
is to grant land to the landless and the need for high
production, the just compensation for the lots subject
matter of this case, using the value in the
[respondents] appraisal report and the land use of the
properties as classified by the Land Bank, are as
follows:

1) TCT No. T-86448 - carpable area - 28.3062
has.
Land Use:
A) Corn land
Area = 13.0000 has.
Value/Ha = P52,700/has (Per Appraisal Report)
Computation:
P52,700/ha x 13.0000 has = P685,100.00
B) Peanut
Area = .2500
Value/Ha = P60,000/has (Per Appraisal Report)
Computation:
P60,000.00/has x .2500 has = P15,000.00
C) Cogonal
Area = 15.0562 has.
Value/Ha = P5,270 (Per Appraisal Report)
Computation:
P5,270.00/has x 15.0562 has = P79,346.17
Total:
Corn land - P685,100.00
Peanut - 15,000.00
Cogonal - 79,346.17
P779,446.17
2) TCT No. T-86449 - carpable area -
22.3267 has.
Land Use:
A) Corn land
Value/Ha = P52,700.00/ha (Per Appraisal Report)
Area = 15.000 has
Computation:
P52,700.00/has. x 15.0000 has = P790,500.00
B) Cogon:
Value/ha = P5,270/ha (Per Appraisal Report)
Area = 7.3267 has
Computation:
P5,270/ha x 7.3267 has = P38,611.7
Total:
Corn land - P790,500.00
Cogon - 38,611.70
P829,111.70
3) TCT No. T-86402 - carpable area - 6.5718 has
Land Use:
A) Corn land
Value/ha = P52,700/ha (Per Appraisal Report)
Area = 3.0000 has
Computation:
P52,700/has x 3.0000 has = P158,100
B) Cogonal
Value/ha = P5,270/ha (Per Appraisal Report)
Area = 3.5718 has
Computation:
P5,270/ha x 3.5718 has = P18,823.28
Total:
Corn land = P158,100.00
Cogonal = 18,823.38
Total = P176,923.38
Based on the foregoing computation, the just
compensation for 1) TCT No. T-86448 with a carpable
area of 28.3062 has. is fixed at P779,446.17; 2) TCT
No. T-86449 with a carpable area of 22.3267 has. is
fixed at P829,111.70; and for 3) TCT No. T-86402
with a carpable area of 6.5718 has. is fixed at
P18,823.38.
Thus, the overall valuation of the property is as follows:
TCT No. T-86648 P 779,446.17
TCT No. T-86649 829,111.70
TCT No. T-86402 176,923.38
TOTAL P1,785,481.25
===========
WHEREFORE, [petitioner LBP] is ordered to pay
[respondent] Conrado Colarina the total sum of ONE
MILLION SEVEN HUNDRED EIGHTY FIVE THOUSAND
FOUR HUNDRED EIGHTY ONE PESOS AND TWENTY FIVE
CENTAVOS (P1,785,481.25) in case or in bond or in any
other mode of payment under Section 18 of RA 6657
otherwise known as the Comprehensive Agrarian
Reform Law, at the option of the landowner.
SO ORDERED.[8]

Still dissatisfied with the valuation of just compensation
for the subject properties, both parties appealed to the
CA. The appellate court affirmed the ruling of the SAC,
to wit:
HEREFORE, premises considered, the August 7,
2000 Decision of the Regional Trial Court of Lega[z]pi
City, Albay, Branch 3, in Agrarian Case No. 95-01, is
hereby AFFIRMED.

SO ORDERED.[9]

Adamant on the accuracy of its computation, petitioner
appeals to this Court, positing the following issues:
THE HONORABLE COURT OF APPEALS COMMITTED
SERIOUS ERRORS OF LAW IN THE FOLLOWING
INSTANCES:
I.
WHEN IT AFFIRMED THE REGIONAL TRIAL COURT OF
LEGA[Z]PI CITY, BRANCH 3 DECISION DATED AUGUST
7, 2000 WHICH AWARDED P1,785,481.25 AS JUST
COMPENSATION FOR THE FIFTY-SEVEN-HECTARE
PROPERTY, AS THE SAID DECISION FAILED TO
CONFORM TO THIS HONORABLE COURTS RULING IN
"LAND BANK OF THE PHILIPPINES V. SPOUSES
VICENTE BANAL AND LEONIDES ARENAS-BANAL (G.R.
NO. 143276).
II.
WHEN IT TREATED THE TAKING OF AGRICULTURAL
LANDS FOR AGRARIAN REFORM PURPOSES AS AN
ORDINARY EXPROPRIATION OF PRIVATE PROPERTY
FOR PUBLIC USE.[10]
We impale the foregoing into the singular issue of
whether the lower courts computation of just
compensation for the subject properties is correct.
We answer in the negative and find the petition
impressed with merit.
As pointed out by petitioner, our ruling in and Bank of
the Philippines v. Sps. Banal[11] is definitive on the
factors to be considered, and the formula utilized, for
the determination of just compensation:
To begin with, under Section 1 of Executive Order No.
405 (1990), the Landbank is charged "primarily with
"the determination of the land valuation and
compensation for all private lands suitable for
agriculture under the Voluntary Offer to Sell or
Compulsory Acquisition arrangement. For its part, the
DAR relies on the determination of the land valuation
and compensation by the Landbank.
x x x x
A party who disagrees with the decision of the DAR
adjudicator may bring the matter to the RTC designated
as a Special Agrarian Court "for final determination of
just compensation.
In the proceedings before the RTC, it is mandated to
apply the Rules of Court and, on its own initiative or at
the instance of any of the parties, "appoint one or more
commissioners to examine, investigate and ascertain
facts relevant to the dispute, including the valuation of
properties, and to file a written report thereof x x x. In
determining just compensation, the RTC is required to
consider several factors enumerated in Section 17 of
R.A. 6657, as amended, thus:
"Sec. 17. etermination of Just Compensation. - In
determining just compensation, the cost of acquisition
of the land, the current value of like properties, its
nature, actual use and income, the sworn valuation by
the owner, the tax declarations, and the assessment
made by government assessors shall be considered.
The social and economic benefits contributed by the
farmers and the farmworkers and by the Government to
the property, as well as the non-payment of taxes or
loans secured from any government financing institution
on the said land, shall be considered as additional
factors to determine its valuation.
These factors have been translated into a basic formula
in DAR Administrative Order No. 6, Series of 1992, as
amended by DAR Administrative Order No. 11, Series of
1994, issued pursuant to the DARs rule-making power
to carry out the object and purposes of R.A. 6657, as
amended.

Subsequent rulings of the Court uniformly parleyed that
Section 17 of R.A. No. 6657 has been translated into a
formula by the DAR through A.O. No. 6, Series of 1992,
as amended by A.O. No. 11, Series of 1994:[12]
A. There shall be one basic formula for the
valuation of lands covered by [Voluntary Offer to Sell]
or [Compulsory Acquisition] regardless of the date of
offer or coverage of the claim:
LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1)
Where: LV = Land Value
CNI = Capitalized Net Income
CS = Comparable Sales
MV = Market Value per Tax Declaration
The above formula shall be used if all the three factors
are present, relevant, and applicable.
A.1 When the CS factor is not present and CNI and MV
are applicable, the formula shall be:
LV = (CNI x 0.9) + (MV x 0.1)
A.2 When the CNI factor is not present, and CS and MV
are applicable, the formula shall be:
LV = (CS x 0.9) + (MV x 0.1)
A.3 When both the CS and CNI are not present and only
MV is applicable, the formula shall be:
LV = MV x 2
In no case shall the value of the land using the formula
MV x 2 exceed the lowest value of land within the same
estate under consideration or within the same -arangay
or municipality (in that order) approved by LBP within
one (1) year from receipt of claimfolder.
x x x x
A.6 The basic formula in the grossing-up of valuation
inputs such as LOs Offer, Sales Transaction (ST),
Acquisition Cost (AC), Market Value Based on Mortgage
(MVM) and Market Value per Tax Declaration (MV) shall
be:
Grossed-up = Valuation input x
Valuation Input Regional Consumer Price
Index (RCPI) Adjustment
Factor
The RCPI Adjustment Factor shall refer to the ratio of
RCPI for the month issued by the National Statistics
Office as of the date when the claimfolder (CF) was
received by LBP from DAR for processing or, in its
absence, the most recent available RCPI for the month
issued prior to the date of receipt of CF from DAR and
the RCPI for the month as of the
date/effectivity/registration of the valuation input.
Expressed in equation form:
RCPI for the Month as of the
Date of Receipt of Claimfolder
by LBP from DAR or the Most
recent RCPI for the Month
Issued Prior to the Date of
RCPI Receipt of CF
Adjustment = --------------
Factor RCPI for the Month Issued as of
the Date/Effectivity/Registration
of the Valuation Input
B. Capitalized Net Income (CNI) - This shall refer to
the difference between the gross sales (AGP x SP) and
total cost of operations (CO) capitalized at 12%.
Expressed in equation form:
CNI = (AGP x SP) - CO
---------
.12
Where: CNI = Capitalized Net Income
AGP = Latest available 12-month's gross
production
immediately preceding the date of offer in case of VOS
or date of notice of coverage in case of CA.
SP = The average of the latest available 12-
months selling prices prior to the date of receipt of the
claimfolder by LBP for processing, such prices to be
secured from the Department of Agriculture (DA) and
other appropriate regulatory bodies or, in their absence,
from the Bureau of Agricultural Statistics. If possible, SP
data shall be gathered from the -arangay or
municipality where the property is located. In the
absence thereof, SP may be secured within the province
or region.
CO = Cost of Operations
Whenever the cost of operations could not be obtained
or verified, an assumed net income rate (NIR) of 20%
shall be used. Landholdings planted to coconut which
are productive at the time of offer/coverage shall
continue to use the 70% NIR. DAR and LBP shall
continue to conduct joint industry studies to establish
the applicable NIR for each crop covered under CARP.
.12 = Capitalization Rate
x x x x
C. CS shall refer to any one or the average of all the
applicable sub-factors, namely, ST, AC and MVM:
Where: ST = Sales Transactions as defined
under Item C.2
AC = Acquisition Cost as defined under Item C.3
MVM = Market Value Based on Mortgage as defined
under Item C.4
x x x x
D. In the computation of Market Value per Tax
Declaration (MV), the most recent Tax Declaration (TD)
and Schedule of Unit Market Value (SMV) issued prior to
receipt of claimfolder by LBP shall be considered. The
Unit Market Value (UMV) shall be grossed up from the
date of its effectivity up to the date of receipt of
claimfolder by LBP from DAR for processing, in
accordance with item II.A.A.6.
In and Bank of the Philippines v. Celada,[13] we
declared:
While SAC is required to consider the acquisition cost of
the land, the current value of like properties, its nature,
actual use and income, the sworn valuation by the
owner, the tax declaration and the assessments made
by the government assessors to determine just
compensation, it is equally true that these factors have
-een translated into a -asic formula -y the #
pursuant to its rule-making power under Section 49 of
RA No. 6657. As the government agency principally
tasked to implement the agrarian reform program, it is
the DARs duty to issue rules and regulations to carry
out the object of the law. DAR AO No. 5, s. of 1998
precisely "filled in the details of Section 17, RA No.
6657 by providing a basic formula by which the factors
mentioned therein may be taken into account. The SAC
was at no liberty to disregard the formula which was
devised to implement the said provision.
It is elementary that rules and regulations issued by
administrative bodies to interpret the law which they
are entrusted to enforce, have the force of law, and are
entitled to great respect. Administrative issuances
partake of the nature of a statute and have in their
favor a presumption of legality. As such, courts cannot
ignore administrative issuances especially when, as in
this case, its validity was not put in issue. Unless an
administrative order is declared invalid, courts have no
option but to apply the same.
In the same vein, and Bank of the Philippines v.
im[14] did not depart from the previous rulings and
explicitly affirmed the mandatory nature of Section 17
of RA No. 6657 and DAR A.O. No. 6092, as amended by
DAR A.O. No. 11-94:
In and Bank of the Philippines v. Spouses Banal, this
Court underscored the mandatory nature of Section
17 of RA 6657 and DAR AO 6-92, as amended by
DAR AO 11-94, viz.:
"In determining just compensation, the #%C is required
to consider several factors enumerated in Section 17 of
#.. 6657, as amended, thus:
"Sec. 17. etermination of Just Compensation. -
In determining just compensation, the cost of
acquisition of the land, the current value of like
properties, its nature, actual use and income, the sworn
valuation by the owner, the tax declarations, and the
assessment made by government assessors shall be
considered. The social and economic benefits
contributed by the farmers and the farmworkers and by
the Government to the property, as well as the non-
payment of taxes or loans secured from any
government financing institution on the said land, shall
be considered as additional factors to determine its
valuation.
%hese factors have -een translated into a -asic formula
in [# 6-92], as amended -y [# 11-94],
issued pursuant to the DARs rule-making power to
carry out the object and purposes of R.A. 6657, as
amended.
%he formula stated in [DAR AO 6-92], as
amended, is as follows:
"LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1)
LV = Land Value
CNI = Capitalized Net Income
CS = Comparable Sales
MV = Market Value per Tax Declaration
The above formula shall be used if all the three
factors are present, relevant and applicable.
A.1 When the CS factor is not present and CNI
and MV are applicable, the formula shall be:
LV = (CNI x 0.9) + (MV x 0.1)
x x x x
While the determination of just compensation involves
the exercise of judicial discretion, however, such
discretion must -e discharged within the -ounds of the
law. Here, the RTC wantonly disregarded R.A. 6657, as
amended, and its implementing rules and regulations.
([DAR AO 6-92], as amended by [DAR AO 11-94]).
x x x x
WHEREFORE, x x x. Civil Case No. 6806 is REMANDED
to the RTC x x x. %he trial judge is directed to
observe strictly the procedures specified above in
determining the proper valuation of the subject
property.
The recent case of eirs of orenzo and Carmen Vidad
and gvid Construction Co., Inc. v. and Bank of the
Philippines[15] is most propinquity on the same point:
LBPs valuation of lands covered by the CARP Law is
considered only as an initial determination, which is not
conclusive, as it is the RTC, sitting as a SAC, that
could make the final determination of just
compensation, taking into consideration the
factors enumerated in Section 17 of RA 6657 and
the applicable DAR regulations. LBPs valuation has
to be substantiated during an appropriate hearing
before it could be considered sufficient in accordance
with Section 17 of RA 6657 and the DAR regulations.
In and Bank of the Philippines v. Celada, the Court
ruled that the factors enumerated under Section 17 of
RA 6657 had already been translated into a basic
formula by the DAR pursuant to its rule-making power
under Section 49 of RA 6657. Thus, the Court held that
the formula outlined in DAR AO No. 5, series of 1998,
should be applied in computing just compensation. DAR
AO No. 5, series of 1998, provides:
A. There shall be one basic formula for the valuation
of lands covered by VOS or CA:
LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1)

Where:
LV = Land Value
CNI = Capitalized Net Income
CS = Comparable Sales
MV = Market Value per Tax Declaration
The above formula shall be used if all three factors are
present, relevant and applicable.
A1. When the CS factor is not present and CNI and
MV are applicable, the formula shall be:
LV = (CNI x 0.9) + (MV x 0.1)
A2. When the CNI factor is not present, and CS and
MV are applicable, the formula shall be:
LV = (CS x 0.9) + (MV x 0.1)
A3. When both the CS and CNI are not present and
only MV is applicable, the formula shall be:
LV = MV x 2
In no case shall the value of idle land using the formula
MV x 2 exceed the lowest value of land within the same
estate under consideration or within the same barangay
or municipality (in that order) approved by LBP within
one (1) year from receipt of claimfolder.
In and Bank of the Philippines v. Spouses Banal, we
remanded the case to the SAC for further reception of
evidence because the trial court based its valuation
upon a different formula and did not conduct any
hearing for the reception of evidence.

The mandatory application of the aforementioned
guidelines in determining just compensation has
been reiterated recently in and Bank of the
Philippines v. im and and Bank of the
Philippines v. Heirs of Eleuterio Cruz, where we
also ordered the remand of the cases to the SAC
for the determination of just compensation
strictly in accordance with the applicable DAR
regulations. [16]
The factors for the determination of just compensation
in Section 17 of R.A. No. 6657, and consequently
converted into a formula in A.O. No. 6, Series of 1992,
as amended by A.O. No. 11, Series of 1994, is
mandatory. and Bank of the Philippines v. Sps.
Banal,[17] as affirmed by our subsequent rulings, did
not equivocate.
We note that A.O. No. 6, Series of 1992 (as amended
by A.O. No. 11, Series of 1994) has been superseded
by A.O. No. 5, Series of 1998. However, A.O. No. 5,
Series of 1998, is not applicable to the present case as
the subject properties were assessed and valued prior
to its effectivity.
A perusal of the records of this case readily reveals the
Claims Valuation and Processing Form[18]
accomplished by petitioner when it
reassessed and revaluated the subject properties. The
document follows the required formula for valuation of
properties under A.O. No. 6, Series of 1992, as
amended by A.O. No. 11, Series of 1994. In fact, even
the RTC used the formula of petitioner to compute just
compensation based on petitioners findings on land use
of the subject properties. However, the RTC, as well as
the CA, was gravely mistaken in using
respondents valuation of the properties contained in
Olivas appraisal report, i.e., P52,700.00/ha.
We note that Olivas appraisal report did not attach
pertinent documents thereto, considering that, as he
had testified, he used the productivity approach:
Q Mr. Witness [Oliva] you said that you gave the
valuation of the coconut land in that property of Mr.
Colarina. What is your valuation to the coconut land per
hectare?
WITNESS:
A For the coconut land, the valuation I arrived at for
the coconut land is the amount of P45,300.00 per
hectare. That is the market value of the 4
th
class
coconut land and the improvements already, sir.
Q What about the banana lands?
A The valuation is P70,800.00 per hectare, that is
the valuation of the land, 4
th
class banana land
including already the improvements.
Q Why did you conclude this high valuation of
banana lands?
A Considering that I have compressed all these
banana in every hectare, I have a reason to believe that
it is a 4
th
class banana land. And in a 4
th
class banana
land, the price per kilo is only P15.00 to P30.00 per kilo.
The effective number of bananas per hectare is only
600 clusters considering that this is the productivity for
a 4
th
class banana land. The produce annually of 4,000
kilos is very minimal. So at P15.00 per kilo, I arrived at
a valuation of P60,000.00 per hectare. The appraisal,
on the other hand, for taxation purposes, we just state
there the area actually being planted to bananas not
considering the clusters of bananas in one hectare.
Banana plantation with this kind of clusters will cost
more than this if it will be properly fertilized by the
owner. So this banana land is only a 4
th
class banana
land and is about 7.5764 hectares of the subject
property with only 4,000 to 8,000 kilos of banana fruits
annually.
[Counsel of defendant DAR]
Q What about the corn land area?
A I valued it at P52,700.00 per hectare, sir.
Q What is your basis?
A I have also here on page 5 of my report. I have
classified the subject portion as a second class corn
land. With a production of 101 to 150 cavans per
hectare per year and the price of corn which is P420.00
per cavan, I arrived at a valuation of P52,700 per
hectare, sir.
x x x x
Q But that is not the data established by the [DAR]?
A That is why I made a separate actual
investigation. I made personal interviews with the
farmers and so we arrived at this production.
Q So your basis is the information which you
gathered from the farmers?
A Considering the kind of soil of the property
planted by the farmers to corn, we will have to arrive at
this productivity, sir.
Q Did you inquire about the government support
price of corn per kilo?
A The government support price is at P7.00 or P8.00
per kilo, sir.
Q Did you get that from the National Food
Authority?
A I got this from the [C]hinese traders because I
want to arrive at the open market valuation. I am not
prone to adopt the government price as I was deputized
by Mr. Colarina [respondent] to appraise his property
independently, not as an assessor but as a private
appraiser from the open market. And I know that this is
still subject for review by the honorable court.
x x x x
Q So do you have the data where you based
the valuation?
A That was the result of my actual interview
with the farmers and traders.
x x x x
Q How much is the valuation you gave to this
rootcrops area?
A The subject portion was classified by me as a 3
rd

class rootcrop land and so I valued it at P60,000.00 per
hectare, sir.
Q Do you mean to tell this honorable court that this
rootcrops land, the banana land and corn land are
distinct areas separate from each other?
A I apprised this honorable court that I
appraised this property not exactly on what is
being produced in the area. I considered the land
itself, the classification of the land, the
boundaries there but some are "ogacon" (lazy) to
cultivate this property. Because I am also an
agriculturist and I also have a lot which is planted
to this kind of plants and I know what will be the
actual produce of the CROPS [inserted in the TSN]
with a certain kind of land. If we consider the
actual produce, it is very low. Because we are
"ogacon" (lazy). hat I am very much concerned
is the kind of the land and then I asked them if we
will have to cultivate the property properly, how
much are we going to expect.
Q Do you mean to impress to us that while you
conducted the ocular inspection, there were area
which were not cultivated?
A When I conducted the ocular inspection, I was
able to classify an area of around 4.8 hectares which
has no value at all, sir.
x x x x
Q So you had the ocular inspection without
anybody from the government or from the
barangay going with you?
A Nobody but I told the barangay captain of
the place that we will be going there for an ocular
inspection and from the barangay captain, we
have learned that that there is a subdivision for
sale which is adjoining the subject properties for
that much amount also.
x x x x
[On questioning by the SAC]
A (Perusing the report submitted by the Land Bank
of the Philippines). This is a very low valuation, your
honor.
Q Why?
A Considering that I did not take into consideration
the valuation that was done by the Assessors Office to
the schedule of value because as an assessor, in
gathering data, we have to base the valuation of every
kind of property. It takes us a hard time to consolidate
all these things because, first of all, one, the
comparative sales approach, for example, your honor,
we seldom find the consideration in a certain sale that is
the true and actual selling price perhaps because of the
implementation of the capital gains tax of the Bureau of
Internal Revenue. Most of them are under valued. Now,
that is why I based my valuation from the actual
procedure. First of all I considered the kind of land
thereon and thereby considered also the different kinds
of perennial trees or plants and based on the actual
interviews I conducted with the farmers, I arrived at the
actual produce where I based my computation not
really considering the assessors value because it is only
for taxation purposes. Nowhere in the Philippines that
the government assessments are reliable.[19]
In stark contrast is the valuation made by witness
Alcantara:
Q Mr. Witness, what rule is followed by Land Bank in
arriving at the valuation as contained in this exhibit?
A The guidelines followed by Land Bank: properties
valued under Administrative Order No. 11 Series of
1996 based on the Honorable Courts Order dated
November 14, 1996.
Q In Exh. "1, how many hectares were valued for
the contemplated acquisition of the property?
A The area for acquisition under Title No. 86448 is
28.3062 hectares.
Q x x x Will you please explain why only a total of
28.3062 [hectares] was computed in the valuation of
the property?
A Some portion of the property is hilly and
mountainous which exceeded the 18% limit set forth
under Section 10 of R.A. 6657. Said portions of land
were mountainous and undeveloped and therefore
excluded from acquisition under existing guidelines.
Q What is the basis of said exclusion from coverage?
A Section 10 of R.A. 6657.
Q Will you please explain to us the character, land
use and condition of this particular land as described in
Exh. "1?
A The property which contains an area of 48.3062
hectares per title is planted to corn, peanut and a large
portion is cogonal. The corn land is 13 hectares, peanut
land is .25 hectares and the cogonal is 15.0562
hectares. A hilly portion which is about 18% slope and a
mountainous portion which is about 25% slope totals 20
hectares. This portion is the excluded one.
Q Will you please tell this Honorable Court what
factors were considered by Land Bank in arriving at the
valuation of the property?
A The factor considered by Land Bank is under
Formula No. 2 which is the capitalized net income (CNI)
x 90% and the market value per tax declaration
wherein we get the remaining 10%.
Q There appears a computation for the CNI. Will you
please explain how the total value was arrived at?
A CNI for corn was taken from the average gross
production based on the field investigation report
multiplied by the selling price from the Department of
Agriculture municipal data, arriving at a total CNI of
P10,291.67 per hectare.
Q What about the computation for the market value
per tax declaration (MVPT)? Will you explain how the
total valuation for the MVPT was arrived at?
A The market value per tax declaration was based
on the third classification as furnished to Land Bank by
the Municipal Assessors Office. The total MVPT as
computed by Land Bank is P14,193.22, so, 10% of
which is P1,419.32.
Q Now, after computing the CNI and the MVPT, what
steps did you undertake to arrive at the total valuation
of the property?
A We applied the applicable formula which is the CNI
x 90% and the MVPT x 10%. The CNI total is P9,262.5
and the market value is P1,419.32. Summing up the
total amount of the two factors, the value per hectare
arrived at for corn land is P10,681.82 per hectare. So, if
we will apply the amount arrived at for the value per
hectare of corn, P10,681.82 x 13 has. for corn land, the
total is P138,863.66. The for peanut land, the total
amount is P3,535.66 and for the cogonal land where we
used the market value per tax declaration multiplied by
2, the total is P117,126.09. Therefore, the total
valuation of this 28.3062 portion of the property
acquired by the government is P259,525.41.
x x x x
A The total area acquired for Title No. 86449 is
22.3267 hectares out of 36.267 hectares per title.
Q What is the basis of your exclusion of the 14
hectares?
A This 14 hectares fall also under the hilly and
mountainous portion which is about 18% slope.
Q x x x [D]id you apply the same rules and
regulations covered by such valuation? Did you apply
the same factors?
A Yes.
Q What is the total?
A The total valuation for this property [TCT No.
86449] is P217,223.60.
x x x x

Q Lastly, in Exh. "3, will you please tell us what is
the area acquired for coverage under CARP?
A The area acquired is 6.5718 hectares out of
12.5718 has.
Q What is the area excluded for valuation?
A The area excluded for valuation falling above 18%
slope is 6 hectares.
Q x x x [D]id you still adopt the same rules and
regulations in computing the valuation?
A The same.
Q What is the total valuation [for TCT No. 86402]?
A The total valuation for Title No. 86402 for the
6.5718 hectares acquired by the government is
P51,762.90.
x x x x
Q Are there any guidelines under the law which
limits or defines what can be used in the valuation of
the property under the CARP?
A There are several valuations/formulas provided for
under R.A. 6657 and Land Bank follows the applicable
formula as reflected in the field investigation report.
Therefore, our basis in determining which factors will be
applied are the result of the field investigation report.
Q Will you please tell this Honorable Court what
particular activities are to be taken for the purpose of
being able to value the property?
A After determining the existence of the property,
the DAR, Land Bank and other agencies concerned
conduct an ocular inspection of the property being
offered for sale under CARP or covered by the CARP.
The data in-put were gathered in the field including the
number of fruit bearing trees, they were also
determined. The production data is also taken and a
survey is being conducted in the field on adjacent
properties. Said data were being compared with the
record of the Municipal agriculturist and other officers.
Q Last question Mr. Witness, the total valuation of
the subject property is as of what point of time?
A The valuation of the property was based under
Administrative Order No. 11 existing at the time of the
valuation of the property.
x x x x
COURT:
When was that?
WINTNESS:
November 19, 1996.[20]
Clearly from the foregoing, the valuation of the subject
properties by petitioner was based on data gathered by
DAR and contained in its Field Investigation Report.[21]
The data correctly reflected actual use and produce of
the subject properties and did not factor in potential use
as what respondents appraiser did. In fact, we note
that the data obtained by Oliva was based on his
unofficial surveys of farmers and Chinese traders. Oliva
readily dismisses government valuation as unreliable
without proffering evidence to support his statement.
This explains the big discrepancy in Olivas Appraisal
Report and petitioners valuation.
While we commend respondent in readily participating
in the governments agrarian reform program, our
previous rulings preclude us from validating the
valuation of the subject properties proffered to, and
affirmed by, the SAC. The government cannot be forced
to purchase land which it finds no need for, regardless
of Olivas unschooled opinion. Considering respondents
belief that the properties are worth more than the
valuation made by the DAR, he can proceed to
develop the land excluded by the DAR from
expropriation into its potential use as assessed by Oliva.
Thus, replacing the valuation of the subject properties
pursuant to the determination of petitioner where the
LV was pegged using the formula {CNI x 90%} + {MV
x 2}, we arrive at a different amount:
1) TCT No. T-86448 - carpable area - 28.3062 has.
Land Use:
A) Corn land
Area = 13.0000 has.
Value/Ha = P10,681.82/ha
Computation:
P10,681.82/ha x 13.0000 has = P138,863.66
B) Peanut
Area = .2500
Value/Ha = P14,142.65/ha
Computation:
P14,142.65/ha x .2500 has = P3,535.66
C) Cogonal
Area = 15.0562 has.
Value/Ha = P7,779.26/ha
Computation:
P7,779.26/ha x 15.0562 has = P117,126.09
Total:
Corn land - P138,863.66
Peanut - 3,535.66
Cogonal - 117,126.09
P259,525.41
2) TCT No. T-86449 - carpable area - 22.3267 has.
Land Use:
A) Corn land
Value/Ha = P10,681.82/ha
Area = 15.00 has
Computation:
P10,681.82/ha x 15.0000 has = P160,227.30
B) Cogon:
Value/ha = P7,779.26/ha
Area = 7.3267 has
Computation:
P7,779.26/ha x 7.3267 has = P56,996.30
Total:
Corn land - P160,227.30
Cogon - 56,996.30
P217,223.60
3) TCT No. T-86402 - carpable area - 6.5718 has
Land Use:
A) Corn land
Value/ha = P7,992.31/ha
Area = 3.0000 has
Computation
P7,992.31/ha x 3.0000 has = P23,976.94
B) Cogonal
Value/ha = P7,779.26/ha
Area = 3.5718 has
Computation:
P7,779.26/ha x 3.5718 has = P27,785.96
Total:
Corn land = P 23,976.94
Cogonal = 27,785.96
Total = P 51,762.90
TCT No. T-86448 - P259,525.41
TCT No. T-86449 217,223.60
TCT No. T-86402 51,762.90
TOTAL P528,511.91
===========
HEREFORE, the petition is hereby GRANTED. The
Decision of the Court of Appeals in CA-G.R. CV No.
68476 and the decision of the Regional Trial Court,
Branch 3, Legazpi City, Albay, in Agrarian Case No. 95-
01 are REVERSED and SET ASIDE. Petitioner Land
Bank of the Philippines is hereby ordered to pay
respondent Conrado O. Colarina the following amounts:
1. P259,525.41 for 28.3062 hectares of TCT
No. 86448;
2. P217,223.60 for 22.3267 hectares of TCT
No. 86449; and
3. P51,762.90 for 6.5718 hectares of TCT
No. 86402.
Petitioner shall pay twelve percent (12%) interest per
annum from finality of this judgment until complete
satisfaction thereof.
SO ORDERED.



























ublic oI the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-67784 February 28, 1986
MABUHAY TEXTILE MILLS CORPORATION, Petitioner, vs.
MINISTER ROBERTO V. ONGPIN, ALFREDO PIO DE RODA,
1R., EDGARDO L. TORDESILLAS, RAMON 1. FAROLAN,
GARMENTS AND TEXTILE EXPORT BOARD AND THE
INTERMEDIATE APPELLATE COURT, Respondents.chanrobles virtual law lib rary

GUTIERREZ, 1R., chanrobles virtual law library
This petition Ior certiorari seeks to annul the decision oI the
Intermediate Appellate Court dated January 6, 1984 which upheld the
cancellation oI petitioner's export quota allocations and the suspension
oI its oIIicers even as it set aside the basis oI such cancellation and
suspension on the ground oI violation oI due process.chanroblesvirtualawl ibrary chan robles virtual law library
Petitioner Mabuhay Textile Mills Corporation (Mabuhay) is a
corporation engaged in the garments and textile import business Ior the
last twenty-seven years. Among the government requirements Ior
engaging in this type oI business are the export quota allocations
issued by the respondent Garments and Textile Export Board.chanroblesvirtualawlibrar y chanrobles virt ual law libra ry
Sometime in 1982, the Board granted export quota allocations Ior
1983 to the petitioner. These export quotas have been granted annually
to the petitioner since 1976. They are automatically renewed every
year provided the grantee has utilized its quotas during the previous
years.chanrob lesvirtualawlib rary chanrobles vi rtual law lib rary
On March 2, 1983, the petitioner received a letter Irom the Board
inIorming it that its 1983 export quota allocations were revoked
eIIective February, 1983. Furthermore, its major stockholders and
oIIicers were also distinguished Irom engaging in business activities
involving garment and textile exports. The decision oI the Board was
based on the Iollowing initial Iindings oI the Bureau oI Customs, to
wit:
1. Two 40-Iooter containers declared to consist oI 210
bales oI acrylic staple Iiber weighing 48.211 kgs. with a
value (including taxes and duties) oI P1,240,857.00
arrived Irom Kobe, Japan on 12 February 1983 on
board the S/S Breadeverette.chanroblesvirtualawlibrary chanrobles vi rtual law lib rary
2. Examination oI the shipment reveals the Iollowing -
a. About 100 bales oI acrylic staple
Iibers were Iound in the Iirst halI oI the
containers; andchanrob les virtual law li brary
b. Assorted textile piece goods Ior
blouses, shirts and dresses were Iound
midway through the containers.
3. The estimated value oI the actual contents oI the 2
containers is P2.5 Million.
The Bureau oI Customs conducted an investigation pursuant to the
above initial Iindings. On July 25, 1983, it rendered a decision
absolving the petitioner Irom any irregularity relative to the subject
shipment in the initial Iindings. It ruled:
xxx xxx xxxchanrob les virtual law lib rary
During the hearing, it was shown that Mr. James Dy,
Executive Vice-President oI Mabuhay contacted the
shipper in Japan, Daiwa Trading Co., Ltd. demanding
explanation Ior the textile contents oI the shipment and
the shipper answered that those (sic) was an interchange
in the loading oI the materials destined Ior Manila and
another shipment destined Ior Indonesia (Exh. "O" and
Stipulation No. 9).chanroblesvirtualawlibrary chanrob les virtual law li brary
Subsequently, Mr. Dy wrote another letter to the ChieI,
CIID (Exh. "P") enclosing therewith two letters Irom
Daiwa Trading Co., Ltd. dated February 21, 1983 and
February 25, 1983 explaining the supposed
interchanging oI the materials destined Ior Manila and
that destined Ior Indonesia (Exhs. "P-1" and "P-2"); a
copy oI a Bill oI Lading oI Samudera Indonesia
Shipping Line Ior the S/S 'OCEAN PRIMA'
purportedly covering 150 crate piece goods consigned
to 'P.T. GADING AJU DJAZA JL 'oI Jakarta (Exhs.
"P.3" & "J-A"); a photo oI an invoice addressed to 'P.T.
GADING AJU DJAZA JL' containing a detailed
description oI assorted design/color oI the Iabrics and
their corresponding values (Exh, " P-4 " and " 5-B ")
and a photocopy oI a Packing List (Exh. "P-5" also "5-
C") containing the description and yardage oI the
Iabrics mentioned in the aIorementioned invoice. The
aIorementioned photocopies oI the shipping documents
were sent by DAIWA TRADING CO., LTD., to
Mabuhay Ior purposes oI explaining the alleged
interchanging oI the materials in the two shipments and
which Mabuhay, through its Executive Vice-Presidents,
submitted to the CIID.chanroblesvirtualawlibrary chanrobles vi rtual law lib rary
ThereaIter, through a series oI communications with
customs authorities in Jakarta and a personal inspection
in Jakarta by the Commissioner oI Customs, while he
was there, it was discovered that no such containers
with Nos. ICSU-4868538 and ICSU-5219207
containing 110 bales oI acrylic staple Iiber was on
board the 'OCEAN PRIMA' and that Bill oI Lading No.
CJ-4 covers a shipment oI steel sheets (Exh. "O-4 ";
Exhs. "R" to "R-2") thus debunking the claim oI
interchanged shipments by DAIWA TRADING CO.,
LTD.chanroblesvirtualawlibrar y chanrobles virt ual law libra ry
The claimant, on the other hand, showed during the
hearing that it opened a letter oI credit Ior the
importation oI 42,000 kilos oI Acryhc Staple Fiber C8
3D V64 at US$1.6 per kilo (Exh. "1") based on a Pro
Forma Invoice oI Daiwa Trading Co., Ltd. (Exh. "l-A").
Upon receipt oI the shipping documents, i.e., the
Invoice (Exh. "D"); the Packing List (Exh. "C") and the
Bill oI Lading (Exh. "B" also Exh. "1") wherein it is
indicated that the shipment was Shipper's Load &
Count' (Exh. "1-A"), the same were given to its broker
in line with its used business practice, Ior the purpose
oI Iiling the import entry.chanroblesvirtualawl ibrary chan robles virtual law libra ry
When the claimant received inIormation that the
shipment contained Iabrics which it did not import, an
explanation was required Irom the shipper, DAIWA
TRADING CORPORATION, LTD. The latter, in two
letters addressed to the claimant (Exhs. "P1" and "P-2"
also Exhs. "4" & "5") alleged that there was an inter
change oI materials in the shipment to the claimant and
another shipment consigned to a customer in Indonesia.
Also sent to the claimant by Daiwa were photocopies oI
a Bill oI Lading (Exh. "P-3"); and Invoice (Exh. "P-4")
and a packing list (Exh. "P-5") supposedly covering a
shipment oI piece goods consigned to 'P.T. GADING
AJU DJAZA JL' which the claimant Iorthwith
submitted to the CIID. Later, in the letter dated March
14, 1983, addressed to the Claimant, the shipper
admitted its culpability in claimant interchanging the
shipments (Exh. "8"). ThereaIter, the Claimant Iiled a
suit against the shipper Ior the damages caused to it by
the latter's action and petitioned Ior the issuance oI a
Writ oI Preliminary Attachment (Exh. "7" to "7-6").chanroblesvirtualawlibrary chanrob les virtual law
library
A careIul scrutiny oI the Iacts and the circumstances
attendant to the case show that the Mabuhay Textile
Mills have no participation in the irregularity relative to
the subject shipment. The same was exported to the
Philippines under a 'Shipper's Load and Count Bill oI
Lading (Exh. " l-A") which means that it was the
shipper who was responsible Ior putting the contents
inside the container. The spurious documents (Exhs. "P-
3", "P-4" and "P-5") came Irom the shipper, Daiwa
Trading Co., Ltd. and were Iorwarded by Mabuhay to
the Bureau oI Customs Ior checking and evaluation.
Lastly, and most important, Daiwa Trading Co., Ltd., in
a letter to Mabuhay dated March 14, 1983 (Exh. "l")
admitted that its staII was responsible Ior the story
about the supposed mix-up with the alleged shipment to
Indonesia.chanroblesvi rtualawlibra ry chanrobles virtual law l ibrary
However, good Iaith should not be isolated alone on the
part oI importer/consignee, but it should be proven also
on the part oI the supplier/exporter. It should be
reckoned that in matter oI importation there are two
primary personalities involved, the supplier and the
importer. The supplier in order to maintain his
credibility to his client/importer, should exercise an
utmost care and extreme caution in shipping orders oI
his importer otherwise there is always the risk oI losing
huge amount oI investment capital by his importers
which ultimately produce tremendous damages on the
part oI the importer similar to the instant case. He must
maintain his honest relationship to his importers.
Within the contemplation oI the Customs Code, the
deIense oI the importer oI good Iaith must be mutually
tie up with the supplier. A good Iaith oI the importer
does not in anyway oIIset the damage committed by the
supplier/exporter Ior it is crystal clear on the provision
oI Section 2530 (1) 3, 4 oI the TariII and Customs
Code, the liability oI the exporter is explicit, thus: chanrobles virtual law libra ry
xxx xxx xxxchanrob les virtual law lib rary
(3) On the strength oI a Ialse documents or aIIidavit
executed by the owner, importer, exporter or consignee
concerning the importation oI such articles; chanrobles vi rtual law lib rary
(4) On the strength oI a Ialse invoice or other
documents executed by the owner, importer, exporter
or consignee concerning the importation or exportation
oI such articles; chanrobles virtual law lib rary
II Mabuhay is prejudiced by such actions, its recourse is
against the exporter by way oI damages and other
remedies provided by law, as in Iact, Mabuhay have so
done by Iilling oI the corresponding complaint against
the exporter and petitioning Ior the issuance oI the
necessary Writ oI Attachment.chanroblesvirtualawlibra ry chanrobles virtual law l ibrary
xxx xxx xxx
On the basis oI such decision, the petitioner, on August 10, 1983,
moved to reconsider the revocation oI its export quota allocations and
the disqualiIication oI its oIIicers Irom the export business. As the
Board Iailed to reply to such a request, two similar letters were sent by
the petitioner on September 13, and 23, 1983 respectively. Again, the
Board did not reply.chanroblesvirt ualawlibrar y chanrobles virtual law lib rary
Finally on September 26 and 29, 1983, two letters were respectively
sent by the Board to the petitioner inIorming the latter that it had
reIerred petitioner's letters to the Commissioner oI Customs Ior
comment.chanroblesvirtualawlibrary chanrobles vi rtual law lib rary
On October 14, 1983, the Commissioner oI Customs responded
through a letter-comment addressed to the Board stating the Iollowing:
xxx xxx xxxchanrob les virtual law lib rary
Kindly be inIormed that seizure proceedings are
proceedings instituted against the articles or goods.
Whenever a decision is rendered in a seizure
proceeding, it is Iinal and conclusive as to the goods but
not as to the persons involved therein where another
proceeding is necessary. Hence, any Iindings made in a
seizure proceeding, with respect to the culpability or
non-culpability oI the persons involved, cannot be
considered binding as to aIIect the judgment that may
be rendered in another. Seizure proceedings cannot
make a Iinal and conclusive pronouncement as to the
guilt or innocence oI persons.
On October 19, 1983, petitioner Iiled an action Ior prohibition and
injunction with preliminary injunction and restraining order against the
Board. On October 24, 1983, the trial court issued a restraining order
directing the Board and its oIIicials to desist and to stop Irom
implementing the decision revoking the petitioner's export quota
allocations and Irom disqualiIying its principal stockholder and
oIIicers Irom engaging in the textile and garment export business.chanrob lesvirtualawlib rary chanrobles virtual law library
The Board moved to reconsider but the same was denied. On
November 14, 1983, the lower court issued a writ oI preliminary
injunction. This, notwithstanding, the next day, the Board denied
petitioner's request Ior reinstatement "on the basis oI the above letter
(the letter oI the Commissioner oI Customs dated October 14, 1983)
and Ior the reason that no new issues had been presented to warrant the
reinstatement. "chanrobles virtual law lib rary
AIter hearing, the trial court rendered judgment in Iavor oI the
petitioner, and among others directed the Board to issue to the
petitioner within two days Irom service oI the writ, %extile Export
Clearances Nos. 23292, 22583 and 14321, and to issue the pertinent
clearances with respect to the textile export shipments oI the petitioner
aIter Iiling oI the required papers and documents. In its decision, the
trial court stated:
The summary revocation oI the export quotas and
export authorizations issued in Iavor oI the petitioner
without hearing violates not only the above-mentioned
provisions oI the Rules and Regulations oI the
respondent board but also the 'due process oI law'
clause oI the Constitution oI the Philippines to the
eIIect that 'no person shall be deprived oI liIe, liberty,
or property without due process oI law, nor shall any
person be denied equal protection oI the laws.' (Article
IV, Sec. 1, New Constitution). According to Daniel
Webster in the Dartmouth College case, due process is
the equivalent oI the law; a law which hears beIore it
condemns, which proceeds upon inquiry and renders
judgment only aIter trial. The meaning is that every
citizen shall hold his liIe, liberty, property, and
immunities under the protection oI the general rules
which govern society. (cited in Philippine
Constitutional Law, p. 168 by Neptali Gonzales, 1975
ed.) chanrobles virtual law library
Administrative due process requires that there be an
impartial tribunal constituted to determine the right
involved; that due notice and opportunity to be heard be
given; that the procedure at the hearing be consistent
with the essentials oI a Iair trial; and that the
proceedings be conducted in such a way that there will
be opportunity Ior a court to determine whether the
applicable rules oI law and procedure were observed.
(42 Am. Jur. p. 451, cited by Neptali Gonzales, p. 183,
Philippine Constitutional Law).
The Board appealed the decision to the Intermediate Appellate
Court.chanroblesvirtualawlibrary chanrobles vir tual law lib rary
On January 4, 1984, the appellate court modiIied the trial court's
decision. It aIIirmed all the Iindings oI Iact oI the court and held that
the petitioner was denied due process by the Board when it cancelled
the export quota allocations. It set aside the letters oI the Board dated
March 2, 1983 and November 14, 1983. However, the appellate court
ordered the Board to give the petitioner and its oIIicers due hearing to
determine whether or not any oI its rules and regulations had been
violated as to warrant the imposition oI any penalty against them. Until
such hearings were held, the petitioner's export quota allocations were
to remain cancelled and its oIIicers suspended. This modiIication is
now the subject oI this petition.chanroblesvirtualawli brary chanrobles vir tual law lib rary
The petitioner contends that the appellate court committed grave abuse
oI discretion when it ordered a new hearing to be conducted
unnecessarily since even without controverting evidence, the evidence
on record relied upon by the Board Iailed miserably to measure up to
the requisite oI "substantial evidence. "chanrobles virtual law l ibrary
This contention has no merit.chanroblesvirtualawlibrary chanrobles vi rtual law lib rary
Executive Order No. 823 provides, among others:
The GTEB shall have the Iollowing powers and
Iunctions: chanrobles virtual law libra ry
h. In case oI violations oI its rules and regulations,
cancel or suspend quota allocations, export
authorizations and licences Ior the operation oI bonded
garment manuIacturing warehouses. (Sec. 2|h| Exec.
Order No. 823 amended Sec. 3|h| oI Exec. Order No.
537).
Likewise, under its Rules and Regulations, said Executive Order
provides:
Rules and Reulations.
Section III. Penalties.- Any act or misrepresentation or
violation oI these Rules and Regulations shall, aIter due
hearing, constitute suIIicient ground Ior the imposition
oI a Iine oI not more than ten per cent (10) oI the
gross FOB value oI the goods exported or Ior a total or
partial IorIeiture oI the oIIender's Export Quota, Export
Authorization and Export License and permit or
temporary disqualiIication Irom enjoying the privilege
to export under all Agreements on textiles, without
prejudice to any liabilities under other applicable laws.
(Sec. III, Part 111, Rules and Regulations).
It is clear Irom the above provisions that the respondent Board is the
body charged with the Iunction oI granting export quota allocations,
issuing licenses to operate bonded warehouses and revoking or
cancelling the same. Correspondingly, it is also authorized to conduct
hearings to determine whether or not violations have been committed
by the grantee .The Board acted arbitrarily when, aIter acting solely
upon the initial Iindings oI the Bureau oI Customs, it issued the
questioned order but once the basis Ior its action proved non-existent,
it reIused to liIt its erroneous and unIounded order.chanroblesvirtualawlib rary chanrobles virtual law libra ry
However, since the Board has reason to believe that the petitioner
might have violated its rules and regulations in connection with the
importation oI materials Ior the petitioner's garment industry then it
has the discretion to conduct a proper hearing to determine the
petitioner's culpability or non-culpability. It does not have to rely on
the Iindings oI other agencies to discharge this Iunction.chanroblesvirtualawl ibrary chanrobles vi rtual law lib rary
In its second assignment oI error, the petitioner maintains that the
appellate court erred in allowing the implementation oI the orders oI
the respondent Board when such orders were set aside Ior having been
issued without a hearing.chanroblesvir tualawlibra ry chanrobles virtual law l ibrary
There is merit in this contention.chanroblesvirtualawl ibrary chanrobles vi rtual law lib rary
The appellate court should have reversed and set aside the cancellation
oI petitioner's export quota allocations and the suspension oI its
oIIicers since the very bases oI these measures were set aside because
oI lack oI due process. As the trial court correctly pointed out:
It is worthwhile to note that the basis oI the revocation
oI the export quotas and export authorizations issued in
Iavor oI the petitioner was based on the initial Iindings
oI the Bureau oI Customs regarding certain shipments
but subsequently the acting collector oI customs oI the
port oI Manila, Mr. Bienvenido P. Alano, Jr., cleared
the petitioner oI any wrongdoing and declared that it
had no participation in the irregularities relative to the
subject shipments. (Decision dated July 25, 1983,
Exhibit "A"). The decision oI the acting collector oI
customs oI the port oI Manila became Iinal on August
18, 1983. The basis oI the revocation has, thereIore,
become ineIIective and unenIorceable so that the
revocation has no more leg to stand on.chanroblesvirtualawlibra ry chanrobles virtual law l ibrary
The petitioner has shown by its evidence and the
allegations oI its veriIied petition that it is entitled to the
relieIs demanded and the whole or part oI such relieIs
consists in restraining the commission or continuance
oI the acts complained oI and that great or irreparable
injury would result to the petitioner beIore the trial or
termination oI this case. It has been shown by the
evidence presented during the hearing Ior the issuance
oI the writs oI preliminary injunction prayed Ior by the
petitioner that Ioreign companies with whom the
petitioner have entered into contracts regarding its
export business like Itoman (U.S.A.) Inc., New York,
N.Y., and the C. ITOH and Co., Ltd. Tokyo, Japan,
have threatened to cancel their contracts with the
petitioner and to sue the latter Ior damages iI it cannot
comply with its commitments to them (Exhs. "I" and
"J"), thereby showing that the petitioner would suIIer
great and irreparable injury iI the injunctions prayed Ior
will not be granted. Aside Irom this, the 700 employees
and workers oI the petitioner will be practically jobless
and they and their Iamilies will suIIer greatly Ior the
duration oI this case iI the injuctions will not be
granted.
To hold that there was a violation oI petitioner's right to due process
but at the same time sustain the end results oI such violation would be
tantamount to denying the right to due process just the same. Indeed,
the importance oI this right which is guaranteed by the Constitution
cannot be stressed strongly enough. In the case oI Bacus v. Ople, (132
SCRA 690, 704), we ruled:
The principle oI due process Iurnishes a standard to
which governmental action should conIorm in order to
impress it with the stamp oI validity. Fidelity to such
standard must oI necessity be the overriding concern oI
government agencies exercising quasi-judicial
Iunctions. Although a speedy administration oI action
implies a speedy trial, speed is not the chieI objective oI
a trial. Respect Ior the rights oI all parties and the
requirements oI procedural due process equally apply in
proceedings beIore administrative agencies with quasi-
judicial perspective in administrative decision making
and Ior maintaining the vision which led to the creation
oI the administrative oIIice. (Citing Amberto V. Court
oI Appeals, 89 SCRA 240 and Baguio Country Club
Corporation v. National Labor Relations Commission,
118 SCRA 557).
Equally important are the requisites oI due process in administrative
proceedings reiterated in the case oI Halili v. Court of Industrial
Relations, (136 SCRA 112, 131):
xxx xxx xxxchanrob les virtual law lib rary
. . . It is a settled rule that in administrative proceedings,
or cases coming beIore administrative tribunals
exercising quasi-judicial powers, due process requires
not only notice and hearing, but also the consideration
by the administrative tribunal oI the evidence
presented; the existence oI evidence to support the
decision; its substantiality; a decision based thereon or
at least contained in the record and disclosed to the
parties, such decision by the administrative tribunal
resting on its own independent consideration oI the law
and Iacts oI the controversy; and such decision
acquainting the parties with the various issues involved
and the reasons thereIor (Ang Tibay v. Court, 69 Phil.
635, cited on p. 84, Philippine Constitutional Law,
Fernando, 1984 ed.)
In the case at bar, the petitioner was never given the chance to present
its side beIore its export quota allocations were revoked and its
oIIicers suspended. While it is true that such allocations as alleged by
the Board are mere privileges which it can revoke and cancel as it may
deem Iit, these privileges have been accorded to petitioner Ior so long
that they have become impressed with property rights especially since
not only do these privileges determine the continued existence oI the
petitioner with assets oI over P80,000,000.00 but also the livelihood oI
some 700 workers who are employed by the petitioner and their
Iamilies. As the appellate court correctly pointed out:
xxx xxx xxxchanrob les virtual law lib rary
. . . This reliance on the 'right privilege' dichotomy has
long been denigrated by leading lights in administrative
law as 'too crude Ior consistent application' by courts.
Indeed, considering the total topography oI this case,
the resort to the right-privilege distinction is too Ieeble
a reIutation oI the Iact that there has been a disregard oI
the due process requirement oI the Constitution by the
petitioner Board. For the irreIutable Iact is that the
private respondent has long been granted its export
allocations on their basis, valuable contracts calling Ior
textile export shipments have been concluded between
the private respondent and Ioreign corporation. Stated
otherwise, these export allocations can not anymore be
categorized as mere 'privilege' but are already
impressed with property rights oI the private
respondent, They cannot be arbitrarily revoked without
causing a collision with the constitutional call that there
must be due process beIore anybody can be denied his
right to property.
Neither can the petitioner's request Ior reinstatement be considered as
substantial compliance with the due process requirement so much so
that any deIect in the initial cancellation oI the export quota allocations
by the Board is deemed to have been cured by petitioner's request Ior
reinstatement; an action which is alleged by the Board as being
tantamount to a motion Ior reconsideration.chanroblesvirtualawlib rary chanrobles virtual law libra ry
It should be noted that no reply was given by the Board when
petitioner requested Ior reinstatement oI its allocations until an action
Ior injunction was Iiled by petitioner. Only then did the Board deny
petitioner's request on the basis oI the letter oI the Commissioner oI
Customs that his Iindings were not conclusive as to the persons
involved therein and on the ground that no new issues were presented
by herein petitioner.chanroblesvirtualawlib rary chanrobles virtual law librar y
How can petitioner present any "new issues" when it was never given
the chance by the Board? Furthermore, the only reason the petitioner
knew why its export quota allocations had been cancelled was the
initial Iindings oI the Bureau oI Customs which were made the sole
basis by the Board Ior such cancellation. It is only but logical that
petitioner would only touch on this issue and nothing else. Thus, such
request Ior reinstatement and the subsequent denial by the Board can
hardly be considered a motion Ior reconsideration that "cured" the
non-observance oI due process. Again, as pointed out by the appellate
court:
Nor are We persuaded by the proposition that the
subsequent requests Ior restoration oI its export
allocations made by the private respondent cured the
due process deIiciency on the part oI the Board. The
requests Ior restoration rest on the allegation oI the
private respondent and its principal oIIicers that they
had no hand in the illicit importation oI the
apprehended shipment. The allegation is buttressed by
the decision itselI oI the Acting Collector oI Customs oI
the Port oI Manila holding that '. . . a careIul scrutiny oI
the Iacts and the circumstance attendant to the case
show that the Mabuhay Textile Mills have no
participation in the irregularity relative to the subject
shipment.' It may be technically true that this statement
does not settle the criminal culpability oI the private
respondent and its oIIicers Ior as pointed out by
petitioner Brig. Gen. Ramon Farolan, Acting
Commissioner oI Customs, a decision in a seizure
proceedings is'. . Iinal and conclusive as to the oods
but not as to the persons involved therein where
another proceeding is necessary.' But this all the more
sharpens the need Ior a real hearing where the private
respondent and its oIIicers should be given a Iair
opportunity to establish their innocence-a Iactual issue
that cannot be resolved by mere resolution oI its
requests Ior reinstatement on the basis oI in. Iormation
known to the Board but unknown to the private
respondent such as the exchange oI communications
between petitioner Farolan and the Director General oI
Customs oI Indonesia. Indeed even in judicial
proceedings, the irreducible rule is that the dismissal oI
an action upon a motion to dismiss constitutes a denial
oI due process oI law iI Irom a consideration oI the
pleadings it appears that there are issues of fact which
cannot be decided without a trial oI the case on the
merits. In quasi-judicial proceedings, the counterpart
rule is that where an adfudicative fact is at issue, a trial-
type hearing ought to be held. (Londoner v. Denver,
210 US 373, 386, 28 S. Ct. 708, 714, 52 L. ed. 1103
119081).
While there is no controlling and precise deIinition oI due process, the
guidelines laid down in the n %ibay v. Court case, supra, and all
subsequent cases reiterating the same Iurnish an unavoidable standard
to which government action must conIorm in order that any
deprivation oI liIe, liberty, and property, in each appropriate case, may
be valid. (See Eastern Broadcasting Corporation v. Dans, Jr., 137
SCRA 628).chanroblesvirtualawlibrary chanrobles virt ual law libra ry
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is
GRANTED and the decision oI the appellate court dated January 6,
1984 and its order oI June 6, 1984 are SET ASIDE. The respondent
Board is hereby ordered to conduct a hearing where the petitioner is
accorded due process to determine whether or not the petitioner has
violated any oI its rules and regulations. Pending such hearing, and to
maintain the status quo ante oI the parties, the Board is directed to
issue Textile Export Clearances in Iavor oI the petitioner without
prejudice to the revocation oI the same iI the petitioner is Iound to be
guilty oI any such violation. No costs.chanroblesvirtualawlibrary chanrobles vi rtual law lib rary
SO ORDERED.

























EN BANC

G.R. No. 175573, September 11, 2008]

OFFICE OF THE OMBUDSMAN, PETITIONER, VS. 1OEL S.
SAMANIEGO,
1]
RESPONDENT.

D E C I S I O N

CORONA, 1.:

This is a petition Ior review under Rule 45 oI the Rules oI Court
assailing the resolutions
|2|
oI the Court oI Appeals (CA) dated
September 11, 2006 and November 21, 2006 in CA-G.R. SP No.
89999 captioned Joel S. Samanieo v. Commission on udit,
Provincial uditors Office of lbay, Leaspi City, lbay.

The Iacts Iollow.

Respondent Joel S. Samaniego was the City Treasurer oI Ligao City,
Albay. On separate dates, the Commission on Audit (COA) through its
Regional Cluster Director Atty. Francisco R. Velasco
|3|
Iiled two
administrative complaints against Samaniego, docketed as OMB-L-A-
03-1060-K
|4|
and OMB-L-A-03-1061-K,
|5|
Ior dishonesty and grave
misconduct.

In these administrative complaints, the COA alleged that respondent
incurred shortages in his accountabilities Ior two separate periods.
|6|

Respondent received letters oI demand requiring him to explain his
side and settle his accountabilities.

In his counter-aIIidavit, respondent averred, among others, that OMB-
L-A-03-1060-K was bereIt oI Iactual basis. He likewise averred that
the alleged amount oI his accountability in OMB-L-A-03-1061-K was
the same amount cited in OMB-L-A-03-1060-K. He also pleaded the
deIense oI restitution oI his alleged accountabilities.

In a joint decision dated April 11, 2005, the OIIice oI the Deputy
Ombudsman Ior Luzon Iound respondent liable Ior grave
misconduct
|7|
because he Iailed to explain his side and settle his
accountabilities in OMB-L-A-03-1060-K. He was meted the penalty oI
one year suspension Irom oIIice. In the same decision, however,
OMB-L-A-03-1061-K was dismissed in view oI respondent's
restitution oI his accountability.
|8|


Via a petition Ior review on certiorari under Rule 43 with a motion Ior
the issuance oI a writ oI preliminary injunction in the CA, respondent
assailed the April 11, 2005 joint decision oI the OIIice oI the
Ombudsman insoIar as it Iound him liable in OMB-L-A-03-1060-K.
This petition was captioned Joel Samanieo versus Commission on
udit, Provincial uditors Office, Leaspi City, lbay and docketed
as CA - G.R. SP No. 89999. His prayer Ior the issuance oI a writ oI
preliminary injunction was granted.

Since it was not impleaded as a respondent in CA- G.R. SP No. 89999,
the OIIice oI the Ombudsman Iiled a motion Ior intervention and to
admit the attached motion to recall the writ oI preliminary injunction.
The motions were denied.

The OIIice oI the Ombudsman now claims that the CA erred in
denying its right to intervene, considering that its joint decision was
the subject oI the appeal. It also asserts that the writ oI preliminary
injunction should be recalled.

We rule Ior the OIIice oI the Ombudsman.
|9|


MANDATE OF THE OFFICE
OF THE OMBUDSMAN

Section 27, Article II oI the Constitution reads:
The State shall maintain honesty and integrity in the public service and
take positive and eIIective measures against graIt and corruption.
To implement this, the Constitution established the OIIice oI the
Ombudsman, composed oI the Ombudsman, one overall deputy and at
least one Deputy each Ior Luzon, Visayas and Mindanao.
|10|
It was the
intention oI the Constitution to make the Ombudsman independent.

The purpose oI the OIIice oI the Ombudsman is enunciated in Section
12, Article XI oI the Constitution:
The Ombudsman and his Deputies, as protectors oI the people, shall
act promptly on complaints Iiled in any Iorm or manner against public
oIIicials or employees oI the government, or any subdivision, agency
or instrumentality thereoI, including government-owned or controlled
corporations, and shall, in appropriate cases, notiIy the complainants
oI the action taken and the result thereoI.
The OIIice oI the Ombudsman is a unique position in the 1987
Constitution.
|11|
The Ombudsman and his deputies Iunction essentially
as a complaints and action bureau.
|12|
Congress enacted Republic Act
(RA) 6770
|13|
providing broad powers,
|14|
as well as a Iunctional and
structural organization, to the OIIice oI the Ombudsman to enable it to
perIorm its constitutionally-mandated Iunctions.

RA 6770 states the mandate oI the Ombudsman:
SEC. 13. Mandate. - The Ombudsman and his deputies, as protectors
oI the people, shall act promptly on complaints Iiled in any Iorm or
manner against oIIicers or employees oI the Government, or oI any
subdivision, agency or instrumentality thereoI, including government-
owned or controlled corporations, and enIorce their administrative,
civil and criminal liability in every case where the evidence warrants
in order to promote eIIicient service by the Government to the people.
To aid the Ombudsman in carrying out its tasks, it was vested with
disciplinary authority over government oIIicials.
|15|
The scope oI this
authority was discussed in Office of the Ombudsman v. C:
|16|

|The OIIice oI the Ombudsman| is vested with "Iull administrative
disciplinary authority" including the power to "determine the
appropriate penalty imposable on erring public oIIicers or employees
as warranted by the evidence, and necessarily, impose the said
penalty." Thus, the provisions in |RA| 6770 taken together reveal the
maniIest intent oI the lawmakers to bestow on the OIIice oI the
Ombudsman full administrative disciplinary authority. These
provisions cover the entire gamut of administrative adjudication
which entails the authority to, inter alia, receive complaints,
conduct investigations, hold hearings in accordance with its rules
of procedure, summon witnesses and require the production of
documents, place under preventive suspension public officers and
employees pending an investigation, determine the appropriate
penalty imposable on erring public officers or employees as
warranted by the evidence and necessarily, impose the said
penalty.xxx (emphasis supplied)
Full disciplinary authority is one oI the broad powers granted to it by
the Constitution and RA 6770. These broad powers, Iunctions and
duties are generally categorized into: investigatory power, prosecutory
power, public assistance Iunctions, authority to inquire and obtain
inIormation, and the Iunction to adopt, institute and implement
preventive measures.
|17|


Actions oI the Ombudsman that do not Iall squarely under any oI these
general headings are not to be construed outright as illegal. The
avowed purpose oI preserving public trust and accountability must be
considered. So long as the Ombudsman's actions are reasonably in line
with its oIIicial Iunctions and are not contrary to law and the
Constitution, they should be upheld. DeIending its decisions in the CA
is one such power.

The Ombudsman is expected to be an "activist watchman," not merely
a passive onlooker.
|18|
A statute granting powers to an agency created
by the Constitution t such as RA 6770 t should be liberally
construed to advance the objectives Ior which it was created.
|19|
In
Buenaseda v. Flavier,
|20|
we held that any interpretation oI RA 6770
that hampers the work oI the Ombudsman should be avoided.

Taking all this into consideration, the Ombudsman is in a league oI its
own. It is diIIerent Irom other investigatory and prosecutory agencies
oI the government because the people under its jurisdiction are public
oIIicials who, through pressure and inIluence, can quash, delay or
dismiss investigations directed against them.
|21|
Its Iunction is critical
because public interest (in the accountability oI public oIIicers and
employees) is at stake.

The Ombudsman concept originated in Sweden and other

Scandinavian countries.
|22|
Its original and classic notion was that oI
an independent and politically neutral oIIice which merely received
and processed the people's complaints against corrupt and abusive
government personnel.
|23|
The Philippine Ombudsman deviated Irom
the classic model. It retained the characteristic independence and
political neutrality but the range oI its Iunctions and powers was
enlarged.

Given the Ioregoing premises, we cannot limit the powers oI the
Ombudsman iI its acts are not contrary to law or the Constitution.

INTERVENTION BY THE OMBUDSMAN IN
CASES IN WHICH ITS DECISION IS ASSAILED
Section 1, Rule 19 oI the Rules oI Court provides:

Section 1. Who may intervene. - A person who has a legal interest in
the matter in litigation, or in the success oI either parties, or an interest
against both, or is so situated as to be adversely aIIected by a
distribution or other disposition oI property in the disposition oI the
court or oI an oIIicer thereoI may, with leave oI court be allowed to
intervene in the action. xxx
Intervention is a remedy by which a third party, not originally
impleaded in the proceedings, becomes a litigant therein to enable him
to protect or preserve a right or interest which may be aIIected by such
proceeding.
|24|
Its purpose is to settle in one action and by a single
judgment the whole controversy (among) the persons involved.
|25|


Intervention is not an absolute right
|26|
as it can be secured only in
accordance with the terms oI the applicable statute or rule. In claiming
the right to intervene, the intervenor must comply with the
requirements laid down by Rule 19 oI the Rules oI Court which
provides that the intervenor must have a legal interest in any oI the
Iollowing:
(a) the matter in controversy;
(b) the success oI either oI the parties;
(c) against both parties or
(d) be so situated as to be adversely aIIected by a distribution or other
disposition oI property in the disposition oI the court or oI an
oIIicer thereoI.
|27|

Intervention must not unduly delay or prejudice the adjudication oI
rights oI the original parties.
|28|
Moreover, it must be shown that the
intervenor's rights may not be Iully protected in a separate
proceeding.
|29|


The legal interest must be actual and material, direct and immediate.
|30|

In asaysay-Labrador v. C,
|31|
the interest which entitles a person
to intervene in a suit:
|m|ust be on the matter in litigation and oI such direct and immediate
character that the intervenor will either gain or lose by the direct legal
operation and eIIect oI the judgment. The words "an interest in the
subject" mean a direct interest in the cause oI action as pleaded and
which would put the intervenor in a legal position to litigate a Iact
alleged in the complaint, without the establishment oI which plaintiII
could not recover.
The CA denied petitioner's motion Ior intervention Ior lack oI basis,
reasoning that:
In the instant case, the Ombudsman's intervention is not proper
considering that, other than its objection to the issuance oI the
injunctive writ, no legal interest in the matter subject oI litigation has
been alleged by the Ombudsman in the motion Ior intervention. xxx
We disagree.

The OIIice oI the Ombudsman suIIiciently alleged its legal interest in
the subject matter oI litigation. Paragraph 2 oI its motion Ior
intervention and to admit the attached motion to recall writ oI
preliminary injunction averred:
2. As a competent disciplining body, the Ombudsman has the right to
seek redress on the apparently erroneous issuance by this Honorable
Court oI the Writ oI Preliminary Injunction enjoining the
implementation oI the Ombudsman's Joint Decision imposing upon
petitioner the penalty oI suspension Ior one (1) year, consistent with
the doctrine laid down by the Supreme Court in PNB vs]. Garcia,
xxx and CSC vs]. Dacoycoy, xxx; (citations omitted; emphasis in the
original)
In asserting that it was a "competent disciplining body," the OIIice oI
the Ombudsman correctly summed up its legal interest in the matter in
controversy. In support oI its claim, it invoked its role as a
constitutionally mandated "protector oI the people," a disciplinary
authority vested with quasi-judicial Iunction to resolve administrative
disciplinary cases against public oIIicials.
|32|
To hold otherwise would
have been tantamount to abdicating its salutary Iunctions as the
guardian oI public trust and accountability.
|33|


Moreover, the OIIice oI the Ombudsman had a clear legal interest in
the inquiry into whether respondent committed acts constituting grave
misconduct,
|34|
an oIIense punishable under the UniIorm Rules in
Administrative Cases in the Civil Service.
|35|
It was in keeping with its
duty to act as a champion oI the people and preserve the integrity oI
public service
|36|
that petitioner had to be given the opportunity to act
Iully within the parameters oI its authority.

It is true that under our rule on intervention, the allowance or
disallowance oI a motion to intervene is leIt to the sound discretion oI
the court
|37|
aIter a consideration oI the appropriate circumstances.
|38|

However, such discretion is not without limitations.
|39|
One oI the
limits in the exercise oI such discretion is that it must not be exercised
in disregard oI law and the Constitution. The CA should have
considered the nature oI the Ombudsman's powers as provided in the
Constitution and RA 6770.

Moreover, the rule on intervention is a rule oI procedure whose object
is to make the powers oI the court Iully and completely available Ior
justice, not to hinder or delay it.
|40|


Both the CA
|41|
and respondent likened the OIIice oI the Ombudsman
to a judge whose decision was in question.
|42|
This was a tad too
simplistic (or perhaps even rather disdainIul) oI the power, duties and
Iunctions oI the OIIice oI the Ombudsman. The OIIice oI the
Ombudsman cannot be detached, disinterested and neutral specially
when deIending its decisions. Moreover, in administrative cases
against government personnel, the oIIense is committed against the
government and public interest. What Iurther prooI oI a direct
constitutional and legal interest in the accountability oI public oIIicers
is necessary?

PROPRIETY AND NECESSITY OF IN1UNCTION
IN APPEALS OF THE DECISIONS OF THE OMBUDSMAN

The CA anchored its denial oI the motion to recall the writ oI
preliminary injunction on its lack oI authority over the case. (The
OIIice oI the Ombudsman's motion Ior intervention was allegedly
improper). But the OIIice oI the Ombudsman could properly intervene
in the appeal Iiled by respondent and thereIore, the CA could
determine whether a recall oI the injunctive writ was proper.

In the interest oI justice and practicality, we will rule on the propriety
oI the issuance oI the injunctive writ.

The applicable provision oI law is Section 7, Rule III oI the Rules oI
Procedure oI the Ombudsman, as amended:
|43|

Section 7. Finality and execution oI decision. - xxx where the penalty
imposed is public censure or reprimand, suspension oI not more than
one month, or a Iine equivalent to one month salary, the decision shall
be Iinal, executory and unappealable. In all other cases, the decision
may be appealed to the Court oI Appeals xxx.

An appeal shall not stop the decision Irom being executory. xxx.
A literal reading oI this rule shows that the mere Iiling oI an appeal
does not prevent the decision oI the Ombudsman Irom becoming
executory. However, we clariIied this rule in Office of the Ombudsman
v. Lafa:
|44|

|O|nly orders, directives or decisions oI the OIIice oI the Ombudsman
in administrative cases imposing the penalty oI public censure,
reprimand, or suspension oI not more than one month, or a Iine not
equivalent to one month salary shall be Iinal and unappealable hence,
immediately executory. In all other disciplinary cases where the
penalty imposed is other than public censure, reprimand, or
suspension of not more than one month, or a fine not equivalent to
one month salary, the law gives the respondent the right to appeal.
In these cases, the order, directive or decision becomes final and
executory only after the lapse of the period to appeal if no appeal
is perfected, or after the denial of the appeal from the said order,
directive or decision. It is only then that execution shall perIorce issue
as a matter oI right. The fact that the Ombudsman Act gives parties
the right to appeal from its decisions should generally carry with it
the stay of these decisions pending appeal. Otherwise, the essential
nature oI these judgments as being appealable would be rendered
nugatory. (emphasis in the original).
The penalty meted out to respondent was suspension Ior one year
without pay. He Iiled an appeal oI the Ombudsman's joint decision on
time. In his appeal, he included a prayer Ior the issuance oI a writ oI
preliminary injunction in order to stay the execution oI the decision
against him. Following Office of the Ombudsman v. Lafa, we hold that
the mere Iiling by respondent oI an appeal suIIiced to stay the
execution oI the joint decision against him. Respondent's prayer Ior the
issuance oI a writ oI preliminary injunction (Ior purposes oI staying
the execution oI the decision against him) was thereIore a superIluity.
The execution oI petitioner's joint decision against respondent should
be stayed during the pendency oI CA-G.R. SP No. 89999.

WHEREFORE, the petition is hereby GRANTED. The resolutions
oI the Court oI Appeals dated September 11, 2006 and November 21,
2006 are hereby REVERSED and SET ASIDE. Accordingly, the
Court oI Appeals is ordered to allow the intervention oI the OIIice oI
the Ombudsman in CA-G.R. SP No. 89999. The writ oI preliminary
injunction is hereby LIFTED as the execution oI the decision in
OMB-L-A-03-1060-K was (and still is) stayed by the Iiling and
pendency oI CA-G.R. SP No. 89999.

No costs.

SO ORDERED.

Puno, C.J., Quisumbin, Carpio-orales, %ina, Chico-Na:ario,
Jelasco, Jr., Nachura, Reyes, Leonardo-De Castro, and Brion, JJ.,
concur.
Ynares-Santiao
*
, Carpio
*
, ustria-artine:, and :cuna
*
, JJ., on
oIIicial leave.




























G.R. No. 109703 1uly 5, 1994
REALTY EXCHANGE VENTURE CORPORATION AND/OR
MAGDIWANG, REALTY CORPORATION, Petitioner, vs.
LUCINA S. SENDINO and the OFFICE OF THE EXECUTIVE
SECRETARY, Office of the President, Malacaang, Manila,
Respondents.
KAPUNAN, chanrobles virtual law library
Private respondent Lucina C. Sendino entered into a reservation
agreement with Realty Exchange Venture, Inc. (REVI) Ior a 120-
square meter lot in Raymondville Subdivision in Sucat, Paranaque Ior
P307,800.00 as its purchase price.
1
She paid P1,000.00 as partial
reservation Iee on January 15, 1989 and completed payment oI this Iee
on January 20, 1989 by paying P4,000.00.
2
chanrobles virtual law libra ry
On July 18, 1989, private respondent paid REVI P16,600.00 as Iull
downpayment on the purchase price.
3
However, she was advised by
REVI to change her co-maker, which she agreed, asking Ior an
extension oI one month to do so.chanroblesvirtualawlibrary chanrobles vi rtual law lib rary
For alleged non-compliance with the requirement oI submission oI the
appropriate documents under the terms oI the original agreement,
4

REVI, through its Vice-President Ior Marketing, inIormed respondent
oI the cancellation oI the contract on the 31st oI July 1989.
5
chanrobles virtual law li brary
On April 20, 1990, private respondent Iiled a complaint Ior SpeciIic
PerIormance against REVI with the oIIice oI Appeals, Adjudication
and Legal AIIairs (OAALA) oI the Housing and Land Use Regulatory
Board (HLURB) asking that respondent be ordered:
1. To comply and continue with the sale oI the house
and lot, Block 4, Lot 17 at the Raymondville
Subdivision, Sucat Road, Paranaque, Metro Manila;chanro bles virtual law li brary
2. To pay complainant actual, nominal and moral
damages, the amount oI which will be proved in the
hearing;chanrobles vi rtual law lib rary
3. To pay complainant attorney's Iee in the sum oI
P10,000.00;chanrobles virtual law lib rary
4. To pay complainant exemplary damages in the sum
oI P10,000.00 to set an example and to avoid a
repetition oI such illegal and unsound business
practices oI the respondent.
6
chanrobles virtual law library
This petition was amended on August 17, 1990 by impleading
petitioners Magdiwang Realty Corporation (MRC) which appeared to
be the registered owner oI the subject lot as per TCT No. 76023.chanroblesvirtualawlibrary chanrobles virtual law libra ry
On April 3, 1991 the HLURB, whose authority to hear and decide the
complaint was challenged by REVI in its answer,
7
rendered its
judgment in Iavor oI private respondent and ordered petitioners to
continue with the sale oI the house and lot and to pay private
respondent P5,000 as moral damages, P5,000 as exemplary damages
and P6,000 as attorney's Iees and costs oI the suit.
8
An appeal Irom
this decision was taken to the HLURB OAALA Arbiter, which
aIIirmed the Board's decision. The decision oI the OAALA Arbiter
was appealed to the OIIice oI the President, herein public
respondent.chanroblesvirtualawlibra ry chanrobles vir tual law lib rary
On January 7, 1993, the public respondent rendered its decision
dismissing the petitioners' appeal. Motion Ior reconsideration oI the
decision was denied by the public respondent on January 26, 1993.
Consequently petitioners come beIore this Court, in this petition,
which the Court resolves to treat as a petition Ior certiorari, raising the
Iollowing issues:
I chanrobles virtual law lib rary
PUBLIC RESPONDENT COMMITTED SERIOUS
ERROR IN DECLARING THAT THE HOUSING
AND LAND USE REGULATORY BOARD HAS
QUSI-JUDICIL FUNCTIONS,
NOTWITHSTANDING ABSENCE OF EXPRESS
GRANT BY EXECUTIVE ORDER NO. 90 OF
DECEMBER 17, 1986 WHICH CREATED IT. AND
EVEN IF THE HLURB HAS QUASI-JUDICIAL
FUNCTIONS, PUBLIC RESPONDENT LIKEWISE
SERIOUSLY ERRED IN DECLARING THAT THE
BOARD OF COMMISSIONERS IS ALLOWED TO
SIT IN A DECISION TO RENDER JUDGMENT
AND TO DELEGATE ITS QUASI-JUDICIAL
AUTHORITY TO A SUBORDINATE OFFICE.
II chanrobles virtual law librar y
PUBLIC RESPONDENT GRAVELY ABUSED ITS
DISCRETION IN DECLARING THAT THE LOT
SUBJECT OF THE CONTRACT SOUGHT TO BE
ENFORCED IS PARAPHERNAL DESPITE
ADMISSION OF ITS CONJUGAL NATURE.
III chanrobles virtual law library
PUBLIC RESPONDENT GRAVELY ABUSED ITS
DISCRETION IN DECLARING THAT ONLY
NOTARIAL NOTICE OF RESCISSION MAY
VALIDLY CANCEL A RESERVATION
AGREEMENT PURSUANT TO REPUBLIC ACT
NO. 6552.
As the Iirst and third issues raised by the petitioners strike at the core
oI the case at bench, this Court deems it appropriate to initially dispose
oI the issue oI private respondent's capacity to bring her complaint
beIore the HLURB-OAALA.chanroblesvirtualawlib rary chanr obles virtual law l ibrary
It is settled that rules oI procedure are as a matter oI course construed
liberally in proceedings beIore administrative bodies.
9
In the instant
case, the original suit Ior speciIic perIormance and damages was Iiled
by the private respondent with the HLURB-OAALA, an
administrative body not hamstrung by the strict procedural
technicalities oI the Rules oI Court. Under the circumstances, it was
certainly appropriate Ior the HLURB-OAALA to have acted on the
substantive questions relating to the validity oI petitioners' unilateral
rescission oI the contract without unduly concerning itselI with a mere
procedural slip, the non-joinder oI private petitioner's husband in the
original complaint beIore the HLURB. Moreover, since petitioners
participated in the administrative proceedings without objecting to or
raising the procedural inIirmity, they were certainly estopped Irom
raising it on appeal beIore the OIIice oI the President and beIore this
Court.chanroblesvirtualawlibrary chan robles virtual law library
Proceeding to the principal issues raised by the petitioner, while E.O.
85 dated 12 December 1986 abolished the Ministry oI Human
Settlements (MHS), it is patently clear Irom a reading oI its provisions
that the said executive order did not abolish the Human Settlements
Regulatory Commission (HSRC) which continued to exercise its
powers and Iunctions even aIter the Ministry oI Human Settlements
ceased to exist. In spite oI the Aquino Government's stated intention oI
eradicating what it considered the vestiges oI the previous regime, it
was not its intention to create a vacuum by abolishing those juridical
entities, agencies, corporations, etc., attached to or supervised by the
MHS, which perIormed vital administrative Iunctions. Pertinently,
Section 3 oI E.O. 85 mandates that:
. . . The Iinal disposition and Iinal organizational
alignment or attachment oI the juridical entities,
agencies, corporations and councils attached to, or
under the administrative supervision oI the MHS
including their respective existing projects,
appropriations and other assets shall be subject to
subsequent enactments by the President.
Pursuant to this provision thereIore, the President subsequently issued
Executive Order No. 90, series oI 1986, recognizing the Human
Settlements Regulatory Commission (renamed the HLURB) as one oI
the principal housing agencies oI the government. Prior to this,
Executive Order No. 648 in 1981 transIerred all the Iunctions oI the
National Housing Authority (pursuant to Presidential Decrees Nos.
957, 1216 and 1344) to the Human Settlements Regulatory
Commission (HSRC) consolidating all regulatory Iunctions relating to
land use and housing development in a single entity.
10
Being the sole
reulatory body Ior housing and land development, the renamed body,
the HLURB,
11
would have been reduced to a Iunctionally sterile entity
iI, as the petitioner contends, it lacked the powers exercised by its
predecessor which included the power to settle disputes concerning
land use and housing development and acquisition. Moreover, this
Court has had the occasion to deIinitively rule on the question as to
whether or not the Housing and Land Use Regulatory Board could
exercise the same quantum oI judicial or quasi-judicial powers
possessed by the HSRC under the Ministry oI Human Settlements in
the exercise oI its regulatory Iunctions when it held, in United Housin
Corporation vs. Hon. Dayrit
12
that:
As explicitly provided by law, jurisdiction over actions
Ior speciIic perIormance oI contractual and statutory
obligations Iiled by buyers oI subdivision lot or
condominium unit against the owner or developer, is
vested exclusively in the HSRC, Section 1 oI PD 1344,
in no uncertain terms, provides: chanrobles virtual law libra ry
Sec. 1. In the exercise oI its Iunctions to regulate real
estate trade and business and in addition to its powers
provided Ior in Presidential Decree No. 957, the
National Housing Authority shall have exclusive
jurisdiction to hear and decide cases oI the Iollowing
nature:
A. Unsound real estate business
practices;chanrobles virt ual law libra ry
B. Claims involving reIund and any
other claims Iiled by subdivision lot or
condominium unit buyer against the
project owner, developer, dealer, broker
or salesman; andchanrob les virtual law lib rary
C. Cases involving specific performance
of contractual and statutory obliations
filed by buyers of subdivision lot or
condominium unit aainst the owner,
developer, dealer, broker or salesman.
(Emphasis Ours)
This is reinIorced by section 8 oI EO 648 (otherwise
known as the Charter oI the Human Settlements
Regulatory Commission) which took eIIect on February
7, 1981, thus: chanrobles virtual law l ibrary
Sec. 8. %ransfer of Functions. - The Regulatory
Iunctions oI the National Housing Authority pursuant to
Presidential Decree Nos. 957, 1216, 1344 and other
related laws are hereby transIerred to the Human
Settlements Regulatory Commission. . . . Among the
regulatory Iunctions are . . . (11) Hear and decide cases
oI unsound real estate business practices, claims
involving reIund Iiled against project owners,
developers, dealers, brokers, or salesmen and cases oI
specific performance (Emphasis Ours).chanroblesvirtualawlib rary chanrob les virtual law lib rary
Private respondents reliance, thereIore, on sections 1
and 8 oI the Judiciary Reorganization Act oI 1980 is
untenable. Thus, as correctly pointed out by petitioner,
section 19, paragraph 6 oI said law is material to the
issue oI where jurisdiction lies, and We quote:
Sec. 19. . . .chanroblesvirtualawlibrar y chanrobles virt ual law libra ry
(6) In all other cases not within the
exclusive furisdiction of any court,
tribunal, persons or body exercising
judicial or quasi-judicial Iunctions.
xxx xxx xxxchanrob les virtual law lib rary
Neither can We accede to private
respondents' claim that resort to the
courts is justiIied under section 41 oI PD
957 speciIically under the phrase "legal
remedies that may be available to
aggrieved subdivision lot buyers."
There is no question that a statute may vest exclusive
original jurisdiction in an administrative agency over
certain disputes and controversies Ialling within the
agency's special expertise. The constitutionality oI such
grant oI exclusive jurisdiction to the National Housing
Authority (now Housing and Land Use Regulatory
Board) over cases involving the sale oI lots in
commercial subdivisions was upheld in %ropical Homes
Inc. v. National Housin uthority (152 SCRA 540
|1987|) and again sustained in a later decision in
ntipolo Realty Corporation v. National Housin
uthority (153 SCRA 399 |1987|) where We restated
that the National Housing Authority (now HLURB)
shall have exclusive jurisdiction to regulate the real
estate trade and business in accordance with the terms
oI PD No. 957 which deIines the quantum oI judicial or
quasi-fudicial powers oI said agency.
13
chanrobles virtual law l ibrary
Clearly, thereIore, the HLURB properly exercised its jurisdiction over
the case Iiled by the petitioners with its adjudicative body, the
OAALA, in ordering petitioners to comply with their obligations
arising Irom the Reservation Agreement. In general, the quantum oI
judicial or quasi-judicial powers which an administrative agency may
exercise is deIined in the agency's enabling act. In view oI the Court's
pronouncement in United Housin Corporation vs. Hon. Dayrit,
supra, recognizing the HLURB as the successor agency oI the HSRC's
powers and Iunctions, it thereIore Iollows that the transIer oI such
Iunctions Irom the NHA to the HRSC eIIected by Section 8 oI E.O.
648, series oI 1981, thereby resulted in the acquisition by the HLURB
oI adjudicatory powers which included the power to "(h)ear and decide
cases oI unsound real estate business practices . . . and cases oI
speciIic perIormance."
14
Obviously, in the exercise oI its powers and
Iunctions, the HLURB must interpret and apply contracts, determine
the rights oI the parties under these contracts, and award damages
whenever appropriate.
15
We Iail to see how the HSRC - which
possessed jurisdiction over the actions Ior speciIic perIormance Ior
contractual and statutory obligations Iiled by buyers oI subdivision lots
against developers - had suddenly lots its adjudicatory powers by the
mere Iiat oI a change in name through E.O. 90. One thrust oI the
multiplication oI administrative agencies is that the interpretation oI
such contracts and agreements and the determination oI private rights
under these agreements is no longer a uniquely judicial Iunction.
16

The absence oI any provision, express or implied, in E.O. 90, repealing
those quasi-judicial powers inherited by the HSRC Irom the National
Housing Authority, Iurthermore militates against petitioners' position
on the question.chanrob lesvirtualawlib rary chanrobles vi rtual law lib rary
Going to petitioners' contention that the decision oI the OAALA
should have been rendered by the Board oI Commissioners sitting en
banc, we Iind ample authority - both in the statutes and in
jurisprudence-justiIying the Board's act oI dividing itselI into divisions
oI three. Under Section 5 oI E.O. 648 which deIines the powers and
duties oI the Commission, the Board is speciIically mandated to
"(a)dopt rules oI procedure Ior the conduct oI its business" and
perIorm such Iunctions necessary Ior the eIIective accomplishment oI
(its) above mentioned Iunctions." Since nothing in the provisions oI
either E.O. 90 or E.O. 648 denies or withholds the power or authority
to delegate adjudicatory Iunctions to a division, we cannot see how the
Board, Ior the purpose oI eIIectively carrying out its administrative
responsibilities and quasi-judicial powers as a regulatory body should
be denied the power, as a matter oI practical administrative procedure,
to constitute its adjudicatory boards into various divisions. AIter all,
the power conIerred upon an administrative agency to issue rules and
regulations necessary to carry out its Iunctions has been held "to be an
adequate source oI authority to delegate a particular Iunction, unless
by express provision oI the Act or by implication it has been
withheld."
17
The practical necessity oI establishing a procedure
whereby cases are decided by three (3) Commissioners Iurthermore
assumes greater signiIicance when one notes that the HLURB, as
constituted, only has Iour (4) Iull time commissioners and Iive (5) part
time commissioners to deal with all the Iunctions, administrative,
adjudicatory, or otherwise, entrusted to
it.
18
As the OIIice oI the President noted in its February 26, 1993
Resolution denying petitioners' Motion Ior Reconsideration, "it is
impossible and very impractical to gather the Iour (4) Iull time and
Iive (5) part time commissioners (together) just to decide a case."
Considering that its part time commissioners act merely in an ex-
officio capacity, requiring a majority oI the Board to sit en banc on
each and every case brought beIore it would result in an administrative
nightmare.
19
chanrobles virtual law library
Finally, petitioners' assertion that RA 6552 is inapplicable in the
instant case because the said law does not apply to cases oI reservation
agreements Iinds no merit in the case at bench in view oI Section 24 oI
P.D. 957 which provides:
Sec. 24. Failure to Pay Installments - The rights oI the
buyer in the event oI his Iailure to pay the installments
due Ior reasons other than the Iailure oI the owner or
developer to develop the project shall be governed by
Republic Act No. 6552.
As the Solicitor General correctly pointed out, RA 6552 makes no
distinction between "option" and "sale"
20
which, under P.D. 957 also
includes "an exchange or attempt to sell, an option oI sale or purchase,
a solicitation oI a sale or an oIIer to sell directly."
21
This all-
embracing deIinition virtually includes all transactions concerning
land and housing acquisition, including reservation agreements. Since
R.A. 6552 mandates cancellation by notarial
act - among other requirements - beIore any cancellation oI a contract
may be eIIected, petitioners' precipitate cancellation oI its contract
with private respondent without observing the conditions imposed by
the said law was invalid and improper.chanroblesvirtualawlibrary chanr obles virtual law l ibrary
In Iine, the HLURB-OAALA acted within the scope oI its authority in
ordering petitioners to comply and continue with the sale oI the house
and lot subject oI the contract between the original parties. It cannot be
gainsaid that the quasi-judicial Iunctions exercised by the body are
necessary incidents to the proper exercise oI its powers and Iunctions
under E.O. 90 and the laws enacted delineating the scope oI authority
oI its Board oI Commissioners. Denying the body those Iunctions so
necessary in carrying out its power to regulate housing and land use
results in its eIIective emasculation as an important regulatory body in
an area vital to the national economy.chanrob lesvirtualawlib rary chanrobles vi rtual law lib rary
The acute housing shortage problem has prompted thousands oI
middle and lower class buyers oI houses and lots and condominium
units to enter into all sorts oI agreements with private housing
developers involving all manner oI installment schemes under
contracts drawn exclusively by these developers. Many oI these virtual
contracts oI adhesion entrap innocent buyers by requiring cash
deposits under reservation agreements which include, sometimes in the
Iine print, deIault clauses guaranteeing huge monetary windIalls Ior
the developers in the event that their buyers (oItentimes Ior the
Ilimsiest oI reasons) deIault by Iailing to come up with certain
requirements. While the Court can take judicial notice oI this
pernicious practice, it can only hope that Iuture legislation would
address the need to protect the innocent middle or lower class home
purchaser. In the case oI the individual victim, this Court can only go
to the extent oI awarding such damages as may be proper under the
peculiar circumstances oI the cases brought beIore it.chanroblesvirtualawlib rary chanr obles virtual law l ibrary
WHEREFORE, premises considered, the petition is hereby
DISMISSED Ior lack oI merit. Costs against petitioners.chanroblesvirtualawlibra ry chanrobles vir tual law lib rary
SO ORDERED.
Cru:, Davide, Jr., Bellosillo and Quiason, JJ., concur.







EN BANC
G.R. No. L-25024 March 30, 1970
TEODORO C. SANTIAGO, 1R. Minor, Represented by his
Mother, Mrs. Angelita C. Santiago, petitioner-appellant,
-versus-
MISS 1UANITA BAUTISTA, ROSALINDA ALPAS, REBECCA
MATUGAS, MILKITA INAMAC, ROMEO AGUSTIN, AIDA
CAMINO, LUNA SARMAGO, AURORA LORENA, SOLEDAD
FRANCISCO and MR. FLOR MARCELO, respondents-appellees.
%eodoro . Santiao for petitioner-appellant.
Ramon C. Cara for respondent-apellees.

BARREDO,
Appeal Irom the order oI the Court oI First Instance oI Cotabato
dismissing, on a motion to dismiss, its Civil Case No. 2012 Ior
certiorari, injunction and damages on the ground that the complaint
therein states no cause oI action, and Irom the subsequent order oI the
court a quo denying the motion Ior the reconsideration oI the said
order oI dismissal.
The record shows that at the time Civil Case No. 2012 was
commenced in the court below, appellant Teodoro Santiago, Jr. was a
pupil in Grade Six at the public school named Sero Elementary School
in Cotabato City. As the school year 1964-1965 was then about to end,
the "Committee On The Rating OI Students For Honor" was
constituted by the teachers concerned at said school Ior the purpose oI
selecting the "honor students" oI its graduating class. With the school
Principal, Mrs. Aurora Lorena, as chairman, and Juanita Bautista,
Rosalinda Alpas, Rebecca Matugas, Milkita Inamac, Romeo Agustin,
Aida Camino and Luna Sarmago, as members, the above-named
committee deliberated and Iinally adjudged Socorro Medina, Patricia
Ligat and Teodoro C. Santiago, Jr. as Iirst, second and third honors,
respectively. The school's graduation exercises were thereaIter set Ior
May 21, 1965; but three days beIore that date, the "third placer"
Teodoro Santiago, Jr., represented by his mother, and with his Iather
as counsel, sought the invalidation oI the "ranking oI honor students"
thus made, by instituting the above-mentioned civil case in the Court
oI First Instance oI Cotabato, against the above-named committee
members along with the District Supervisor and the Academic
Supervisor oI the place.
The corresponding complaint Iiled alleged, inter alia: that plaintiII-
petitioner Teodoro C. Santiago, Jr. is a sixth grader at the Sero
Elementary School in Cotabato City scheduled to be graduated on May
21st, 1965 with the honor rank of third place, which is disputed; that
the teachers oI the school had been made respondents as they compose
the "Committee on the Rating oI Student Ior Honor", whose grave
abuse oI oIIicial discretion is the subject oI suit, while the other
deIendants were included as Principal, District Supervisor and
Academic Supervisor oI the school; that Teodoro Santiago, Jr. had
been a consistent honor pupil Irom Grade I to Grade V oI the Sero
Elementary School, while Patricia Ligat (second placer in the
disputed ranking in Grade VI) had never been a close rival oI
petitioner beIore, except in Grade V wherein she ranked third; that
Santiago, Jr. had been prejudiced, while his closest rival had been so
much beneIited, by the circumstance that the latter, Socorro Medina,
was coached and tutored during the summer vacation oI 1964 by Mrs.
Alpas who became the teacher oI both pupils in English in Grade VI,
resulting in the Iar lead Medina obtained over the other pupil; that the
committee reIerred to in this case had been illegally constituted as the
same was composed oI all the Grade VI teachers only, in violation oI
the Service Manual Ior Teachers oI the Bureau oI Public Schools
which provides that the committee to select the honor students should
be composed oI all teachers in Grades V and VI; that there are direct
and circumstantial matters, which shall be proven during the trial,
wherein respondents have exercised grave abuse oI discretion and
irregularities, such as the changing oI the Iinal ratings on the grading
sheets oI Socorro Medina and Patricia Ligat Irom 80 to 85, and
some teachers giving petitioner a starting grade oI 75 in Grade VI,
which proves that there has already an intention to pull him to a much
lower rank at the end oI the school year; that several district
examinations outside oI teachers' daily units and other than periodical
tests were given, ratings in which were heavily considered in the
determination oI periodical ratings, whereas according to the
Academic Supervisor and Acting Division Superintendent oI schools
oI the place such district examinations were not advisable; that there
was a unanimous agreement and understanding among the respondent
teachers to insult and prejudice the second and third honors by rating
Socorro Medina with a perIect score, which is very unnatural; that the
words "Iirst place" in petitioner's certiIicate in Grade I was erased and
replaced with the words "second place", which is an instance oI the
unjust and discriminating abuses committed by the respondent teachers
in the disputed selection oI honor pupils they made; that petitioner
personally appealed the matter to the School Principal, to the District
Supervisor, and to the Academic Supervisor, but said oIIicials "passed
the buck to each other" to delay his grievances, and as to appeal to
higher authorities will be too late, there is no other speedy and
adequate remedy under the circumstances; and, that petitioner and his
parents suIIered mental and moral damages in the amount oI
P10,000.00. They prayed the court, among others, to set aside the Iinal
list oI honor students in Grade VI oI the Sero Elementary School Ior
that school year 1964-1965, and, during the pendency oI the suit, to
enjoin the respondent teachers Irom oIIicially and Iormally publishing
and proclaiming the said honor pupils in Grade VI in the graduation
exercises the school was scheduled to hold on the 21st oI May oI that
year 1965. The injunction prayed Ior was denied by the lower court in
its order oI May 20, 1965, the said court reasoning out that the
graduation exercises were then already set on the Iollowing day, May
21, 1965, and the restraining oI the same would be shocking to the
school authorities, parents, and the community who had eagerly
looked Iorward to the coming oI that yearly happy event. As
scheduled, the graduation exercises oI the Sero Elementary School Ior
the school year 1964-1965 was held on May 21, with the same
protested list oI honor students.
Having been required by the above-mentioned order to answer the
petition within ten (10) days, respondents moved Ior the dismissal oI
the case instead. Under date oI May 24, 1965, they Iiled a motion to
dismiss, on the grounds (1) that the action Ior certiorari was improper,
and (2) that even assuming the propriety oI the action, the question
brought beIore the court had already become academic. This was
opposed by petitioner.
In an order dated June 4, 1965, the motion to dismiss oI respondents
was granted, the court reasoning thus:
The respondents now move to dismiss the petition Ior
being improper and Ior being academic. In order to
resolve the motion to dismiss, the Court has careIully
examined the petition to determine the suIIiciency oI
the alleged cause oI action constituting the special civil
action oI certiorari.
The pertinent portions oI the petition alleging 'grave
abuse oI discretion' are Iound in paragraphs 3, 4, 5, 6, 7,
8, 9 and 10. These allegations may be substantially
summarized as Iollows: Paragraph 3 alleges that since
grades one to six, the students closely contending Ior
class honors were Socorro Medina, Teodoro Santiago,
Jr., Dolores Dalican and Patricia Ligat.
Socorro Medina obtained Iirst honor thrice (grades I, V
and VI); once second honor (grade IV), and twice third
place (grades II and III).
Teodoro Santiago, Jr. obtained Iirst place once (grade
IV); Iour times second place (grades I, II, III, and V)
and once third place (grade VI).
Dolores Dalican obtained twice Iirst place (grades II,
III); once third place (grade I).
Patricia Ligat once third place (grade V); and once second place
(grade VI).
That as now ranked in the graduation Ligat is given
second place while Teodoro Santiago, Jr., is given the
third place only. This is the ranking now disputed by
petitioner, Teodoro Santiago, Jr.
Paragraph 4 alleges that Socorro Medina was tutored in
the summer oI 1964 by Mrs. Rosalinda Alpas who
became her English teacher in the sixth grade; that as
such, Mrs. Alpas unjustly Iavored Socorro against her
rivals.
Paragraph 5 alleges that the teachers who composed the
committee on honor students are all grade six teachers
while the Service Manual For Teachers provides that
the committee shall be composed oI the teachers Irom
the IiIth and sixth grades.
Paragraph 6 alleges that there are direct and
circumstantial evidence showing the change oI ratings
oI Socorro Medina and Patricia Ligat Irom 80 to
85 and the intention to junk petitioner to a lower rank.
Paragraph 7 alleges that the giving oI district
examinations upon which ratings were partly based
were not advisable.
Paragraph 8 alleges that the teachers rated Socorro
Medina a perIect pupil which is unnatural.
Paragraph 9 alleges that on the Iirst grade certiIicate oI
the petitioner the word "First Place" was erased and
changed to "Second Place".
Paragraph 10 alleges that petitioner personally appealed
to the school authorities but they only 'passed the buck
to each other.'
SECOND PARAGRAPH VIOLATED
Rule 65, Section 1 oI the Rules oI Court provides:
'Section 1. Petition Ior certiorari.
When any tribunal, board, or oIIicer
exercising judicial Iunctions, has acted
without or in excess oI its or his
jurisdiction, or with grave abuse oI
discretion and there is no appeal, nor any
plain, speedy, and adequate remedy in
the ordinary course oI law, a person
aggrieved thereby may Iile a veriIied
petition in the proper court alleging the
Iacts with certainty and praying that
judgment be rendered annulling or
modiIying the proceedings, as the law
requires, oI such tribunal, board or
oIIicer.'
'The petition shall be accompanied by a
certiIied true copy oI the judgment or
order subject thereoI, together with
copies oI all pleadings and documents
relevant and pertinent thereto.'
It is striking, indeed, that this petition has not been
accompanied by a certiIied true copy oI the judgment or
order complained oI, together with all pleadings and
documents which are relevant thereto, as required by
the second, paragraph oI the aIorequoted rule. This
violation renders the petition extremely indeIinite and
uncertain. There is no written Iormal judgment or order
oI respondents that is submitted Ior revision or
correction oI this Court. This violation is Iatal to the
petition.
ADMINISTRATIVE REMEDIES NEGLECTED
All that the petition alleges is that the petitioner
personally appealed to the school authorities who only
'passed the buck to each other.' This allegation does not
show that petitioner Iormally availed oI and exhausted
the administrative remedies oI the Department oI
Education. The petition implies that this is the Iirst
Iormal complaint oI petitioner against his teachers. The
administrative agencies oI the Department oI Education
could have investigated the grievances oI the petitioner
with dispatch and give eIIective remedies, but petitioner
negligently abandoned them. Petitioner cannot now
claim that he lacked any plain, speedy and adequate
remedy.
NO GRAVE ABUSE OF DISCRETION
Allegations relating to the alleged 'grave abuse oI
discretion' on the part oI teachers reIer to errors,
mistakes, or irregularities rather than to real grave
abuse oI discretion that would amount to lack oI
jurisdiction. Mere commission oI errors in the exercise
oI jurisdiction may not be corrected by means oI
certiorari.
In view oI the Ioregoing, the Court is oI the opinion,
and so holds, that the petition states no cause oI action
and should be, as it is hereby dismissed.
Upon receipt oI a copy oI the above-quoted order, the petitioner
moved Ior the reconsideration thereoI, but the same proved to be
Iutile, hence, this appeal.
Appellant here assails the holding oI the lower court that his petition
states no cause oI action on the grounds discussed by the court a
quo in the appealed order above-quoted (1) that the petition does
not comply with the second paragraph oI Sec. 1 oI Rule 65 because it
has not been accompanied by a certiIied true copy oI the judgment or
order subject thereoI, together with copies oI all pleadings and
documents relevant and pertinent thereto; (2) that administrative
remedies were not Iirst exhausted; and (3) that there was no grave
abuse oI discretion on the part oI the teachers who constituted the
committee reIerred to. On the other hand, appellees maintain that the
court below did not err in dismissing the case on said grounds. Further,
they argue in Iavor oI the questioned order oI dismissal upon the
additional ground that the "committee on the ratings oI students Ior
honor" whose actions are here condemned by appellant is not the
"tribunal, board or oIIicer exercising judicial Iunctions" against which
an action Ior certiorari may lie under Section 1 oI Rule 65.
The last point raised by appellees deserves Iirst consideration, Ior iI
really the said committee oI teachers does not Iall within the category
oI the tribunal, board, or officer exercisin fudicial functions
contemplated by Rule 65, Iurther discussion oI the issues raised by
appellant may no longer be necessary. To resolve this problem the
Iollowing tests may be employed:
In this jurisdiction certiorari is a special civil action
instituted against 'any tribunal, board, or oIIicer
exercising judicial Iunctions.' (Section 1, Rule 67.) A
judicial Iunction is an act perIormed by virtue oI
judicial powers; the exercise oI a judicial Iunction is the
doing oI something in the nature oI the action oI the
court (34 C.J. 1182). In order that a special civil action
oI certiorari may be invoked in this jurisdiction the
Iollowing circumstances must exist: (1) that there must
be a speciIic controversy involving rights oI persons or
property and said controversy is brought beIore a
tribunal, board or oIIicer Ior hearing and determination
oI their respective rights and obligations.
'Judicial action is an adjudication upon
the rights oI parties who in general
appear or are brought beIore the tribunal
by notice or process, and upon whose
claims some decision or judgment is
rendered. It implies impartiality,
disinterestedness, a weighing oI adverse
claims, and is inconsistent with
discretion on the one hand Ior the
tribunal must decide according to law
and the rights oI the parties or with
dictation on the other; Ior in the Iirst
instance it must exercise its own
judgment under the law, and not act
under a mandate Irom another power. ...
The character oI its action in a given
case must decide whether that action is
judicial, ministerial, or legislative, or
whether it be simply that oI a public
agent oI the country or State, as in its
varied jurisdictions it may by turns be
each.' (In Re Saline County
Subscription, 100 Am. Dec. 337, 338,
cited in Southeastern Greyhound Lines
v. Georgia Public Service Commission,
181 S. E. 836-837.)
'It may be said generally that the
exercise oI judicial Iunction is to
determine what the law is, and what the
legal rights oI parties are, with respect to
a matter in controversy; and whenever
an oIIicer is clothed with that authority,
and undertakes to determine those
questions, he acts judicially.' (State ex
rel. Board oI Commissioners oI St. Louis
County, et al. v. Dunn, 90 N. W. 772-
773.)
(2) the tribunal, board or oIIicer beIore whom the
controversy is brought must have the power and
authority to pronounce judgment and render a decision
on the controversy construing and applying the laws to
that end.
'The phrase "judicial power" is not
capable oI a precise deIinition which
would be applicable to all cases. The
term has been variously deIined as the
authority to determine the rights oI
persons or property by arbitrating
between adversaries in speciIic
controversies at the instance oI a party
thereto; the authority exercised by that
department oI government which is
charged with the declaration oI what the
law is and its construction so Iar as it is
written law; the authority or power
vested in the judges or in the courts; the
authority vested in some court, oIIicer,
or persons to hear and determine when
the rights oI persons or property or the
propriety oI doing an act is the subject
matter oI adjudication; the power
belonging to or emanating Irom a judge
as such; the power conIerred upon a
public oIIicer, involving the exercise oI
judgment and discretion in the
determination oI questions oI right in
speciIic cases aIIecting the interest oI
persons or property, as distinguished
Irom ministerial power or authority to
carry out the mandates oI judicial power
or the law; the power exercised by courts
in hearing and determining cases beIore
them, or some matter incidental thereto,
and oI which they have jurisdiction; the
power oI a court to decide and
pronounce a judgment; the power which
adjudicates upon and protects the rights
and interests oI individual citizens, and
to that end construes and applies the law.
"Judicial power" implies the
construction oI laws and the adjudication
oI legal rights. It includes the power to
hear and determine but not everyone
who may hear and determine has judicial
power. The term "judicial power" does
not necessarily include the power to hear
and determine a matter that is not in the
nature oI a suit or action between the
parties.' (34 C.J. 1183-1184.) .
(3) the tribunal, board or oIIicer must pertain to that
branch oI the sovereign power which belongs to the
judiciary, or at least, which does not belong to the
legislative or executive department.
... the distinction between legislative or
ministerial Iunctions and judicial
Iunctions is diIIicult to point out. What
is a judicial Iunction does not depend
solely upon the mental operation by
which it is perIormed or the importance
oI the act. In solving this question, due
regard must be had to the organic law oI
the state and the division oI power oI
government. In the discharge oI
executive and legislative duties, the
exercise oI discretion and judgment oI
the highest order is necessary, and
matters oI the greatest weight and
importance are dealt with. It is not
enough to make a Iunction judicial that it
requires discretion, deliberation, thought,
and judgment. It must be the exercise of
discretion and fudment within that
subdivision of the soverein power
which belons to the fudiciary, or, at
least, which does not belon to the
leislative or executive department. II
the matter, in respect to which it is
exercised, belongs to either oI the two
last-named departments oI government,
it is not judicial. As to what is judicial
and what is not seems to be better
indicated by the nature oI a thing, than
its deIinition.' (Whealing & Elm Grove
Railroad Co. Appt. v. Town oI
Triadelphia, et al., 4 L.R.A. (N. S.) pp.
321, 328-329.) |Emphasis supplied|
1

'WHAT ARE JUDICIAL OR QUASI
JUDICIAL ACTS. It is diIIicult, iI not
impossible, precisely to deIine what are
judicial or quasi judicial acts, and there
is considerable conIlict in the decisions
in regard thereto, in connection with the
law as to the right to the writ oI
certiorari. It is clear, however, that it is
the nature of the act to be performed,
rather than of the office, board, or body
which performs it, that determines
whether or not it is the dischare of a
fudicial or quasi-fudicial function. It is
not essential that the proceedings should
be strictly and technically judicial, in the
sense in which that word is used when
applied to the courts oI justice, but it is
suIIicient iI they are quasi judicial. It is
enough iI the oIIicers act judicially in
making their decision, whatever may be
their public character. ...' "In State ex rel.
Board of Commrs. vs. Dunn (86 Minn.
301, 304), the Iollowing statements were
made:
'The precise line oI demarkation between
what are judicial and what are
administrative or ministerial Iunctions is
oIten diIIicult to determine. The exercise
oI judicial Iunctions may involve the
perIormance oI legislative or
administrative duties, and the
perIormance oI administrative or
ministerial duties, may, in a measure,
involve the exercise oI judicial
Iunctions. It may be said generally that
the exercise oI judicial Iunctions is to
determine what the law is, and what the
legal rights oI parties are, with respect to
a matter in controversy; and whenever
an oIIicer is clothed with that authority,
and undertakes to determine those
questions, he acts judicially.'
2

It is evident, upon the Ioregoing authorities, that the so called
committee on the rating oI students Ior honor whose actions are
questioned in this case exercised neither judicial nor quasi judicial
Iunctions in the perIormance oI its assigned task. From the above-
quoted portions oI the decision cited, it will be gleaned that beIore
tribunal board, or oIIicer may exercise judicial or quasi judicial acts, it
is necessary that there be a law that give rise to some speciIic rights oI
persons or property under which adverse claims to such rights are
made, and the controversy ensuing thereIrom is brought, in turn,
beIore the tribunal, board or oIIicer clothed with power and authority
to determine what that law is and thereupon adjudicate the respective
rights oI the contending parties. As pointed out by appellees,
3

however, there is nothing on record about any rule oI law that provides
that when teachers sit down to assess the individual merits oI their
pupils Ior purposes oI rating them Ior honors, such Iunction involves
the determination oI what the law is and that they are thereIore
automatically vested with judicial or quasi judicial Iunctions. Worse
still, this Court has not even been appraised by appellant oI the
pertinent provisions oI the Service Manual oI Teachers Ior Public
Schools appellees allegedly violated in the composition oI the
committee they constituted thereunder, and, in the perIormance oI that
committee's duties.
At any rate, the situation brought beIore Us in this case, the seemingly
one oI Iirst impression, is not without substantial parallel. In the case
oI Felipe vs. Leuterio, etc., et al.,
4
the issue presented Ior
determination was whether or not the courts have the authority to
reverse the award oI the board oI judges oI an oratorical contest, and
this Court declared that the judiciary has no power to reverse the
award oI the board oI judges oI that contest and, Ior that matter, it
would not interIere in literary contests, beauty contests and similar
competitions. It was reasoned out thus:
For more than thirty years oratorical tilts have been
held periodically by schools and colleges in this islands.
Inter-collegiate oratorical competitions are oI more
recent origin. Members oI this court have taken part in
them either as contestants in their school days (In the
College oI Law, U.P. annual oratorical contest, Iirst
prize was awarded to Justice Montemayor in 1914 and
to Justice Labrador in 1916), or as members oI the
board oI judges aIterwards. They know some Iew
verdicts did not reIlect the audience's preIerence and
that errors have sometimes been ascribed to the award
oI the judges. Yet no party ever presumed to invoke
judicial intervention; Ior it is unwritten law in such
contests that the board's decision is Iinal and
unappealable.
Like the ancient tournaments oI the Sword, these
tournaments oI the Word apply the highest tenets oI
sportsmanship: Iinality oI reIeree's verdict. No alibis,
no murmurs oI protest. The participants are supposed to
join the competition to contribute to its success by
striving their utmost: the prizes are secondary.
No rights to the prizes may be asserted by the
contestants, because theirs was merely the privilege to
compete Ior the prize, and that privilege did not ripen
into a demandable right unless and until they were
proclaimed winners oI the competition by the appointed
arbiters or reIerees or judges.
Incidentally, these school activities have been imported
Irom the United States. We Iound in American
jurisprudence no litigation questioning the
determination oI the board oI judges.
Now, the Iact that a particular action has had no
precedent during a long period aIIords some reason Ior
doubting the existence oI the right sought to be
enIorced, especially where occasion Ior its assertion
must have oIten arisen; and courts are cautious beIore
allowing it, being loath to establish a new legal
principle not in harmony with the generally accepted
views thereon. (See C.J.S. Vol. 1, p. 1012.)
We observe that in assuming jurisdiction over the
matter, the respondent judge reasoned out that where
there is a wrong there is a remedy and that courts oI
Iirst instance are courts oI general jurisdiction.
The Ilaw in his reasoning lies in the assumption that
Imperial suIIered some wron at the hands oI the board
oI judges. II at all, there was error on the part oI one
judge, at most. Error and wrong do not mean the same
thing. 'Wrong' as used in the aIoresaid principle is the
deprivation or violation oI a right. As stated beIore, a
contestant has no riht to the prize unless and until he
or she is declared winner by the board oI reIerees or
judges.
Granting that Imperial suIIered some loss or injury, yet
in law there are instances oI damnum absque infuria.
This is one oI them. II Iraud or malice had been proven,
it would be a diIIerent proposition. But then her action
should be directed against the individual judge or
judges who Iraudulently or maliciously injured her. Not
against the other judges.
But even were We to assume Ior the moment, as the court below
apparently did, that judicial intervention might be sought in cases oI
this nature, still, We are inclined to sustain the order oI dismissal
appealed Irom Ior Iailure on the part oI appellant to comply with the
requirements oI Section 1 oI Rule 65. To be sure, the lower court's
holding that appellant's Iailure to accompany his petition with a copy
oI the judgment or order subject thereoI together with copies oI all
pleadings and documents relevant and pertinent thereto "is Iatal to his
cause" is supported not only by the provision oI that Rule but by
precedents as well. In the case oI lafar, et al. vs. Court of Industrial
Relations,
5
where it was claimed by therein petitioners that the
respondent court had acted with grave abuse oI discretion in estimating
certain rice harvests involved in the case in terms oI cavans instead oI
cans, allegedly in complete disregard oI the decision oI the Court oI
First Instance oI Batangas in Expropriation Proceedings No. 84 and oI
this Court in G.R. No.
L-6191,
6
and in ordering thereaIter the division oI the said rice
harvests on the ratio oI 70-30 in Iavor oI the tenants, this Court denied
the petition Ior certiorari on the ground, among others, oI Iailure on
the part oI said petitioners to attach to their petition copies oI the
decisions allegedly violated. Speaking thru Mr. Justice J.B.L. Reyes
then, this Court held:
The petition is patently without merit. In the Iirst place,
it is not even suIIicient in Iorm and substance to justiIy
the issuance oI the writ oI certiorari prayed Ior. It
charges that the Court oI Industrial Relations abused its
discretion in disregarding the decision oI the Court oI
First Instance oI Batangas in Expropriation Proceedings
No. 84 and oI this Court in G.R. No. L-6191; yet it does
not attach to the petition the decisions allegedly
violated by the Court below and point out which
particular portion or portions thereoI have been
disregarded by the respondent Court.
The same principle was applied in the more recent case oI NS
vs. unicipality of Libmanan, et al.,
7
wherein this Court dismissed (by
Resolution) the petition Ior certiorari and mandamus Iiled by the
National Waterworks and Sewerage Authority against the Court oI
First Instance oI Camarines Sur, and the municipality oI Libmanan. In
the Iollowing language, this Court emphasized the importance oI
complying with the said requirement oI Rule 65:
While paragraph 3 oI the petition speaks oI the
complaint Iiled by the respondent municipality with the
respondent court Ior recovery oI property with damages
(Civil Case No. L-161) no copy thereoI is attached to
the petition.
Similarly, paragraph 4 oI the petition mentions the
decision rendered by the respondent court on December
10, 1965, but no copy thereoI is attached to the petition.
Again, paragraph 5 oI the petition speaks oI the order oI
deIault entered by the respondent court and oI the
motion Ior reconsideration Iiled by petitioner in the
case above-mentioned, but no copy oI the order oI
deIault is attached to its petition.
Bearing in mind that the petition under consideration
was Iiled Ior the purpose oI enjoining the respondent
court Irom executing the decision rendered in Civil
Case No. L-161, the importance oI the missing
pleadings is obvious.
Moreover, the petition is also Ior the purpose oI
securing an order commanding the respondent court to
approve either the original or the amended record on
appeal Iiled petition, but no copy oI either is attached to
its petition.
In view oI the Ioregoing, the petition under
consideration is dismissed.
It might be true, as pointed out by appellant, that he received a copy oI
the programme oI the graduation exercises held by the Sero
Elementary School in the morning oI the very day oI that graduation
exercises, implying that he could not have attached then a copy thereoI
(to show the decision oI the committee oI teachers in the ranking oI
students complained oI) to his petition. The stubborn Iact remains,
however, that appellant had known oI such decision oI the said
committee oI teachers much earlier, as shown by the circumstance that
according to him, even beIore the Iiling oI his petition with the lower
court on the 19th oI May, 1965, he had personally appealed the said
committee's decision with various higher authorities oI the above-
named school, who merely passed the buck to each other. Moreover,
appellant mentions in his petition various other documents or papers
as the Service Manual Ior Teachers allegedly violated by appellees
in the constitution oI their committee; altered grading sheets; and
erasures in his Grade I certiIicate which appellant never bothered to
attach to his petition. There could be no doubt then that he miserably
Iailed to comply with the requirement oI Rule 65 above-mentioned.
With this conclusion, it is no longer necessary to pass upon the other
two errors assigned by appellant.
FOR THE FOREGOING CONSIDERATIONS, the judgment
appealed Irom is aIIirmed, with costs against appellant.
Concepcion, C.J., Reyes, J.B.L., Di:on, akalintal, Zaldivar, Castro,
Fernando, %eehankee and Jillamor, JJ., conc














G.R. No. 182707 : September 1, 2010
SPOUSES ERNESTO LIM and ZENAIDA LIM, Petitioner, vs.
RUBY SHELTER BUILDERS AND REALTY DEVELOPMENT
CORPORATION, Respondent.
D E C I S I O N
ABAD,
This case is about the jurisdiction oI the Housing and Land Use
Regulatory Board (HLURB) over an action to compel a land developer
to deliver a promised title over one-Iourth oI a subdivided lot.
The Facts and the Case
Sometime in May 2001 petitioners Ernesto and Zenaida Lim (the
Lims) bought Ior P190,000.00 a 318-square meter lot that then Iormed
part oI a bigger lot
1
cralaw in Barangay Triangulo, Naga City. Respondent
Ruby Shelter Builders and Realty Development Corporation (Ruby
Shelter), the seller and owner, undertook to subdivide the lot and, upon
approval by the Bureau oI Lands, execute a deed oI absolute sale in
Iavor oI the Lims. In December 2001 Ruby Shelter delivered the deed
oI sale to the spouses with a promise to give them the title to the lot as
soon as the subdivision plan had been approved.
Ruby Shelter then caused the approval oI a subdivision plan Ior its lot,
dividing it into Iour, including the one sold to the Lims, identiIied as
Lot 9-E-2-B. But, despite repeated demands, Ruby Shelter did not
deliver the Lims' title. Consequently, the latter Iiled an action against it
Ior delivery oI title with damages beIore the HLURB.
On March 1, 2004 the HLURB Legal Services Group (LSG) rendered
a decision Ior the Lims, which decision the HLURB Board oI
Commissioners aIIirmed. On September 5, 2005, acting on Ruby
Shelter's appeal, the OIIice oI the President (OP) upheld the HLURB
decision, a copy oI which Ruby Shelter got on September 20, 2005.
On October 11, 2005 the latter Iiled a motion Ior leave to be allowed
to Iile an attached belated motion Ior reconsideration. The OP denied
the motion. On December 29, 2005 it Iurther issued an Order declaring
its September 5, 2005 decision Iinal and executory.
Notwithstanding the OP's above Order, on January 31, 2006 Ruby
Shelter Iiled a motion Ior extension oI time to Iile a petition Ior review
with the Court oI Appeals (CA).nad On October 23, 2006 the Lims
moved Ior the issuance oI a writ oI execution, which the HLURB LSG
granted.
Meanwhile, the CA gave due course to Ruby Shelter's petition Ior
review and on December 6, 2007 rendered a decision granting the
same and setting aside the OP's rulings. The CA ruled that the HLURB
had no jurisdiction over the claim oI the spouses, thus, this petition.
The Issue Presented
The sole issue presented in this case is whether or not the Lims' action
Ialls within the jurisdiction oI the HLURB.
The Ruling of the Court
The jurisdiction oI a court or a quasi-judicial body over the subject
matter oI the action is determined by the nature oI the action pleaded
as appearing in the allegations oI the complaint.
2
cralaw But where the actual
issues are evident Irom the records oI the case, then jurisdiction over
the subject matter need not depend upon the literal assertions in the
complaint, but on the law as applied to established Iacts based on the
evidence that the parties presented in due course.
3
cralaw
Section 1 oI Presidential Decree 1344
4
cralaw vests in the National Housing
Authority (now HLURB) exclusive jurisdiction to hear and decide the
Iollowing cases: (a) unsound real estate business practices; (b) claims
involving reIund and any other claims Iiled by subdivision lot or
condominium unit buyer against the project owner, developer, dealer,
broker or salesman; and (c) cases involving speciIic perIormance oI
contractual and statutory obligations Iiled by buyers oI subdivision lot
or condominium unit against the owner, developer, dealer, broker or
salesman.
This provision must be read in the light oI the law's preamble, which
explains the reasons Ior enactment oI the law or the contextual basis
Ior its interpretation. The law's introductory clause states that the
HLURB exercises regulatory authority over cases oI swindling and
Iraudulent manipulations perpetrated by unscrupulous subdivision
sellers and operators, such as Iailure to deliver titles to the buyers or
titles Iree Irom liens and encumbrances.
5
cralaw
To determine iI the HLURB has jurisdiction over the complaint oI the
spouses, the law must be interpreted as applied to the Iacts. Here,
Ruby Shelter never oIIered any excuse in reIusing to deliver the title to
the spouses other than the alleged lack oI jurisdiction oI that body over
the action. It did not deny the sale and its obligation to deliver the title
oI the land to the spouses.
The plain Iact is that the Lims bought a Iourth oI a parcel oI land Irom
Ruby Shelter Ior P190,000.00. The parties agreed that Ruby Shelter
shall cause the subdivision oI the lot and upon approval by the Bureau
oI Lands, execute the deed oI sale. Subsequently, Ruby Shelter gave
that deed to the Lims with a promise to give the title once its
subdivision plan had been approved. Ruby Shelter later delivered a
copy oI the approved plan to the Lims showing the segregation oI the
portion they bought Irom the rest oI the original lot. But Ruby Shelter
Iailed on its promise to deliver the title to the Lims, despite repeated
demands. These circumstances clearly present a case Ior speciIic
perIormance that the subdivision lot buyers brought against Ruby
Shelter, a matter properly cognizable by the HLURB.
Ruby Shelter oI course claims that the transaction did not relate to a
land developer's contractual and statutory obligations to a buyer oI a
subdivision lot since the lot that the Lims bought Irom it did not Iorm
part oI a subdivision development, the size oI a community. It merely
subdivided a lot into Iour and sold one portion to the Lims.
But the controlling Iact is not the size oI the original lot that Ruby
Shelter had subdivided but the Iact that the Lims bought their portion
oI that lot Irom a licensed land developer whose dealings on properties
are regulated by the HLURB. The Lims bought their lot relying on the
belieI that Ruby Shelter, as licensed land developer, shall abide by its
duties and obligations under its contract and the laws.
Lastly, the CA committed a grave error in giving due course to Ruby
Shelter's petition when the OP's Decision dated September 5, 2005 had
already attained Iinality and had become executory.
WHEREFORE, the Court GRANTS the petition, REVERSES and
SETS ASIDE the Decision oI the Court oI Appeals in CA-G.R. SP
93138 dated December 6, 2007 and its Resolution dated April 25,
2008, and REINSTATES the Decision oI the OIIice oI the President
dated September 5, 2005 and its Order dated December 29, 2005.
SO ORDERED.













ECOND DIVISION

G.R. No. L-39655 March 21, 1975
ARROW TRANSPORTATION CORPORATION, petitioner,
-versus-
BOARD OF TRANSPORTATION and SULTAN RENT-A-CAR,
INC., respondents.
anuel Imbon for petitioner.
Office of the Solicitor General Estelito P. endo:a and ssistant
Solicitor General Reynato S. Puno for respondent Board.
Pastor C. Bacani and Ernesto Ganiban for private respondent.

FERNANDO,
It must have been the realization that a challenge to a provisional
permit issued by respondent Board oI Transportation
1
based on the
absence oI a hearing is not likely to be attended with success that
prompted petitioner to rely on another aspect oI procedural due
process, the inIirmity alleged being traceable to what it considered
lack oI jurisdiction.
2
There is the invocation oI Philippine Lon
Distance %elephone Company v. edina
3
with its mention oI both
competitors and the public being notiIied. It does not suIIice.
Something more, which more, is necessary. The reliance is misplaced.
Its applicability is by no means obvious. As was pointed out in the
answer oI respondent Board oI Transportation, such a claim is hardly
persuasive with the procedure set Iorth in Presidential Decree No. 101
being Iollowed and the provisional authority to operate being based on
an urgent public need. Such a contention merits the approval oI the
Court. The petition cannot prosper.
Both petitioner and private respondent Sultan Rent-a-Car are domestic
corporations.
4
The Iormer has in his Iavor a certiIicate oI public
convenience to operate a public utility bus air-conditioned-auto-truck
service Irom Cebu City to Mactan International Airport and vice-versa
with the use oI twenty (20) units.
5
Private respondent on September
12, 1974 Iiled a petition with the respondent Board Ior the issuance oI
a certiIicate oI public convenience to operate a similar service on the
same line.
6
Eight days later, without the required publication, the
Board issued an order granting it provisional permit to operate such
auto-truck service on the line applied Ior.
7
There was a motion Ior
reconsideration and Ior the cancellation oI such provisional permit
Iiled on October 21, 1974,
8
but without awaiting Iinal action thereon,
this petition was Iiled. 9 This is the explanation: "That petitioner has
not waited Ior the resolution oI his Motion Ior Reconsideration beIore
going to this Court considering that the question involved herein is
purely a legal one, aside Irom the Iact that the issuance oI the Order
without the Board having acquired jurisdiction oI the case yet, is
patently illegal or was perIormed without jurisdiction."
10

So it was set Iorth in the petition Iiled on November 16, 1974. As a
preliminary injunction was likewise sought, a hearing was scheduled
Ior November 29, 1974. It was cancelled, this Court issuing a
resolution instead, requiring respondents to Iile an answer not later
than December 6, 1974 and setting the hearing on the merits oI the
case on Wednesday, December 11, 1974. In the answer submitted the
Iacts alleged were substantially admitted.
11
It denied the allegation
that there must be a publication beIore a provisional permit can be
issued, reIerence being made, as noted, to Presidential Decree No. 101,
which authorized respondent Board to grant provisional permits when
warranted by compelling circumstances and to proceed promptly along
the method oI legislative inquiry.
12
The case was then argued on
December 11, 1974, Attorney Manuel Imbong appearing Ior petitioner
and Assistant Solicitor General Reynato S. Puno appearing Ior
respondent Board oI Transportation.
13
ThereaIter, the parties were
given twenty days to Iile their respective memoranda and an additional
ten-day period to submit replies thereto iI so minded. In time all the
pleadings were submitted, and the case was ready Ior decision.
The petition, to repeat, cannot prosper.
1. It is to be, admitted that the claim Ior relieI on the asserted
constitutional deIiciency based on procedural due process, not Irom
the standpoint oI the absence oI a hearing but Irom the lack oI
jurisdiction without the required publication having been made, was
argued vigorously and developed exhaustively in the memoranda oI
petitioner. The arguments set Iorth, while impressed with plausibility,
do not suIIice to justiIy the grant oI certiorari. Moreover, the doctrine
announced in the Philippine Long Distance Telephone Company
decision, heavily leaned on by petitioner is, at the most, a Irail and
insubstantial support and gives way to decisions oI this Court that have
an even more speciIic bearing on this litigation.
2. A barrier to petitioner's pretension, not only Iormidable but also
insurmountable, is the well-settled doctrine that Ior a provisional
permit, an ex parte hearing suIIices.
14
The decisive consideration is
the existence oI the public need.
15
That was shown in this case,
respondent Board, on the basis oI demonstrable data, being satisIied oI
the pressing necessity Ior the grant oI the provisional permit sought.
There is no warrant Ior the nulliIication oI what was ordered by it. It
must have been, as already noted, this state oI the law that did lead
petitioner to harp on its interpretation oI what Ior it is the teaching oI
the Philippine Long Distance Telephone Company decision.
16
There
was therein stated that one oI the compelling reasons that led this
Court to hold that the deIunct Public Service Commission did not
acquire jurisdiction was that no provision was made Ior bringing in as
parties thereto the competitors oI the Philippine Long Distance
Telephone Company.
17
That is the basis Ior the objection on
procedural due process ground. While no doubt such a holding was
necessary Ior the decision oI that case which dealt with a petition Ior
the reexamination oI a decision that was held to be Iinal and
executory, it Iinds no application to this controversy dealing with a
provisional permit. This is made clear by this portion oI the opinion oI
Justice Sanchez: "Araneta seeks reexamination oI the rates approved
by the Commission. Araneta avers that PLDT can carry out its
improvement and expansion program at less onerous terms to the
subscribers. But Araneta |University| was not a party to the rate-Iixing
case or to any oI the other proceedings below. These rate-Iixing and
allied cases terminated with the Iinal judgment oI January 9, 1964. Not
being a party, it could not have moved to reconsider said decision. Nor
could it have appealed Irom that decision it had no standing in that
case. Even iI we treat Araneta's reexamination petition as one Ior
reconsideration, the time thereIor has long passed.
18
It was then
stated: The reexamination herein sought by Araneta, perIorce seeks the
Iixing oI new and diIIerent rates.
19
Further: Araneta in eIIect,
institutes a fresh
petition Ior new rates diIIerent Irom those already established. Such
petition is a proceeding separate and distinct Irom those concluded by
the Iinal judgment oI PSC oI January 9, 1964.
20
The conclusion,
thereIore, necessarily Iollows:" We hold that the Public Service
Commission may not reduce or increase rates established in a
judgment that has become Iinal, without proper notice; and that a
Commission order reducing or increasing said rates without such
notice is void."
21
Under the Iacts oI that case, the procedural due
process inIirmity amounting to lack oI jurisdiction is quite apparent.
The opposite is true with this present petition which deals with a grant
oI provisional permit. It would be to liIt out oI context the reIerence
made in the aIoresaid opinion with reIerence to notiIication to the
competitors to give a color oI applicability to the situation beIore us.
Clearly then, the allegation oI a Iailure to Iollow the command oI the
due process guarantee is bereIt oI any legal Ioundation.
3. The question oI whether the controversy is ripe Ior judicial
determination was likewise argued by the parties. For it is undeniable
that at the time the petition was Iiled. there was pending with the
respondent Board a motion Ior reconsideration. Ordinarily, its
resolution should be awaited. Prior thereto, an objection grounded on
prematurity can be raised. Nonetheless, counsel Ior petitioner would
stress that certiorari lies as the Iailure to observe procedural due
process ousted respondent Board oI whatever jurisdiction it could have
had in the premises. This Court was impelled to go into the merits oI
the controversy at this stage, not only because oI the importance oI the
issue raised but also because oI the strong public interest in having the
matter settled. As was set Iorth in Executive Order No. 101 which
prescribes the procedure to be Iollowed by respondent Board, it is the
policy oI the State, as swiItly as possible, to improve the deplorable
condition oI vehicular traIIic, obtain maximum utilization oI existing
public motor vehicles and eradicate the harmIul and unlawIul trade oI
clandestine operators, as well as update the standard oI those carrying
such business, making it "imperative to provide, among other urgently
needed measures, more expeditious methods in prescribing, redeIining,
or modiIying the lines and mode oI operation oI public utility motor
vehicles that now or thereaIter, may operate in this country.
22
It is
essential then both Irom the standpoint oI the Iirms engaged as well as
oI the riding public to ascertain whether or not the procedure Iollowed
in this case and very likely in others oI a similar nature satisIies the
procedural due process requirement. Thus its ripeness Ior adjudication
becomes apparent.
To paraphrase what was said in Edu v. Ericta
23
where the validity oI a
legislation was passed upon in a certiorari proceeding to annul and set
aside a writ oI preliminary injunction, to so act would be to conserve
both time and eIIort. Those desiring to engage in public utility
business as well as the public are both vitally concerned with the Iinal
determination oI the standards to be Iollowed in the procedure that
must be observed. There is, to repeat, a great public interest in a
deIinitive outcome oI the crucial issue involved. One oI the most noted
authorities on Administrative Law, proIessor Kenneth Culp Davis,
discussing the ripeness concept, is oI the view that the resolution oI
what could be a debilitating uncertainty with the conceded ability oI
the judiciary to work out a solution oI the problem posed is a potent
argument Ior minimizing the emphasis laid on its technical aspect.
24

WHEREFORE, the petition Ior certiorari is dismissed. No costs.
akalintal, C.J., Barredo, ntonio and Fernande:, JJ., concur.



























FIRST DIVISION

G.R. No. 160876, 1anuary 18, 2008]

AZUCENA MAGALLANES, EVELYN BACOLOD and HEIRS
OF 1UDITH COTECSON, Petitioners, vs. SUN YAT SEN
ELEMENTARY SCHOOL, PAZ GO, ELENA CUBILLAN,
WILLY ANG GAN TENG, BENITO ANG, and TEOTIMO TAN,
Respondents.

D E C I S I O N

SANDOVAL-GUTIERREZ, 1.:

For our resolution is the instant Petition Ior Review on Certiorari
seeking to reverse the Resolution oI the Court oI Appeals (Seventh
Division) dated October 29, 2001 in CA-G.R. SP No. 67068; its
Resolution oI May 8, 2003 denying the motion Ior reconsideration;
and its Resolution oI October 10, 2003, denying the motion Ior
reconsideration oI the Resolution oI May 8, 2003.

The Iacts oI the case are:

Azucena Magallanes, Evelyn Bacolod, Judith Cotecson (represented
by her heirs), petitioners, Grace Gonzales, and Bella Gonzales were all
employed as teachers in the Sun Yat Sen Elementary School in
Surigao City.

Paz Go and Elena Cubillan are principals oI the said school. Willy
Ang Gan Teng and Benito Ang are its directors, while Teotimo Tan is
the school treasurer. They are all respondents herein.

On May 22, 1994, respondents terminated the services oI petitioners.
Thus, on August 3, 1994, they Iiled with the Sub-Regional Arbitration
Branch No. X, National Labor Relations Commission (NLRC), Butuan
City, complaints against respondents Ior illegal dismissal,
underpayment oI wages, payment oI backwages, 13th month pay,
ECOLA, separation pay, moral damages, and attorneyts Iees.
Likewise, on August 22, 1994, petitioner Cotecson Iiled a separate
complaint praying Ior the same relieIs.

On June 3, 1995, Labor Arbiter Rogelio P. Legaspi rendered a
Decision declaring that petitioners were illegally dismissed Irom the
service and ordering respondents to reinstate them to their Iormer or
equivalent positions without loss oI seniority rights, and to pay them
their backwages, salary diIIerential, 13th month pay diIIerential, and
service incentive leave beneIits toas oI June 20, 1995.t
Respondents were likewise directed to pay petitioners moral and
exemplary damages.

On appeal by respondents, the NLRC, in its Decision dated February
20, 1996, reversed the Arbiterts judgment, holding that petitioners
are contractual employees and that respondents merely allowed their
contracts to lapse.

Petitioners timely Iiled a motion Ior reconsideration, but it was denied
by the NLRC in its Resolution dated April 17, 1996.

Petitioners then Iiled with the Court oI Appeals a petition Ior
certiorari, docketed as CA-G.R. SP No. 50531.

On October 28, 1999, the Court oI Appeals (Special Sixteenth
Division) rendered its Decision,
|1|
the dispositive portion oI which
reads:
WHEREFORE, the instant petition is GRANTED with respect to
petitioners Cotecson, Bacolod, and Magallanes, the questioned
Resolutions oI the NLRC dated February 20 and April 1996 are hereby
REVERSED and SET ASIDE as to them.

The Decision dated July 3, 1995 oI the Labor Arbiter is hereby
REINSTATED as to the said petitioners except as to the award oI
moral and exemplary damages which is hereby DELETED.

SO ORDERED.
The Court oI Appeals (Special Sixteenth Division) ruled that in lieu oI
reinstatement, petitioners Cotecson, Bacolod, and Magallanes
toshall be entitled to separation pay equivalent to one month salary
and backwages computed Irom the time oI their illegal dismissal up to
the time oI the promulgation oI its Decision.t With respect to Bella
Gonzales and Grace Gonzales, the Court oI Appeals Iound that that
they have not acquired the status oI regular employees having rendered
only two years oI service.
Consequently, their dismissal Irom the service is valid. Under the
Manual oI Regulations Ior Private Schools, only Iull-time teachers
who have rendered three (3) years oI consecutive service shall be
considered permanent.

Respondents Iiled a motion Ior reconsideration but it was denied by
the appellate court in its Resolution dated January 13, 2000.

Respondents then Iiled with this Court a petition Ior certiorari,
docketed as G.R. No. 142270. However, it was dismissed Ior lack oI
merit in a Minute Resolution dated April 12, 2000. Their motion Ior
reconsideration was denied with Iinality by this Court on July 19,
2000.

Meanwhile, on October 4, 2000, petitioners Iiled with the Labor
Arbiter a motion Ior execution oI his Decision as modiIied by the
Court oI Appeals.

In an Order dated January 8, 2001, the Labor Arbiter computed the
petitionerst monetary awards reckoned Irom the time oI their
illegal dismissal in June 1994 up to October 29, 1999, pursuant to the
Decision oI the Court oI Appeals (Special Sixteenth Division) in CA-
G.R. SP No. 50531. Respondents interposed an appeal to the NLRC
(docketed as NLRC Case No. M-006176-2001), contending that the
computation should only be up to June 20, 1995 (the date indicated in
the Labor Arbiterts Decision).

In an Order dated March 30, 2001, the NLRC modiIied the Labor
Arbiterts computation and ruled that the monetary awards due to
petitioners should be computed Irom June 1994 up to June 20, 1995.

Petitioners then Iiled a petition Ior certiorari with the Court oI
Appeals, docketed as CA-G.R. SP No. 67068, raIIled oII to the
Seventh Division. However, in its Resolution oI October 29, 2001, the
petition was dismissed outright Ior their Iailure to attach to their
petition copies oI the pleadings Iiled with the Labor Arbiter, thus:
No copies oI the pleadings Iiled beIore the Labor Arbiter appear to
have been attached to the petition in violation oI the provisions oI
Section 1, Rule 65 and Section 3, Rule 46 oI the 1997 Rules oI Civil
Procedure, as amended, which requires that the petition:
x x x shall be accompanied by a clearly legible duplicate original or
certiIied true copy oI the judgment, order, resolution or ruling subject
thereoI, such material portions oI the record as are reIerred to therein
and other documents relevant or pertinent thereto x x x
WHEREFORE, the instant petition is DISMISSED OUTRIGHT
pursuant to Section 3, Rule 46 oI the 1997 Rules oI Civil Procedure.

SO ORDERED.
Petitioners Iiled a motion Ior reconsideration, but they erroneously
indicated therein the case number as CA-G.R. SP No. 50531, instead
oI CA-G.R. SP No. 67068. Their error was compounded by stating
that the petition was with the Special Sixteenth Division, instead oI the
Seventh Division. As a result, the Special Sixteenth Division issued a
Minute Resolution dated April 22, 2002 which merely noted the
motion, thus:

The petitionerst motion Ior reconsideration dated November 22,
2001 and Iiled by registered mail on November 26, 2001 is merely
noted since there was no October 29, 2001 resolution that was issued
in this case which the motion Ior reconsideration seeks to be
reconsidered.

On realizing their mistake, petitioners then Iiled with the Seventh
Division a Motion to TransIer The Case to it.

In a Resolution promulgated on May 8, 2003, the Seventh Division
denied petitionerst Motion To TransIer The Case on the ground,
among others, that the motion is tonon-existentt since it does not
bear the correct case number, hence, could not be attached to the
records oI CA-G.R. SP No. 67068.

UnIazed, petitioners Iiled a motion Ior reconsideration, but it was
denied by the Seventh Division in its Resolution oI October 10, 2003.

At Iirst glance, the petition beIore us appears to be a Iutile attempt to
revive an extinct motion denied by the appellate court (Seventh
Division) by reason oI technicality. But in the interest oI speedy
administration oI justice, we should not only delve in technicalities.
We shall then address these two issues: (1) whether the Court oI
Appeals (Seventh Division) erred in holding that aIIixing a wrong
docket number on a motion renders it tonon-existent;t and (2)
whether the issuance by the NLRC oI the Order dated March 30, 2001,
amending the amounts oI separation pay and backwages, awarded by
the Court oI Appeals (Sixteenth Division) to petitioners and computed
by the Labor Arbiter, is tantamount to grave abuse oI discretion
amounting to lack or excess oI jurisdiction.

On the first issue, the Court oI Appeals (Seventh Division) is correct
when it ruled that petitionerst motion Ior reconsideration oI its
Resolution dated October 29, 2001 in CA-G.R. SP No. 67068 is
tonon-existent.t Petitionerst counsel placed a wrong case
number in their motion, indicating CA-G.R. SP No. 50531 (Special
Sixteenth Division) instead oI CA-G.R. SP No. 50531 (Seventh
Division), the correct case number. In Llantero v. Court of ppeals,
|2|

we ruled that where a pleading bears an erroneous docket number and
thus tocould not be attached to the correct case,t the said
pleading is, Ior all intents and purposes, tonon-existent.t As aptly
stated by the Special Sixteenth Division, it has neither the duty nor the
obligation to correct the error or to transIer the case to the Seventh
Division. In ea Land Resources and Development Corporation v.
C-E Construction Corporation,
|3|
which likewise involves a wrong
docket number in a motion, we ruled that the duty to correct the
mistake Ialls solely on the party litigant whose Iault caused the
anomaly. To hold otherwise would be to impose upon appellate courts
the burden oI being nannies to appellants, ensuring the absence oI
pitIalls that hinder the perIection oI petitions and appeals. Strictly
speaking, it is a dogma that the mistake or negligence oI counsel binds
the clients
|4|
and appellate courts have no share in that burden.

However, we opt Ior liberality in the application oI the rules to the
instant case in light oI the Iollowing considerations. First, the rule that
negligence oI counsel binds the client may be relaxed where adherence
thereto would result in outright deprivation oI the clientts liberty
or property or where the interests oI justice so require.
|5|
Second, this
Court is not a slave oI technical rules, shorn oI judicial discretion t'
in rendering justice, it is guided by the norm that on the balance,
technicalities take a backseat against substantive rights. Thus, iI the
application oI the rules would tend to Irustrate rather than promote
justice, it is always within this Courtts power to suspend the rules
or except a particular case Irom its application.
|6|

This case involving a labor dispute has dragged on Ior over a decade
now. Petitioners have waited too long Ior what is due them under the
law. One oI the original petitioners, Judith Cotecson, died last
September 28, 2003 and has been substituted by her heirs. It is time to
write Iinis to this controversy. The Labor Code was promulgated to
promote the welIare and well-being oI the working man. Its spirit and
intent mandate the speedy administration oI justice, with least attention
to technicalities but without sacriIicing the Iundamental requisites oI
due process.
|7|


We recall that in CA-G.R. SP No. 50531, the Court oI Appeals
(Special Sixteenth Division) held that petitioners Cotecson, Bacolod,
and Magallanes toshall be entitled to separation pay equivalent to
one month salary and backwages computed from the time of their
illegal dismissal up to the time of the promulgation of this
decision.t This Decision was promulgated on October 28, 1999.
The respondentst motion Ior reconsideration was denied by the
Court oI Appeals (Former Special Sixteenth Division) on January 13,
2000. On April 12, 2000, this Court dismissed respondentst
petition Ior certiorari, docketed as G.R. No. 142270, and denied their
motion Ior reconsideration with Iinality as early as July 19, 2000.

Clearly, the Decision in CA-G.R. SP No. 50531 had long become Iinal
and executory. The Labor Arbiter computed the monetary awards due
to petitioners corresponding to the period Irom June 1994 to October
28, 1999, in accordance with the Decision oI the Court oI Appeals
(Special Sixteenth Division). The award Ior backwages and money
claims is in the total sum oI P912,086.15.

It does not escape our attention that upon respondentst appeal Irom
the Labor Arbiterts Order computing the beneIits due to
petitioners, the NLRC modified the final and executory Decision of
the Court of Appeals (Special Sixteenth Division) when it decreed
that the monetary award due to petitioners should be computed
up to 1une 20, 1995 only (not October 28, 1999), thus, amounting to
a lesser amount oI P147,673.16.

We sustain petitionerst contention that the NLRC, in modiIying
the award oI the Court oI Appeals, committed grave abuse oI
discretion amounting to lack or excess oI jurisdiction. Quasi-judicial
agencies have neither business nor power to modify or amend the
final and executory Decisions of the appellate courts. Under the
principle oI immutability oI judgments, any alteration or amendment
which substantially aIIects a Iinal and executory judgment is void Ior
lack oI jurisdiction.
|8|
We thus rule that the Order dated March 30,
2001 oI the NLRC directing that the monetary award should be
computed Irom June 1994, the date petitioners were dismissed Irom
the service, up to June 20, 1995 only, is void.

WHEREFORE, we GRANT the petition. The challenged
Resolutions dated October 29, 2001, May 8, 2003, and October 10,
2003 in CA-G.R. SP No. 67068 are REVERSED. The Order oI the
NLRC dated March 30, 2001 in NLRC Case No. M-006176-2001 is
SET ASIDE. The Order oI the Labor Arbiter dated January 8, 2001 is
REINSTATED.

SO ORDERED.

Puno, C.J. (Chairperson), Corona, :cuna and Leonardo-De Cas


























EN BANC
G.R. No. 142801-802. 1uly 10, 2001]
BUKLOD NG KAWANING EIIB, CESAR POSADA,
REMEDIOS G. PRINCESA, BEN1AMIN KHO, BENIGNO
MANGA, LULU MENDOZA, petitioners vs. HON. EXECUTIVE
SECRETARY RONALDO B. ZAMORA, HON. SECRETARY
1OSE PARDO, DEPARTMENT OF FINANCE, HON.
SECRETARY BEN1AMIN DIOKNO, DEPARTMENT OF
BUDGET AND MANAGEMENT, HON. SECRETARY
ARTEMIO TUQUERO, DEPARTMENT OF 1USTICE,
Respondents.
D E C I S I O N
SANDOVAL-GUTIERREZ, .: chanroblesvirtuallawlibrary
In this petition Ior certiorari, prohibition and mandamus, petitioners
Buklod Ng Kawaning EIIB, Cesar Posada, Remedios Princesa,
Benjamin Kho, Benigno Manga and Lulu Mendoza, Ior themselves
and in behalI oI others with whom they share a common or general
interest, seek the nulliIication oI ecutive Order Ao 191 |1| and
ecutive Order Ao 223 |2| on the ground that they were issued by
the OIIice oI the President with grave abuse oI discretion and in
violation oI their constitutional right to security oI tenure.
chanroblesvirtuallawlibrary
The Iacts are undisputed: chanroblesvirtuallawlibrary
On June 30, 1987, Iormer President Corazon C. Aquino, issued
Executive Order No. 127 |3| establishing the Economic Intelligence
and Investigation Bureau (EIIB) as part oI the structural organization
oI the Ministry oI Finance. |4| The EIIB was designated to perIorm the
Iollowing Iunctions: chanroblesvirtuallawlibrary
(a) Receive, gather and evaluate intelligence reports and
inIormation and evidence on the nature, modes and extent oI
illegal activities aIIecting the national economy, such as, but not
limited to, economic sabotage, smuggling, tax evasion, and dollar-
salting, investigate the same and aid in the prosecution oI
cases;chanroblesvirtuallawlibrary
(b) Coordinate with external agencies in monitoring the Iinancial
and economic activities oI persons or entities, whether domestic
or Ioreign, which may adversely aIIect national Iinancial interest
with the goal oI regulating, controlling or preventing said
activities;chanroblesvirtuallawlibrary
(c) Provide all intelligence units oI operating Bureaus or OIIices
under the Ministry with the general Iramework and guidelines in
the conduct oI intelligence and investigating
works;chanroblesvirtuallawlibrary
(d) Supervise, monitor and coordinate all the intelligence and
investigation operations oI the operating Bureaus and OIIices
under the Ministry;chanroblesvirtuallawlibrary
(e) Investigate, hear and Iile, upon clearance by the Minister, anti-
graIt and corruption cases against personnel oI the Ministry and
its constituents units;chanroblesvirtuallawlibrary
(f) PerIorm such other appropriate Iunctions as may be assigned
by the Minister or his deputies.|5| chanroblesvirtuallawlibrary
In a desire to achieve harmony oI eIIorts and to prevent possible
conIlicts among agencies in the course oI their anti-smuggling
operations, President Aquino issued Memorandum Order No. 225 on
March 17, 1989, providing, among others, that the EIIB shall be the
aency of primary responsibility for anti-smulin operations in all
land areas and inland waters and waterways outside the areas of sole
furisdiction of the Bureau of Customs. |6| chanroblesvirtuallawlibrary
Eleven years aIter, or on January 7, 2000, President Joseph Estrada
issued Executive Order No. 191 entitled Deactivation of the Economic
Intellience and Investiation Bureau. |7| Motivated by the Iact that
the designated Iunctions oI the EIIB are also being perIormed by the
other existing agencies oI the government and that there is a need to
constantly monitor the overlapping oI Iunctions among these agencies,
Iormer President Estrada ordered the deactivation oI EIIB and the
transIer oI its Iunctions to the Bureau oI Customs and the National
Bureau oI Investigation. chanroblesvirtuallawlibrary
Meanwhile, President Estrada issued Executive Order No. 196 |8|
creating the Presidential Anti-Smuggling Task Force duana. |9|
chanroblesvirtuallawlibrary
Then the day Ieared by the EIIB employees came. On March 29, 2000,
President Estrada issued Executive Order No. 223 |10| providing that
all EIIB personnel occupying positions speciIied therein shall be
deemed separated Irom the service eIIective April 30, 2000, pursuant
to a bona fide reorganization resulting to abolition, redundancy,
merger, division, or consolidation oI positions. |11| chanroblesvirtuallawlibrary
Agonizing over the loss oI their employment, petitioners now come
beIore this Court invoking our power oI judicial review oI Executive
Order Nos. 191 and 223. They anchor their petition on the Iollowing
arguments:
Achanroblesvirtuallawlibrary
Executive Order Nos. 191 and 223 should be annulled as they are
unconstitutional for being violative of Section 2(3), Article IX-B of
the Philippine Constitution and/or for having been issued with
grave abuse of discretion amounting to lack or excess of
jurisdiction.
B.chanroblesvirtuallawlibrary
The abolition of the EIIB is a hoax. Similarly, if Executive Order
Nos. 191 and 223 are considered to effect a reorganization of the
EIIB, such reorganization was made in bad faith.
C.chanroblesvirtuallawlibrary
The President has no authority to abolish the
EIIB.chanroblesvirtuallawlibrary
Petitioners contend that the issuance oI the aIore-mentioned executive
orders is: (a) a violation oI their right to security oI tenure; (b) tainted
with bad Iaith as they were not actually intended to make the
bureaucracy more eIIicient but to give way to Task Force Aduana, the
Iunctions oI which are essentially and substantially the same as that oI
EIIB; and (c) a usurpation oI the power oI Congress to decide whether
or not to abolish the EIIB. chanroblesvirtuallawlibrary
Arguing in behalI oI respondents, the Solicitor General maintains that:
(a) the President enjoys the totality oI the executive power provided
under Sections 1 and 7, Article VII oI the Constitution, thus, he has the
authority to issue Executive Order Nos. 191 and 223; (b) the said
executive orders were issued in the interest oI national economy, to
avoid duplicity oI work and to streamline the Iunctions oI the
bureaucracy; and (c) the EIIB was not abolished, it was only
deactivated. chanroblesvirtuallawlibrary
The petition is bereIt oI merit. chanroblesvirtuallawlibrary
Despite the presence oI some procedural Ilaws in the instant petition,
such as, petitioners disregard oI the hierarchy oI courts and the non-
exhaustion oI administrative remedies, we deem it necessary to
address the issues. It is in the interest oI the State that questions
relating to the status and existence oI a public oIIice be settled without
delay. We are not without precedent. In Dario v. ison, |12| we
liberally decreed: chanroblesvirtuallawlibrary
The Court disregards the questions raised as to procedure, Iailure to
exhaust administrative remedies, the standing oI certain parties to sue,
Ior two reasons, +b]ecause of the demands of public interest,
including the need for stability in the public service,' and because oI
the serious implications oI these cases on the administration oI the
Philippine civil service and the rights oI public
servants.chanroblesvirtuallawlibrary
At Iirst glance, it seems that the resolution oI this case hinges on the
question - Does the deactivation of EIIB constitute abolition of an
office? However, aIter coming to terms with the prevailing law and
jurisprudence, we are certain that the ultimate queries should be a)
Does the President have the authority to reorani:e the executive
department? and, b) How should the reorani:ation be carried out?
chanroblesvirtuallawlibrary
Surely, there exists a distinction between the words deactivate and
abolish. To deactivate means to render inactive or ineIIective or to
break up by discharging or reassigning personnel, |13| while to
abolish means to do away with, to annul, abrogate or destroy
completely. |14| In essence, abolition denotes an intention to do away
with the oIIice wholly and permanently. |15| Thus, while in abolition,
the oIIice ceases to exist, the same is not true in deactivation where the
oIIice continues to exist, albeit remaining dormant or inoperative. Be
that as it may, deactivation and abolition are both reorganization
measures. chanroblesvirtuallawlibrary
The Solicitor General only invokes the above distinctions on the
mistaken assumption that the President has no power to abolish an
oIIice. chanroblesvirtuallawlibrary
The general rule has always been that the power to abolish a public
oIIice is lodged with the legislature. |16| This proceeds Irom the legal
precept that the power to create includes the power to destroy. A
public oIIice is either created by the Constitution, by statute, or by
authority oI law. |17| Thus, except where the oIIice was created by the
Constitution itselI, it may be abolished by the same legislature that
brought it into existence. |18| chanroblesvirtuallawlibrary
The exception, however, is that as Iar as bureaus, agencies or oIIices in
the executive department are concerned, the Presidents power oI
control may justiIy him to inactivate the Iunctions oI a particular
oIIice, |19| or certain laws may grant him the broad authority to carry
out reorganization measures. |20| The case in point is Larin v.
Executive Secretary. |21| In this case, it was argued that there is no
law which empowers the President to reorganize the BIR. In decreeing
otherwise, this Court sustained the Iollowing legal basis, thus:
chanroblesvirtuallawlibrary
Initially, it is argued that there is no law yet which empowers the
President to issue E.O. No. 132 or to reorganize the
BIR.chanroblesvirtuallawlibrary
We do not agree.
x x x x x x chanroblesvirtuallawlibrary
Section 48 oI R.A. 7645 provides that:chanroblesvirtuallawlibrary
Sec. 48. Scalin Down and Phase Out of ctivities of encies ithin
the Executive Branch. The heads oI departments, bureaus and oIIices
and agencies are hereby directed to identiIy their respective activities
which are no longer essential in the delivery oI public services and
which may be scaled down, phased out or abolished, subject to civil
service rules and regulations. X x x. ctual scalin down, phasin out
or abolition oI the activities shall be eIIected pursuant to Circulars or
Orders issued Ior the purpose by the OIIice oI the
President.chanroblesvirtuallawlibrary
Said provision clearly mentions the acts oI scaling down, phasing out
and abolition oI oIIices only and does not cover the creation oI oIIices
or transIer oI Iunctions. Nevertheless, the act oI creating and
decentralizing is included in the subsequent provision oI Section 62
which provides that:chanroblesvirtuallawlibrary
Sec. 62. Unauthori:ed orani:ational chares.- Unless otherwise
created by law or directed by the President oI the Philippines, no
organizational unit or changes in key positions in any department or
agency shall be authorized in their respective organization structures
and be Iunded Irom appropriations by this Act. (italics
ours)chanroblesvirtuallawlibrary
The foregoing provision evidently shows that the President is
authorized to effect organizational changes including the creation
of offices in the department or agency concerned.
x x x x x x chanroblesvirtuallawlibrary
Another legal basis oI E.O. No. 132 is Section 20, Book III oI E.O.
No. 292 which states:chanroblesvirtuallawlibrary
Sec. 20. Residual Powers. Unless Congress provides otherwise, the
President shall exercise such other powers and functions vested in the
President which are provided for under the laws and which are not
speciIically enumerated above or which are not delegated by the
President in accordance with law. (italic ours)chanroblesvirtuallawlibrary
This provision speaks of such other powers vested in the President
under the law. What law then gives him the power to reorganize?
It is Presidential Decree No. 1772 which amended Presidential
Decree No. 1416. These decrees expressly grant the President of
the Philippines the continuing authority to reorganize the national
government, which includes the power to group, consolidate
bureaus and agencies, to abolish offices, to transfer functions, to
create and classify functions, services and activities and to
standardize salaries and materials. The validity oI these two decrees
are unquestionable. The 1987 Constitution clearly provides that all
laws, decrees, executive orders, proclamations, letters oI instructions
and other executive issuances not inconsistent with this Constitution
shall remain operative until amended, repealed or revoked. So Iar,
there is yet no law amending or repealing said decrees. (Emphasis
supplied)chanroblesvirtuallawlibrary
Now, let us take a look at the assailed executive order.
chanroblesvirtuallawlibrary
In the whereas clause oI E.O. No. 191, Iormer President Estrada
anchored his authority to deactivate EIIB on Section 77 oI Republic
Act 8745 (FY 1999 General ppropriations ct), a provision similar
to Section 62 oI R.A. 7645 quoted in Larin, thus; chanroblesvirtuallawlibrary
Sec. 77. Orani:ed Chanes. Unless otherwise provided by law or
directed by the President of the Philippines, no changes in key
positions or organizational units in any department or agency shall be
authorized in their respective organizational structures and Iunded
Irom appropriations provided by this Act.chanroblesvirtuallawlibrary
We adhere to the precedent or ruling in Larin that this provision
recognizes the authority oI the President to eIIect organizational
changes in the department or agency under the executive structure.
Such a ruling Iurther Iinds support in Section 78 oI Republic Act No.
8760. |22| Under this law, the heads oI departments, bureaus, oIIices
and agencies and other entities in the Executive Branch are directed
(a) to conduct a comprehensive review oI their respective mandates,
missions, objectives, Iunctions, programs, projects, activities and
systems and procedures; (b) identiIy activities which are no longer
essential in the delivery oI public services and which may be scaled
down, phased-out or abolished; and (c) adopt measures that will result
in the streamlined organization and improved overall perIormance oI
their respective agencies. |23| Section 78 ends up with the mandate
that the actual streamlinin and productivity improvement in aency
orani:ation and operation shall be effected pursuant to Circulars or
Orders issued for the purpose by the Office of the President. |24| The
law has spoken clearly. We are leIt only with the duty to sustain.
chanroblesvirtuallawlibrary
But oI course, the list oI legal basis authorizing the President to
reorganize any department or agency in the executive branch does not
have to end here. We must not lose sight oI the very source oI the
power that which constitutes an express grant oI power. Under Section
31, Book III oI Executive Order No. 292 (otherwise known as the
dministrative Code of 1987), the President, subject to the policy in
the Executive Office and in order to achieve simplicity, economy
and efficiency, shall have the continuing authority to reorganize
the administrative structure of the Office of the President. For this
purpose, he may transIer the Iunctions oI other Departments or
Agencies to the OIIice oI the President. In Canoni:ado v. uirre, |25|
we ruled that reorganization involves the reduction of personnel,
consolidation of offices, or abolition thereof by reason of economy
or redundancy of functions. It takes place when there is an alteration
oI the existing structure oI government oIIices or units therein,
including the lines oI control, authority and responsibility between
them. The EIIB is a bureau attached to the Department oI Finance.
|26| It Ialls under the OIIice oI the President. Hence, it is subject to the
Presidents continuing authority to reorganize. chanroblesvirtuallawlibrary
It having been duly established that the President has the authority to
carry out reorganization in any branch or agency oI the executive
department, what is then leIt Ior us to resolve is whether or not the
reorganization is valid. In this jurisdiction, reorganizations have been
regarded as valid provided they are pursued in good Iaith.
Reorganization is carried out in good Iaith iI it is Ior the purpose oI
economy or to make bureaucracy more eIIicient. |27| Pertinently,
Republic Act No. 6656 |28| provides Ior the circumstances which may
be considered as evidence oI bad Iaith in the removal oI civil service
employees made as a result oI reorganization, to wit: (a) where there is
a signiIicant increase in the number oI positions in the new staIIing
pattern oI the department or agency concerned; (b) where an oIIice is
abolished and another perIorming substantially the same Iunctions is
created; (c) where incumbents are replaced by those less qualiIied in
terms oI status oI appointment, perIormance and merit; (d) where there
is a classiIication oI oIIices in the department or agency concerned and
the reclassiIied oIIices perIorm substantially the same Iunctions as the
original oIIices, and (e) where the removal violates the order oI
separation. |29| chanroblesvirtuallawlibrary
Petitioners claim that the deactivation oI EIIB was done in bad Iaith
because Iour days aIter its deactivation, President Estrada created the
Task Force duana. chanroblesvirtuallawlibrary
We are not convinced. chanroblesvirtuallawlibrary
An examination oI the pertinent Executive Orders |30| shows that the
deactivation oI EIIB and the creation oI Task Force Aduana were done
in good Iaith. It was not Ior the purpose oI removing the EIIB
employees, but to achieve the ultimate purpose oI E.O. No. 191, which
is economy. While Task Force Aduana was created to take the place oI
EIIB, its creation does not entail expense to the government.
chanroblesvirtuallawlibrary
Firstly , there is no employment of new personnel to man the Task
Force. E.O. No. 196 provides that the technical, administrative and
special staffs of EIIB are to be composed of people who are
already in the public service, they being employees of other
existing agencies. Their tenure with the Task Force would only be
temporary, i.e., only when the agency where they belong is called
upon to assist the Task Force. Since their employment with the
Task force is only by way of detail or assignment they retain their
employment with the existing agencies. And should the need for
them cease, they would be sent back to the agency concerned.
chanroblesvirtuallawlibrary
Secondly , the thrust oI E.O. No. 196 is to have a small group oI
military men under the direct control and supervision oI the President
as base oI the governments anti-smuggling campaign. Such a smaller
base has the necessary powers 1) to enlist the assistance oI any
department, bureau, or oIIice and to use their respective personnel,
Iacilities and resources; and 2) to select and recruit personnel Irom
within the PSG and ISAFP Ior assinment to the Task Force.
Obviously, the idea is to encourage the utilization of personnel,
facilities and resources of the already existing departments,
agencies, bureaus, etc., instead of maintaining an independent
office with a whole set of personnel and facilities. The EIIB had
proven itselI burdensome Ior the government because it maintained
separate oIIices in every region in the Philippines. chanroblesvirtuallawlibrary
And thirdly, it is evident Irom the yearly budget appropriation oI the
government that the creation oI the Task Force Aduana was especially
intended to lessen EIIBs expenses. Tracing Irom the yearly General
Appropriations Act, it appears that the allotted amount Ior the EIIBs
general administration, support, and operations Ior the year 1995, was
P128,031,000; |31| Ior 1996, P182,156,000; |32| Ior 1998,
P219,889,000; |33| and, Ior 1999, P238,743,000. |34| These amounts
were Iar above the P50,000,000 |35| allocation to the Task Force
duana Ior the year 2000. chanroblesvirtuallawlibrary
While basically, the Iunctions oI the EIIB have devolved upon the
Task Force Aduana, we Iind the latter to have additional new powers.
The Task Force Aduana, being composed oI elements Irom the
Presidential Security Group (PSG) and Intelligence Service Armed
Forces oI the Philippines (ISAFP), |36| has the essential power to effect
searches, sei:ures and arrests. The EIIB did not have this power. The
Task Force Aduana has the power to enlist the assistance oI any
department, bureau, oIIice, or instrumentality oI the government,
including government-owned or controlled corporations; and to use
their personnel, Iacilities and resources. Again, the EIIB did not have
this power. And, the Task Force Aduana has the additional authority to
conduct investigation oI cases involving ill-gotten wealth. This was
not expressly granted to the EIIB. chanroblesvirtuallawlibrary
Consequently, it cannot be said that there is a Ieigned reorganization.
In Blaquera v. Civil Sevice Commission, |37| we ruled that a
reorganization in good Iaith is one designed to trim the Iat oII the
bureaucracy and institute economy and greater eIIiciency in its
operation. chanroblesvirtuallawlibrary
Lastly, we hold that petitioners right to security oI tenure is not
violated. Nothing is better settled in our law than that the abolition oI
an oIIice within the competence oI a legitimate body iI done in good
Iaith suIIers Irom no inIirmity. Valid abolition oI oIIices is neither
removal nor separation oI the incumbents. |38| In the instructive
words laid down by this Court in Dario v. ison, |39| through Justice
Abraham F. Sarmiento: chanroblesvirtuallawlibrary
Reorganizations in this jurisdiction have been regarded as valid
provided they are pursued in good Iaith. As a general rule, a
reorganization is carried out in good Iaith iI it is Ior the purpose oI
economy or to make bureaucracy more eIIicient. In that event, no
dismissal (in case of dismissal) or separation actually occurs
because the position itself ceases to exist. And in that case, security
of tenure would not be a Chinese wall. Be that as it may, iI the
abolition, which is nothing else but a separation or removal, is done Ior
political reasons or purposely to deIeat security oI tenure, otherwise
not in good Iaith, no valid abolition takes and whatever abolition is
done, is void ab initio. There is an invalid abolition as where there is
merely a change oI nomenclature oI positions, or where claims oI
economy are belied by the existence oI ample Iunds.chanroblesvirtuallawlibrary
Indeed, there is no such thing as an absolute right to hold oIIice.
Except constitutional oIIices which provide Ior special immunity as
regards salary and tenure, no one can be said to have any vested right
in an oIIice or its salary. |40| chanroblesvirtuallawlibrary
While we cast a commiserating look upon the plight oI all the EIIB
employees whose lives perhaps are now torn with uncertainties, we
cannot ignore the unIortunate reality that our government is also
battling the impact oI a plummeting economy. Unless the government
is given the chance to recuperate by instituting economy and eIIiciency
in its system, the EIIB will not be the last agency to suIIer the impact.
We cannot Irustrate valid measures which are designed to rebuild the
executive department. chanroblesvirtuallawlibrary
WHEREFORE, the petition is hereby DENIED. No costs.
chanroblesvirtuallawlibrary
SO ORDERED. chanroblesvirtuallawlibrary
avide r C Bellosillo Melo Puno Jitug Kapunan Mendoza
Pardo BuenaYnares-Santiago and e Leon r concur
chanroblesvirtuallawlibrary
Panganiban and Quisumbing in the result chanroblesvirtuallawlibrary
Conzaga-Reyes on leave










G.R. No. 96409 February 14, 1992
CITIZEN 1. ANTONIO M. CARPIO, Petitioner, vs. THE
EXECUTIVE SECRETARY, THE SECRETARY OF LOCAL
GOVERNMENTS, THE SECRETARY OF NATIONAL
DEFENSE and THE NATIONAL TREASURER, Respondents.chanrobles virtual law library

PARAS, chanrobles virtual law library
At the very outset, it should be well to set Iorth the constitutional
provision that is at the core oI the controversy now conIronting us,
thus:
Article XVI, Section 6: chanrobles virtual law libra ry
The State shall establish and maintain one police Iorce,
which stall be national in scope and civilian in
character, to be administered and controlled by a
national police commission. The authority oI local
executives over the police units in their jurisdiction
shall be provided by law.
1
chanrobles virtual law l ibrary
With the aIorequoted provision in mind, Congress passed Republic
Act No. 6975 entitled "AN ACT ESTABLISHING THE PHILIPPINE
NATIONAL POLICE UNDER A REORGANIZED DEPARTMENT
OF THE INTERIOR AND LOCAL GOVERNMENT, AND FOR
OTHER PURPOSES" as the consolidated version oI House Bill No.
23614 and Senate Bill No. 463.chanroblesvirtualawlibrary chanrob les virtual law lib rary
Following the said Act's approval by President Corazon C. Aquino on
December 13, 1990, it was published on December 17, 1990.
2
chanrobles virtual law library
Presently, however, petitioner as citizen, taxpayer and member oI the
Philippine Bar sworn to deIend the Constitution, Iiled the petition now
at bar on December 20, 1990, seeking this Court's declaration oI
unconstitutionality oI RA 6975 with prayer Ior temporary restraining
order.chanroblesvirtualawlibrary chanrobles vi rtual law lib rary
But in an en banc resolution dated December 27, 1990, We simply
required the public respondents to Iile their Comment, without
however giving due course to the petition and the prayer therein.
Hence, the Act took eIIect aIter IiIteen days Iollowing its publication,
or on January 1, 1991.
3
chanrobles virtual law library
BeIore we settle down on the merits oI the petition, it would likewise
be well to discuss albeit brieIly the history oI our police Iorce and the
reasons Ior the ordination oI Section 6, Article XVI in our present
Constitution.chanroblesvir tualawlibra ry chanrobles vir tual law libra ry
During the Commonwealth period, we had the Philippine
Constabulary as the nucleus oI the Philippine Ground Force (PGF),
now the Armed Forces oI the Philippines (AFP). The PC was made
part oI the PGF but its administrative, supervisory and directional
control was handled by the then Department oI the Interior. AIter the
war, it remained as the "National Police" under the Department oI
National DeIense, as a major service component oI the AFP.
4
chanrobles virtual law libra ry
Later, the Integration Act oI 1975
5
created the Integrated National
Police (INP) under the OIIice oI the President, with the PC as the
nucleus, and the local police Iorces as the civilian components. The
PC-INP was headed by the PC ChieI who, as concurrent Director-
General oI the INP, exercised command Iunctions over the INP.
6
chanrobles virtual law library
The National Police Commission (NAPOLCOM)
7
exercised
administrative control and supervision while the local executives
exercised operational supervision and direction over the INP units
assigned within their respective localities. 8
The set-up whereby the INP was placed under the command oI the
military component, which is the PC, severely eroded the INP's
civilian character and the multiplicity in the governance oI the PC-INP
resulted in ineIIicient police service.
9
Moreover, the integration oI the
national police Iorces with the PC also resulted in inequities since the
military component had superior beneIits and privileges.
10
chanrobles virtual law library
The Constitutional Commission oI 1986 was Iully aware oI the
structural errors that beset the system. Thus, Com. Teodulo C.
Natividad explained that:
xxx xxx xxx
MR. NATIVIDAD. . . . The basic tenet
oI a modern police organization is to
remove it Irom the military.
11

xxx xxx xxxchanrob les virtual law lib rary
Here in our draIt Constitution, we have already made a
constitutional postulate that the military cannot occupy
any civil service position |in Section 6 oI the Article on
the Civil Service
12
| ThereIore, in keeping with this and
because oI the universal acceptance that a police Iorce
is a civilian Iunction, a public service, and should not
be perIormed by military Iorce, one oI the basic reIorms
we are presenting here is that it should be separated
Irom the military Iorce which is the PC.
13

xxx xxx xxxchanrob les virtual law lib rary
Furthermore:
xxx xxx xxxchanrob les virtual law lib rary
. . . the civilian police cannot blossom into Iull
proIession because most oI the key positions are being
occupied by the military So, it is up to this Commission
to remove the police Irom such a situation so that it can
develop into a truly proIessional civilian police. . . .
14
chanrobles virtual law
library
Hence, the "one police Iorce, national in scope, and civilian in
character" provision that is now Article XVI, Section 6 oI the 1987
Constitution.chanroblesvir tualawlibra ry chanrobles vir tual law libra ry
And so we now come to the merits oI the petition at hand.chanroblesvirtualawlib rary chanrob les virtual law lib rary
In the main, petitioner herein respectIully advances the view that RA
6975 emasculated the National Police Commission by limiting its
power "to administrative control" over the Philippine National Police
(PNP), thus, "control" remained with the Department Secretary under
whom both the National Police Commission and the PNP were placed.
15
chanrobles virtual law librar y
We do not share this view.chanroblesvirtualawlib rary chanrob les virtual law li brary
To begin with, one need only reIer to the Iundamentally accepted
principle in Constitutional Law that the President has control oI all
executive departments, bureaus, and oIIices to lay at rest petitioner's
contention on the matter.chanroblesvirtualawlibrary chanrobles vir tual law lib rary
This presidential power oI control over the executive branch oI
government extends over all executive oIIicers Irom Cabinet Secretary
to the lowliest clerk
17
and has been held by us, in the landmark case oI
ondano vs. Silvosa,
18
to mean "the power oI |the President| to alter
or modiIy or nulliIy or set aside what a subordinate oIIicer had done in
the perIormance oI his duties and to substitute the judgment oI the
Iormer with that oI the latter." It is said to be at the very "heart oI the
meaning oI ChieI Executive."
19
chanrobles virtual law lib rary
Equally well accepted, as a corollary rule to the control powers oI the
President, is the "Doctrine oI QualiIied Political Agency". As the
President cannot be expected to exercise his control powers all at the
same time and in person,
20
he will have to delegate some oI them to
his Cabinet members.chanroblesvirtualaw library chan robles virtual law libra ry
Under this doctrine, which recognizes the establishment oI a single
executive,
21
"all executive and administrative organizations are
adjuncts oI the Executive Department, the heads oI the various
executive departments are assistants and agents oI the ChieI Executive,
and, except in cases where the ChieI Executive is required by the
Constitution or law to act in person on the exigencies oI the situation
demand that he act personally, the multiIarious executive and
administrative Iunctions oI the ChieI Executive are perIormed by and
through the executive departments, and the acts of the Secretaries of
such departments, performed and promulated in the reular course of
business, unless disapproved or reprobated by the Chief Executive
presumptively the acts of the Chief Executive."
22
(emphasis ours) chanrobles virtual law librar y
Thus, and in short, "the President's power oI control is directly
exercised by him over the members oI the Cabinet who, in turn, and by
his authority, control the bureaus and other oIIices under their
respective jurisdictions in the executive department."
23
chanrobles virtual law lib rary
Additionally, the circumstance that the NAPOLCOM and the PNP are
placed under the reorganized Department oI Interior and Local
Government is merely an administrative realignment that would
bolster a system oI coordination and cooperation among the citizenry,
local executives and the integrated law enIorcement agencies and
public saIety agencies created under the assailed Act,
24
the Iunding oI
the PNP being in large part subsidized by the national government.chanroblesvirtualawlibra ry chanrobles vir tual law
library
Such organizational set-up does not detract Irom the mandate oI the
Constitution that the national police Iorce shall be administered and
controlled by a national police commission as at any rate, and in Iact,
the Act in question adequately provides Ior administration and control
at the commission level, as shown in the Iollowing provisions, to wit:
Sec. 14. Powers and Functions of the Commission. -
The Commission shall exercise the Iollowing powers
and Iunctions:
xxx xxx xxxchanrob les virtual law lib rary
(i) Approve or modiIy plans and programs on education
and training, logistical requirements, communications,
records, inIormation systems, crime laboratory, crime
prevention and crime reporting;chan robles virtual law libra ry
(j) AIIirm, reverse or modiIy, through the National
Appellate Board, personnel disciplinary actions
involving demotion or dismissal Irom the service
imposed upon members oI the Philippine National
Police by the ChieI oI the PNP;chanrobles virtual law libra ry
(k) Exercise appellate jurisdiction through .the regional.
appellate boards over administrative cases against
policemen and over decisions on claims Ior police
beneIits;
xxx xxx xxxchanrob les virtual law lib rary
Sec. 26. The Command and direction oI the PNP shall
be vested in the ChieI oI the PNP . . . Such command
and direction oI the ChieI oI the PNP may be delegated
to subordinate oIIicials with respect to the units under
their respective commands, in accordance with the rules
and regulations prescribed by the Commission. . . .
xxx xxx xxxchanrob les virtual law lib rary
Sec. 35. . . . To enhance police operational eIIiciency
and eIIectiveness, the ChieI oI the PNP may constitute
such other support units as may be necessary subject to
the approval oI the Commission. . . .
xxx xxx xxxchanrob les virtual law lib rary
Sec. 37. . . . There shall be established a perIormance
evaluation system which shall be administered in
accordance with the rules, regulations and standards;
and a code oI conduct promulgated by the Commission
Ior members oI the PNP. . . .
xxx xxx xxx
Petitioner Iurther asserts that in maniIest derogation oI the power oI
control oI the NAPOLCOM over the PNP, RA 6975 vested the power
to choose the PNP Provincial Director and the ChieIs oI Police in the
Governors and Mayors, respectively; the power oI "operational
supervision and control" over police units in city and municipal
mayors; in the Civil Service Commission, participation in
appointments to the positions oI Senior Superintendent to Deputy
Director-General as well as the administration oI qualiIying entrance
examinations; disciplinary powers over PNP members in the "People's
Law EnIorcement Boards" and in city and municipal mayors.
25
chanrobles virtual law library
Once more, we Iind no real controversy upon the Ioregoing
assertions.chanroblesvirt ualawlibrar y chanrobles virt ual law libra ry
It is true that when the Constitutional Commissioners oI 1986 provided
that the authority oI local executives over the police units in their
jurisdiction shall be provided by law, they intended that the day-to-day
Iunctions oI police work like crime, investigation, crime prevention
activities, traIIic control, etc., would be under the operational control
oI the local executives as it would not be advisable to give Iull control
oI the police to the local executives.
26
chanrobles virtual law library
They reasoned that in the past, this gave rise to warlordism, bossism,
and sanctuaries Ior vices and abuses.
27
chanrobles virtual law libra ry
It would appear then that by vesting in the local executives the power
to choose the oIIicers in question, the Act went beyond the bounds oI
the Constitution's intent.chanroblesvirtualawlibrary chanrob les virtual law lib rary
Not so. We Iind light in the principle oI constitutional construction that
every presumption should be indulged in Iavor oI constitutionality and
the court in considering the validity oI the statute in question should
give it such reasonable construction as can be reached to bring it
within the Iundamental
law.
28
chanrobles virtual law libra ry
Under the questioned provisions, which read as Iollows:
D. PARTICIPATION OF LOCAL EXECUTIVES IN
THE ADMINISTRATION OF THE PNP.chanroblesvirtualawlibrar y chanrobles virt ual law libra ry
Sec. 51. Powers of Local Government Officials over the
PNP Units or Forces.chanroblesvirtualawlib rary chanrob les virtual law lib rary
Governors and mayors shall be deputi:ed as
representatives oI the Commission in their respective
territorial jurisdictions. s such, the local executives
shall discharge the Iollowing Iunctions: chan robles virtual law libra ry
a.) Provincial Governor - (1) . . .chanroblesvirtualawlibrary chanr obles virtual law l ibrary
The provincial governor shall choose the provincial
director Irom a list oI three (3) eligibles recommended
by the PNP Regional Director.chanroblesvirtualawlibrary chanr obles virtual law l ibrary
4) . . . City and municipal mayors shall have the
Iollowing authority over the PNP units in their
respective jurisdictions: chanr obles virtual law l ibrary
i.) Authority to choose the chieI oI police Irom a list oI
Iive (5) eligibles recommended by the Provincial Police
Director. . . . (Emphasis ours)
Iull control remains with the National Police Commission.chanroblesvirtualawlib rary chanrob les virtual law lib rary
We agree, and so hold, with the view oI the Solicitor General that
"there is no usurpation oI the power oI control oI the NAPOLCOM
under Section 51 because under this very same provision, it is clear
that the local executives are only acting as representatives oI the
NAPOLCOM. . . . As such deputies, they are answerable to the
NAPOLCOM Ior their actions in the exercise oI their Iunctions under
that section. Thus, unless countermanded by the NAPOLCOM, their
acts are valid and binding as acts oI the NAPOLCOM."
29
It is
signiIicant to note that the local oIIicials, as NAPOLCOM
representatives, will choose the oIIicers concerned Irom a list oI
eligibles (those who meet the general qualiIications Ior appointment to
the PNP)
30
to be recommended by PNP oIIicials.chanrob lesvirtuala wlibrary chanro bles virtual law l ibrary
The same holding is true with respect to the contention on the
operational supervision and control exercised by the local oIIicials.
Those oIIicials would simply be acting as representatives oI the
Commission.chanroblesvirtualawlib rary chanr obles virtual law l ibrary
As regards the assertion involving the Civil Service Commission,
suIIice it to say that the questioned provisions, which read:
Sec. 31. ppointment of PNP Officers and embers. -
The Appointment oI the oIIicers and members oI the
PNP shall be eIIected in the Iollowing manner: chanrob les virtual law lib rary
a.) Police OIIicer I to Senior Police OIIicer IV. -
Appointed by the PNP regional director Ior regional
personnel or by the ChieI oI the PNP Ior national
headquarters personnel and attested by the Civil Service
Commission;chanrobles vir tual law lib rary
b.) Inspector to Superintendent. - Appointed by the
ChieI oI the PNP, as recommended by their immediate
superiors, and attested by the Civil Service
Commission;chanrobles vir tual law lib rary
c.) Senior Superintendent to Deputy Director-General. -
Appointed by the President upon recommendation oI
the ChieI oI the PNP, with proper endorsement by the
Chairman oI the Civil Service
Commission . . .chanroblesvirtualawlibrary chanrobles vir tual law lib rary
Sec. 32. Examinations for Policemen. - The Civil
Service Commission shall administer the qualiIying
entrance examinations Ior policemen on the basis oI the
standards set by the NAPOLCOM.
precisely underscore the civilian character oI the national police Iorce,
and will undoubtedly proIessionalize the same.chanroblesvirtualawlib rary chanr obles virtual la w library
The grant oI disciplinary powers over PNP members to the "People's
Law EnIorcement Boards" (or the PLEB) and city and municipal
mayors is also not in derogation oI the commission's power oI control
over the PNP.chanroblesvirtualawlibrary chanrob les virtual law lib rary
Pursuant to the Act, the Commission exercises appellate jurisdiction,
thru the regional appellate boards, over decisions oI both the PLEB
and the said mayors. This is so under Section 20(c). Furthermore, it is
the Commission which shall issue the implementing guidelines and
procedures to be adopted by the PLEB Ior in the conduct oI its
hearings, and it may assign NAPOLCOM hearing oIIicers to act as
legal consultants oI the PLEBs (Section 43-d4, d5).chanroblesvirtualawlibrary chan robles virtual law libra ry
As a disciplinary board primarily created to hear and decide citizen's
complaints against erring oIIicers and members oI the PNP, the
establishment oI PLEBs in every city, and municipality would all the
more help proIessionalize the police Iorce.chanroblesvirtualawlibrary chanr obles virtual law l ibrary
Petitioner would likewise have this Court imagine that Section 12 oI
the questioned Act, the pertinent portion oI which reads:
Sec. 12. Relationship of the Department with the
Department of National Defense. - During a period oI
twenty- Iour (24) months Irom the eIIectivity oI this
Act, the Armed Forces oI the Philippines (AFP) shall
continue its present role oI preserving the internal and
external security oI the State: Provided, that said period
may be extended by the President, iI he Iinds it
justiIiable, Ior another period not exceeding twenty-
Iour (24) months, aIter which, the Department shall
automatically take over Irom the AFP the primary role
oI preserving internal security, leaving to the AFP its
primary role oI preserving external security.
xxx xxx xxx
constitutes an "encroachment upon, interIerence with, and an
abdication by the President oI, executive control and commander-in-
chieI powers."chanrobles vir tual law lib rary
That We are not disposed to do Ior such is not the case at all here. A
rejection thus oI petitioner's submission anent Section 12 oI the Act
should be in order in the light oI the Iollowing exchanges during the
CONCOM deliberations oI Wednesday, October 1, 1986:
xxx xxx xxxchanrob les virtual law lib rary
MR. RODRIGO. Just a Iew questions. The President oI
the Philippines is the Commander-in-ChieI oI all the
armed Iorces.chanroblesvirtualawlib rary chanrob les virtual law lib rary
MR. NATIVIDAD. Yes, Madam President.chanroblesvirtualawlibra ry chanrobles vir tual law lib rary
MR. RODRIGO. Since the national police is not
integrated with the armed Iorces, I do not suppose they
come under the Commander-in-ChieI powers oI the
President oI the Philippines.chanroblesvir tualawlibra ry chanrobles vir tual law lib rary
MR. NATIVIDAD. They do, Madam President. By law
they are under the supervision and control oI the
President oI the Philippines.chanroblesvir tualawlibra ry chanrobles vir tual law lib rary
MR. RODRIGO. Yes, but the President is not the
Commander-in-ChieI oI the national police.chanroblesvir tualawlibra ry chanrobles vir tual law lib rary
MR. NATIVIDAD. He is the President.chanroblesvirtualawlibrary chanrobles vi rtual law lib rary
MR. RODRIGO. Yes, the Executive. But they do not
come under that speciIic provision that the President is
Commander-in-ChieI oI all the armed Iorces.chanroblesvirtualawlib rary chanrob les virtual law lib rary
MR. NATIVIDAD. No, not under the Commander-in-
ChieI provision.chanroblesvi rtualawlibra ry chanrobles vi rtual law lib rary
MR. RODRIGO. There are two other powers oI the
President. The President has control over departments,
bureaus and oIIices, and supervision over local
governments. Under which does the police Iall, under
control or under supervision?chan robles virtual law library
MR. NATIVIDAD. Both, Madam President.chanroblesvirtualawlibrary chanro bles virtual law l ibrary
MR. RODRIGO. Control and Supervision.chanroblesvir tualawlibra ry chanrobles vir tual law lib rary
MR. NATIVIDAD. Yes, in Iact, the National Police
Commission is under the OIIice oI the President.
(CONCOM RECORDS, Vol. 5, p. 296)
It thus becomes all too apparent then that the provision herein assailed
precisely gives muscle to and enIorces the proposition that the national
police Iorce does not Iall under the Commander-in-ChieI powers oI the
President. This is necessarily so since the police Iorce, not being
integrated with the military, is not a part oI the Armed Forces oI the
Philippines. As a civilian agency oI the government, it properly comes
within, and is subject to, the exercise by the President oI the power oI
executive control.chanroblesvirtualawlib rary chanrob les virtual law li brary
Consequently, Section 12 does not constitute abdication oI
commander-in-chieI powers. It simply provides Ior the transition
period or process during which the national police would gradually
assume the civilian Iunction oI saIeguarding the internal security oI the
State. Under this instance, the President, to repeat, abdicates nothing oI
his war powers. It would bear to here state, in reiteration oI the
preponderant view, that the President, as Commander-in-ChieI, is not a
member oI the Armed Forces. He remains a civilian whose duties
under the Commander-in-ChieI provision "represent only a part oI the
organic duties imposed upon him. All his other Iunctions are clearly
civil in nature."
31
His position as a civilian Commander-in-ChieI is
consistent with, and a testament to, the constitutional principle that
"civilian authority is, at all times, supreme over the military." (Article
II, Section 3, 1987 Constitution) chanrobles virtual law l ibrary
Finally, petitioner submits that the creation oI a "Special Oversight
Committee" under Section 84 oI the Act, especially the inclusion
therein oI some legislators as members (namely: the respective
Chairmen oI the Committee on Local Government and the Committee
on National DeIense and Security in the Senate, and the respective
Chairmen oI the Committee on Public Order and Security and the
Committee on National DeIense in the House oI Representatives) is an
"unconstitutional encroachment upon and a diminution oI, the
President's power oI control over all executive departments, bureaus
and oIIices."chanrobles vir tual law libra ry
But there is not the least interIerence with the President's power oI
control under Section 84. The Special Oversight Committee is simply
an ad hoc or transitory body, established and tasked solely with
planning and overseeing the immediate "transIer, merger and/or
absorption" into the Department oI the Interior and Local
Governments oI the "involved agencies." This it will undertake in
accordance with the phases oI implementation already laid down in
Section 85 oI the Act and once this is carried out, its Iunctions as well
as the committee itselI would cease altogether.
32
As an ad hoc body,
its creation and the Iunctions it exercises, decidedly do not constitute
an encroachment and in diminution oI the power oI control which
properly belongs to the President. What is more, no executive
department, bureau or oIIice is placed under the control or authority,
oI the committee.
33
chanrobles virtual law library
As a last word, it would not be amiss to point out here that under the
Constitution, there are the so-called independent Constitutional
Commissions, namely: The Civil Service Commission, Commission
on Audit, and the Commission on Elections. (Article IX-A, Section 1) chanrobles
virtual law lib rary
As these Commissions perIorm vital governmental Iunctions, they
have to be protected Irom external inIluences and political pressures.
Hence, they were made constitutional bodies, independent oI and not
under any department oI the government.
34
Certainly, they are not
under the control oI the President.chanroblesvirtualawlibrary chanr obles virtual law l ibrary
The Constitution also created an independent oIIice called the
"Commission on Human Rights." (Article XIII, Section
17|1|).However, this Commission is not on the same level as the
Constitutional Commissions under Article IX, although it is
independent like the latter Commissions.
35
It still had to be constituted
thru Executive Order No. 163 (dated May 5, 1987).chanroblesvirtualawlibrary chan robles virtual law libra ry
In contrast, Article XVI, Section 6 thereoI, merely mandates the
statutory creation oI a national police commission that will administer
and control the national police Iorce to be established thereunder.chanroblesvirtualawlibra ry chanrobles vi rtual law lib rary
This commission is, Ior obvious reasons, not in the same category as
the independent Constitutional Commissions oI Article IX and the
other constitutionally created independent OIIice, namely, the
Commission on Human Rights.chanroblesvirtualawlibrary chan robles virtual law libra ry
By way oI resume, the three Constitutional Commissions (Civil
Service, Audit, Elections) and the additional commission created by
the Constitution (Human Rights) are all independent oI the Executive;
but the National Police Commission is not.
36
In Iact, it was stressed
during the CONCOM deliberations that this commission would be
under the President, and hence may be controlled by the President,
thru his or her alter eo, the Secretary oI the Interior and Local
Government.chanroblesvirtualawlibrary chan robles virtual law library
WHEREFORE, having in view all oI the Ioregoing holdings, the
instant petition is hereby DISMISSED Ior lack oI merit.chanroblesvirtualawlib rary chanrobles vi rtual law lib rary
SO ORDERED.
Narvasa, C.J., elencio-Herrera, Gutierre:, Jr., Cru:, Feliciano,
Padilla, Bidin, Grio-quino, edialdea, Realado, Davide, Jr.,
Romero and Nocon, JJ., concur.









epublic oI the Philippines
SUPREME COURT
Manila
EN BANC

G.R. No. L-27887 February 22, 1971
FRANCISCO M. CUCHARO, petitioner-appellant, vs. HON.
ABELARDO SUBIDO, Commissioner of Civil Service, HON.
VITALIANO BERNARDINO, Director of Public Schools and
MR. PEDRO SAN VICENTE, Division Superintendent of Schools,
Davao City, respondents-appellees.
MAKASIAR, chanrobles virtual law library
This petition Ior certiorari and prohibition with the prayer Ior the
issuance oI a writ oI preliminary mandatory injunction was Iiled by
petitioner-appellant Francisco M. Cucharo by way oI appeal (p. 144,
rec.) Irom the order dated July 20, 1966 respectively dismissing the
petition as well as denying appellant's motion Ior summary judgment
and Irom the order oI August 4, 1966 denying the motion Ior
reconsideration oI the order oI July 20, 1966 (pp. 128, 142., rec.).chanroblesvirtualawlibrary chanrob les virtual law li brary
It is undisputed that petitioner-appellant Francisco M. Cucharo was
Iormerly the principal oI Calinan Elementary School, Calinan District,
Davao City. On January 28, 1956, a senior teacher (regular)
examination was given by the Civil Service Commission. When he
was promoted as District Supervisor sometime in 1960 by virtue oI his
junior teacher eligibility, he gave as additional qualiIication has senior
teacher (promotional) eligibility, claiming that he received on March
28, 1958 Irom the Civil Service Commissioner a report oI his rating
showing that he obtained a passing mark oI 81.78 in the senior
teacher examination. Because he actually Iailed in the said senior
teacher examination, in a third indorsement dated August 27, 1962, the
Commissioner oI Civil Service required him to explain why "the
notice oI rating dated March 28, 1958 purporting to show that he
obtained a rating oI 81.78 in the senior teacher (promotional)
examination ... contains certain unauthorized erasures and insertions"
which make it diIIerent Irom the notice as originally issued.chanrob lesvirtualawlib rary chanrobles vi rtual law lib rary
AIter a Iormal investigation at which he denied making the alleged
erasures and insertions, petitioner-appellant was Iound guilty oI
serious misconduct consisting oI IalsiIication oI a civil service rating
card in Administrative Case No. R-24579 oI the Civil Service
Commission and was accordingly dismissed Irom the service by the
Civil Service Commissioner eIIective on the last day oI duty with pay
in a decision dated August 6, 1965. In the same decision, the Civil
Service Commission likewise directed that the said decision be
executed immediately in the public interest (Annex A, petition, pp. 12-
14, rec.).chanroblesvirtualawlibrar y chanrobles virt ual law libra ry
The Civil Service Commissioner coursed the aIoresaid decision
through the respondent Director oI Public Schools, who in turn
transmitted the same to the respondent superintendent oI city schools
oI Davao City in a letter dated September 30, 1965, directing that the
decision oI the Civil Service Commissioner be executed immediately
"but not beyond ten days Irom receipt thereoI" and requesting that
three copies oI the special order covering the dismissal oI petitioner-
appellant Irom the service together with the advice oI the date he
acknowledges receipt oI the decision be Iurnished his oIIice (Director
oI Public Schools) by return indorsement thereoI (Annex B oI the
petition, p. 14, rec.).chanroblesvirtualawlibrary chan robles virtual law library
Pursuant to the aIoresaid instructions oI the Director oI Public
Schools, the respondent superintendent oI city schools oI Davao City
issued Division Order No. 677, s. 1965, dated December 1, 1965
making oI record the separation oI the petitioner-appellant Irom the
service pursuant to the order oI dismissal by the Commissioner oI
Civil Service eIIective that day, December 1, 1965 (Annex C oI the
petition or Exh. 2 - Motion, pp. 15, 173, rec.); and transmitted the said
Division Order No. 677 together with his Iirst indorsement dated
December 1, 1965 to petitioner-appellant inviting attention to the basic
communication oI the Director oI Public Schools and to the enclosed
decision oI the Commissioner oI Civil Service, and requesting that
petitioner-appellant acknowledges receipt oI the enclosed decision oI
the Civil Service Commissioner by return indorsement (Exh. 1,
Opposition, p. 172, rec.).chanroblesvirtualawlibrary chanrobles vir tual law lib rary
In his second indorsement dated December 1, 1965, petitioner-
appellant acknowledged receipt at 3 o'clock in the aIternoon oI that
day, December 1, 1965, "the said order oI dismissal entitled Division
Order No. 677, series oI 1965, together with a copy oI the letter oI the
Director oI Public Schools, dated September 30, 1965, to the Division
Superintendent oI Schools, Davao City, to execute immediately the
alleged decision oI the Commissioner oI Civil Service in
Administrative Case No. R-24579, a copy oI which is attached to the
said letter," expressly stating therein that he is receiving the same
"UNDER PROTEST because the said copy oI the decision is ordered
executed beIore he could receive it and beIore he could have the
opportunity to read it, thereby arbitrarily denying and prevailing him
Irom Iiling a motion Ior its reconsideration or appealing the same ..."
(Annex D, petition or Exh. T, Motion, p. 16, rec.).chanroblesvirtualawlib rary chanrobles vi rtual law lib rary
In another letter also dated December 1, 1965 addressed to Mr.
Primitivo Raquel, Principal oI Calinan Central Elementary School,
Davao City, the respondent-appellee superintendent oI city schools
designated the Iormer "as Principal in Charge oI Calinan District vice
Mr. Francisco Cucharo, separated, eIIective immediately" and
instructed him to receive all money and property responsibility Irom
Mr. Cucharo, herein petitioner-appellant (Exh. Q, Motion, p. 168,
rec.).chanroblesvirtualawlibrar y chanrobles virt ual law libra ry
In his letter-circular dated December 6, 1965, addressed to all
principals/head teachers, Principal In Charge Primitivo R. Raquel
quoted verbatim the letter oI respondent-appellee superintendent oI
city schools dated December 1, 1965 Ior their inIormation and
guidance (Exh. R - Motion, p. 169, rec.); and on the same day as such
principal-in-charge, he issued another letter circular to all principals/
head teachers and teacher-in-charge in the Calinan District inIorming
them that there will be a meeting on December 8, 1965 at 7:30 in the
morning (Exh. S, Motion, p. 170, rec.).chanroblesvirtualawlibrary chanrobles vir tual law lib rary
Not satisIied with the decision, petitioner-appellant Iiled on December
2, 1965 the present petition Ior certiorari and prohibition with writ oI
preliminary mandatory injunction in the Court oI First Instance oI
Davao: (1) to declare the Civil Service Commissioner with having
acted with grave abuse oI discretion and without authority oI law in
ordering his immediate dismissal; (2) to declare null and void the
decision oI the Civil Service Commissioner dismissing him Irom the
service; (3) to declare the respondent superintendent oI city schools as
without authority oI law in issuing Division Order No. 677, series oI
1965, as well as to declare said order null and void; and (4) to declare
respondent-appellee Director oI Public Schools as having acted with
grave abuse oI discretion and without authority oI law in amending the
decision oI the Civil Service Commission with respect to the execution
thereoI (pp. 1-21, rec.).chanroblesvirtualawlibrary chanrobles vi rtual law lib rary
On December 4, 1965, the lower court issued ex parte a writ oI
preliminary injunction directing the respondents-appellees to reIrain
Irom executing the decision in Administrative Case No. R-24579 and
to reIrain Irom replacing petitioner-appellant (p. 22-23, 26-27, rec.).chanroblesvirtualawlibrary
chanrobles virtual law lib rary
On December 27, 1965, petitioner-appellant Iiled a motion to declare
respondent division superintendent oI city schools in contempt oI court
Ior having designated the principal teacher oI Calinan Elementary
School to assume the duties oI District Supervisor oI Calinan District
in violation oI the preliminary injunction, claiming that he never
vacated the position, much less turned over the same to the one
designated to perIorm its duties (pp. 30-41, rec.).chanroblesvirtualawlibrar y chanrobles virtual law li brary
On December 27, 1965, the Civil Service Commission received
petitioner-appellant's motion Ior reconsideration on the decision oI the
Civil Service Commissioner dated August 6, 1965, which motion was
reIerred to the Director oI Public Schools by the Iirst indorsement
dated January 17, 1966 Ior comment and recommendation (par. 2|b| oI
respondent's Answer dated January 21, 1966, pp. 83-84 rec.).chanroblesvirtualawlibrary chanrobles vir tual law lib rary
On December 31, 1965, respondent superintendent oI city schools
Iiled a motion to quash preliminary writ oI injunction and an
opposition to the motion to declare him in contempt oI court (pp. 45-
47, rec.).chanroblesvirtualawlibrar y chanrobles virt ual law libra ry
On January 3, 1966, petitioner-appellant Iiled a motion to declare
respondent superintendent oI city schools in deIault (p. 42, rec.).chanroblesvirtualawlibrar y chanrobles virt ual law libra ry
On January 5, 1966, the trial court, aIter hearing, issued an order
dissolving the writ oI preliminary injunction issued on December 4,
1965 and denied the motion to declare respondent superintendent oI
city schools in contempt oI court on the ground that respondent
superintendent oI city schools had already accomplished the acts
sought to be restrained (p. 49, rec.). In another order issued on the
same day, the lower court denied the motion to declare respondent
superintendent oI city schools in deIault (p. 44, rec.).chanroblesvirtualawlibrar y chanrobles virt ual law libra ry
On January 11, 1966, petitioner-appellant Iiled an urgent motion Ior
reconsideration oI the two orders dated January 5, 1966 dissolving the
writ oI preliminary injunction and denying the motion to declare
respondent superintendent oI city schools in deIault (pp. 50-59, 60-62,
rec.).chanroblesvirtualawlibrar y chanrobles virt ual law libra ry
On July 1, 1966, the date set Ior pre-trial, the lower court issued an
order granting respondent superintendent oI city schools Iive days
within which to Iile a motion to dismiss the petition and petitioner-
appellant was given a similar period to Iile an opposition (p. 107, rec).
On July 6, l966, a motion to dismiss was Iiled (pp. 109-111, rec.) and
on July 8, 1966, petitioner-appellant Iiled his opposition thereto with a
counter-motion Ior summary judgment (pp. 112-121, rec.).chanroblesvirtualawlibrar y chanrobles virt ual law libra ry
On July 20, 1966, the lower court issued an order dismissing the
petition and denied is without merit petitioner-appellant's motion Ior
summary oI judgement. (p. 128, rec.).chanroblesvirtualawlibrary chanrob les virtual law lib rary
Hence, this appeal (p. 144, rec.).chanroblesvirtualawlibrar y chanrobles virt ual law libra ry
Petitioner-appellant claims that the lower court erred: (1) in not
resolving his urgent motion Ior reconsideration oI the order dated
January 5,1966 particularly the portion dissolving the writ oI
preliminary injunction, and the motion Ior reconsideration oI order
dated January 5, 1966 denying his motion to declare respondent
superintendent oI city schools in deIault beIore setting the pre-trial on
July 1, 1966; (2) in dismissing the petition; and (3) in not granting the
motion Ior summary judgment.chanroblesvirtualawlibra ry chanrobles vir tual law lib rary
The three errors assigned by petitioner-appellant shall be discussed
jointly.chanrob lesvirtualawlib rary chanrob les virtual law lib rary
As a major premise, it has been the repeated pronouncement oI this
Supreme Tribunal that the Civil Service Commissioner has the
discretion to order the immediate execution in the public interest oI his
decision separating petitioner-appellant Irom the service, always
subject however to the rule that, in the event the Civil Service Board oI
Appeals or the proper court determines that his dismissal is illegal, he
should be paid the salary corresponding to the period oI his separation
Irom the service until his reinstatement.
1
chanrobles virtual law library
As elucidated by Mr. Justice Arsenio Dizon in the Cabigao case,
"although the decision oI the Commissioner oI Civil Service adverse
to the government employee under investigation is appealable to the
Civil Service Board oI Appeals, the Commissioner has discretion to
enIorce it and make it eIIective pending appeal, to protect public
interest. However, the removal or the continued suspension oI the
employee eIIected through the execution oI the appealed decision shall
be considered as unjustiIied should said decision be reversed by the
Civil Service Board oI Appeals and, in such case, as provided Ior in
Section 35 oI the Civil Service Act oI 1959, the employee 'shall be
restored to his position with Iull pay Ior the period oI suspension'."
2
chanrobles virtual law libra ry
Petitioner-appellant is indulging in euphemism when he states that the
decision dismissing him Irom the service cannot be executed
immediately beIore he could receive it and beIore he could have the
opportunity to read the same, thereby arbitrarily preventing him Irom
Iiling a motion Ior reconsideration or appealing the same; because he
actually received the copy oI the decision consisting only oI two pages
(see Annex A to the petition, pp. 12-13, rec.) which will not take him
Iive minutes to read and comprehend its contents.chanroblesvirtualawlibrary chanrob les virtual law lib rary
While he received only a copy oI the decision, he does not impugn its
correctness or accuracy. At any rate, he was Iortunate Ior the decision
dated August 6, 1965, was executed only on December 1, 1965 or over
three months thereaIter.chanroblesvirtualawlibrary chanrob les virtual law lib rary
That the Commissioner oI Civil Service concluded that "the Iacts oI
this case engender reasonable belieI that respondent is guilty oI the
charge" is only one way oI expressing the idea that the Iacts support
the reasonable conclusion that petitioner-appellant is guilty oI the
charge against him. As to the intrinsic merits oI the Iindings oI Iacts oI
the Civil Service Commissioner, the same would still depend on the
appreciation thereoI by the Civil Service Board oI Appeals. As
heretoIore stated, should he be exonerated by the Civil Service Board
oI Appeals or my the Civil Service Commissioner himselI acting on
his motion Ior reconsideration, petitioner-appellant would be entitled
to recover back salaries.chanroblesvirtualawlib rary chanrob les virtual law lib rary
The basic ground that the petition states no cause oI action, upon
which respondent superintendent oI city schools predicates his motion
to dismiss beIore the lower court, which is also alleged as a special
deIense in the Answer Iiled by the Solicitor General (p. 85, rec.), is
predicated on the Iact that petitioner-appellant has not exhausted
administrative remedies by Iiling a motion Ior reconsideration oI the
decision Iiled with the Civil Service Commissioner (which he
subsequently Iiled on December 27, 1965) and an appeal to the Civil
Service Board oI Appeals, beIore he can seek any remedy Irom the
court. There is nothing in the record indicating the status oI his motion
Ior reconsideration oI the decision oI the Civil Service Commissioner
or whether he has Iiled an appeal with the Civil Service Board oI
Appeals. Such an omission to exhaust all administrative remedies open
to him under the law is Iatal to his petition, Ior it signiIies lack oI a
cause oI action.
3
chanrobles virtual law librar y
Because the order oI the trial court dated August 6, 1966 dismissing
the petition and denying his motion Ior summary judgment, aIter
considering the grounds invoked in the motion to dismiss as well as
the reasons advanced by petitioner-appellant in opposition thereto and
to support his counter-motion Ior summary judgment, is proper and
legal, there was no need Ior the lower court to resolve petitioner-
appellant's motion Ior reconsideration oI the order dated January 5,
1966 quashing the writ oI preliminary injunction and the order dated
January 5, 1966 denying his motion to declare respondent
superintendent oI city schools in deIault, which would merely be an
exercise in Iutility.chanr oblesvirtualawlib rary chanro bles virtual law l ibrary
While it is true that exhausting oI administrative remedies is a general
rule, the case oI the petitioner-appellant does not Iall under anyone oI
the recognized exceptions thereto as enunciated by this Tribunal, some
oI which are re-stated in Escalante vs. Subido, supra.chanroblesvirtualawlib rary chanrobles vi rtual law lib rary
Petitioner-appellant will not suIIer irreparable injury or damage by
awaiting a Iinal administrative action in his case;" because he can
collect back salaries should his dismissal be adjudged illegal.
5
The
issues involved in the decision the Civil Service Commissioner
separating him Irom the service are not purely illegal questions.
6
The
act oI the Commissioner oI Civil Service is not patently devoid oI any
color oI authority or maniIestly illegal; neither did the Civil Service
Commissioner act without or in excess oI his jurisdiction nor commit a
grave abuse oI discretion amounting to lack oI
jurisdiction.
7
chanrobles virtual law l ibrary
The case oI Guisadio vs. Jillalu:, et al.
8
does not apply to the case at
bar. In the Guisadio case, the execution oI the decision was enjoined
by the trial court; because in a case, which the decision oI the
Commissioner oI Civil Service "considered Guisadio resigned Irom
the service eIIective on (his) last day oI service with pay," it did not
expressly direct that the said decision is immediately executory in the
public interest. It was the respondent District Supervisor therein who
wanted its immediate execution, Ior he directed Guisadio to turn over
all his (Guisado's ) property accountabilities beIore Guisadio received
a copy oI the decision itselI, which immediate implementation was
joined by trial court therein. In the instant case, the decision oI the
Civil Service Commissioner expressly directs its immediate execution
in public interest. We ruled in the Guisadio case that based "on the
Iacts presented to the trial judge," the trial judge "adopted the proper
view" and "did not err" in enjoining the immediate execution oI the
decision oI the Civil Service Commissioner.
9
chanrobles virtual law lib rary
However that may be, the case oI Yarcia vs. City of Bauio, %rocio vs.
Subido, ustria vs. uditor General and Cabiao v. Del Rosario,
which were decided subsequently to the Guisadio case, should be
decisive oI the case at bar since the relevant Iacts oI the aIoresaid
cases and oI the instant case are analogous.chanroblesvirtualawlibrary chan robles virtual law librar y
Neither can petitioner-appellant properly invoke the case oI baya vs.
Jilleas, et al.
10
In the instant case, the decision oI the Civil Service
Commissioner was promulgated aIter an administrative investigation
oI the charges against appellant. In said Abaya case, the petitioner
therein was ordered dismissed Irom the service without prior
investigation or hearing. In the Abaya case, only a purely legal
question was involved, and the order oI dismissal therein was patently
illegal by reason oI the Iact that the petitioner therein was denied due
process, which issues removed the Abaya case Irom being governed
by the doctrine oI exhaustion oI administrative remedies. 11 As
heretoIore stated, such exceptions do not obtain here.chanroblesvirtualawlibrary chan robles virtual law l ibrary
We are thereIore constrained to dismiss as We hereby dismiss the
appeal. With costs against petitioner-appellant.
































LEJANDFO V. DONATO, JF. C.F. No. 165788
Pciiiioncr,
Prcscni.

PUNO,
C.J.,
QUISUMDINC,
YNAFES-
SANTIACO,
SANDOVAL-
CUTIEFFEZ,
CAFPIO,

- ucsus - AUSTFIA-
MAFTINEZ,
COFONA,
CAFPIO-
MOFALES,
CALLEJO,
SF.,
AZCUNA,
TINCA,
CHICO-
NAZAFIO,
CAFCIA, and
VELASCO,
JF., JJ.
CIVIL SEFVICE COMMISSION
FECIONAL OFFICE NO. 1,
Promulgaicd.
Fcsondcni.
Fclruary 7,
2007

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - -

D E C I S I O N

CALLEJO, SF., J..

Dcforc iIc Couri is iIc Pciiiion for Fcvicw on
Cctou filcd ly Alcjandro V. Donaio, Jr. wIicI sccls io
rcvcrsc and sci asidc iIc Dccision daicd Ociolcr 11,
2004 of iIc Couri of Acals in CA-C.F. SP No. 73854.
TIc assailcd dccision affirmcd Fcsoluiion No. 020348
daicd MarcI 7, 2002 and Fcsoluiion No. 021423 daicd
Ociolcr 23, 2002 of iIc Civil Scrvicc Commission (CSC}
wIicI Iad, in iurn, affirmcd iIc dccision of iIc Civil
Scrvicc Commission Fcgional Officc No. 1 (CSCFO 1}
finding ciiiioncr Donaio, Jr. guiliy of disIoncsiy and
falsificaiion of official documcni and ordcring Iis
dismissal from iIc scrvicc.

TIc casc arosc from iIc following facis.

Donaio, Jr. was a sccondary scIool icacIcr ai iIc
San Pcdro Aariado Naiional HigI ScIool in Alcala,
Pangasinan wIilc Cil C. Arcc Icld iIc osiiion of
Asscssmcni Clcrl II ai iIc Officc of iIc Municial
Trcasurcr of iIc said municialiiy. On Ociolcr 5, 1998,
iIc Managcmcni Informaiion Officc of iIc CSC in
Diliman, Quczon Ciiy rcccivcd an anonymous lciicr-
comlaini rcqucsiing an invcsiigaiion on iIc allcgcd
disIoncsi aci commiiicd ly Donaio, Jr. Ii was allcgcd
iIai Donaio, Jr., falscly rcrcscniing Iimsclf as Arcc
during iIc Carccr Scrvicc Sul-Profcssional Eaminaiion
Icld in 1995, iool iIc said caminaiion in lcIalf of iIc
laiicr. TIc anonymous comlaini siaicd in ari.

I Iavc iIc Ionor io rcqucsi your good Officc io
invcsiigaic iIc disIoncsiy commiiicd ly Mr. Alcjandro V.
Donaio, Jr. wIo imcrsonaicd Mr. Cil C. Arcc during iIc
Sul-Profcssional Eaminaiion ialcn in 1995. TIcy arc
worling in San Pcdro Aariado Naiional HigI ScIool,
Alcala, Pangasinan and in iIc Municialiiy of Alcala,
rcscciivcly.

TIcy arc cIcaiing iIc govcrnmcni and as
far as rumors iIis is noi only iIc
caminaiion anomaly Ic commiiicd.




AiiacIcd iIcrcio was a IoiograI of Donaio, Jr.
TIc lciicr-comlaini was immcdiaicly forwardcd io iIc
CSCFO 1, Ciiy of San Fcrnando, La Union, wIicI
rcquircd Donaio, Jr. and Arcc io sulmii iIcir rcscciivc
answcrs iIcrcio. In Iis Answcr daicd May 19, 1999, Arcc
vcIcmcnily dcnicd commiiiing sucI aci of disIoncsiy.
Hc claimcd iIai Ic was iIc samc crson wIo iool iIc
said caminaiion and iIrougI |Iis| own mcrii
succcssfully asscd iIc samc." In suori iIcrcof, Ic
aiiacIcd iIc joini-affidavii of Ccrry Calrcra and David
Arcc aiicsiing iIai, on Augusi 5, 1990, iIcy all, including
Arcc, iool iIc Carccr Scrvicc Sul-Profcssional
Eaminaiion givcn ly iIc CSC ai iIc Dinmalcy CaiIolic
HigI ScIool, Dinmalcy, Pangasinan.

Donaio, Jr., for Iis ari, avcrrcd in Iis Answcr
daicd May 24, 1999 iIai.
I was grcaily iroullcd iIai my iciurc
acarcd in iIc Scai Plan. TIc acarancc
of my iciurc would sulsianiiaic iIc
allcgaiion of iIc anonymous comlaini,
wIocvcr Ic/sIc is.

TIc iruiI is iIai Mr. Arcc aslcd mc oncc
io ialc iIc icsi for Iim, lui I vcIcmcnily
rcfuscd iIc offcr lnowing iIai iIis would |lc|
ianiamouni io cIcaiing, and iIai ii would
ui mc in Ioi waicrs.

Mr. Arcc iold mc iIai Ic Iad ialcn iIc
caminaiion, lui did noi malc ii. Ii was
iIcn iIai Ic aslcd mc io ialc iIc
caminaiion for Iim, of wIicI I rcfuscd
lnowing iIai iIc Honorallc Commission Ias
somc criincni rccords of mysclf sucI as
coics of my Aoinimcni Pacrs, PDS,
PDET, and oiIcr similar documcnis.

TIc faci is, I adviscd Iim io iry again,
wIicI Ic did. Hc cvcn aslcd mc io
accomany Iim in Dinmalcy io Icl Iim
locaic Iis icsiing room. Aficr wc Iad found
Iis icsiing room, I immcdiaicly lcfi Iim
lnowing iIai iIcrc was noiIing clsc I could
do. I rocccdcd io Lingaycn io visii my
moiIcr.

Aficr somc iimc, Mr. Arcc announccd io
mc iIai Ic asscd iIc icsi wiiI a vcry IigI
raiing.

How my iciurc was uscd, I Iavc no
idca. All I lnow is iIai I uscd iIai iciurc
wIcn I iool my PDET in Novcmlcr 1998 in
Daguan Ciiy. I Iad oiIcr coics of iIai
iciurc, iwo of wIicI I sulmiiicd io Mrs.
Erlinda C. Tadco, my formcr rincial, for
loan uroscs. As for iIc rcsi, I could no
longcr locaic iIcm lccausc I ciiIcr mislaccd
iIcm or losi iIcm.

I suscci iIai my iciurc was uscd for
crsonal vcndciia againsi mc, io Iarass mc
in ordcr iIai I dcsisi from furiIcring my casc
filcd lcforc iIc Honorallc Commission
againsi my formcr rincial.

I, iIcrcforc, vcIcmcnily dcny iIc
allcgaiion of iIc Honorallc Anonymous
Comlaini, wIocvcr Ic/sIc is.

TIc Piciurc Scai Plan (PSP} of Eaminaiion Foom
No. 24 in Dinmalcy CaiIolic HigI ScIool for iIc Augusi 5,
1990 Carccr Scrvicc Sul-Profcssional Eaminaiion
(wIcrc iIc namc Cil Arcc acarcd} sIowcd iIai iIc
idcniificaiion (ID} iciurc asicd alovc iIc namc Cil Arcc
was iIai of Donaio, Jr. Ii was also olscrvcd iIai iIc
signaiurc acaring iIcrcon was diffcrcni from iIc
signaiurc of Arcc in Iis Answcr.

Taling inio considcraiion iIc forcgoing, a Formal
CIargc daicd Ociolcr 12, 1999 was filcd ly Fomco C. Dc
Lcon, Dirccior IV of CSCFO 1, againsi Donaio, Jr. and
Arcc for disIoncsiy and falsificaiion of official documcni.
TIc casc was doclcicd as Adminisiraiivc Casc No. 99-
27. Donaio, Jr. and Arcc wcrc, accordingly, rcquircd io
filc iIcir rcscciivc answcrs io iIc said formal cIargc.

In Iis Answcr daicd Dcccmlcr 14, 1999, Arcc
lasically adoicd iIc allcgaiions in Iis rcvious answcr.
In addiiion iIcrcio, Ic claimcd iIai cvcr sincc Ic was a
cIild, ii was Iis Ialii io lcc IoiograIs of mcmlcrs of
Iis family and fricnds in Iis wallci, including iIai of
Donaio, Jr. According io Arcc, during iIc said
caminaiion, Ic may Iavc misialcnly sulmiiicd iIc ID
iciurc of Donaio, Jr. WiiI rcscci io iIc signaiurc, Arcc
mainiaincd iIai iIc signaiurc on iIc PSP was onc of Iis
signaiurcs and iIai iIc onc iIai acarcd on Iis answcr
was wIai Ic was using ai iIc iimc.

In Iis Answcr daicd Dcccmlcr 24, 1999, Donaio,
Jr. adoicd iIc avcrmcnis in Iis rcvious answcr.
Addiiionally, Ic Iarcd on iIc aarcni discrcancy in
iIc daics considcring iIai iIc anonymous lciicr-
comlaini siaicd iIai iIc daic of caminaiion was in
1995 wIilc in iIc formal cIargc, iwo diffcrcni daics wcrc
mcniioncd. Augusi 5, 1990 and Augusi 5, 1999. TIc
discrcancy in iIc daics allcgcdly rcndcrcd Iim incaallc
of addrcssing Icad-on iIc cIargcs againsi Iim. Hc
vigorously dcnicd iIai Ic misrcrcscnicd Iimsclf as Arcc
and iIai Ic iool iIc said govcrnmcni caminaiion in iIc
laiicr's sicad. Hc claimcd iIai Ic was ai Iis rcsidcncc in
Pollacion Easi, Alcala, Pangasinan iIc wIolc day of
Augusi 5, 1990 and, in faci, Ic rcccivcd somc visiiors
iIcrcai. Hc sulmiiicd iIc affidaviis of Diosdado Tamayo
and Daldomino Daiuan aiicsiing iIai iIcy wcni io scc
Iim ai Iis Iousc on iIc said daic.

Sulscqucnily, a irial-iyc Icaring was conducicd
wIcrc iIc ariics, ariicularly Donaio, Jr. and Arcc, wcrc
givcn iIc ooriuniiy io roffcr documcniary and
icsiimonial cvidcncc. TIcrcaficr, iIc CSCFO 1, iIrougI
Lorcnzo S. Daniog, Dirccior IV, rcndcrcd Dccision No.
2001-113 daicd May 30, 2001 in Adminisiraiivc Casc No.
99-27, dismissing Donaio, Jr. and Arcc from iIc scrvicc
for disIoncsiy and falsificaiion of official documcni.

Donaio, Jr. and Arcc sougIi rcconsidcraiion of iIc
said dccision and/or ncw irial lui iIcir rcscciivc
moiions wcrc dcnicd ly iIc CSCFO 1 for lacl of mcrii.
Dy way of acal, iIcy clcvaicd iIc casc io iIc CSC.

Aficr duc considcraiion of iIc lcadings, iIc CSC
romulgaicd Fcsoluiion No. 020348 daicd MarcI 7,
2002, affirming iIc carlicr dccision of iIc CSCFO 1. TIc
CSC rulcd iIai iIcrc was sulsianiial cvidcncc io Iold
loiI Donaio, Jr. and Arcc guiliy of iIc cIargcs of
disIoncsiy and falsificaiion of official documcni.
Sccifically, iIc ID iciurc of Donaio, Jr. asicd on iIc
PSP during iIc Augusi 5, 1990 Carccr Scrvicc Sul-
Profcssional Eaminaiion alovc Arcc's namc and iIc
marlcd dissimilariiy lciwccn Arcc's uroricd signaiurc
iIcrcon and Iis signaiurc as acaring in Iis answcr
wcrc ialcn ly iIc CSC as indicaiivc of iIc faci iIai ii was
Donaio, Jr. wIo aciually iool iIc said caminaiion in
lcIalf of Arcc.

TIc disosiiivc oriion of CSC Fcsoluiion No.
020348 rcads.

WHEFEFOFE, iIc acal of Cil Arcc and
Alcjandro Donaio, Jr. is Icrcly DISMISSED.
Accordingly, iIc Dccision daicd May 30, 2001
of iIc Civil Scrvicc Commission Fcgional
Officc (CSCFO} No. 1, San Fcrnando Ciiy, La
Union, finding iIcm guiliy of DisIoncsiy and
Falsificaiion of Official Documcni and
dismissing iIcm from iIc scrvicc siands.

IFMO and CSCFO 1 arc dirccicd io cffcci
iIc rcvocaiion of iIc civil scrvicc cligililiiics
of Cil Arcc and Alcjandro Donaio, Jr. in iIc
imlcmcniaiion of iIis rcsoluiion.

A moiion for rcconsidcraiion iIcrcof was filcd ly
Donaio, Jr. and Arcc lui ii was dcnicd ly iIc CSC in iis
Fcsoluiion No. 021423 daicd Ociolcr 23, 2002. In iIis
rcsoluiion, iIc CSC sircsscd iIai iIc guili of Arcc and
Donaio, Jr. was sufficicnily rovcn ly sulsianiial
cvidcncc; Icncc, iIcrc is no cogcni rcason io warrani iIc
rcvcrsal or modificaiion of CSC Fcsoluiion No. 020348
daicd MarcI 7, 2002."

Donaio, Jr. and Arcc foriIwiiI filcd wiiI iIc Couri
of Acals (CA} a ciiiion for rcvicw assailing iIc
aforcsaid rcsoluiions of iIc CSC. TIc CA, Iowcvcr, in iIc
assailcd Dccision daicd Ociolcr 11, 2004, affirmcd CSC
Fcsoluiion Nos. 020348 and 021423.

TIc CA did noi givc crcdcncc io iIcir insisicncc
iIai iIc lciicr-comlaini sIould Iavc lccn dismisscd
ouirigIi for non-comliancc wiiI Scciion 8, Fulc II of iIc
Uniform Fulcs on Adminisiraiivc Cascs in iIc Civil
Scrvicc. In ariicular, ii was Donaio, Jr. and Arcc's
conicniion iIai iIc CSC sIould Iavc dismisscd ouirigIi
iIc anonymous lciicr-comlaini. Addrcssing iIis
argumcni, iIc CA, ccIoing iIc rcasoning of iIc CSC,
oinicd oui iIai iIc lasis for iIc formal invcsiigaiion
againsi iIcm was noi iIc anonymous comlaini lui iIc
finding of a 5nu ucc casc againsi iIcm aficr a faci-
finding invcsiigaiion.


TIc CA, lilcwisc, considcrcd as ucrilc Donaio, Jr.
and Arcc's claim iIai iIc documcniary cvidcncc againsi
iIcm Iad no rolaiivc valuc as iIc ullic officials wIo
wcrc in cusiody of iIcsc documcnis wcrc noi rcscnicd.
TIc CA rcasoncd iIai iIc documcniary cvidcncc againsi
Donaio, Jr. and Arcc arc ullic documcnis and iIc
rolaiivc wcigIi accordcd iIcsc documcnis is cnunciaicd
in Scciion 23, Fulc 132 of iIc Fcviscd Fulcs on Evidcncc,
io wii.

SEC. 23. !uIc docuncnts us cudcncc.
Documcnis consisiing of cnirics in ullic
rccords madc in iIc crformancc of a duiy ly
a ullic officcr arc 5nu ucc cvidcncc of iIc
facis iIcrcin siaicd. All oiIcr ullic
documcnis arc cvidcncc, cvcn againsi a iIird
crson, of iIc faci wIicI gavc risc io iIcir
cccuiion and of iIc daic of iIc laiicr.


Sccifically, iIc cvidcniiary valuc of iIc PSP for
Eaminaiion Foom No. 24 of iIc Dinmalcy CaiIolic HigI
ScIool in wIicI iIc ID iciurc of Donaio, Jr. was asicd
alovc Arcc's namc was, according io iIc CA, corrccily
givcn cvidcniiary wcigIi ly iIc CSC in consonancc wiiI
iIc alovc-quoicd rovision, and csccially wIcn vicwcd
in iIc conici of Arcc's asscriion iIai Ic may Iavc
misialcnly sulmiiicd Donaio Jr.'s ID iciurc wIcn Ic
iool iIc said govcrnmcni caminaiion. Lacling a
saiisfaciory clanaiion for Donaio, Jr.'s ID iciurc on
iIc said PSP and iIc variancc lciwccn Arcc's uroricd
signaiurc iIcrcon and iIai on iIc answcr iIai Ic filcd
wiiI iIc CSCFO 1, iIc CA Icld iIai Donaio, Jr. and Arcc
wcrc corrccily found liallc for disIoncsiy and falsificaiion
of official documcni.

Donaio, Jr. and Arcc's claim of violaiion of iIcir
rigIi io duc roccss wIcn iIcy wcrc found
adminisiraiivcly liallc, allcgcdly dcsiic iIc alscncc of
wiincsscs againsi iIcm, was givcn sIori sIrifi ly iIc CA.
Ii oinicd oui iIai iIc rccords clcarly sIowcd iIai iIcy
wcrc accordcd iIc ooriuniiy io rcscni iIcir sidc and,
in faci, iIcy sulmiiicd cvidcncc io conirovcri iIc cIargcs
againsi iIcm. TIc CA rulcd iIai undcr iIc
circumsianccs iIc rcquircmcnis of duc roccss Iad lccn
sufficicnily mci.

TIc disosiiivc oriion of iIc assailcd CA dccision rcads.

WHEFEFOFE, iIc ciiiion for rcvicw is
DENIED for lacl of mcrii and rcsondcni's
assailcd Fcsoluiion Nos. 020348 and 021423
arc AFFIFMED n toto.

SO OFDEFED.


Only Donaio, Jr. (iIc ciiiioncr} filcd iIc rcscni
ciiiion for rcvicw sccling io rcvcrsc and sci asidc iIc
Dccision daicd Ociolcr 11, 2004 of iIc CA. Hc raiscs iIc
following issucs for iIc Couri's rcsoluiion.

I

WHETHEF OF NOT THE
PFOCEEDINCS, UNDEFTAKEN DY THE
FESPONDENT, THE FOFUM OF OFICIN,
AFE TAINTED WITH IFFECULAFITY,
INCLUDINC DENIAL TO PETITIONEF OF
THE FICHT OF CONFFONTATION, SUCH
THAT THEFE IS NOT A SINCLE PIECE OF
EVIDENCE ADDUCED ACAINST
PETITIONEF;

II

WHETHEF OF NOT THE FOFUM OF
OFICIN AND THE SUDSEQUENT FOFA IN
WHICH THIS CASE PASSED THFOUCH ON
APPEAL AFE COFFECT IN CONCLUDINC
THAT PETITIONEF IMPEFSONATED CIL C.
AFCE DECAUSE OF THE PFESENCE OF
THE FOFMEF'S PICTUFE IN THE SPACE
INTENDED FOF THE PICTUFE OF THE
LATTEF IN THE PICTUFE SEAT PLAN
(EXHIDIT C"} OF THE AUCUST 5, 1990
CIVIL SEFVICE EXAMINATION AT FOOM 24,
DINMALEY CATHOLIC HICH SCHOOL,
DINMALEY, PANCASINAN.


TIc ciiiioncr mainly assails iIc rcliancc ly iIc
CSCFO 1, iIc CSC and iIc CA on iIc Piciurc Scai Plan
(marlcd as EIilii C"}, wIicI coniaincd Iis ID iciurc
alovc iIc namc of Arcc, in finding iIcm loiI guiliy of iIc
adminisiraiivc cIargcs of disIoncsiy and falsificaiion of
official documcni. Ii is Iis conicniion iIai iIc PSP was
crroncously considcrcd as cvidcncc wIcn wIai was
rcscnicd during iIc rocccdings conducicd ly iIc
CSCFO 1 was only a Ioiocoy iIcrcof. Uon iIc
ciiiioncr's dcmand, ai iIc Icaring of Augusi 8, 2000, iIc
counscl of CSCFO 1 roduccd a documcni wIicI Ic
claimcd was an original coy of iIc PSP. Howcvcr, iIc
ciiiioncr oljccicd io iIc manncr of rcscniaiion lccausc
iIc counscl was noi allcgcdly iIc cusiodian of iIc said
documcni. Morcovcr, Ic was noi ui on iIc wiincss
siand and, conscqucnily, was noi suljccicd io cross-
caminaiion. TIc ciiiioncr cmIasizcs iIai iIc PSP was
noi idcniificd and formally offcrcd in cvidcncc.

TIc ciiiioncr claims violaiion of Iis rigIi io duc
roccss lccausc Ic was noi allc io confroni iIc crson
wIo rcarcd, and wIo was in cusiody of, iIc PSP. Hc
mainiains iIai iIc rcscncc of Iis ID iciurc alovc Arcc's
namc could lc madc ly any crson ly simly asiing ii
ovcr anoiIcr ID iciurc for an cvil urosc. In iIis
conncciion, Ic accuscs Iis formcr rincial, Mrs. Erlinda
Tadco, as iIc onc rcsonsillc iIcrcfor lccausc Ic (iIc
ciiiioncr}, iogciIcr wiiI Iis co-icacIcrs, filcd an
adminisiraiivc casc againsi Icr, for wIicI sIc was mcicd
a finc cquivalcni io Icr si moniIs salary.

TIc ciiiion is lcrcfi of mcrii.

Ii musi lc siaicd, ai iIc ouisci, iIai iIc CSCFO 1,
iIc CSC and iIc CA uniformly found iIc ciiiioncr liallc
for iIc cIargcs of disIoncsiy and falsificaiion of official
documcni. In so doing, iIc PSP, on wIicI iIc ID iciurc
of iIc ciiiioncr acarcd alovc iIc namc of Arcc, was
givcn crcdcncc ly iIc CSCFO 1, iIc CSC and iIc CA io
suori iIc adminisiraiivc cIargcs againsi iIc ciiiioncr
and Arcc.

No rulc is morc cnircncIcd in iIis jurisdiciion iIan
iIai iIc findings of facis of adminisiraiivc lodics, if lascd
on sulsianiial cvidcncc, arc conirolling on iIc rcvicwing
auiIoriiy. Siaicd in anoiIcr manncr, as a gcncral rulc,
faciual findings of adminisiraiivc agcncics, sucI as iIc
CSC, iIai arc affirmcd ly iIc CA, arc conclusivc uon
and gcncrally noi rcvicwallc ly iIis Couri.

To lc surc, iIcrc arc rccognizcd ccciions io iIis
rulc, io wii. (1} wIcn iIc findings arc groundcd
cniircly on scculaiion, surmiscs, or conjcciurcs; (2}
wIcn iIc infcrcncc madc is manifcsily misialcn, alsurd,
or imossillc; (3} wIcn iIcrc is gravc alusc of discrciion;
(4} wIcn iIc judgmcni is lascd on a misarcIcnsion of
facis; (5} wIcn iIc findings of facis arc confliciing; (6}
wIcn in maling iis findings, iIc CA wcni lcyond iIc
issucs of iIc casc, or iis findings arc conirary io iIc
admissions of loiI iIc acllani and iIc acllcc; (7}
wIcn iIc findings arc conirary io iIosc of iIc irial couri;
(8} wIcn iIc findings arc conclusions wiiIoui ciiaiion of
sccific cvidcncc on wIicI iIcy arc lascd; (9} wIcn iIc
facis sci foriI in iIc ciiiion as wcll as in iIc ciiiioncr's
main and rcly lricfs arc noi disuicd ly iIc rcsondcni;
(10} wIcn iIc findings of facis arc rcmiscd on iIc
suoscd alscncc of cvidcncc and coniradicicd ly iIc
cvidcncc on rccord; and (11} wIcn iIc CA manifcsily
ovcrloolcd ccriain rclcvani facis noi disuicd ly iIc
ariics, wIicI, if rocrly considcrcd, would jusiify a
diffcrcni conclusion. Nonc of iIcsc ccciions Ias lccn
sIown io lc aiicndani in iIc rcscni casc.

On iIc oiIcr Iand, ciiiioncr would lilc iIis Couri
io rc-caminc iIc cvidcncc againsi Iim as Ic imugns, in
ariicular, iIc PSP wIicI coniaincd Iis ID iciurc alovc
Arcc's namc. Howcvcr, ii is noi iIc funciion of iIis Couri
io analyzc or wcigI all ovcr again iIc cvidcncc and
crcdililiiy of wiincsscs rcscnicd lcforc iIc lowcr couri,
irilunal or officc. TIis flows from iIc lasic rincilc
iIai iIc Surcmc Couri is noi a iricr of facis. Iis
jurisdiciion is limiicd io rcvicwing and rcvising crrors of
law imuicd io iIc lowcr couri, iIc laiicr's findings of faci
lcing conclusivc and noi rcvicwallc ly iIis Couri.

TIc ciiiioncr's conicniion iIai Iis rigIi io duc
roccss was violaicd lccausc Ic was noi allc io cross-
caminc iIc crson wIo Iad cusiody of iIc PSP is
unavailing. In anoiIcr casc, iIc Couri addrcsscd a
similar conicniion ly siaiing iIai iIc ciiiioncr iIcrcin
could noi arguc iIai sIc Iad lccn dcrivcd of duc
roccss mcrcly lccausc no cross-caminaiion iool lacc.
Indccd, in adminisiraiivc rocccdings, duc roccss is
saiisficd wIcn iIc ariics arc affordcd fair and rcasonallc
ooriuniiy io clain iIcir sidc of iIc conirovcrsy or
givcn ooriuniiy io movc for a rcconsidcraiion of iIc
aciion or ruling comlaincd of. SucI minimum
rcquircmcnis Iavc lccn saiisficd in iIis casc for, in faci,
Icarings wcrc conducicd ly iIc CSCFO 1 and iIc
ciiiioncr and Arcc aciivcly ariiciaicd iIcrcin and cvcn
sulmiiicd iIcir rcscciivc cvidcncc. Morcovcr, iIcy wcrc
allc io sccl rcconsidcraiion of iIc dccision of iIc CSCFO
1 and, sulscqucnily, io clcvaic iIc casc for rcvicw io iIc
CSC and iIc CA.

Lilcwisc unavailing is iIc ciiiioncr's roicsiaiion
iIai iIc PSP was noi idcniificd and formally offcrcd in
cvidcncc. TIc CSC, including iIc CSCFO 1 in iIis casc,
lcing an adminisiraiivc lody wiiI quasi-judicial owcrs,
is noi lound ly iccInical rulcs of roccdurc and cvidcncc
in iIc adjudicaiion of cascs, suljcci only io limiiaiions
imoscd ly lasic rcquircmcnis of duc roccss. As carlicr
oincd, iIcsc lasic rcquircmcnis of duc roccss Iavc
lccn comlicd wiiI ly iIc CSC, including iIc CSCFO 1.

Ii is wcll, ai iIis oini, io quoic wiiI aroval iIc
following raiiocinaiion madc ly iIc CSC.

TIc iciurc of Donaio asicd ovcr iIc
namc of Cil Arcc in iIc PSP during iIc Carccr
Scrvicc Sul-rofcsssional Eaminaiion on
Augusi 5, 1990 is indicaiivc of iIc faci iIai
rcsondcni Arcc did noi crsonally ialc iIc
said caminaiion lui Donaio in Iis lcIalf.
TIis is so lccausc as a maiicr of roccdurc,
iIc room camincrs assigncd io sucrvisc iIc
conduci of caminaiion closcly caminc iIc
iciurcs sulmiiicd ly iIc caminccs. An
camincc is noi allowcd ly iIc camincrs io
ialc iIc caminaiion if Ic docs noi lool lilc
iIc crson in iIc iciurc Ic sulmiiicd and
afficd in iIc PSP (CSC Fcsoluiion No. 95-
3694 daicd Junc 20, 1995 ciicd in CSC
Fcsoluiion No. 97-0217 daicd January 14,
1997}. Olviously, iIc crson wIosc iciurc
is asicd on iIc PSP was iIc onc wIo iool
iIc caminaiion for and in lcIalf of Arcc. In
iIc offcnsc of imcrsonaiion, iIcrc arc always
iwo crsons involvcd. TIc offcnsc cannoi
roscr wiiIoui iIc aciivc ariiciaiion of
loiI crsons (CSC Fcsoluiion No. 94-6582}.
FuriIcr, ly cngaging or colluding wiiI
anoiIcr crson io ialc iIc icsi in Iis lcIalf
and iIcrcaficr ly claiming iIc rcsuliani
assing raic as Iis, clincIcs iIc casc againsi
Iim. In cascs of imcrsonaiion, iIc
Commission Ias consisicnily rcjccicd claims
of good faiiI, for t s contu to Iunun
nutuc tIut u 5cson u do (n5csonuton)
utIout tIc conscnt o tIc 5cson Icng
n5csonutcd." (CSC rcsoluiion No. 94-0826}

Ii Ias lccn a sciilcd rulc in iIis
jurisdiciion iIai iIc duly accomlisIcd form
of iIc Civil Scrvicc is an official documcni of
iIc Commission, wIicI, ly iis vcry naiurc is
considcrcd in iIc samc caicgory as iIai of a
ullic documcni, admissillc in cvidcncc
wiiIoui nccd of furiIcr roof. As official
documcni, iIc conicnis/cnirics iIcrcin madc
in iIc coursc of official duiy arc 5nu ucc
cvidcncc of iIc facis siaicd iIcrcin (Muudu
us. CSC, CA-C.F. SP No. 40764 daicd
Scicmlcr 27, 1996}.
Addiiionally, iIc ciiiioncr's roosiiion iIai iIc
maiicr could lc iIc Iandiworl of Iis formcr
rincial, wIo Iad an ac io grind againsi Iim, is
uiicrly rcosicrous. TIis larc and graiuiious
allcgaiion cannoi siand againsi iIc ruinous
cvidcncc againsi Iim and Arcc. TIosc govcrnmcni
cmloyccs wIo rcarcd iIc PSP and wIo
sucrviscd iIc conduci of iIc Carccr Scrvicc Sul-
Profcssional Eaminaiion on Augusi 5, 1990, cnjoy
iIc rcsumiion iIai iIcy rcgularly crformcd iIcir
duiics and iIis rcsumiion cannoi lc disuicd ly
mcrc conjcciurcs and scculaiions.
In finc, iIc CA commiiicd no rcvcrsillc crror wIcn
ii affirmcd iIc rcsoluiions of iIc CSC finding iIc
ciiiioncr guiliy of disIoncsiy and falsificaiion of
official documcni. TIc ciiiioncr Ias miscrally
failcd io rcscni any cogcni rcason for iIc Couri io
dcviaic from iIc saluiary rulc iIai faciual findings
of adminisiraiivc agcncics, csccially wIcn affirmcd
ly iIc CA, arc gcncrally Icld io lc linding and final
so long as iIcy arc suoricd ly sulsianiial
cvidcncc in iIc rccord of iIc casc.

WHEFEFOFE, rcmiscs considcrcd, iIc ciiiion is
DENIED for lacl of mcrii. TIc Dccision daicd Ociolcr
11, 2004 of iIc Couri of Acals in CA-C.F. SP No. 73854
is AFFIFMED n toto.

SO OFDEFED.































.R. No. 88550 April 18, 1990
INDUSTRIAL ENTERPRISES, INC., Petitioner, vs. THE HON.
COURT OF APPEALS, MARINDUQUE MINING &
INDUSTRIAL CORPORATION, THE HON. GERONIMO
VELASCO in his capacity as Minister of Energy and
PHILIPPINE NATIONAL BANK, Respondents.
MELENCIO-HERRERA,
This petition seeks the review and reversal oI the Decision oI
respondent Court oI Appeals in CA-G.R. CV No. 12660,
1
which ruled
adversely against petitioner herein.chanroblesvirt ualawlibrar y chanrobles virt ual law libra ry
Petitioner Industrial Enterprises Inc. (IEI) was granted a coal operating
contract by the Government through the Bureau oI Energy
Development (BED) Ior the exploration oI two coal blocks in Eastern
Samar. Subsequently, IEI also applied with the then Ministry oI
Energy Ior another coal operating contract Ior the exploration oI three
additional coal blocks which, together with the original two blocks,
comprised the so-called "Giporlos Area."chanr obles virtual law l ibrary
IEI was later on advised that in line with the objective oI rationalizing
the country's over-all coal supply-demand balance . . . the logical coal
operator in the area should be the Marinduque Mining and Industrial
Corporation (MMIC), which was already developing the coal deposit
in another area (Bagacay Area) and that the Bagacay and Giporlos
Areas should be awarded to MMIC (Rollo, p. 37). Thus, IEI and
MMIC executed a Memorandum oI Agreement whereby IEI assigned
and transIerred to MMIC all its rights and interests in the two coal
blocks which are the subject oI IEI's coal operating contract.chanroblesvirtualawlibrary chanrobles vi rtual law lib rary
Subsequently, however, IEI Iiled an action Ior rescission oI the
Memorandum oI Agreement with damages against MMIC and the then
Minister oI Energy Geronimo Velasco beIore the Regional Trial Court
oI Makati, Branch 150,
2
alleging that MMIC took possession oI the
subject coal blocks even beIore the Memorandum oI Agreement was
Iinalized and approved by the BED; that MMIC discontinued work
thereon; that MMIC Iailed to apply Ior a coal operating contract Ior the
adjacent coal blocks; and that MMIC Iailed and reIused to pay the
reimbursements agreed upon and to assume IEI's loan obligation as
provided in the Memorandum oI Agreement (Rollo, p. 38). IEI also
prayed that the Energy Minister be ordered to approve the return oI the
coal operating contract Irom MMIC to petitioner, with a written
conIirmation that said contract is valid and eIIective, and, in due
course, to convert said contract Irom an exploration agreement to a
development/production or exploitation contract in IEI's Iavor.chanroblesvirtualawlibrary chanr obles virtual law l ibrary
Respondent, Philippine National Bank (PNB), was later impleaded as
co-deIendant in an Amended Complaint when the latter with the
Development Bank oI the Philippines eIIected extra-judicial
Ioreclosures on certain mortgages, particularly the Mortgage Trust
Agreement, dated 13 July 1981, constituted in its Iavor by MMIC aIter
the latter deIaulted in its obligation totalling around P22 million as oI
15 July 1984. The Court oI Appeals eventually dismissed the case
against the PNB (Resolution, 21 September 1989).chanroblesvirtualawlibra ry chanrobles vir tual law lib rary
Strangely enough, Mr. Jesus S. Cabarrus is the President oI both IEI
and MMIC.chanroblesvirtualawlib rary chanrob les virtual law lib rary
In a summary judgment, the Trial Court ordered the rescission oI the
Memorandum oI Agreement, declared the continued eIIicacy oI the
coal operating contract in Iavor oI IEI; ordered the reversion oI the two
coal blocks covered by the coal operating contract; ordered BED to
issue its written aIIirmation oI the coal operating contract and to
expeditiously cause the conversion thereoI Irom exploration to
development in Iavor oI IEI; directed BED to give due course to IEI's
application Ior a coal operating contract; directed BED to give due
course to IEI's application Ior three more coal blocks; and ordered the
payment oI damages and rehabilitation expenses (Rollo, pp. 9-10).chanroblesvirtualawlibrary chanrob les virtual law lib rary
In reversing the Trial Court, the Court oI Appeals held that the
rendition oI the summary judgment was not proper since there were
genuine issues in controversy between the parties, and more
importantly, that the Trial Court had no jurisdiction over the action
considering that, under Presidential Decree No. 1206, it is the BED
that has the power to decide controversies relative to the exploration,
exploitation and development oI coal blocks (Rollo, pp. 43-44).chanroblesvirtualawlibrary chanrobles vir tual law lib rary
Hence, this petition, to which we resolved to give due course and to
decide.chanrob lesvirtualawlib rary chanrobles vi rtual law lib rary
Incidentally, the records disclose that during the pendency oI the
appeal beIore the Appellate Court, the suit against the then Minister oI
Energy was dismissed and that, in the meantime, IEI had applied with
the BED Ior the development oI certain coal blocks.chanroblesvirtualawlib rary chanrobles vi rtual law lib rary
The decisive issue in this case is whether or not the civil court has
jurisdiction to hear and decide the suit Ior rescission oI the
Memorandum oI Agreement concerning a coal operating contract over
coal blocks. A corollary question is whether or not respondent Court oI
Appeals erred in holding that it is the Bureau oI Energy Development
(BED) which has jurisdiction over said action and not the civil
court.chanroblesvirtualawlibrary chanro bles virtual law l ibrary
While the action Iiled by IEI sought the rescission oI what appears to
be an ordinary civil contract cognizable by a civil court, the Iact is that
the Memorandum oI Agreement sought to be rescinded is derived Irom
a coal-operating contract and is inextricably tied up with the right to
develop coal-bearing lands and the determination oI whether or not the
reversion oI the coal operating contract over the subject coal blocks to
IEI would be in line with the integrated national program Ior coal-
development and with the objective oI rationalizing the country's over-
all coal-supply-demand balance, IEI's cause oI action was not merely
the rescission oI a contract but the reversion or return to it oI the
operation oI the coal blocks. Thus it was that in its Decision ordering
the rescission oI the Agreement, the Trial Court, inter alia, declared
the continued eIIicacy oI the coal-operating contract in IEI's Iavor and
directed the BED to give due course to IEI's application Ior three (3)
IEI more coal blocks. These are matters properly Ialling within the
domain oI the BED.chanroblesvirtualawlibrar y chanrobles virt ual law libra ry
For the BED, as the successor to the Energy Development Board
(abolished by Sec. 11, P.D. No. 1206, dated 6 October 1977) is tasked
with the Iunction oI establishing a comprehensive and integrated
national program Ior the exploration, exploitation, and development
and extraction oI Iossil Iuels, such as the country's coal resources;
adopting a coal development program; regulating all activities relative
thereto; and undertaking by itselI or through service contracts such
exploitation and development, all in the interest oI an eIIective and
coordinated development oI extracted resources.chanroblesvirtualawlibrary cha nrobles virtual law l ibrary
Thus, the pertinent sections oI P.D. No. 1206 provide:
Sec. 6. Bureau of Enery Development. There is created
in the Department a Bureau oI Energy Development,
hereinaIter reIerred to in this Section as the Bureau,
which shall have the Iollowing powers and Iunctions,
among others: chanrobles vir tual law lib rary
a. Administer a national proram Ior the
encouragement, guidance, and whenever necessary,
regulation oI such business activity relative to the
exploration, exploitation, development, and extraction
of fossil fuels such as petroleum, coal, . . .chanroblesvirtualawlibra ry chanrobles vir tual law libra ry
The decisions, orders, resolutions or actions oI the
Bureau may be appealed to the Secretary whose
decisions are Iinal and executory unless appealed to the
President. (Emphasis supplied.)
That law Iurther provides that the powers and Iunctions oI the deIunct
Energy Development Board relative to the implementation oI P.D. No.
972 on coal exploration and development have been transIerred to the
BED, provided that coal operating contracts including the transIer or
assignment oI interest in said contracts, shall require the approval oI
the Secretary (Minister) oI Energy (Sec. 12, P.D. No. 1206).
Sec. 12. . . . the powers and Iunctions transIerred to the
Bureau oI Energy Development are:
xxx xxx xxxchanrob les virtual law lib rary
ii. The Iollowing powers and Iunctions oI the Energy
Development Board under PD No. 910 . . .chanroblesvirtualawlibrary chanr obles virtual law l ibrary
(1) Undertake by itself or throuh other arranements,
such as service contracts, the active exploration,
exploitation, development, and extraction of enery
resources . . .chanroblesvirtualawlibrary chan robles virtual law library
(2) Reulate all activities relative to the exploration,
exploitation, development, and extraction of fossil and
nuclear fuels . . .chanroblesvirtualawlibrary chanrobles virtua l law libra ry
(P.D. No. 1206) (Emphasis supplied.)
P.D. No. 972 also provides:
Sec. 8. Each coal operating contract herein authorized
shall . . . be executed by the Energy Development
Board.
Considering the Ioregoing statutory provisions, the jurisdiction oI the
BED, in the Iirst instance, to pass upon any question involving the
Memorandum oI Agreement between IEI and MMIC, revolving as its
does around a coal operating contract, should be sustained.chanroblesvirtualawlib rary chanrob les virtual law lib rary
In recent years, it has been the jurisprudential trend to apply the
doctrine oI primary jurisdiction in many cases involving matters that
demand the special competence oI administrative agencies. It may
occur that the Court has jurisdiction to take cognizance oI a particular
case, which means that the matter involved is also judicial in character.
However, iI the case is such that its determination requires the
expertise, specialized skills and knowledge oI the proper
administrative bodies because technical matters or intricate questions
oI Iacts are involved, then relieI must Iirst be obtained in an
administrative proceeding beIore a remedy will be supplied by the
courts even though the matter is within the proper jurisdiction oI a
court. This is the doctrine oI primary jurisdiction. It applies "where a
claim is oriinally coni:able in the courts, and comes into play
whenever enIorcement oI the claim requires the resolution oI issues
which, under a regulatory scheme, have been placed within the special
competence oI an administrative body, in such case the fudicial
process is suspended pendin referral of such issues to the
administrative body for its view" (United States v. Western PaciIic
Railroad Co., 352 U.S. 59, Emphasis supplied).chanroblesvirtualawlibra ry chanrobles vir tu al law library
Clearly, the doctrine oI primary jurisdiction Iinds application in this
case since the question oI what coal areas should be exploited and
developed and which entity should be granted coal operating contracts
over said areas involves a technical determination by the BED as the
administrative agency in possession oI the specialized expertise to act
on the matter. The Trial Court does not have the competence to decide
matters concerning activities relative to the exploration, exploitation,
development and extraction oI mineral resources like coal. These
issues preclude an initial judicial determination. It behooves the courts
to stand aside even when apparently they have statutory power to
proceed in recognition oI the primary jurisdiction oI an administrative
agency.
One thrust oI the multiplication oI administrative
agencies is that the interpretation oI contracts and the
determination oI private rights thereunder is no longer a
uniquely judicial Iunction, exercisable only by our
regular courts (Antipolo Realty Corp. vs. National
Housing Authority, 153 SCRA 399, at 407).
The application oI the doctrine oI primary jurisdiction, however, does
not call Ior the dismissal oI the case below. It need only be suspended
until aIter the matters within the competence oI the BED are threshed
out and determined. Thereby, the principal purpose behind the doctrine
oI primary jurisdiction is salutarily served.
UniIormity and consistency in the regulation oI
business entrusted to an administrative agency are
secured, and the limited Iunction oI review by the
judiciary are more rationally exercised, by preliminary
resort, Ior ascertaining and interpreting the
circumstances underlying legal issues, to agencies that
are better equipped than courts by specialization, by
insight gained through experience, and by more Ilexible
procedure (Far East ConIerence v. United States, 342
U.S. 570).
With the Ioregoing conclusion arrived at, the question as to the
propriety oI the summary judgment rendered by the Trial Court
becomes unnecessary to resolve.chanroblesvirtualawl ibrary chan robles virtual law librar y
WHEREFORE, the Court Resolved to DENY the petition. No costs.chanroblesvirtualawlibrary
chanrobles virtual law lib rary
SO ORDERED.
Paras, Padilla, Sarmiento and Realado, JJ., concur.
chanrobles virtual law library






























ublic oI the Philippines
SUPREME COURT
Manila
EN BANC

G.R. No. 118910 November 16, 1995
KILOSBAYAN, INCORPORATED, 1OVITO R. SALONGA,
CIRILO A. RIGOS, ERME CAMBA, EMILIO C. CAPULONG,
1R., 1OSE T. APOLO, EPHRAIM TENDERO, FERNANDO
SANTIAGO, 1OSE ABCEDE, CHRISTINE TAN, RAFAEL G.
FERNANDO, RAOUL V. VICTORINO, 1OSE CUNANAN,
QUINTIN S. DOROMAL, SEN. FREDDIE WEBB, SEN.
WIGBERTO TAADA, REP. 1OKER P. ARROYO, Petitioners,
vs. MANUEL L. MORATO, in his capacity as Chairman of the
Philippine Charity Sweepstakes Office, and the PHILIPPINE
GAMING MANAGEMENT CORPORATION, Respondents.
R E S O L U T I O N

MENDOZA, chanrobles virtual law library
Petitioners seek reconsideration oI our decision in this case. They
insist that the decision in the Iirst case has already settled (1) whether
petitioner Kilosbayan, Inc. has a standing to sue and (2) whether under
its charter (R.A. No. 1169, as amended) the Philippine Charity
Sweepstakes OIIice can enter into any Iorm oI association or
collaboration with any party in operating an on-line lottery.
Consequently, petitioners contend, these questions can no longer be
reopened.chanroblesvirtualawlibrar y chanrobles virt ual law libra ry
Because two members oI the Court did not consider themselves bound
by the decision in the Iirst case, petitioners suggest that the two, in
joining the dissenters in the Iirst case in reexamining the questions in
the present case, acted otherwise than according to law. They cite the
Iollowing statement in the opinion oI the Court:
The voting on petitioners' standing in the previous case
was a narrow one, with seven (7) members sustaining
petitioners' standing and six (6) denying petitioners'
right to bring the suit. The majority was thus a tenuous
one that is not likely to be maintained in any subsequent
litigation. In addition, there have been changes in the
membership oI the Court, with the retirement oI
Justices Cruz and Bidin and the appointment oI the
writer oI this opinion and Justice Francisco. Given this
Iact it is hardly tenable to insist on the maintenance oI
the ruling as to petitioners' standing.
Petitioners claim that this statement "conveys a none too subtle
suggestion, perhaps a Freudian slip, that the two new
appointees, regardless oI the merit oI the Decision in the Iirst
Kilosbayan case against the lotto (Kilosbayan, et al. v.
Guingona, 232 SCRA 110 (1994)) must oI necessity align
themselves with all the Ramos appointees who were dissenters
in the Iirst case and constitute the new majority in the second
lotto case." And petitioners ask, "why should it be so?"
Petitioners ask a question to which they have made up an answer.
Their attempt at psychoanalysis, detecting a Freudian slip where none
exists, may be more revealing oI their own unexpressed wish to Iind
motives where there are none which they can impute to some members
oI the Court.chanroblesvirtualawlibrary chanrob les virtual law lib rary
For the truth is that the statement is no more than an eIIort to explain -
rather than to fustify - the majority's decision to overrule the ruling in
the previous case. It is simply meant to explain that because the Iive
members oI the Court who dissented in the Iirst case (Melo, Quiason,
Puno, Vitug and Kapunan, JJ.) and the two new members (Mendoza
and Francisco, JJ.) thought the previous ruling to be erroneous and its
reexamination not to be barred by stare decisis, res fudicata or
conclusiveness oI judgment, or law oI the case, it was hardly tenable
Ior petitioners to insist on the Iirst ruling.chanroblesvir tualawlibra ry chanrobles vir tual law lib rary
Consequently to petitioners' question "hat is the lue that holds them
toether," implying some ulterior motives on the part oI the new
majority in reexamining the two questions, the answer is: None, except
a conviction on the part oI the Iive, who had been members oI the
Court at the time they dissented in the Iirst case, and the two new
members that the previous ruling was erroneous. The eighth Justice
(Padilla, J.) on the other hand agrees with the seven Justices that the
ELA is in a real sense a lease agreement and thereIore does not violate
R.A. No. 1169.chanroblesvirtualawlibrary chan robles virtual law libra ry
The decision in the Iirst case was a split decision: 7-6. With the
retirement oI one oI the original majority (Cruz, J.) and one oI the
dissenters (Bidin, J.) it was not surprising that the Iirst decision in the
Iirst case was later reversed.chanroblesvirtualawlibra ry chanrobles vi rtual law lib rary
It is argued that, in any case, a reexamination oI the two questions is
barred because the PCSO and the Philippine Gaming Management
Corporation made a " formal commitment not to ask Ior a
reconsideration oI the Decision in the Iirst lotto case and instead
submit a new agreement that would be in conIormity with the PCSO
Charter (R.A. No. 1169, as amended) and with the Decision oI the
Supreme Court in the Iirst Kilosbayan case against on-line, hi-tech
lotto."chanrobles virtual law libra ry
To be sure, a new contract was entered into which the majority oI the
Court Iinds has been purged oI the Ieatures which made the Iirst
contract objectionable. Moreover, what the PCSO said in its
maniIestation in the Iirst case was the Iollowing:
1. They are no longer Iiling a motion Ior
reconsideration oI the Decision oI this Honorable Court
dated May 5, 1994, a copy oI which was received on
May 6, 1994.chanroblesvirtualawlibrary chanrobles virtual law libra ry
2. Respondents PCSO and PGMC are presently
negotiating a new lease agreement consistent with the
authority oI PCSO under its charter (R.A. No. 1169, as
amended by B.P. Blg. 42) and conIormable with the
pronouncements oI this Honorable Court in its Decision
oI May 5, 1995.
The PGMC made substantially the same maniIestation as the
PCSO.
There was thus no "Iormal commitment" - but only a manifestation -
that the parties were not Iiling a motion Ior reconsideration. Even iI
the parties made a "Iormal commitment," the six (6) dissenting
Justices certainly could not be bound thereby not to insist on their
contrary view on the question oI standing. Much less were the two
new members bound by any "Iormal commitment" made by the
parties. They believed that the ruling in the Iirst case was erroneous.
Since in their view reexamination was not barred by the doctrine oI
stare decisis, res fudicata or conclusiveness oI judgment or law oI the
case, they voted the way they did with the remaining Iive (5)
dissenters in the Iirst case to Iorm a new majority oI eight.chanroblesvirtualawlibrary chanrobles virtual law libra ry
Petitioners ask, "hy should this be so?" Because, as explained in the
decision, the Iirst decision was erroneous and no legal doctrine stood
in the way oI its reexamination. It can, thereIore, be asked "with equal
candor": "Why should this not be so?"chanrobles virt ual law libra ry
Nor is this the Iirst time a split decision was tested, iI not reversed, in a
subsequent case because oI change in the membership oI a court. In
1957, this Court, voting 6-5, held in Feliciano v. quinas, G.R. No. L-
10201, Sept. 23, 1957 that the phrase "at the time oI the election" in
2174 oI the Revised Administrative Code oI 1917 meant that a
candidate Ior municipal elective position must be at least 23 years oI
age on the date of the election. On the other hand, the dissenters
argued that it was enough iI he attained that age on the day he assumed
oIIice.chanroblesvirtualawlib rary chanrob les virtual law lib rary
Less than three years later, the same question was beIore the Court
again, as a candidate Ior municipal councilor stated under oath in her
certiIicate oI candidacy that she was eligible Ior that position although
she attained the requisite age (23 years) only when she assumed oIIice.
The question was whether she could be prosecuted Ior IalsiIication. In
People v. Yan, 107 Phi. 888 (1960), the Court ruled she could not.
Justice, later ChieI Justice, Benison, who dissented in the Iirst case,
Feliciano v. quinas, supra, wrote the opinion oI the Court, holding
that while the statement that the accused was eligible was "inexact or
erroneous, according to the majority in the Feliciano case," the
accused could not be held liable Ior IalsiIication, because
the question |whether the law really required candidates
to have the required age on the day oI the election or
whether it was suIIicient that they attained it at the
beginning oI the term oI oIIice| has not been discussed
anew, despite the presence of new members; we simply
assume Ior the purpose oI this decision that the doctrine
stands.
Thus because in the meantime there had been a change in the
membership oI the Court with the retirement oI two members (Recess
and Flex, JJ.) who had taken part in the decision in the Iirst case and
their replacement by new members (Barrera and Gutierrez-David, JJ.)
and the Iact that the vote in the Iirst case was a narrow one (6 to 5), the
Court allowed that the continuing validity oI its ruling in the Iirst case
might well be doubted. For this reason it gave the accused the beneIit
oI the doubt that she had acted in the good Iaith belieI that it was
suIIicient that she was 23 years oI age when she assumed oIIice.chanroblesvirtualawlib rary chanrob les virtual law lib rary
In that case, the change in the membership oI the Court and the
possibility oI change in the ruling were noted without anyone - much
less would-be psychoanalysts - Iinding in the statement oI the Court
any Freudian slip. The possibility oI change in the rule as a result oI
change in membership was accepted as a suIIicient reason Ior Iinding
good Iaith and lack oI criminal intent on the part oI the accused.chanroblesvirtualawl ibrary chan robles virtual law librar y
Indeed, a change in the composition oI the Court could prove the
means oI undoing an erroneous decision. This was the lesson oI Knox
v. Lee, 12 Wall. 457 (1871). The Legal Tender Acts, which were
passed during the Civil War, made U.S. notes (greenbacks) legal
tender Ior the payment oI debts, public or private, with certain
exceptions. The validity oI the acts, as applied to preexisting debts,
was challenged in Hepburn v. Griswold, 8 Wall. 603 (1869). The
Court was then composed oI only eight (8) Justices because oI
Congressional eIIort to limit the appointing power oI President
Johnson. Voting 5-3, the Court declared the acts void. ChieI Justice
Chase wrote the opinion oI the Court in which Iour others, including
Justice Grier, concurred. Justices Miller, Swayne and Davis dissented.
A private memorandum leIt by the dissenting Justices described how
an eIIort was made "to convince an aged and inIirm member oI the
court |Justice Grier| that he had not understood the question on which
he voted," with the result that what was originally a 4-4 vote was
converted into a majority (5-3) Ior holding the acts invalid.chanroblesvi rtualawlibra ry chanrobles vir tual law lib rary
On the day the decision was announced, President Grant nominated to
the Court William Strong and Joseph P. Bradley to Iill the vacancy
caused by the resignation oI Justice Grier and to restore the
membership oI the Court to nine. In 1871, Hepburn v. Griswold was
overruled in the Legal Tender Cases, as Knox v. Lee came to be
known, in an opinion by Justice Strong, with a dissenting opinion by
ChieI Justice Chase and the three other surviving members oI the
Iormer majority. There were allegations that the new Justices were
appointed Ior their known views on the validity oI the Legal Tender
Acts, just as there were others who deIended the character and
independence oI the new Justices. History has vindicated the
overruling oI the Hepburn case by the new majority. The Legal Tender
Cases proved to be the Court's means oI salvation Irom what ChieI
Justice Hughes later described as one oI the Court's "selI-inIlicted
wounds."
1

We now consider the speciIic grounds Ior petitioners' motion Ior
reconsideration.chanroblesvirt ualawlibrar y chanrobles virt ual law libra ry
I. We have held that because there are no genuine issues oI
constitutionality in this case, the rule concerning real party in interest,
applicable to private litigation rather than the more liberal rule on
standin, applies to petitioners. Two objections are made against that
ruling: (1) that the constitutional policies and principles invoked by
petitioners, while not supplying the basis Ior aIIirmative relieI Irom
the courts, may nonetheless be resorted to Ior striking down laws or
oIIicial actions which are inconsistent with them and (2) that the
Constitution, by guaranteeing to independent people's organizations
"eIIective and reasonable participation at all levels oI social, political
and economic decision-making" (Art. XIII, 16), grants them
standing to sue on constitutional grounds.chanroblesvirtualawlib rary chanrob les virtual law li brary
The policies and principles oI the Constitution invoked by petitioner
read:
Art. II, 5. The maintenance oI peace and order, the
protection liIe, liberty, and property, and the promotion
of the eneral welfare are essential Ior the enjoyment
by all the people oI the blessings oI democracy.
Id., 12. The natural and primary right and duty oI
parents in the rearing oI the youth Ior civic eIIiciency
and the development of moral character shall receive
the support oI the Government.
Id., 13. The State recognizes the vital role oI the
youth in nation-building and shall promote and protect
their physical, moral, spiritual, intellectual, and social
well-bein. It shall inculcate in the youth patriotism and
nationalism, and encourage their involvement in public
and civic aIIairs.
Id., 17. The State shall give priority to education,
science and technology, arts, culture, and sports to
Ioster patriotism and nationalism, accelerate social
progress, and promote total human liberation and
development.
As already stated, however, these provisions are not selI-executing.
They do not conIer rights which can be enIorced in the courts but only
provide uidelines for leislative or executive action. By authorizing
the holding oI lottery Ior charity, Congress has in eIIect determined
that consistently with these policies and principles oI the Constitution,
the PCSO may be given this authority. That is why we said with
respect to the opening by the PAGCOR oI a casino in Cagayan de Oro,
"the morality oI gambling is not a justiciable issue. Gambling is not
illegal per se. . . . It is left to Conress to deal with the activity as it
sees fit." (Magtajas v. Pryce Properties Corp., Inc., 234 SCRA 255,
268 |1994|).chanroblesvirtualawlibrary chanrobles vi rtual law lib rary
It is noteworthy that petitioners do not question the validity oI the law
allowing lotteries. It is the contract entered into by the PCSO and the
PGMC which they are assailing. This case, thereIore, does not raise
issues oI constitutionality but only oI contract law, which petitioners,
not being privies to the agreement, cannot raise.chanroblesvirtualawlib rary chanr obles virtual law lib rary
Nor does Kilosbayan's status as a people's organization give it the
requisite personality to question the validity oI the contract in this
case. The Constitution provides that "the State shall respect the role oI
independent people's organizations to enable the people to pursue and
protect, within the democratic Iramework, their legitimate and
collective interests and aspirations through peaceIul and lawIul
means," that their right to "eIIective and reasonable participation at all
levels oI social, political, and economic decision-making shall not be
abridged." (Art. XIII, 15-16) chanrobles virtual law libra ry
These provisions have not changed the traditional rule that only real
parties in interest or those with standin, as the case may be, may
invoke the judicial power. The jurisdiction oI this Court, even in cases
involving constitutional questions, is limited by the "case and
controversy" requirement oI Art. VIII, 5. This requirement lies at
the very heart oI the judicial Iunction. It is what diIIerentiates
decision-making in the courts Irom decision-making in the political
departments oI the government and bars the bringing oI suits by just
any party.chanroblesvi rtualawlibra ry chanrobles vi rtual law lib rary
Petitioners quote extensively Irom the speech oI Commissioner Garcia
beIore the Constitutional Commission, explaining the provisions on
independent people's organizations. There is nothing in the speech,
however, which supports their claim oI standing. On the contrary, the
speech points the way to the legislative and executive branches oI the
government, rather than to the courts, as the appropriate Iora Ior the
advocacy oI petitioners' views.
2
Indeed, the provisions on independent
people's organizations may most useIully be read in connection with
the provision on initiative and reIerendum as a means whereby the
people may propose or enact laws or reject any oI those passed by
Congress. For the Iact is that petitioners' opposition to the contract in
question is nothing more than an opposition to the government policy
on lotteries.chanroblesvirtualawlib rary chanrob les virtual law lib rary
It is nevertheless insisted that this Court has in the past accorded
standing to taxpayers and concerned citizens in cases involving
"paramount public interest." Taxpayers, voters, concerned citizens and
legislators have indeed been allowed to sue but then only (1) in cases
involvin constitutional issues and
(2) under certain conditions. Petitioners do not meet these
requirements on standing.
%axpayers are allowed to sue, Ior example, where there is a claim oI
illegal disbursement oI public Iunds. (Pascual v. Secretary oI Public
Works, 110 Phi. 331 (1960); Sanidad v. Comelec, 73 SCRA 333
(1976); Bugnay Const. & Dev. v. Laron, 176 SCRA 240 (1989); City
Council oI Cebu v. Cuizon, 47 SCRA 325 |1972|) or where a tax
measure is assailed as unconstitutional. (VAT Cases |Tolentino v.
Secretary oI Finance|, 235 SCRA 630 |1994|) Joters are allowed to
question the validity oI election laws because oI their obvious interest
in the validity oI such laws. (Gonzales v. Comelec, 21 SCRA 774
|1967|) Concerned citi:ens can bring suits iI the constitutional
question they raise is oI "transcendental importance" which must be
settled early. (Emergency Powers Cases |Araneta v. Dinglasan|, 84
Phi. 368 (1949); Iloilo Palay and Corn Planters Ass'n v. Feliciano, 121
Phi. 358 (1965); Philconsa v. Gimenez, 122 Phi. 894 (1965); CLU v.
Executive Secretary, 194 SCRA 317 |1991|) Leislators are allowed
to sue to question the validity oI any oIIicial action which they claim
inIringes their prerogatives qua legislators. (Philconsa v. Enriquez,
235 506 (1994); Guingona v. PCGG, 207 SCRA 659 (1992); Gonzales
v. Macaraig, 191 SCRA 452 (1990); Tolentino v. Comelec, 41 SCRA
702 (1971); Tatad v. Garcia, G.R. No. 114222, April 16, 1995
(Mendoza, J., concurring)) chanrobles virtual law l ibrary
Petitioners do not have the same kind oI interest that these various
litigants have. Petitioners assert an interest as taxpayers, but they do
not meet the standing requirement Ior bringing taxpayer's suits as set
Iorth in Dumlao v. Comelec, 95 SCRA 392, 403 (1980), to wit:
While, concededly, the elections to be held involve the
expenditure oI public moneys, nowhere in their Petition
do said petitioners allee that their tax money is "bein
extracted and spent in violation of specific
constitutional protections aainst abuses of leislative
power" (Flast v. Cohen, 392 U.S., 83 |1960|), or that
there is a misapplication oI such Iunds by respondent
COMELEC (see Pascual vs. Secretary oI Public Works,
110 Phil. 331 |1960|), or that public money is being
deIlected to any improper purpose. Neither do
petitioners seek to restrain respondent Irom wasting
public Iunds through the enIorcement oI an invalid or
unconstitutional law. (Philippine Constitution
Association vs. Mathay, 18 SCRA 300 |1966|), citin
Philippine Constitution Association vs. Gimenez, 15
SCRA 479 |1965|). Besides, the institution of a
taxpayers suit, per se, is no assurance of fudicial
review. As held by this Court in Tan vs. Macapagal (43
SCRA 677 |1972|), speaking through our present ChieI
Justice, this Court is vested with discretion as to
whether or not a taxpayer's suit should be entertained.
(Emphasis added)
Petitioners' suit does not Iall under any oI these categories oI
taxpayers' suits.
Neither do the other cases cited by petitioners support their contention
that taxpayers have standing to question government contracts
regardless oI whether public Iunds are involved or not. In Gon:ales v.
National Housin, Corp., 94 SCRA 786 (1979), petitioner Iiled a
taxpayer's suit seeking the annulment oI a contract between the NHC
and a Ioreign corporation. The case was dismissed by the trial court.
The dismissal was aIIirmed by this Court on the grounds oI res
fudicata and pendency oI a prejudicial question, thus avoiding the
question oI petitioner's standing.chanroblesvirtualawl ibrary chan robles virtual law librar y
On the other hand, in Gon:ales v. Raqui:a, 180 SCRA 254 (1989),
petitioner sought the annulment oI a contract made by the government
with a Ioreign corporation Ior the purchase oI road construction
equipment. The question oI standing was not discussed, but even iI it
was, petitioner's standing could be sustained because he was a
minority stockholder oI the Philippine National Bank, which was one
oI the deIendants in the case.chanroblesvirtualawlib rary chanro bles virtual law l ibrary
In the other case cited by petitioners, City Council oI Cebu v. Cui:on,
47 SCRA 325 (1972), members oI the city council were allowed to sue
to question the validity oI a contract entered into by the city
government Ior the purchase oI road construction equipment because
their contention was that the contract had been made without their
authority. In addition, as taxpayers they had an interest in seeing to it
that public Iunds were spent pursuant to an appropriation made by
law.chanroblesvir tualawlibrar y chanrobles virt ual law libra ry
But, in the case at bar, there is an allegation that public Iunds are being
misapplied or misappropriated. The controlling doctrine is that oI
Gon:ales v. arcos, 65 SCRA 624 (1975) where it was held that Iunds
raised Irom contributions Ior the beneIit oI the Cultural Center oI the
Philippines were not public Iunds and petitioner had no standing to
bring a taxpayer's suit to question their disbursement by the President
oI the Philippines.chanroblesvirtualawlib rary chanro bles virtual law l ibrary
Thus, petitioners' right to sue as taxpayers cannot be sustained. Nor as
concerned citi:ens can they bring this suit because no speciIic injury
suIIered by them is alleged. As Ior the petitioners, who are members oI
Congress, their right to sue as leislators cannot be invoked because
they do not complain oI any inIringement oI their rights as
legislators.chanroblesvirtualawlibrary chanrobles vi rtual law lib rary
Finally, in Jalmonte v. PCSO, G.R. No. 78716, September 22, 1987,
we threw out a petition questioning another Iorm oI lottery conducted
by the PCSO on the ground that petitioner, who claimed to be a
"citizen, lawyer, taxpayer and Iather oI three minor children," had no
direct and personal interest in the lottery. We said: "He must be able to
show, not only that the law is invalid, but also that he has sustained or
is in immediate danger oI sustaining some direct injury as a result oI
its enIorcement, and not merely that he suIIers thereby in some
indeIinite way. It must appear that the person complainin has been or
is about to be denied some riht or privilee to which he is lawfully
entitled or that he is about to be subfected to some burdens or
penalties by reason of the statute complained of." In the case at bar,
petitioners have not shown why, unlike petitioner in the Valmonte
case, they should be accorded standing to bring this suit.chanroblesvirtualawlibrar y chanrobles virt ual law libra ry
The case oI Oposa v. Factoran, Jr. 224 SCRA 792 (1993) is diIIerent.
Citizens' standing to bring a suit seeking the cancellation oI timber
licenses was sustained in that case because the Court considered Art.
II, 16 a right-conIerring provision which can be enIorced in the
courts. That provision states:
The State shall protect and advance the riht of the
people to a balanced and healthIul ecology in accord
with the rhythm and harmony oI nature. (Emphasis)
In contrast, the policies and principles invoked by petitioners in
this case do not permit oI such categorization.
Indeed, as already stated, petitioners' opposition is not really to the
validity oI the ELA but to lotteries which they regard to be immoral.
This is not, however, a legal issue, but a policy matter Ior Congress to
decide and Congress has permitted lotteries Ior charity.chanroblesvi rtualawlibra ry chanrobles vi rtual law lib rary
Nevertheless, although we have concluded that petitioners do not have
standing, we have not stopped there and dismissed their case. For in
the view we take, whether a party has a cause oI action and, thereIore,
is a real party in interest or one with standing to raise a constitutional
question must turn on whether he has a right which has been violated.
For this reason the Court has not ducked the substantive issues raised
by petitioners.chanroblesvirtualawlib rary chanrob les virtual law lib rary
II. R.A. No. 1169, as amended by B.P No . 42, states:
1. The Philippine Charity Sweepstakes OIIice. - The
Philippine Charity Sweepstakes OIIice, hereinaIter
designated the OIIice, shall be the principal government
agency Ior raising and providing Ior Iunds Ior health
programs, medical assistance and services and charities
oI national character, and as such shall have the general
powers conIerred in section thirteen oI Act Numbered
One Thousand Four Hundred FiIty-Nine, as amended,
and shall have the authority: chanrobles virtual law libra ry
A. To hold and conduct charity sweepstakes races,
lotteries and other similar activities, in such Irequency
and manner, as shall be determined, and subject to such
rules and regulations as shall be promulgated by the
Board oI Directors.chanroblesvirtualawlibrary chanr obles virtual law l ibrary
B. Subject to the approval oI the Minister oI Human
Settlements, to engage in health and welIare-related
investments, programs, projects and activities which
may be proIit-oriented, by itselI or in collaboration,
association or joint venture with any person,
association, company or entity, whether domestic or
Ioreign, except Ior the activities mentioned in the
preceding paragraph (A), Ior the purpose oI providing
Ior permanent and continuing sources oI Iunds Ior
health programs, including the expansion oI existing
ones, medical assistance and services, and/or charitable
grants: Provided, That such investments will not
compete with the private sector in areas where
investments are adequate as may be determined by the
National Economic and Development Authority.
Petitioners insist on the ruling in the previous case that the PCSO
cannot hold and conduct charity sweepstakes, lotteries and other
similar activities in collaboration, association or joint venture with any
other party because oI the clause "except Ior the activities mentioned
in the preceding paragraph (A)" in paragraph (B) oI 1. Petitioners
contend that the ruling is the law oI this case because the parties are
the same and the case involves the same issue, i.e., the meaning oI this
statutory provision.chanroblesvir tualawlibra ry chanrobles vir tual law lib rary
The "law oI the case" doctrine is inapplicable, because this case is not
a continuation oI the Iirst one. Petitioners also say that inquiry into the
same question as to the meaning oI the statutory provision is barred by
the doctrine oI res fudicata. The general rule on the "conclusiveness oI
judgment," however, is subject to the exception that a question may be
reopened if it is a leal question and the two actions involve
substantially different claims. This is generally accepted in American
law Irom which our Rules oI Court was adopted. (Montana v. United
States, 440 U.S. 59 L.Ed.2d 147, 210 (1979); RESTATEMENT OF
THE LAW 2d, ON JUDGMENTS, 28; P. BATOR, D. MELTZER,
P. MISHKIN AND D. SHAPIRO, THE FEDERAL COURTS AND
THE FEDERAL SYSTEM 1058, n.2 |3rd Ed., 1988|) There is nothing
in the record oI this case to suggest that this exception is inapplicable
in this jurisdiction.chanroblesvirtualawli brary chan robles virtual law l ibrary
Indeed, the questions raised in this case are legal questions and the
claims involved are substantially diIIerent Irom those involved in the
prior case between the parties. As already stated, the ELA is
substantially diIIerent Irom the Contract oI Lease declared void in the
Iirst case.chanroblesvirtualawlibrary chan robles virtual law libra ry
Borrowing Irom the dissenting opinion oI Justice Feliciano, petitioners
argue that the phrase "by itselI or in collaboration, association or joint
venture with any other party" qualiIies not only 1 (B) but also 1
(A), because the exception clause ("except Ior the activities mentioned
in the preceding paragraph |A|") "operates, as it were, as a renvoi
clause which reIers back to Section 1(A) and in this manner avoids the
necessity oI simultaneously amending the text oI Section 1(A)."chanrob les virtual law lib rary
This interpretation, however, Iails to take into account not only the
location oI the phrase in paragraph (B), when it should be in paragraph
(A) had that been the intention oI the lawmaking authority, but also the
phrase "by itselI." In other words, under paragraph (B), the PCSO is
prohibited Irom "engag|ing| in . . . investments, programs, projects and
activities" iI these involve sweepstakes races, lotteries and other
similar activities not only "in collaboration, association or joint
venture" with any other party but also "by itselI." Obviously, this
prohibition cannot apply when the PCSO conducts these activities
itselI. Otherwise, what paragraph (A) authorizes the PCSO to do,
paragraph (B) would prohibit.chanroblesvir tualawlibra ry chanrobles vir tual law lib rary
The Iact is that the phrase in question does not qualiIy the authority oI
the PCSO under paragraph (A), but rather the authority granted to it by
paragraph (B). The amendment oI paragraph (B) by B.P. Blg. 42 was
intended to enable the PCSO to engage in certain investments,
programs, projects and activities Ior the purpose oI raising Iunds Ior
health programs and charity. That is why the law provides that such
investments by the PCSO should "not compete with the private sector
in areas where investments are adequate as may be determined by the
National Economic and Development Authority." Justice Davide, then
an Assemblyman, made a proposal which was accepted, reIlecting the
understanding that the bill they were discussing concerned the
authority oI the PCSO to invest in the business oI others. The
Iollowing excerpt Irom the Record oI the Batasan Pambansa shows
this to be the subject oI the discussion:
MR. DAVIDE. May I introduce an amendment aIter
"adequate". The intention oI the amendment is not to
leave the determination oI whether it is adequate or not
to anybody. And my amendment is to add aIter
"adequate" the words AS MAY BE DETERMINED
BY THE NATIONAL ECONOMIC AND
DEVELOPMENT AUTHORITY. As a mater oI Iact, it
will strengthen the authority to invest in these areas,
provided that the determination oI whether the private
sector's activity is already adequate must be determined
by the National Economic and Development
Authority.chanroblesvi rtualawlibra ry chanrobles vi rtual law lib rary
Mr. ZAMORA. Mr. Speaker, the committee accepts the
proposed amendment.chanroblesvirtualawlibrary chan robles virtual law librar y
MR. DAVIDE. Thank you, Mr. Speaker.chanroblesvirtualawlibrary chanro bles virtual law li brary
(2 RECORD OF THE BATASAN PAMBANSA, Sept.
6, 1979,
p. 1007)
Thus what the PCSO is prohibited Irom doing is Irom investing in a
business engaged in sweepstakes races, lotteries and other similar
activities. It is prohibited from doin so whether "in collaboration,
association or foint venture" with others or "by itself." This seems to
be the only possible interpretation oI 1 (A) and (B) in light oI its text
and its legislative history. That there is today no other entity engaged
in sweepstakes races, lotteries and the like does not detract Irom the
validity oI this interpretation.chanroblesvirtualawlibra ry chanrobles vi rtual law lib rary
III. The Court noted in its decision that the provisions oI the Iirst
contract, which were considered to be Ieatures oI a joint venture
agreement, had been removed in the new contract. For instance, 5 oI
the ELA provides that in the operation oI the on-line lottery, the PCSO
must employ "its own competent and qualiIied personnel." Petitioners
claim, however, that the "contemporaneous interpretation" oI PGMC
oIIicials oI this provision is otherwise. They cite the testimony oI Glen
Barroga oI the PGMC beIore a Senate committee to the eIIect that
under the ELA the PGMC would be operating the lottery system "side
by side" with PCSO personnel as part oI the transIer oI technology.chanroblesvirtualawlib rary chanrob les virtual
law library
Whether the transIer oI technology would result in a violation oI
PCSO's Iranchise should be determined by Iacts and not by what some
oIIicials oI the PGMC state by way oI opinion. In the absence oI prooI
to the contrary, it must be presumed that 5 reIlects the true intention
oI the parties. Thus, Art. 1370 oI the Civil Code says that "II the terms
oI a contract are clear and leave no doubt upon the intention oI the
contracting parties, the literal meaning oI its stipulations shall control."
The intention oI the parties must be ascertained Irom their
"contemporaneous and subsequent acts." (Art. 1371; Atlantic GulI Co.
v. Insular Government, 10 Phil. 166 |1908|) It cannot simply be
judged Irom what one oI them says. On the other hand, the claim oI
third parties, like petitioners, that the clause on upgrading oI
equipment would enable the parties aIter a while to change the
contract and enter into something else in violation oI the law is mere
speculation and cannot be a basis Ior judging the validity oI the
contract.chanroblesvirtualawlibrary chan robles virtual law librar y
IV. It is contended that 1 oI E.O. No. 301 covers all types oI
"contract|s| Ior public services or for furnishin oI supplies, materials
and equipment to the government or to any oI its branches, agencies or
instrumentalities" and not only contracts oI purchase and sale.
Consequently, a lease oI equipment, like the ELA, must be submitted
to public bidding in order to be valid. This contention is based on two
premises: (1) that 1 oI E.O. No. 301 applies to any contract whereby
the government acquires title to or the use oI the equipment and (2)
that the words "supplies," "materials," and "equipment" are distinct
Irom each other so that when an exception in 1 speaks oI "supplies,"
it cannot be construed to mean "equipment."chanrobles virtual law li brary
Petitioners' contention will not bear analysis. For example, the term
"supplies" is used in paragraph (a), which provides that a contract Ior
the Iurnishing oI "supplies" in order to meet an emergency is exempt
Irom public bidding. Unless "supplies" is construed to include
"equipment," however, the lease oI heavy equipment needed Ior rescue
operations in case oI a calamity will have to be submitted to public
bidding beIore it can be entered into by the government.chanroblesvirtualawlibrary chan robles virtual law librar y
In dissent Justice Feliciano says that in such a situation the
government can simply resort to expropriation, paying compensation
aIterward. This is just like purchasing the equipment through
negotiation when the question is whether the purchase should be by
public bidding, not to mention the Iact that the power to expropriate
may not be exercised when the government can very well negotiate
with private owners.chanroblesvirtualawlibrary chan robles virtual law libra ry
Indeed, there are Iundamental diIIiculties in simultaneously
contending (1) that E.O. No. 301, 1 covers both contracts oI sale and
lease agreements and (2) that the words "supplies," "materials" and
"equipment" can not be interchanged. Thus, under paragraph (b) oI
1, public bidding is not required "whenever the supplies are to be
used in connection with a project or activity which cannot be delayed
without causing detriment to the public service." Following petitioners'
theory, there should be a public bidding beIore the government can
enter into a contract Ior the lease oI bulldozers and dredging
equipment even iI these are urgently needed in areas ravaged by lahar
because, first, lease contracts are covered by the general rule and,
second, the exception to public bidding in paragraph (b) covers only
"supplies" but not equipment.chanroblesvirtualawlibrary chan robles virtual law librar y
To take still another example. Paragraph (d), which does away with
the requirement oI public bidding "whenever the supplies under
procurement have been unsuccessIully placed on bid Ior at least two
consecutive times, either due to lack oI bidders or the oIIers received
in each instance were exorbitant or nonconIorming to speciIications."
Again, Iollowing the theory oI the petitioners, a contract Ior the lease
oI equipment cannot be entered into even iI there are no bids because,
Iirst, lease contracts are governed by the general rule on public bidding
and, second, the exception to public bidding in paragraph (d) applies
only to contracts Ior the Iurnishing oI "supplies."chan robles virtual law lib rary
Other examples can be given to show the absurdity oI interpreting 1
as applicable to any contract Ior the Iurnishing oI supplies, materials
and equipment and oI considering the words "supplies," "materials"
and "equipment" to be not interchangeable. Our ruling that 1 oI E.O.
No. 301 does not cover the lease oI equipment avoids these
Iundamental diIIiculties and is supported by the text oI 1, which is
entitled "Guidelines Ior Neotiated Contracts" and by the Iact that the
only provisions oI E.O. No. 301 on leases, namely, 6 and 7,
concern the lease oI buildings by or to the government. Thus the text
oI 1 reads:
1. Guidelines for Neotiated Contracts. - Any
provision oI law, decree, executive order or other
issuances to the contrary notwithstanding, no contract
Ior public services or Ior Iurnishing supplies, materials
and equipment to the government or any oI its
branches, agencies or instrumentalities shall be renewed
or entered into without public bidding, except under
any oI the Iollowing situations:
a. Whenever the supplies are urgently
needed to meet an emergency which
may involve the loss oI, or danger to, liIe
and/or property; chanrobles virtual law libra ry
b. Whenever the supplies are to be used
in connection with a project or activity
which cannot be delayed without
causing detriment to the public service;chanr obles virtual
law library
c. Whenever the materials are sold by an
exclusive distributor or manuIacturer
who does not have subdealers selling at
lower prices and Ior which no suitable
substitute can be obtained elsewhere at
more advantageous terms to the
government;chanrobles vir tual law lib rary
d. Whenever the supplies under
procurement have been unsuccessIully
placed on bid Ior at least two
consecutive times, either due to lack oI
bidders or the oIIers received in each
instance were exhorbitant or non-
conIorming to speciIications;chanrobles vi rtual law lib rary
e. In cases where it is apparent that the
requisition oI the needed supplies
throuh neotiated purchase is most
advantageous to the government to be
determined by the Department Head
concerned; andchanrob les virtual law lib rary
I. Whenever the purchase is made Irom
an agency oI the government.
Indeed, the purpose Ior promulgating E.O. No. 301 was merely to
decentralize the system oI reviewing neotiated contracts oI purchase
Ior the Iurnishing oI supplies, materials and equipment as well as lease
contracts oI buildings. TheretoIore, E.O. No. 298, promulgated on
August 12, 1940, required consultation with the Secretary oI Justice
and the Department Head concerned and the approval oI the President
oI the Philippines beIore contracts Ior the Iurnishing oI supplies,
materials and equipment could be made on a negotiated basis, without
public bidding. E.O. No. 301 changed this by providing as Iollows:
2. Jurisdiction over Negotiated Contracts. - In line
with the principles oI decentralization and
accountability, negotiated contracts Ior public services
or Ior Iurnishing supplies, materials or equipment may
be entered into by the department or agency head or the
governing board oI the government-owned or
controlled corporation concerned, without need oI prior
approval by higher authorities, subject to availability oI
Iunds, compliance with the standards or guidelines
prescribed in Section 1 hereoI, and to the audit
jurisdiction oI the commission on Audit in accordance
with existing rules and regulations.chanroblesvirtualawlib rary chanro bles virtual law li brary
Negotiated contracts involving P2,000,000 up to
P10,000,000 shall be signed by the Secretary and two
other Undersecretaries.
xxx xxx xxxchanrob les virtual law lib rary
7. Jurisdiction Over Lease Contracts. - The heads oI
agency intending to rent privately-owned buildings or
spaces Ior their use, or to lease out government-owned
buildings or spaces Ior private use, shall have authority
to determine the reasonableness oI the terms oI the
lease and the rental rates thereoI, and to enter into such
lease contracts without need oI prior approval by higher
authorities, subject to compliance with the uniIorm
standards or guidelines established pursuant to Section
6 hereoI by the DPWH and to the audit jurisdiction oI
COA or its duly authorized representative in
accordance with existing rules and regulations.
In sum, E.O. No. 301 applies only to contracts Ior the purchase oI
supplies, materials and equipment, and it was merely to change the
system oI administrative review oI emergency purchases, as
theretoIore prescribed by E.O. No. 298, that E.O. No. 301 was issued
on July 26, 1987. Part B oI this Executive Order applies to leases oI
buildings, not oI equipment, and thereIore does not govern the lease
contract in this case. Even iI it applies, it does not require public
bidding Ior entering into it.chanroblesvirtualawlibrary chanrobles vi rtual law lib rary
Our holding that E.O. No. 301, 1 applies only to contracts oI
purchase and sale is conIormable to P.D. No. 526, promulgated on
August 2, 1974, which is in pari materia. P.D. No. 526 requires local
governments to hold public bidding in the "procurement oI supplies."
By speciIying "procurement oI supplies" and excepting Irom the
general rule "purchases" when made under certain circumstances, P.D.
No. 526, 12 indicates quite clearly that it applies only to contracts oI
purchase and sale. This provision reads:
12. Procurement without public biddin. -
Procurement oI supplies may be made without the
beneIit oI public bidding in the Iollowing modes:chanrobles virtual law library
(1) Personal canvass oI responsible merchants;chanrob les virtual law lib rary
(2) Emerency purchases;chanrobles vi rtual law lib rary
(3) Direct purchases Irom manuIacturers or exclusive
distributors;chanrobles vir tual law lib rary
(4) Thru the Bureau oI Supply Coordination; andchanrobles vir tual law li brary
(5) Purchase from other overnment entities or Ioreign
governments.
Sec. 3 broadly deIines the term "supplies" as including -
everything except real estate, which may
be needed in the transaction oI public
business, or in the pursuit oI any
undertaking, project, or activity, whether
oI the nature oI equipment, Iurniture,
stationery, materials Ior construction, or
personal property oI any sort, including
non-personal or contractual services
such as the repair and maintenance oI
equipment and Iurniture, as well as
trucking, hauling, janitorial, security,
and related or analogous services.
Thus, the texts oI both E.O. No. 301, 1 and oI P.D. No. 526, 1
and 12, make it clear that only contracts Ior the purchase and sale oI
supplies, materials and equipment are contemplated by the rule
concerning public biddings.chanroblesvir tualawlibra ry chanrobles vir tual law lib rary
Finally, it is contended that equipment leases are attractive and
commonly used in place oI contracts oI purchase and sale because oI
"multiIarious credit and tax constraints" and thereIore could not have
been leIt out Irom the requirement oI public bidding. Obviously these
credit and tax constraints can have no attraction to the government
when considering the advantages oI sale over lease oI equipment. The
Iact that lease contracts are in common use is not a reason Ior implying
that the rule on public bidding applies not only to government
purchases but also to lease contracts. For the fact also is that the
overnment leases equipment, such as copyin machines, personal
computers and the like, without oin throuh public biddin.chanroblesvirtualawlibrary chanrobles vir tual law libra ry
FOR THE FOREGOING REASONS, the motion Ior reconsideration
oI petitioners is DENIED with Iinality.chan roblesvirtualawlib rary chanr obles virtual law l ibrary
SO ORDERED.
chanrobles virtual law library
elo, Puno, Kapunan, Francisco and Hermosisima, Jr., JJ., concur.chanroblesvirtualawlibrary
chanrobles virtual law library
Narvasa, C.J. and Pananiban , JJ., took no part.chanroblesvirtualawlibrary chanrobles virtual law library



Republic oI the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 111107. 1anuary 10, 1997]
LEONARDO A. PAAT, in his capacity as Officer-in-Charge
(OIC), Regional Executive Director (RED), Region 2 and 1OVITO
LAYUGAN, 1R., in his capacity as Community Environment and
Natural Resources Officer (CENRO), both of the Department of
Environment and Natural Resources (DENR), Petitioners vs.
COURT OF APPEALS, HON. RICARDO A. BACULI in his
capacity as Presiding 1udge of Branch 2, Regional Trial Court at
Tuguegarao, Cagayan, and SPOUSES BIENVENIDO and
VICTORIA DE GUZMAN, Respondents.
D E C I S I O N
TORRES, 1R., .:chanroblesvirtualawlibrary
Without violating the principle oI exhaustion oI administrative
remedies, may an action Ior replevin prosper to recover a movable
property which is the subject matter oI an administrative IorIeiture
proceeding in the Department oI Environment and Natural Resources
pursuant to Section 68-A oI P. D. 705, as amended, entitled The
Revised Forestry Code oI the Philippines? chanrob lesvirtualawlib rary
Are the Secretary oI DENR and his representatives empowered to
conIiscate and IorIeit conveyances used in transporting illegal Iorest
products in Iavor oI the government?chanroblesvir tualawlibra ry
These are two Iundamental questions presented beIore us Ior our
resolution.chanroblesvirtualawl ibrary
The controversy on hand had its incipiency on May 19, 1989 when the
truck oI private respondent Victoria de Guzman while on its way to
Bulacan Irom San Jose, Baggao, Cagayan, was seized by the
Department oI Environment and Natural Resources (DENR, Ior
brevity) personnel in Aritao, Nueva Vizcaya because the driver could
not produce the required documents Ior the Iorest products Iound
concealed in the truck. Petitioner Jovito Layugan, the Community
Environment and Natural Resources OIIicer (CENRO) in Aritao,
Cagayan, issued on May 23, 1989 an order oI conIiscation oI the truck
and gave the owner thereoI IiIteen (15) days within which to submit an
explanation why the truck should not be IorIeited. Private respondents,
however, Iailed to submit the required explanation. On June 22,
1989,|1| Regional Executive Director Rogelio Baggayan oI DENR
sustained petitioner Layugans action oI conIiscation and ordered the
IorIeiture oI the truck invoking Section 68-A oI Presidential Decree
No. 705 as amended by Executive Order No. 277. Private respondents
Iiled a letter oI reconsideration dated June 28, 1989 oI the June 22,
1989 order oI Executive Director Baggayan, which was, however,
denied in a subsequent order oI July 12, 1989.|2| Subsequently, the
case was brought by the petitioners to the Secretary oI DENR pursuant
to private respondents statement in their letter dated June 28, 1989 that
in case their letter Ior reconsideration would be denied then this letter
should be considered as an appeal to the Secretary.|3| Pending
resolution however oI the appeal, a suit Ior replevin, docketed as Civil
Case 4031, was Iiled by the private respondents against petitioner
Layugan and Executive Director Baggayan|4| with the Regional Trial
Court, Branch 2 oI Cagayan,|5| which issued a writ ordering the return
oI the truck to private respondents.|6| Petitioner Layugan and
Executive Director Baggayan Iiled a motion to dismiss with the trial
court contending, inter alia, that private respondents had no cause oI
action Ior their Iailure to exhaust administrative remedies. The trial
court denied the motion to dismiss in an order dated December 28,
1989.|7| Their motion Ior reconsideration having been likewise
denied, a petition Ior certiorari was Iiled by the petitioners with the
respondent Court oI Appeals which sustained the trial courts order
ruling that the question involved is purely a legal question.|8| Hence,
this present petition,|9| with prayer Ior temporary restraining order
and/or preliminary injunction, seeking to reverse the decision oI the
respondent Court oI Appeals was Iiled by the petitioners on September
9, 1993. By virtue oI the Resolution dated September 27, 1993,|10| the
prayer Ior the issuance oI temporary restraining order oI petitioners
was granted by this Court. chanroblesvirtualawlibrar y
Invoking the doctrine oI exhaustion oI administrative remedies,
petitioners aver that the trial court could not legally entertain the suit
Ior replevin because the truck was under administrative seizure
proceedings pursuant to Section 68-A oI P.D. 705, as amended by E.O.
277. Private respondents, on the other hand, would seek to avoid the
operation oI this principle asserting that the instant case Ialls within
the exception oI the doctrine upon the justiIication that (1) due process
was violated because they were not given the chance to be heard, and
(2) the seizure and IorIeiture was unlawIul on the grounds: (a) that the
Secretary oI DENR and his representatives have no authority to
conIiscate and IorIeit conveyances utilized in transporting illegal Iorest
products, and (b) that the truck as admitted by petitioners was not used
in the commission oI the crime.chanroblesvirtualawlib rary
Upon a thorough and delicate scrutiny oI the records and relevant
jurisprudence on the matter, we are oI the opinion that the plea oI
petitioners Ior reversal is in order.chanroblesvirtualawlibrary
This Court in a long line oI cases has consistently held that beIore a
party is allowed to seek the intervention oI the court, it is a pre-
condition that he should have availed oI all the means oI
administrative processes aIIorded him. Hence, iI a remedy within the
administrative machinery can still be resorted to by giving the
administrative oIIicer concerned every opportunity to decide on a
matter that comes within his jurisdiction then such remedy should be
exhausted Iirst beIore courts judicial power can be sought. The
premature invocation oI courts intervention is Iatal to ones cause oI
action.|11| Accordingly, absent any Iinding oI waiver or estoppel the
case is susceptible oI dismissal Ior lack oI cause oI action.|12| This
doctrine oI exhaustion oI administrative remedies was not without its
practical and legal reasons, Ior one thing, availment oI administrative
remedy entails lesser expenses and provides Ior a speedier disposition
oI controversies. It is no less true to state that the courts oI justice Ior
reasons oI comity and convenience will shy away Irom a dispute until
the system oI administrative redress has been completed and complied
with so as to give the administrative agency concerned every
opportunity to correct its error and to dispose oI the case. However, we
are not amiss to reiterate that the principle oI exhaustion oI
administrative remedies as tested by a battery oI cases is not an
ironclad rule. This doctrine is a relative one and its Ilexibility is called
upon by the peculiarity and uniqueness oI the Iactual and
circumstantial settings oI a case. Hence, it is disregarded (1) when
there is a violation oI due process,|13| (2) when the issue involved is
purely a legal question,|14| (3) when the administrative action is
patently illegal amounting to lack or excess oI jurisdiction,|15| (4)
when there is estoppel on the part oI the administrative agency
concerned,|16| (5) when there is irreparable injury,|17| (6) when the
respondent is a department secretary whose acts as an alter ego oI the
President bears the implied and assumed approval oI the latter,|18| (7)
when to require exhaustion oI administrative remedies would be
unreasonable,|19| (8) when it would amount to a nulliIication oI a
claim,|20| (9) when the subject matter is a private land in land case
proceedings,|21| (10) when the rule does not provide a plain, speedy
and adequate remedy, and (11) when there are circumstances
indicating the urgency oI judicial intervention.|22| chanroblesvirtualawlibrary
In the case at bar, there is no question that the controversy was
pending beIore the Secretary oI DENR when it was Iorwarded to him
Iollowing the denial by the petitioners oI the motion Ior
reconsideration oI private respondents through the order oI July 12,
1989. In their letter oI reconsideration dated June 28, 1989,|23| private
respondents clearly recognize the presence oI an administrative Iorum
to which they seek to avail, as they did avail, in the resolution oI their
case. The letter, reads, thus: chanroblesvirtualawlib rary
xxxchanrob lesvirtualawlib rary
II this motion Ior reconsideration does not merit your Iavorable action,
then this letter should be considered as an appeal to the Secretary.|24|
chanroblesvirtualawlib rary
It was easy to perceive then that the private respondents looked up to
the Secretary Ior the review and disposition oI their case. By appealing
to him, they acknowledged the existence oI an adequate and plain
remedy still available and open to them in the ordinary course oI the
law. Thus, they cannot now, without violating the principle oI
exhaustion oI administrative remedies, seek courts intervention by
Iiling an action Ior replevin Ior the grant oI their relieI during the
pendency oI an administrative proceedings.chanroblesvirtualawli brary
Moreover, it is important to point out that the enIorcement oI Iorestry
laws, rules and regulations and the protection, development and
management oI Iorest lands Iall within the primary and special
responsibilities oI the Department oI Environment and Natural
Resources. By the very nature oI its Iunction, the DENR should be
given a Iree hand unperturbed by judicial intrusion to determine a
controversy which is well within its jurisdiction. The assumption by
the trial court, thereIore, oI the replevin suit Iiled by private
respondents constitutes an unjustiIied encroachment into the domain oI
the administrative agencys prerogative. The doctrine oI primary
jurisdiction does not warrant a court to arrogate unto itselI the
authority to resolve a controversy the jurisdiction over which is
initially lodged with an administrative body oI special
competence.|25| In Felipe Ismael, Jr. and Co. vs. Deputy Executive
Secretary,|26| which was reiterated in the recent case oI Concerned
OIIicials oI MWSS vs. Vasquez,|27| this Court held: chanroblesvirtualawlibrary
Thus, while the administration grapples with the complex and
multiIarious problems caused by unbriddled exploitation oI these
resources, the judiciary will stand clear. A long line oI cases establish
the basic rule that the courts will not interIere in matters which are
addressed to the sound discretion oI government agencies entrusted
with the regulation oI activities coming under the special technical
knowledge and training oI such agencies.chanroblesvirtualawli brary
To sustain the claim oI private respondents would in eIIect bring the
instant controversy beyond the pale oI the principle oI exhaustion oI
administrative remedies and Iall within the ambit oI excepted cases
heretoIore stated. However, considering the circumstances prevailing
in this case, we can not but rule out these assertions oI private
respondents to be without merit. First, they argued that there was
violation oI due process because they did not receive the May 23, 1989
order oI conIiscation oI petitioner Layugan. This contention has no leg
to stand on. Due process does not necessarily mean or require a
hearing, but simply an opportunity or right to be heard.|28| One may
be heard, not solely by verbal presentation but also, and perhaps many
times more creditably and practicable than oral argument, through
pleadings.|29| In administrative proceedings moreover, technical rules
oI procedure and evidence are not strictly applied; administrative
process cannot be Iully equated with due process in its strict judicial
sense.|30| Indeed, deprivation oI due process cannot be successIully
invoked where a party was given the chance to be heard on his motion
Ior reconsideration,|31| as in the instant case, when private
respondents were undisputedly given the opportunity to present their
side when they Iiled a letter oI reconsideration dated June 28, 1989
which was, however, denied in an order oI July 12, 1989 oI Executive
Director Baggayan. In Navarro III vs. Damasco,|32| we ruled that : chanroblesvirtualawlibrary
The essence oI due process is simply an opportunity to be heard, or as
applied to administrative proceedings, an opportunity to explain ones
side or an opportunity to seek a reconsideration oI the action or ruling
complained oI. A Iormal or trial type hearing is not at all times and in
all instances essential. The requirements are satisIied when the parties
are aIIorded Iair and reasonable opportunity to explain their side oI the
controversy at hand. What is Irowned upon is the absolute lack oI
notice or hearing.chanroblesvirtualawlib rary
Second, private respondents imputed the patent illegality oI seizure
and IorIeiture oI the truck because the administrative oIIicers oI the
DENR allegedly have no power to perIorm these acts under the law.
They insisted that only the court is authorized to conIiscate and IorIeit
conveyances used in transporting illegal Iorest products as can be
gleaned Irom the second paragraph oI Section 68 oI P.D. 705, as
amended by E.O. 277. The pertinent provision reads as Iollows: chanroblesvirtualawli brary
SECTION 68. xxxchanroblesvirtualawl ibrary
xxxchanrob lesvirtualawlib rary
The court shall Iurther order the conIiscation in Iavor oI the
government oI the timber or any Iorest products cut, gathered,
collected, removed, or possessed, as well as the machinery,
equipments, implements and tools illegaly |sic| used in the area where
the timber or Iorest products are Iound. (Underline ours)chanroblesvirtualawlibrary
A reading, however, oI the law persuades us not to go along with
private respondents thinking not only because the aIorequoted
provision apparently does not mention nor include conveyances that
can be the subject oI conIiscation by the courts, but to a large extent,
due to the Iact that private respondents interpretation oI the subject
provision unduly restricts the clear intention oI the law and inevitably
reduces the other provision oI Section 68-A, which is quoted herein
below: chanroblesvirtualawl ibrary
SECTION 68-A. dministrative uthority of the Department or His
Duly uthori:ed Representative %o Order Confiscation. In all cases oI
violation oI this Code or other Iorest laws, rules and regulations, the
Department Head or his duly authorized representative, may order the
conIiscation oI any Iorest products illegally cut, gathered, removed, or
possessed or abandoned, and all conveyances used either by land,
water or air in the commission oI the oIIense and to dispose oI the
same in accordance with pertinent laws, regulations and policies on the
matter. (Underline ours)chanroblesvirtualawlibrary
It is, thus, clear Irom the Ioregoing provision that the Secretary and his
duly authorized representatives are given the authority to conIiscate
and IorIeit any conveyances utilized in violating the Code or other
Iorest laws, rules and regulations. The phrase to dispose oI the same is
broad enough to cover the act oI IorIeiting conveyances in Iavor oI the
government. The only limitation is that it should be made in
accordance with pertinent laws, regulations or policies on the matter.
In the construction oI statutes, it must be read in such a way as to give
eIIect to the purpose projected in the statute.|33| Statutes should be
construed in the light oI the object to be achieved and the evil or
mischieI to be suppressed, and they should be given such construction
as will advance the object, suppress the mischieI, and secure the
beneIits intended.|34| In this wise, the observation oI the Solicitor
General is signiIicant, thus: chanroblesvirtualawlibrary
But precisely because oI the need to make Iorestry laws more
responsive to present situations and realities and in view oI the
urgency to conserve the remaining resources oI the country, that the
government opted to add Section 68-A. This amendatory provision is
an administrative remedy totally separate and distinct Irom criminal
proceedings. More than anything else, it is intended to supplant the
inadequacies that characterize enIorcement oI Iorestry laws through
criminal actions. The preamble oI EO 277-the law that added Section
68-A to PD 705-is most revealing:chanro blesvirtualawlib rary
WHEREAS, there is an urgency to conserve the remaining Iorest
resources oI the country Ior the beneIit and welIare oI the present and
Iuture generations oI Filipinos;chanroblesvirt ualawlibrar y
WHEREAS, our Iorest resources may be eIIectively conserved and
protected through the vigilant enIorcement and implementation oI our
Iorestry laws, rules and regulations;chanrob lesvirtualawlib rary
WHEREAS, the implementation oI our Iorestry laws suIIers Irom
technical diIIiculties, due to certain inadequacies in the penal
provisions oI the Revised Forestry Code oI the Philippines; andchanroblesvi rtualawlibra ry
WHEREAS, to overcome this diIIiculties, there is a need to penalize
certain acts more responsive to present situations and realities;chanroblesvirt ualawlibrary
It is interesting to note that Section 68-A is a new provision
authorizing the DENR to conIiscate, not only conveyances, but Iorest
products as well. On the other hand, conIiscation oI Iorest products by
the court in a criminal action has long been provided Ior in Section 68.
II as private respondents insist, the power on conIiscation cannot be
exercised except only through the court under Section 68, then Section
68-A would have no purpose at all. Simply put, Section 68-A would
not have provided any solution to the problem perceived in EO 277,
supra.|35| chanroblesvirtualawlibrary
Private respondents, likewise, contend that the seizure was illegal
because the petitioners themselves admitted in the Order dated July 12,
1989 oI Executive Director Baggayan that the truck oI private
respondents was not used in the commission oI the crime. This order, a
copy oI which was given to and received by the counsel oI private
respondents, reads in part, vi:. :chanroblesvirtualawlibrary
xxx while it is true that the truck oI your client was not used by her in
the commission oI the crime, we uphold your claim that the truck
owner is not liable Ior the crime and in no case could a criminal case
be Iiled against her as provided under Article 309 and 310 oI the
Revised Penal Code. xxx|36|chanroblesvirtuallawlibrary
chanroblesvirtualawlib rary
We observed that private respondents misread the content oI the
aIorestated order and obviously misinterpreted the intention oI
petitioners. What is contemplated by the petitioners when they stated
that the truck "was not used in the commission oI the crime" is that it
was not used in the commission oI the crime oI theIt, hence, in no case
can a criminal action be Iiled against the owner thereoI Ior violation oI
Article 309 and 310 oI the Revised Penal Code. Petitioners did not
eliminate the possibility that the truck was being used in the
commission oI another crime, that is, the breach oI Section 68 oI
P.D.705 as amended by E.O. 277. In the same order oI July 12, 1989,
petitioners pointed out: chanroblesvirtualawlibrary
xxx However, under Section 68 oI P.D.705 as amended and Iurther
amended by Executive Order No.277 speciIically provides Ior the
conIiscation oI the conveyance used in the transport oI Iorest products
not covered by the required legal documents. She may not have been
involved in the cutting and gathering oI the product in question but the
Iact that she accepted the goods Ior a Iee or Iare the same is thereIor
liable. xxx|37|chanroblesvirtuallawlibrary
chanroblesvirtualawlib rary
Private respondents, however, contended that there is no crime deIined
and punishable under Section 68 other than qualiIied theIt, so that,
when petitioners admitted in the July 12, 1989 order that private
respondents could not be charged Ior theIt as provided Ior under
Articles 309 and 310 oI the Revised Penal Code, then necessarily
private respondents could not have committed an act constituting a
crime under Section 68. We disagree. For clarity, the provision oI
Section 68 oI P.D. 705 beIore its amendment by E.O. 277 and the
provision oI Section 1 oI E.O. No.277 amending the aIorementioned
Section 68 are reproduced herein, thus: chanroblesvirtualawlibrary
SECTION 68. Cuttin, atherin and/or collectin timber or other
products without license. - Any person who shall cut, gather, collect,
or remove timber or other Iorest products Irom any Iorest land, or
timber Irom alienable and disposable public lands, or Irom private
lands, without any authority under a license agreement, lease, license
or permit, shall be guilty oI qualiIied theIt as deIined and punished
under Articles 309 and 310 oI the Revised Penal Code xxx.
(Underscoring ours; Section 68, P.D.705 beIore its amendment by
E.O.277 )chanroblesvirtualawlibrary
SECTION 1. Section 68 oI Presidential Decree No.705, as amended, is
hereby amended to read as Iollows:chan roblesvirtualawli brary
Section 68. Cuttin, atherin and/or collectin timber or other forest
products without license. -Any person who shall cut, gather, collect,
remove timber or other Iorest products Irom any Iorest land, or timber
Irom alienable or disposable public land, or Irom private land, without
any authority, or possess timber or other Iorest products without the
legal documents as required under existing Iorest laws and regulations,
shall be punished with the penalties imposed under Articles 309 and
310 oI the Revised Penal Code xxx." (Underscoring ours; Section 1,
E.O No. 277 amending Section 68, P.D. 705 as amended) chanroblesvirtualawl ibrary
With the introduction oI Executive Order No. 277 amending Section
68 oI P.D. 705, the act oI cutting, gathering, collecting, removing, or
possessing Iorest products without authority constitutes a distinct
oIIense independent now Irom the crime oI theIt under Articles 309
and 310 oI the Revised Penal Code, but the penalty to be imposed is
that provided Ior under Article 309 and 310 oI the Revised Penal
Code. This is clear Irom the language oI Executive Order No. 277
when it eliminated the phrase shall be guilty oI qualiIied theIt as
deIined and punished under Articles 309 and 310 oI the Revised Penal
Code and inserted the words shall be punished with the penalties
imposed under Article 309 and 310 oI the Revised Penal Code. When
the statute is clear and explicit, there is hardly room Ior any extended
court ratiocination or rationalization oI the law.|38|chanroblesvirtuallawlibrary
chanroblesvirtualawlib rary
From the Ioregoing disquisition, it is clear that a suit Ior replevin can
not be sustained against the petitioners Ior the subject truck taken and
retained by them Ior administrative IorIeiture proceedings in pursuant
to Section 68-A oI the P. D. 705, as amended. Dismissal oI the
replevin suit Ior lack oI cause oI action in view oI the private
respondents Iailure to exhaust administrative remedies should have
been the proper course oI action by the lower court instead oI
assuming jurisdiction over the case and consequently issuing the writ
ordering the return oI the truck. Exhaustion oI the remedies in the
administrative Iorum, being a condition precedent prior to ones
recourse to the courts and more importantly, being an element oI
private respondents right oI action, is too signiIicant to be waylaid by
the lower court. chanroblesvirtualawlibrary
It is worth stressing at this point, that a suit Ior replevin is Iounded
solely on the claim that the deIendant wrongIully withholds the
property sought to be recovered. It lies to recover possession oI
personal chattels that are unlawIully detained.|39| To detain is deIined
as to mean to hold or keep in custody,|40| and it has been held that
there is tortuous taking whenever there is an unlawIul meddling with
the property, or an exercise or claim oI dominion over it, without any
pretense oI authority or right; this, without manual seizing oI the
property is suIIicient.|41| Under the Rules oI Court, it is indispensable
in replevin proceedings, that the plaintiII must show by his own
aIIidavit that he is entitled to the possession oI property, that the
property is wrongIully detained by the deIendant, alleging the cause oI
detention, that the same has not been taken Ior tax assessment, or
seized under execution, or attachment, or iI so seized, that it is exempt
Irom such seizure, and the actual value oI the property.|42| Private
respondents miserably Iailed to convince this Court that a wrongIul
detention oI the subject truck obtains in the instant case. It should be
noted that the truck was seized by the petitioners because it was
transporting Iorest products with out the required permit oI the DENR
in maniIest contravention oI Section 68 oI P.D. 705 as amended by
E.O 277. Section 68-A oI P.D. 705, as amended, unquestionably
warrants the conIiscation as well as the disposition by the Secretary oI
DENR or his duly authorized representatives oI the conveyances used
in violating the provision oI Iorestry laws. Evidently, the continued
possession or detention oI the truck by the petitioners Ior
administrative IorIeiture proceeding is legally permissible, hence, no
wrongIul detention exists in the case at bar. chanroblesvirtualawlibrary
Moreover, the suit Ior replevin is never intended as a procedural tool
to question the orders oI conIiscation and IorIeiture issued by the
DENR in pursuance to the authority given under P.D.705, as amended.
Section 8 oI the said law is explicit that actions taken by the Director
oI the Bureau oI Forest Development concerning the enIorcement oI
the provisions oI the said law are subject to review by the Secretary oI
DENR and that courts may not review the decisions oI the Secretary
except through a special civil action Ior certiorari or prohibition. It
reads : chanroblesvirtualawlibrary
SECTION 8. REVIEW - All actions and decisions oI the Director are
subject to review, motu propio or upon appeal oI any person aggrieved
thereby, by the Department Head whose decision shall be Iinal and
executory aIter the lapse oI thirty (30) days Irom the receipt oI the
aggrieved party oI said decision, unless appealed to the President in
accordance with Executive Order No. 19, Series oI 1966. The Decision
oI the Department Head may not be reviewed by the courts except
through a special civil action Ior certiorari or prohibition.chanroblesvirtualawlib rary
WHEREFORE, the Petition is GRANTED; the Decision oI the
respondent Court oI Appeals dated October 16, 1991 and its
Resolution dated July 14, 1992 are hereby SET ASIDE AND
REVERSED; the Restraining Order promulgated on September 27,
1993 is hereby made permanent; and the Secretary oI DENR is
directed to resolve the controversy with utmost dispatch. chanroblesvirtualawlibrary
SO ORDERED.chanroblesvirtualawlibrar y
Regalado (Chairman) Romero Puno and Mendoza concur




G.R. No. 132767. 1anuary 18, 2000] chanrobles virtual law libra ry
PHILIPPINE VETERANS BANK, Petitioner vs THE
HON. COURT OF APPEALS, HON. SECRETARY OF
THE DEPT. OF AGRARIAN REFORM, DEPT. OF
AGRARIAN REFORM AD1UDICATION BOARD,
DAVAO CITY and LAND BANK OF THE
PHILIPPINES, Respondents.
D E C I S I O N chanrobles virtual law library
MENDOZA, .: chanrobles virtual law library
This is a petition Ior review oI the decision oI the Court oI Appeals,|1|
dated August 28, 1997, aIIirming the dismissal by the Regional Trial
Court, Branch 2, Tagum, Davao, oI the petition Ior judicial
determination oI the just compensation Iiled by petitioner Ior the
taking oI its property under the Comprehensive Agrarian ReIorm
Program. chanrobles vir tual law lib rary
The Iacts are as Iollows: chanrobles vir tual law lib rary
Petitioner Philippine Veterans Bank owned Iour parcels oI land in
Tagum, Davao, which are covered by TransIer CertiIicates oI Title
Nos. T-38666, T-38667, T-6236, and T-27591. The lands were taken
by the Department oI Agrarian ReIorm Ior distribution to landless
Iarmers pursuant to the Comprehensive Agrarian ReIorm Law (R.A.
No. 6657). DissatisIied with the valuation oI the land made by
respondents Land Bank oI the Philippines and the Department oI
Agrarian ReIorm Adjudication Board (DARAB), petitioner Iiled a
petition Ior a determination oI the just compensation Ior its property.
The petition was Iiled on January 26, 1994 with the Regional Trial
Court, Branch 2, Tagum, Davao, which on February 23, 1995,
dismissed the petition on the ground that it was Iiled beyond the 15-
day reglementary period Ior Iiling appeals Irom the orders oI the
DARAB. Its order|2| states in pertinent parts:
Since this case was Iiled only on January 26, 1994, the
IiIteen-day period provided Ior under Section 51 oI
Republic Act 6657 which is the Comprehensive
Agrarian ReIorm Law within which to appeal, already
lapsed.
Section 51 oI Republic Act No. 6657 provides:
Section 51. Finality oI Determination. -
Any case or controversy beIore it (DAR)
shall be decided within thirty (30) days
aIter it is submitted Ior resolution. Only
one (1) motion Ior reconsideration shall
be allowed. Any order, ruling or decision
shall be Iinal aIter the lapse oI IiIteen
(15) days Irom receipt oI a copy thereoI.
chanrobles virtual law lib rary
On appeal to the Court oI Appeals, the decision was aIIirmed. It was
held that:
Jurisdiction over land valuation cases is lodged in the
Department oI Agrarian ReIorm Adjudication Board, as
is plainly provided under Rule II oI the DARAB
Revised Rules oI Procedure. Jksm
Section 1. Primary and Exclusive
Oriinal and ppellate Jurisdiction. The
Board shall have primary and exclusive
jurisdiction, both original and appellate,
to determine and adjudicate all agrarian
disputes, involving the implementation
oI the Comprehensive Agrarian ReIorm
Program (CARP) under Republic Act
No. 6657, Executive Order Nos. 228,
229, and 129-A, Republic Act No. 3844
as amended by Republic Act No. 6389,
Presidential Decree No. 27 and other
agrarian laws and their implementing
rules and regulations. SpeciIically, such
jurisdiction shall include but not be
limited to the Iollowing:
. . . .
b) The valuation oI land, and
determination and payment oI just
compensation, Iixing and collection oI
lease rentals, disturbance compensation,
amortization payments, and similar
disputes concerning the Iunctions oI the
Land Bank oI the Philippines.
. . . .
The above provision does not negate the original and
exclusive jurisdiction vested in Special Agrarian Court
over all petitions Ior the determination oI just
compensation to landowners as provided in Section 51
oI R.A. 6657.
Note, however, must be taken oI Rule XIII, Section 11
oI the DARAB Rules oI Procedure, which speciIically
states that,
The decision oI the Adjudicator on land
valuation and preliminary determination
and payment oI just compensation shall
not be appealable to the Board but shall
be brought directly to the Regional Trial
Court designated as Special Agrarian
Courts within IiIteen (15) days Irom
receipt oI the notice thereoI. Any party
shall be entitled to only one motion Ior
reconsideration.
. . . .
In pursuance thereoI, it is clear that the right oI a
landowner who disagrees with the valuation Iixed by
the DAR to Iile a petition Ior the judicial Iixing oI just
compensation beIore special agrarian courts must be
exercised within the period provided in Rule XIII,
Section 11.
In this case, appellant neither gives inIormation
regarding the date oI its receipt oI the questioned Order
oI the DAR Provincial Adjudicator, nor disputes the
conclusion made by the trial court that, "(s)ince this
case was Iiled only on January 26, 1994, the IiIteen-day
period provided Ior under Section 51 oI Republic Act
6657 which is the Comprehensive Agrarian ReIorm
Law within which to appeal already lapsed". The court
a quos conclusion thereIore stands. It did not commit an
error in dismissing the petition Iiled by Philippine
Veterans Bank Ior having been Iiled out oI time.|3| Esmsc
chanrobles virtual law lib rary
Petitioner Iiled a motion Ior reconsideration, but its motion was
likewise denied. Hence, this petition Ior review. Petitioner raises the
Iollowing issue:
SHOULD A PETITION FOR THE JUDICIAL
FIXING OF JUST COMPENSATION BEFORE
SPECIAL AGRARIAN COURT BE |FILED| WITHIN
THE PERIOD PROVIDED IN RULE XIII, SECTION
11 OF THE DARAB RULES OF PROCEDURE AND
BEFORE THE DECISION OF THE DAR
PROVINCIAL ADJUDICATOR BECOMES FINAL
AND EXECUTORY?chanrobles vir tual law lib rary
Petitioner argues that DAR adjudicators have no jurisdiction to
determine the just compensation Ior the taking oI lands under the
Comprehensive Agrarian ReIorm Program, because such jurisdiction
is vested in Regional Trial Courts designated as Special Agrarian
Courts and, thereIore, a petition Ior the Iixing oI just compensation can
be Iiled beyond the 15-day period oI appeal provided Irom the
decision oI the DAR adjudicator. chanrobles virtual law library
On the other hand, respondents argue that actions Ior the Iixing oI just
compensation must be Iiled in the appropriate courts within 15 days
Irom receipt oI the decision oI the DAR adjudicator, otherwise such
decision becomes Iinal and executory, pursuant to 51 oI R.A. No.
6657. chanrobles virtual law libra ry
Petitioners contention has no merit. chanrobles virtual law libra ry
The pertinent provisions oI R.A. No. 6657 provides:
Sec. 50. Quasi-Judicial Power of the DR. - The DAR
is hereby vested with primary jurisdiction to determine
and adjudicate agrarian reIorm matters and shall have
exclusive original jurisdiction over all matters involving
the implementation oI agrarian reIorm, except those
Ialling under the exclusive jurisdiction oI the
Department oI Agriculture (DA) and the Department oI
Environment and Natural Resources (DENR) . . . .
Sec. 57. Special Jurisdiction. - The Special Agrarian
Courts shall have original and exclusive jurisdiction
over all petitions Ior the determination oI just
compensation to landowners, and the prosecution oI all
criminal oIIenses under this Act. The Rules oI Court
shall apply to all proceedings beIore the Special
Agrarian Courts, unless modiIied by this Act.
The Special Agrarian Courts shall decide all
appropriate cases under their special jurisdiction within
thirty (30) days Irom submission oI the case Ior
decision. Esmmis chan robles virtual law librar y
There is nothing contradictory between the provision oI 50 granting
the DAR primary jurisdiction to determine and adjudicate "agrarian
reIorm matters" and exclusive original jurisdiction over "all matters
involving the implementation oI agrarian reIorm," which includes the
determination oI questions oI just compensation, and the provision oI
57 granting Regional Trial Courts "original and exclusive jurisdiction"
over (1) all petitions Ior the determination oI just compensation to
landowner, and (2) prosecutions oI criminal oIIenses under R.A. No.
6657.|4| The Iirst reIers to administrative proceedings, while the
second reIers to judicial proceedings. Under R.A. No. 6657, the Land
Bank oI the Philippines is charged with the preliminary determination
oI the value oI lands placed under land reIorm program and the
compensation to be paid Ior their taking. It initiates the acquisition oI
agricultural lands by notiIying the landowner oI the governments
intention to acquire his land and the valuation oI the same as
determined by the Land Bank.|5| Within 30 days Irom receipt oI notice,
the landowner shall inIorm the DAR oI his acceptance or rejection oI
the oIIer.|6| In the event the landowner rejects the oIIer, a summary
administrative proceeding is held by the provincial (PARAD), the
regional (RARAD) or the central (DARAB) adjudicator, as the case
may be, depending on the value oI the land, Ior the purpose oI
determining the compensation Ior the land. The landowner, the Land
Bank, and other interested parties are then required to submit evidence
as to the just compensation Ior the land. The DAR adjudicator decides
the case within 30 days aIter it is submitted Ior decision.|7| II the
landowner Iinds the price unsatisIactory, he may bring the matter
directly to the appropriate Regional Trial Court.|8| chanrobles virtual law libra ry
To implement the provisions oI R.A. No. 6657, particularly 50 thereoI,
Rule XIII, 11 oI the DARAB Rules oI Procedure provides:
Land Jaluation and Preliminary Determination and
Payment of Just Compensation. - The decision oI the
Adjudicator on land valuation and preliminary
determination and payment oI just compensation shall
not be appealable to the Board but shall be brought
directly to the Regional Trial Courts designated as
Special Agrarian Courts within IiIteen (15) days Irom
receipt oI the notice thereoI. Any party shall be entitled
to only one motion Ior reconsideration. ChieI chanrobles virtual law li brary
As we held in Republic v. Court of ppeals,|9| this rule is an
acknowledgment by the DARAB that the power to decide just
compensation cases Ior the taking oI lands under R.A. No. 6657 is
vested in the courts. It is error to think that, because oI Rule XIII, 11,
the original and exclusive jurisdiction given to the courts to decide
petitions Ior determination oI just compensation has thereby been
transIormed into an appellate jurisdiction. It only means that, in
accordance with settled principles oI administrative law, primary
jurisdiction is vested in the DAR as an administrative agency to
determine in a preliminary manner the reasonable compensation to be
paid Ior the lands taken under the Comprehensive Agrarian ReIorm
Program, but such determination is subject to challenge in the courts. chanrobles virtual law
library
The jurisdiction oI the Regional Trial Courts is not any less "original
and exclusive" because the question is Iirst passed upon by the DAR,
as the judicial proceedings are not a continuation oI the administrative
determination. For that matter, the law may provide that the decision
oI the DAR is Iinal and unappealable. Nevertheless, resort to the
courts cannot be Ioreclosed on the theory that courts are the guarantors
oI the legality oI administrative action.|10| chanrobles virtual law librar y
Accordingly, as the petition in the Regional Trial Court was Iiled
beyond the 15-day period provided in Rule XIII, 11 oI the Rules oI
Procedure oI the DARAB, the trial court correctly dismissed the case
and the Court oI Appeals correctly aIIirmed the order oI dismissal. chanro bles virtual law li brary
WHEREFORE, the decision oI the Court oI Appeals is AFFIRMED. chanrobles
virtual law lib rary
SO ORDERED. chanrobles virtual law lib rary
Bellosillo, (Chairman), Quisumbin, Buena, and De Leon, Jr., JJ.,
concur.''























THIRD DIVISION
SALVADOR A. PLEYTO,
Petitioner,
- versus-
PHILIPPINE NATIONAL
POLICE CRIMINAL
INVESTIGATION AND
DETECTION GROUP
(PNP-CIDG),
Respondent.
G.R. No. 169982
Present:
YNARES-SANTIAGO,
J.
Chairperson,
AUSTRIA-
MARTINEZ,
CORONA,*
CHICO-NAZARIO,
and
REYES, JJ.
Promulgated:
November 23, 2007
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- -x
D E C I S I O N
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on
Certiorari[1] under Rule 45 of the Rules of Court,
assailing the dismissal from service of petitioner
Salvador A. Pleyto after being found guilty of grave
misconduct and dishonesty by the Office of the
Ombudsman in its Decision,[2] dated 27 May 2004, in
OMB-C-A-03-0347-I, affirmed by the Court of Appeals
in its Decision,[3] dated 20 July 2005, in CA-G.R. SP
No. 87086.
The present Petition stems from a Complaint,[4] dated
28 July 2003, filed by respondent Philippine National
Police-Criminal Investigation and Detection Group (PNP-
CIDG), through its Director, Eduardo S. Matillano, with
the Office of the Ombudsman, which charges petitioner
and the rest of his family as follows:
The undersigned Director of the PNP Criminal
Investigation and Detection Group is hereby filing
complaints for 'iolation of RA 1379 (An Act
Declaring Forfeiture in favor of the State any
property found to have been unlawfully acquired
by any public officer) in relation to Section 8, RA
3019 (Anti-Graft and Corrupt Practices Act, as
amended, Section 8(a) of RA 6713, (Code of
Ethical Standard for Public official and employee)
and Section 7 of RA 3019 (Statement of Assets
and iabilities) and for violation of Article 171 para
4, RPC (Perjury/Falsification of Public Official
Documents) against the following:
1. USEC SV# . PEY%- # 1 May Street,
Congressional Village, Quezon City;
2. MIGUE PEY% (Wife)- # 1 May Street,
Congressional Village, Quezon City;
3. SV# G. PEY%, J#.,- # 1 May Street,
Congressional Village, Quezon City;
4. M#Y G#CE PE%Y- # 1 May Street,
Congressional Village, Quezon City; and
5. #USSE PEY%- 64 P. Santiago Street, Sta. Maria,
Bulacan.[5]
The said Complaint was based on the
investigation/inquiry on the alleged lavish lifestyle and
nefarious activities of certain personnel of the
Department of Public Works and Highways (DPWH)
conducted by a team, composed of Atty. Virgilio T.
Pablico (Atty. Pablico) and Crime Investigator II
Dominador D. Ellazar, Jr. (Investigator Ellazar, Jr.) of
the PNP-CIDG, together with investigating officers from
other government agencies. Petitioner, then serving
as a DPWH Undersecretary, was one of the subjects of
the investigating team since he reportedly amassed
unexplained wealth. Investigating officers, Atty.
Pablico and Investigator Ellazar, Jr., executed a Joint
Affidavit,[6] essentially stating that: (1) petitioner and
the rest of his family accumulated numerous real
properties in Bulacan, other than their newly renovated
residence in Quezon City; (2) petitioner did not honestly
fill out his Statements of Assets and Liabilities and
Networth (SALNs) for the years 2001 and 2002 for he
failed to declare therein all of his and his wifeCs real
and personal properties, the true value thereof, and
their business interests; (3) petitioner and his family
also took frequent foreign trips from 1993 to 2002; and
(4) the properties and foreign trips of petitioner and his
family are grossly disproportionate to petitionerCs
income.
The Investigating Panel from the Preliminary
Investigation and Administrative Adjudication Bureau A
(PIAB-A) of the Office of the Ombudsman, tasked to
evaluate the Complaint against petitioner and his
family, issued a Report on 9 September 2003,
recommending that the said Complaint be docketed as
separate administrative and criminal cases. Pursuant
thereto, the administrative complaint was docketed as
OMB-C-A-03-0347-1, while the criminal complaint
was docketed as OMB-C-C-03-05130-1. It is the
administrative complaint, OMB-C-A-03-0347-1, for
grave misconduct and dishonesty, which presently
concerns this Court.[7]
In its initial evaluation of the Cnumerous pieces of
evidenceCl which were attached to the Complaint, the
Office of the Ombudsman, in its Order, dated 25
September 2003,[8] found that the evidence warranted
the preventive suspension of petitioner for six months
without pay pending the conduct of the administrative
proceedings against him. The said Preventive
Suspension Order shall be deemed immediately
effective and executory. The petitioner filed with the
Court of Appeals CA-G.R. SP No. 79516, a Petition for
Certiorari under Rule 65 of the Rules of Court, praying
for the nullification of the Preventive Suspension Order
issued by the Office of the Ombudsman. However, the
said Preventive Suspension Order had already lapsed
even before the Court of Appeals could resolve the
Petition in CA-G.R. SP No. 79516, thus, rendering the
same moot and academic.
In the meantime, petitioner, his wife, and his children
filed their respective Counter-Affidavits and
Supplemental Affidavits before the Office of the
Ombudsman, presenting the following defenses: (1)
petitioner admits ownership of the real properties
identified in the Complaint but alleges that they were
acquired by way of foreclosure or dacion en pago in the
course of his wifeCs lending business in Sta. Maria,
Bulacan; (2) petitioner is not solely dependent on his
salary since his wife has been operating several
businesses in Bulacan, including lending, piggery, and
pawnshop, for the last 25 years; (3) his children are not
financially dependent on petitioner and his wife, but are
full-fledged entrepreneurs and professionals; and (4)
the computation of their travel expenses is exaggerated
and inaccurate since most of petitionerCs trips were
sponsored by foreign and local organizations, his
wifeCs trips were promotional travel packages to
Asian destinations, and his childrenCs trips were at
their own expense.
On 28 June 2004, the Office of the Ombudsman
promulgated its Decision[9] in OMB-C-A-03-0347-I,
dismissing petitioner from service. The dispositive
portion of said Decision reads C"
HEREFORE, premises considered, respondent
SALVADOR A. PLEYTO, is hereby found guilty of
GRAVE MISCONDUCT and DISHONESTY and is meted
the penalty of DISMISSAL FROM THE SERVICE with
cancellation oI eligibility, IorIeiture oI retirement beneIits, and the
perpetual disqualiIication Ior reemployment in the government service.
The Honorable Secretary, Department of Public Works
and Highways, Port Area, Manila, is hereby directed to
implement this Order immediately upon receipt hereof
and to promptly inform this Office of compliance
therewith.[10]
PetitionerCs Motion for Reconsideration was denied
by the Office of the Ombudsman in an Order[11] dated
12 October 2004.
Petitioner then assailed before the Court of Appeals the
Decision, dated 28 June 2004, and Order, dated 12
October 2004, of the Office of the Ombudsman in OMB-
C-A-03-0347-I by filing a Petition for Review under Rule
43 of the Rules of Court with Prayer for Temporary
Restraining Order and/or Writ of Preliminary Injunction,
docketed as CA-G.R. SP No. 87086. Petitioner prayed
to the appellate court that:
1. Upon filing of the petition, a Temporary
Restraining Order and/or rit of Preliminary
Injunction be immediately issued directing the
Office of the Ombudsman, its officials and agents, or
persons acting for and on it [sic] behalf, including the
Secretary of the Department of Public Works and
Highways from implementing the assailed Decision of
the Ombudsman dated 28 June 2004 and its Order
dated 12 October 2004.
2. After hearing on the merits, that judgment
be rendered nullifying the assailed Decision of the
Ombudsman dated June 28, 2004 and Order dated
October 12, 2004 in OMB-C-A-03-0347-I.
Other relief and remedies just and equitable under the
premises are likewise prayed for.[12]
On 5 November 2004, the Court of Appeals issued a
Temporary Restraining Order against the
implementation of the assailed Decision of the Office of
the Ombudsman dismissing petitioner from service and
directed the PNP-CIDG, the named respondent in
petitionerCs Petition for Review, to file its Comment
thereto.
The Office of the Solicitor General (OSG), on behalf of
the PNP-CIDG, requested an extension of 30 days, or
until 28 December 2004, within which to file its
Comment on the Petition.
However, even before the OSG could file its Comment,
the Office of the Ombudsman filed its own Comment
(with Motions to Intervene; Admit Comment; and Recall
Temporary Restraining Order) on 29 December 2004. It
sought leave from the Court of Appeals to adduce
pertinent facts and arguments to show that it acted
with due process and impartiality, and relied only on the
evidence on record in adjudging petitioner guilty of
grave misconduct and dishonesty. The Office of the
Ombudsman insisted that it has been shown by
overwhelming evidence, as well as by petitionerCs
own admissions in his counter-affidavit and other
pleadings before the Office of the Ombudsman and his
Petition before the Court of Appeals, that petitioner
committed gross dishonesty for amassing wealth
grossly disproportionate to his known lawful income,
and refusing to fully declare many of his other
properties. Hence, the Office of the Ombudsman
submits that the administrative penalty of dismissal
from the service imposed on petitioner stands on solid
legal and factual grounds, which should be accorded
weight and respect, if not finality, by the appellate
court.
Petitioner promptly filed a Reply d Cautelam (To
OmbudsmanCs Comment) with Supplemental Plea.
In addition to opposing the intervention of the Office of
the Ombudsman in CA-G.R. SP No. 87086, petitioner
also addressed the arguments presented by the Office
of the Ombudsman in its Comment on the propriety of
his dismissal from service. He avers that he has
adequately controverted by clear and convincing
evidence the unsubstantiated charges against him.
Petitioner thus pleads anew for the immediate and
urgent grant of his prayer for a writ of preliminary
injunction to enjoin the execution of the order of
dismissal of the Office of the Ombudsman.
On 26 January 2005, the Court of Appeals issued a
Resolution admitting the Comment of the Office of the
Ombudsman, again directing the OSG to file its
Comment on the Petition on behalf of PNP-CIDG, and
submitting for resolution petitionerCs application for
the issuance of a writ of preliminary injunction. The
OSG, representing the PNP-CIDG, eventually filed its
Comment on 31 January 2005.
Finding that the execution of the judgment of dismissal
from service of petitioner pending his appeal thereof
would possibly work injustice to petitioner, or tend to
render the judgment on his appeal ineffectual, the
Court of Appeals issued a Resolution[13] on 1 March
2005 granting the writ of preliminary injunction, thus,
ordering the Office of the Ombudsman and all persons
action on its behalf from implementing its assailed
Decision, dated 28 June 2004, and Order, dated 12
October 2004, pending final determination of CA-G.R.
SP No. 87086. The appellate court further directed
the parties to submit their memoranda.
Petitioner and the Office of the Ombudsman filed their
respective Memoranda, while the OSG manifested that
it was adopting its Comment and the Comment of the
Office of the Ombudsman on the Petition as its
Memorandum.
On 20 July 2005, the Court of Appeals promulgated its
Decision in CA-G.R. SP No. 87086, dismissing the
Petition and affirming the dismissal from the service of
petitioner as adjudged by the Office of the
Ombudsman. It summed up its findings thus:
To repeat, the administrative liabilities of the petitioner
proven by substantial evidence is his failure to file a
truthful and accurate SALN and possession of assets
manifestly out of proportion of (sic) his legitimate
income. Either one is legal basis for dismissal or
removal from office. As a final recourse, the petitioner
asks for the chance to correct his SALN before he
should be held administratively liable. The
Ombudsman ripostes that this would be a mockery of
the law, saying that the SALN is not a misdeclare-first-
and correct-if-caught instrument, but a full and solemn
recording under oath of al (sic) the items required to be
reported. Ipse dixit.
IN VIEW OF THE FOREGOING, the decision appealed
from is AFFIRMED, and the petition DISMISSED. The
writ of preliminary injunction is LIFTED.[14]
The Co





























THIRD DIVISION
G.R. No. 139813. 1anuary 31, 2001]
1OELBITO-ONON, Petitioner vs HON. 1UDGE NELIA YAP
FERNANDEZ, R.T.C. Br. 50 Puerto Princesa City and Palawan,
and ELEGIO QUE1ANO, 1R., Respondents.
D E C I S I O N
GONZAGA-REYES, .: chanroblesvirtuallawlibrary
This Petition Ior Certiorari and Prohibition with prayer Ior the
issuance oI a temporary restraining order and writ oI injunction seeks
the reversal oI the Order oI the Regional Trial Court oI Palawan and
Puerto Princesa City, |1| Branch 50 in SPL. PROC. NO. 1056 entitled
Elegio F. Quejano, Jr., petitioner vs. Joel Bito-Onon, et. al.,
respondents which denied herein petitioners motion to dismiss the
Petition Ior Review oI the Resolution oI the Board oI Election
Supervisors dated August 25, 1997 in case number L-10-97 Iiled by
herein private respondent with said court. chanroblesvirtuallawlibrary
It appears Irom the records that the petitioner, Joel Bito-Onon is the
duly elected Barangay Chairman oI Barangay Tacras, Narra, Palawan
and is the Municipal Liga Chapter President Ior the Municipality oI
Narra, Palawan. The private respondent, Elegio Quejano, Jr. on the
other hand, is the duly elected Barangay Chairman oI Barangay Rizal,
Magsaysay, Palawan and is the Municipal Liga Chapter President Ior
the Municipality oI Magsaysay, Palawan. Both Onon and Quejano
were candidates Ior the position oI Executive Vice-President in the
August 23, 1997 election Ior the Liga ng Barangay Provincial Chapter
oI the province oI Palawan. Onon was proclaimed the winning
candidate in the said election prompting Quejano to Iile a post
proclamation protest with the Board oI Election Supervisors (BES),
which was decided against him on August 25, 1997. chanroblesvirtuallawlibrary
Not satisIied with the decision oI the BES, Quejano Iiled a Petition Ior
Review oI the decision oI the BES with the Regional Trial Court oI
Palawan and Puerto Princesa City (RTC). On April 26, 1999, Onon
Iiled a motion to dismiss the Petition Ior Review raising the issue oI
jurisdiction. Onon claimed that the RTC had no jurisdiction to review
the decisions rendered by the BES in any post proclamation electoral
protest in connection with the 1997 Liga ng mga Barangay election oI
oIIicers and directors. In his motion to dismiss, Onon claimed that the
Supplemental Guidelines Ior the 1997 Liga ng mga Barangay election
issued by the DILG on August 11, 1997 in its Memorandum Circular
No. 97-193, providing Ior review oI decisions or resolutions oI the
BES by the regular courts oI law is an ultra vires act and is void Ior
being issued without or in excess oI jurisdiction, as its issuance is not a
mere act oI supervision but rather an exercise oI control over the Ligas
internal organization. chanroblesvirtuallawlibrary
On June 22, 1999, the RTC denied Onons motion to dismiss. In its
order, the RTC ratiocinated that the Secretary oI the Department oI
Interior and Local Government |2| is vested with the power to
establish and prescribe rules, regulations and other issuances and
implementing laws on the general supervision oI local government
units and the promotion oI local autonomy and monitor compliance
thereoI by said units. |3| The RTC added that DILG Circular No. 97-
193 was issued by the DILG Secretary pursuant to his rule-making
power as provided Ior under Section 7, Chapter II, Book IV oI the
Administrative Code. |4| Consequently, the RTC ruled that it had
jurisdiction over the petition Ior review Iiled by Quejada. |5|
chanroblesvirtuallawlibrary
Motion Ior reconsideration oI the aIoresaid Order was denied |6|
prompting the petitioner to Iile the present petition wherein the
Iollowing issues are raised: chanroblesvirtuallawlibrary
A. WHETHER OR NOT THE QUESTIONED PROVISION
IN MEMORANDUM CIRCULAR 97-193 WAS ISSUED BY
THE DILG SECRETARY IN EXCESS OF HIS
AUTHORITY.chanroblesvirtuallawlibrary
B. WHETHER OR NOT THE RESPONDENT 1UDGE
COMMITTED GRAVE ABUSE OF DISCRETION IN
ISSUING THE QUESTIONED ORDERS.|7| chanroblesvirtuallawlibrary
In support oI his petition, Onon argues that the Supplemental
Guidelines Ior the 1997 Synchronized Election oI the Provincial and
Metropolitan Chapters and Ior the Election oI the National Chapter oI
the Liga ng mga Barangay contradicts the Implementing Rules and
Guidelines Ior the 1997 General Elections oI the Liga ng mga
Barangay OIIicers and Directors and is thereIore invalid. Onon alleges
that the Liga ng mga Barangay (LIGA) is not a local government unit
considering that a local government unit must have its own source oI
income, a certain number oI population, and a speciIic land area in
order to exist or be created as such. Consequently, the DILG only has
a limited supervisory authority over the LIGA. Moreover, Onon argues
that even iI the DILG has supervisory authority over the LIGA, the act
oI the DILG in issuing Memorandum Circular No. 97-193 or the
supplemental rules and guidelines Ior the conduct oI the 1997 LIGA
elections had the eIIect oI modiIying, altering and nulliIying the rules
prescribed by the National Liga Board. Onon posits that the issuance
oI said guidelines allowing an appeal oI the decision oI the BES to the
regular courts rather than to the National Liga Board is no longer an
exercise oI supervision but an exercise oI control. |8| chanroblesvirtuallawlibrary
In his comment to the petition, private respondent Quejano argues that
the Secretary oI the DILG has competent authority to issue rules and
regulations like Memorandum Circular No. 97-893. The Secretary oI
DILGs rule-making power is conIerred by the Administrative Code.
Considering that the Memorandum Circular was issued pursuant to his
rule making power, Quejano insists that the lower court did not
commit any reversible error when it denied Onons motion to dismiss.
|9| chanroblesvirtuallawlibrary
On the other hand, the public respondent represented herein by the
Solicitor General, Iiled a separate ManiIestation and Motion in Lieu oI
Comment agreeing with the position oI petitioner Onon. The Solicitor
General aIIirms Onons claim that in issuing the questioned
Memorandum Circular, the Secretary oI the DILG eIIectively
amended the rules and guidelines promulgated by National Liga
Board. This act was no longer a mere act oI supervision but one oI
control. The Solicitor General submits that the RTC committed grave
abuse oI discretion in not dismissing the petition Ior review oI the BES
decision Iiled beIore it Ior Iailure oI the petitioner to exhaust the
rightIul remedy which was to appeal to the National Liga Board. |10|
chanroblesvirtuallawlibrary
On October 27, 1999, this Court denied petitioner Onons motion Ior
the issuance oI restraining order Ior lack oI merit. chanroblesvirtuallawlibrary
AIter a careIul review oI the case, we sustain the position oI the
petitioner. chanroblesvirtuallawlibrary
The resolution oI the present controversy requires an examination oI
the questioned provision oI Memorandum Circular No. 97-193 and the
Implementing Rules and Guidelines Ior the 1997 General Elections oI
the Liga ng mga Barangay OIIicers and Directors (GUIDELINES).
The memorandum circular reads, insoIar as pertinent, as Iollows:
chanroblesvirtuallawlibrary
Any post-proclamation protest must be Iiled with the BES within
twenty-Iour (24) hours Irom the closing oI the election. The BES shall
decide the same within Iorty-eight (48) hours Irom receipt thereoI. The
decision oI the BES shall be Iinal and immediately executory without
prefudice to the filin of a Petition for Review with the reular courts
of law.|11| (emphasis supplied) chanroblesvirtuallawlibrary
On the other hand, the GUIDELINES provides that the BES shall have
the Iollowing among its duties: chanroblesvirtuallawlibrary
To resolve any post-proclamation electoral protest which must be
submitted in writing to this Board within twenty-Iour (24) hours Irom
the close oI election; provided said Board shall render its decision
within Iorty-eight (48) hours Irom receipt hereoI; and provided Iurther
that the decision must be submitted to the National Liga Headquarters
within twenty-Iour (24) hours Irom the said decision. The decision oI
the Board oI Election Supervisors in this respect shall be subfect to
review by the National Lia Board the decision of which shall be final
and executory.|12| (emphasis supplied) chanroblesvirtuallawlibrary
Memorandum Circular No. 97-193 was issued by the DILG Secretary
pursuant to the power oI general supervision oI the President over all
local government units which was delegated to the DILG Secretary by
virtue oI Administrative Order No. 267 dated February 18, 1992. |13|
The Presidents power oI general supervision over local government
units is conIerred upon him by the Constitution. |14| The power oI
supervision is deIined as the power oI a superior oIIicer to see to it that
lower oIIicers perIorm their Iunctions in accordance with law. |15|
This is distinguished Irom the power oI control or the power oI an
oIIicer to alter or modiIy or set aside what a subordinate oIIicer had
done in the perIormance oI his duties and to substitute the judgment oI
the Iormer Ior the latter. |16| chanroblesvirtuallawlibrary
On many occasions in the past, this court has had the opportunity to
distinguish the power oI supervision Irom the power oI control. In
%aule vs. Santos, |17| we held that the ChieI Executive wielded no
more authority than that oI checking whether a local government or
the oIIicers thereoI perIorm their duties as provided by statutory
enactments. He cannot interIere with local governments provided that
the same or its oIIicers act within the scope oI their authority.
Supervisory power, when contrasted with control, is the power oI mere
oversight over an inIerior body; it does not include any restraining
authority over such body. |18| OIIicers in control lay down the rules in
the doing oI an act. II they are not Iollowed, it is discretionary on his
part to order the act undone or re-done by his subordinate or he may
even decide to do it himselI. Supervision does not cover such
authority. Supervising oIIicers merely sees to it that the rules are
Iollowed, but he himselI does not lay down such rules, nor does he
have the discretion to modiIy or replace them. II the rules are not
observed, he may order the work done or re-done to conIorm to the
prescribed rules. He cannot prescribe his own manner Ior the doing oI
the act. |19| chanroblesvirtuallawlibrary
Does the Presidents power oI general supervision extend to the liga ng
mga barangay, which is not a local government unit? |20|
chanroblesvirtuallawlibrary
We rule in the aIIirmative. In Opinion No. 41, Series oI 1995, the
Department oI Justice ruled that the liga ng mga barangay is a
government organization, being an association, Iederation, league or
union created by law or by authority oI law, whose members are either
appointed or elected government oIIicials. The Local Government
Code |21| deIines the liga ng mga barangay as an organization oI all
barangays Ior the primary purpose oI determining the representation oI
the liga in the sanggunians, and Ior ventilating, articulating and
crystallizing issues aIIecting barangay government administration and
securing, through proper and legal means, solutions thereto. |22| The
liga shall have chapters at the municipal, city, provincial and
metropolitan political subdivision levels. The municipal and city
chapters oI the liga shall be composed oI the barangay representatives
oI the municipal and city barangays respectively. The duly elected
presidents oI the component municipal and city chapters shall
constitute the provincial chapter or the metropolitan political
subdivision chapter. The duly elected presidents oI highly urbanized
cities, provincial chapters, the Metropolitan Manila chapter and
metropolitan political subdivision chapters shall constitute the
National Liga ng mga Barangay. |23| chanroblesvirtuallawlibrary
The liga at the municipal, city, provincial, metropolitan political
subdivision, and national levels directly elect a president, a vice-
president and Iive (5) members oI the board oI directors. The board
shall appoint its secretary and treasurer and create such other positions
as it may deem necessary Ior the management oI the chapter. |24|
chanroblesvirtuallawlibrary
The ligas are primarily governed by the provisions oI the Local
Government Code. |25| However, their respective constitution and by-
laws shall govern all other matters aIIecting the internal organization
oI the liga not otherwise provided Ior in the Local Government Code
provided that the constitution and by-laws shall be suppletory to the
provisions oI Book III, Title VI oI the Local Government Code and
shall always conIorm to the provisions oI the Constitution and existing
laws. |26| chanroblesvirtuallawlibrary
Having in mind the Ioregoing principles, we rule that Memorandum
Circular No. 97-193 oI the DILG insoIar as it authorizes the Iiling a
Petition Ior Review oI the decision oI the BES with the regular courts
in a post proclamation electoral protest is oI doubtIul constitutionality.
We agree with both the petitioner and the Solicitor General that in
authorizing the Iiling oI the petition Ior review oI the decision oI the
BES with the regular courts, the DILG Secretary in eIIect amended
and modiIied the GUIDELINES promulgated by the National Liga
Board and adopted by the LIGA which provides that the decision oI
the BES shall be subject to review by the National Liga Board. The
amendment oI the GUIDELINES is more than an exercise oI the
power oI supervision but is an exercise oI the power oI control, which
the President does not have over the LIGA. Although the DILG is
given the power to prescribe rules, regulations and other issuances, the
Administrative Code limits its authority to merely monitoring
compliance by local government units oI such issuances. |27| To
monitor means to watch, observe or check and is compatible with the
power oI supervision oI the DILG Secretary over local governments,
which is limited to checking whether the local government unit
concerned or the oIIicers thereoI perIorm their duties as per statutory
enactments. |28| Besides, any doubt as to the power oI the DILG
Secretary to interIere with local aIIairs should be resolved in Iavor oI
the greater autonomy oI the local government. |29| chanroblesvirtuallawlibrary
The public respondent judge thereIore committed grave abuse oI
discretion amounting to lack or excess oI jurisdiction in not dismissing
the respondents Petition Ior Review Ior Iailure to exhaust all
administrative remedies and Ior lack oI jurisdiction. chanroblesvirtuallawlibrary
WHEREFORE , the instant petition is hereby GRANTED. The Order
oI the Regional Trial Court dated June 22, 1999 is REVERSED and
SET ASIDE. The Petition Ior Review Iiled by the private respondent
docketed as SPL. PROC. NO. 1056 is DISMISSED. chanroblesvirtuallawlibrary
SO ORDERED. chanroblesvirtuallawlibrary
Melo (Chairman) Jitug Panganiban and Sandoval-Cutierrez
concur





















Republic oI the Philipppines
SUPREME COURT
Manila
EN BANC
G.R. No. 146319. October 26, 2001]
BEN1AMIN E. CAWALING, 1R., petitioner, vs THE
COMMISSION ON ELECTIONS, and Rep. Francis 1oseph G.
Escudero, Respondents.
G.R. No. 146342. October 26, 2001]
BEN1AMIN E. CAWALING, 1R., petitioner, vs THE
EXECUTIVE SECRETARY TO THE PRESIDENT OF THE
REPUBLIC OF THE PHILIPPINES, SECRETARY OF THE
INTERIOR AND LOCAL GOVERNMENT, SECRETARY OF
THE DEPARTMENT OF BUDGET AND MANAGEMENT,
SOLICITOR GENERAL, PROVINCE OF SORSOGON,
MUNICIPALITY OF SORSOGON, MUNICIPALITY OF
BACON, Respondents
D E C I S I O N
SANDOVAL-GUTIERREZ, .:chanroblesvirtuallawlibrary
BeIore us are two (2) separate petitions challenging the
constitutionality oI Republic Act No. 8806 which created the City oI
Sorsogon and the validity oI the plebiscite conducted pursuant thereto.
chanroblesvirtuallawlibrary
On August 16, 2000, Iormer President Joseph E. Estrada signed into
law R.A. No. 8806, an Act Creating The City OI Sorsogon By
Merging The Municipalities OI Bacon And Sorsogon In The Province
OI Sorsogon, And Appropriating Funds ThereIor. |1| chanroblesvirtuallawlibrary
Pursuant to Section 10, Article X oI the Constitution, |2| the
Commission on Elections (COMELEC), on December 16, 2000,
conducted a plebiscite in the Municipalities oI Bacon and Sorsogon
and submitted the matter Ior ratiIication. chanroblesvirtuallawlibrary
On December 17, 2000, the Plebiscite City Board oI Canvassers
(PCBC) proclaimed |3| the creation oI the City oI Sorsogon as having
been ratiIied and approved by the majority oI the votes cast in the
plebiscite. |4| chanroblesvirtuallawlibrary
Invoking his right as a resident and taxpayer oI the Iormer
Municipality oI Sorsorgon, Benjamin E. Cawaling, Jr. Iiled on January
2, 2001 the present petition Ior certiorari (G.R. No. 146319) seeking
the annulment oI the plebiscite on the Iollowing grounds:
chanroblesvirtuallawlibrary
A. The December 16, 2000 plebiscite was conducted beyond the
required 120-day period Irom the approval oI R.A. 8806, in violation
oI Section 54 thereoI; andchanroblesvirtuallawlibrary
B. Respondent COMELEC Iailed to observe the legal requirement oI
twenty (20) day extensive inIormation campaign in the Municipalities
oI Bacon and Sorsogon beIore conducting the
plebiscite.chanroblesvirtuallawlibrary
Two days aIter Iiling the said action, or on January 4, 2001, petitioner
instituted another petition (G.R. No. 146342), this time Ior prohibition,
seeking to enjoin the Iurther implementation oI R.A. No. 8806 Ior
being unconstitutional, contending, in essence, that: chanroblesvirtuallawlibrary
1. The creation oI Sorsogon City by merging two municipalities
violates Section 450(a) oI the Local Government Code oI 1991 (in
relation to Section 10, Article X oI the Constitution) which requires
that only a municipality or a cluster oI barangays may be converted
into a component city; andchanroblesvirtuallawlibrary
2. R.A. No. 8806 contains two (2) subjects, namely, the (a) creation oI
the City oI Sorsogon and the (b) abolition oI the Municipalities oI
Bacon and Sorsogon, thereby violating the one subject-one bill rule
prescribed by Section 26(1), Article VI oI the
Constitution.chanroblesvirtuallawlibrary
Hence, the present petitions which were later consolidated. |5|
chanroblesvirtuallawlibrary
SigniIicantly, during the pendency oI these cases, speciIically during
the May 14, 2001 elections, the newly-created Sorsogon City had the
Iirst election oI its oIIicials. Since then, the City Government oI
Sorsogon has been regularly discharging its corporate and political
powers pursuant to its charter, R.A. No. 8806. chanroblesvirtuallawlibrary
We shall Iirst delve on petitioners constitutional challenge against
R.A. No. 8806 in G.R. No. 146342. chanroblesvirtuallawlibrary
Every statute has in its Iavor the presumption oI constitutionality. |6|
This presumption is rooted in the doctrine oI separation oI powers
which enjoins upon the three coordinate departments oI the
Government a becoming courtesy Ior each others acts. |7| The theory
is that every law, being the joint act oI the Legislature and the
Executive, has passed careIul scrutiny to ensure that it is in accord
with the Iundamental law. |8| This Court, however, may declare a law,
or portions thereoI, unconstitutional, where a petitioner has shown a
clear and unequivocal breach oI the Constitution, not merely a
doubtIul or argumentative one. |9| In other words, the grounds Ior
nullity must be beyond reasonable doubt, |10| Ior to doubt is to
sustain. |11| chanroblesvirtuallawlibrary
Petitioner initially rejects R.A. No. 8806 because it violates Section
10, Article X oI the Constitution which provides, inter alia:
chanroblesvirtuallawlibrary
Section 10. No province, city, municipality, or barangay may be
created, divided, merged, abolished, or its boundary substantially
altered, except in accordance with the criteria established in the local
government code and subject to approval by a majority oI the votes
cast in a plebiscite in the political units directly aIIected. (Emphasis
ours)chanroblesvirtuallawlibrary
The criteria Ior the creation oI a city is prescribed in Section 450 oI the
Local Government Code oI 1991 (the Code), thus: chanroblesvirtuallawlibrary
Section 450. Requisites for Creation. (a) A municipality or a cluster
oI barangays may be converted into a component city iI it has an
average annual income, as certiIied by the Department oI Finance, oI
at least Twenty million (P20,000,000.00) Ior the last two (2)
consecutive years based on 1991 constant prices, and iI it has either oI
the Iollowing requisites:chanroblesvirtuallawlibrary
(i) a contiguous territory oI at least one hundred (100) square
kilometers, as certiIied by the Lands Management Bureau;
orchanroblesvirtuallawlibrary
(ii) a population oI not less than one hundred IiIty thousand (150,000)
inhabitants, as certiIied by the National Statistics
OIIice:chanroblesvirtuallawlibrary
Provided, That, the creation thereoI shall not reduce the land area,
population, and income oI the original unit or units at the time oI said
creation to less than the minimum requirements prescribed
herein.chanroblesvirtuallawlibrary
(b) The territorial jurisdiction oI a newly-created city shall be properly
identiIied by metes and bounds. The requirement on land area shall not
apply where the city proposed to be created is composed oI one (1) or
more islands. The territory need not be contiguous iI it comprises two
(2) or more islands.chanroblesvirtuallawlibrary
(c) The average annual income shall include the income accruing to
the general Iund, exclusive oI speciIic Iunds, transIers, and non-
recurring income. (Emphasis ours)chanroblesvirtuallawlibrary
Petitioner is not concerned whether the creation oI Sorsogon City
through R.A. No. 8806 complied with the criteria set by the Code as to
income, population and land area. What he is assailing is its mode oI
creation. He contends that under Section 450(a) oI the Code, a
component city may be created only by converting a municipality or a
cluster oI baranays, not by merging two municipalities, as what R.A.
No. 8806 has done. chanroblesvirtuallawlibrary
This contention is devoid oI merit. chanroblesvirtuallawlibrary
Petitioners constricted reading oI Section 450(a) oI the Code is
erroneous. The phrase A municipality or a cluster oI baranays may
be converted into a component city is not a criterion but simply one oI
the modes by which a city may be created. Section 10, Article X oI the
Constitution, quoted earlier and which petitioner cited in support oI his
posture, allows the merger oI local government units to create a
province, city, municipality or baranay in accordance with the
criteria established by the Code. Thus, Section 8 oI the Code distinctly
provides: chanroblesvirtuallawlibrary
Section 8. Division and Merger. Division and merger oI existing local
government units shall comply with the same requirements herein
prescribed for their creation: Provided, however, That such division
shall not reduce the income, population, or land area oI the local
government unit or units concerned to less than the minimum
requirements prescribed in this Code: Provided, Iurther, That the
income classiIication oI the original local government unit or units
shall not Iall below its current income classiIication prior to such
division. x x x. (Emphasis ours)chanroblesvirtuallawlibrary
Verily, the creation oI an entirely new local government unit through a
division or a merger oI existing local government units is recognized
under the Constitution, provided that such merger or division shall
comply with the requirements prescribed by the Code.
chanroblesvirtuallawlibrary
Petitioner Iurther submits that, in any case, there is no compelling
reason Ior merging the Municipalities oI Bacon and Sorsogon in order
to create the City oI Sorsogon considering that the Municipality oI
Sorsogon alone already qualiIies to be upgraded to a component city.
This argument goes into the wisdom oI R.A. No. 8806, a matter which
we are not competent to rule. In ngara v lectoral Commission
|12| this Court, through Justice Jose P. Laurel, made it clear that the
judiciary does not pass upon questions oI wisdom, justice or
expediency oI legislation. In the exercise oI judicial power, we are
allowed only to settle actual controversies involving rights which are
legally demandable and enIorceable, |13| and may not annul an act oI
the political departments simply because we Ieel it is unwise or
impractical. |14| chanroblesvirtuallawlibrary
Next, petitioner assails R.A. No. 8806 since it contravenes the one
subject-one bill rule enunciated in Section 26 (1), Article VI oI the
Constitution, to wit: chanroblesvirtuallawlibrary
Section 26 (1). Every bill passed by the Congress shall embrace only
one subject which shall be expressed in the title thereof. (emphasis
ours)chanroblesvirtuallawlibrary
Petitioner contends that R.A. No. 8806 actually embraces two
principal subjects which are: (1) the creation oI the City oI Sorsogon,
and (2) the abolition oI the Municipalities oI Bacon and Sorsogon.
While the title oI the Act suIIiciently inIorms the public about the
creation oI Sorsogon City, petitioner claims that no such inIormation
has been provided on the abolition oI the Municipalities oI Bacon and
Sorsogon. chanroblesvirtuallawlibrary
The argument is Iar Irom persuasive. Contrary to petitioners assertion,
there is only one subject embraced in the title oI the law, that is, the
creation oI the City oI Sorsogon. The abolition/cessation oI the
corporate existence oI the Municipalities oI Bacon and Sorsogon due
to their merger is not a subject separate and distinct Irom the creation
oI Sorsogon City. Such abolition/cessation was but the logical, natural
and inevitable consequence oI the merger. Otherwise put, it is the
necessary means by which the City oI Sorsogon was created. Hence,
the title oI the law, An Act Creating the City oI Sorsogon by Merging
the Municipalities oI Bacon and Sorsogon in the Province oI
Sorsogon, and Appropriating Funds ThereIor, cannot be said to
exclude the incidental eIIect oI abolishing the two municipalities, nor
can it be considered to have deprived the public oI Iair inIormation on
this consequence. chanroblesvirtuallawlibrary
It is well-settled that the one title-one subject rule does not require the
Congress to employ in the title oI the enactment language oI such
precision as to mirror, Iully index or catalogue all the contents and the
minute details therein. |15| The rule is suIIiciently complied with iI the
title is comprehensive enough as to include the general object which
the statute seeks to eIIect, |16| and where, as here, the persons
interested are inIormed oI the nature, scope and consequences oI the
proposed law and its operation. |17| Moreover, this Court has
invariably adopted a liberal rather than technical construction oI the
rule so as not to cripple or impede legislation. |18| chanroblesvirtuallawlibrary
Consequently, we hold that petitioner has Iailed to present clear and
convincing prooI to deIeat the presumption oI constitutionality oI R.A.
No. 8806. chanroblesvirtuallawlibrary
We now turn to G.R. No. 146319 wherein petitioner assails the
validity oI the plebiscite conducted by the COMELEC Ior the
ratiIication oI the creation oI Sorsogon City. chanroblesvirtuallawlibrary
Petitioner asserts that the plebiscite required by R.A. No. 8806 should
be conducted within 120 days Irom the approval oI said Act per
express provision oI its Section 54, viz: chanroblesvirtuallawlibrary
Sec. 54. Plebiscite. The City oI Sorsogon shall acquire corporate
existence upon the ratiIication oI its creation by a majority oI the votes
cast by the qualiIied voters in a plebiscite to be conducted in the
present municipalities oI Bacon and Sorsogon within one hundred
twenty (120) days Irom the approval oI this Act. x x x. (Emphasis
ours)chanroblesvirtuallawlibrary
The Act was approved on August 16, 2000 by Iormer President Joseph
E. Estrada. Thus, petitioner claims, the December 16, 2000 plebiscite
was conducted one (1) day late Irom the expiration oI the 120-day
period aIter the approval oI the Act. This 120-day period having
expired without a plebiscite being conducted, the Act itselI expired
and could no longer be ratiIied and approved in the plebiscite held on
December 16, 2000. chanroblesvirtuallawlibrary
In its comment, the COMELEC asserts that it scheduled the plebiscite
on December 16, 2000 based on the date oI the eIIectivity oI the Act.
Section 65 oI the Act states: chanroblesvirtuallawlibrary
Sec. 65. EIIectivity. - This Act shall take eIIect upon its publication in
at least two (2) newspapers oI general and local
circulation.chanroblesvirtuallawlibrary
The law was Iirst published in the August 25, 2000 issue oI TODAY,
a newspaper oI general circulation. Then on September 01, 2000, it
was published in a newspaper oI local circulation in the Province oI
Sorsogon. Thus, the publication oI the law was completed on
September 1, 2000 , which date, according to the COMELEC, should
be the reckoning point in determining the 120-day period within which
to conduct the plebiscite, not Irom the date oI its approval (August 16,
2000) when the law had not yet been published. The COMELEC
argues that since publication is indispensable Ior the eIIectivity oI a
law, citing the landmark case oI %aada vs %uvera, |19| it could only
schedule the plebiscite aIter the Act took eIIect. Thus, the COMELEC
concludes, the December 16, 2000 plebiscite was well within the 120-
day period Irom the eIIectivity oI the law on September 1, 2000.
chanroblesvirtuallawlibrary
The COMELEC is correct. chanroblesvirtuallawlibrary
In addition, Section 10 oI the Code provides: chanroblesvirtuallawlibrary
Section 10. Plebiscite Requirement. No creation, division, merger,
abolition, or substantial alteration oI boundaries oI local government
units shall take eIIect unless approved by a majority oI the votes cast
in a plebiscite called Ior the purpose in the political unit or units
directly aIIected. Such plebiscite shall be conducted by the
Commission on Elections within one hundred twenty (120) days Irom
the date of the effectivity oI the law or ordinance aIIecting such
action, unless said law or ordinance fixes another date. (Emphasis
ours) chanroblesvirtuallawlibrary
Quite plainly, the last sentence oI Section 10 mandates that the
plebiscite shall be conducted within 120 days Irom the date oI the
effectivity oI the law, not Irom its approval. While the same provision
allows a law or ordinance to Iix another date Ior conducting a
plebiscite, still such date must be reckoned Irom the date oI the
eIIectivity oI the law. chanroblesvirtuallawlibrary
Consequently, the word approval in Section 54 oI R.A. No. 8806,
which should be read together with Section 65 (eIIectivity oI the Act)
thereoI, could only mean eIIectivity as used and contemplated in
Section 10 oI the Code. This construction is in accord with the
Iundamental rule that all provisions oI the laws relating to the same
subject should be read together and reconciled to avoid inconsistency
or repugnancy to established jurisprudence. As we stated in %aada
chanroblesvirtuallawlibrary
Art. 2. Laws shall take eIIect aIter IiIteen days Iollowing the
completion oI their publication in the OIIicial Gazette, unless it is
otherwise provided. This Code shall take eIIect one year aIter such
publication.chanroblesvirtuallawlibrary
AIter a careIul study oI this provision and oI the arguments oI the
parties, both on the original petition and on the instant motion, we
have come to the conclusion, and so hold, that the clause unless it is
otherwise provided reIers to the date oI eIIectivity and not to the
requirement oI publication itselI, which cannot in any event be
omitted. This clause does not mean that the legislature may make
the law effective immediately upon approval, or on any other date,
without its previous publication. (Emphasis
supplied)chanroblesvirtuallawlibrary
To give section 54 a literal and strict interpretation would in eIIect
make the Act eIIective even beIore its publication, which scenario is
precisely abhorred in %aada chanroblesvirtuallawlibrary
Lastly, petitioner alleges that the COMELEC Iailed to conduct an
extensive inIormation campaign on the proposed Sorsogon cityhood
20 days prior to the scheduled plebiscite as required by Article 11
(b.4.ii), Rule II oI the Rules and Regulations Implementing the Code.
However, no prooI whatsoever was presented by petitioner to
substantiate his allegation. Consequently, we sustain the presumption
|20| that the COMELEC regularly perIormed or complied with its duty
under the law in conducting the plebiscite. chanroblesvirtuallawlibrary
WHEREFORE , the instant petitions are DISMISSED Ior lack oI
merit. Costs against petitioner. chanroblesvirtuallawlibrary
SO ORDERED. chanroblesvirtuallawlibrary
avide r C Bellosillo Melo Puno Kapunan Mendoza
Panganiban Quisumbing Pardo Buena Ynares-Santiago and e
Leon r concur. chanroblesvirtuallawlibrary
Jitug on official leave
















epublic oI the Philippines
SUPREME COURT
Manila
EN BANC

G.R. No. 96754 1une 22, 1995
CONGRESSMAN 1AMES L. CHIONGBIAN (Third District,
South Cotobato) ADELBERT W. ANTONINO (First District,
South Cotobato), WILFREDO G. CAINGLET (Third District,
Zamboanga del Norte), HILARION RAMIRO, 1R. (Second
Division, Misamis Occidental), ERNESTO S. AMATONG (Second
District, Zamboanga del Norte), ALVIN G. DANS (Lone District,
Basilan), ABDULLAH M. DIMAPORO (Second District, Lanao
del Norte), and CONGRESSWOMAN MARIA CLARA A.
LOBREGAT (Lone District, Zamboanga City) petitioners, vs.
HON. OSCAR M. ORBOS, Executive Secretary; COMMITTEE
CHAIRMAN SEC. FIDEL V. RAMOS, CABINET OFFICERS
FOR REGIONAL DEVELOPMENT FOR REGIONS X AND
XII, CHAIRMAN OF THE REGIONAL DEVELOPMENT
COUNCIL FOR REGION X, CHAIRMAN 1ESUS V. AYALA,
CABINET OFFICERS FOR REGIONAL DEVELOPMENT FOR
REGIONS XI and XII, DEPARTMENT OF LOCAL
GOVERNMENT, NATIONAL ECONOMIC AND
DEVELOPMENT AUTHORITY SECRETARIAT,
PRESIDENTIAL MANAGEMENT STAFF, HON. GUILLERMO
CARAGUE, Secretary of the DEPARTMENT OF BUDGET and
MANAGEMENT; and HON. ROSALINA S. CA1UCUM, OIC
National Treasurer, Respondents.
IMMANUEL 1ALDON, Petitioner, vs. HON. EXECUTIVE
SECRETARY OSCAR M. ORBOS, HON. FIDEL RAMOS, HON.
SECRETARY LUIS SANTOS, AND HON. NATIONAL
TREASURER ROSALINA CA1UCOM, Respondents.chanrobles virtual law lib rary

MENDOZA, chanrobles virtual law library
These suits challenge the validity oI a provision oI the Organic Act Ior
the Autonomous Region in Muslim Mindanao (R.A. No. 6734),
authorizing the President oI the Philippines to "merge" by
administrative determination the regions remaining aIter the
establishment oI the Autonomous Region, and the Executive Order
issued by the President pursuant to such authority, "Providing Ior the
Reorganization oI Administrative Regions in Mindanao." A temporary
restraining order prayed Ior by the petitioners was issued by this Court
on January 29, 1991, enjoining the respondents Irom enIorcing the
Executive Order and statute in question.chanroblesvirtualawl ibrary chan robles virtual law librar y
The Iacts are as Iollows: chanrobles vir tual law lib rary
Pursuant to Art. X, 18 oI the 1987 Constitution, Congress passed
R.A. No. 6734, the Organic Act Ior the Autonomous Region in
Muslim Mindanao, calling Ior a plebiscite to be held in the provinces
oI Basilan, Cotobato, Davao del Sur, Lanao del Norte, Lanao del Sur,
Maguindanao, Palawan, South Cotabato, Sultan Kudarat, Sulu, Tawi-
Tawi, Zamboanga del Norte, and Zamboanga del Sur, and the cities oI
Cotabato, Dapitan, Dipolog, General Santos, Iligan, Marawi, Pagadian,
Puerto Princesa and Zamboanga. In the ensuing plebiscite held on
November 16, 1989, Iour provinces voted in Iavor oI creating an
autonomous region. These are the provinces oI Lanao del Sur,
Maguindanao, Sulu and Tawi-Tawi. In accordance with the
constitutional provision, these provinces became the Autonomous
Region in Muslim Mindanao.chanroblesvirtualawlibrary chan robles virtual law libra ry
On the other hand, with respect to provinces and cities not voting in
Iavor oI the Autonomous Region, Art. XIX, 13 oI R.A. No. 6734
provides,
That only the provinces and cities voting Iavorably in
such plebiscites shall be included in the Autonomous
Region in Muslim Mindanao. The provinces and cities
which in the plebiscite do not vote Ior inclusion in the
Autonomous Region shall remain in the existing
administrative regions. Provided, however, that the
President may, by administrative determination, merge
the existing regions.
Pursuant to the authority granted by this provision, then President
Corazon C. Aquino issued on October 12, 1990 Executive Order No.
429, "providing Ior the Reorganization oI the Administrative Regions
in Mindanao." Under this Order, as amended by E.O. No. 439 -
(1) Misamis Occidental, at present part oI Region X,
will become part oI Region IX.chanroblesvirtualawlibra ry chanrobles vir tual law lib rary
(2) Oroquieta City, Tangub City and Ozamiz City, at
present parts oI Region X will become parts oI Region
IX.chanroblesvirtualawlibrary chanr obles virtual law l ibrary
(3) South Cotobato, at present a part oI Region XI, will
become part oI Region XII.chanroblesvirtualawlibrary chanrob les virtual law lib rary
(4) General Santos City, at present part oI Region XI,
will become part oI Region XII.chanroblesvirtualawlibrary chan robles virtual law library
(5) Lanao del Norte, at present part oI Region XII, will
become part oI Region IX.chanroblesvirtualawlibrary chan robles virtual law librar y
(6) Iligan City and Marawi City, at present part oI
Region XII, will become part oI Region IX.
Petitioners in G.R. No. 96754 are, or at least at the time oI the Iiling oI
their petition, members oI Congress representing various legislative
districts in South Cotobato, Zamboanga del Norte, Basilan, Lanao del
Norte and Zamboanga City. On November 12, 1990, they wrote then
President Aquino protesting E.O. No. 429. They contended that
There is no law which authorizes the President to pick
certain provinces and cities within the existing regions -
some oI which did not even take part in the plebiscite as
in the case oI the province oI Misamis Occidental and
the cities oI Oroquieta, Tangub and Ozamiz - and
restructure them to new administrative regions. On the
other hand, the law (Sec. 13, Art. XIX, R.A. 6734) is
speciIic to the point, that is, that "the provinces and
cities which in the plebiscite do not vote Ior inclusion in
the Autonomous Region shall remain in the existing
administrative regions."chanrobles virt ual law libra ry
The transIer oI the provinces oI Misamis Occidental
Irom Region X to Region IX; Lanao del Norte Irom
Region XII to Region IX, and South Cotobato Irom
Region XI to Region XII are alterations oI the existing
structures oI governmental units, in other words,
reorani:ation. This can be gleaned Irom Executive
Order No. 429, thus
Whereas, there is an urgent need to
reorganize the administrative regions in
Mindanao to guarantee the eIIective
delivery oI Iield services oI government
agencies taking into consideration the
Iormation oI the Autonomous Region in
Muslim Mindanao.
With due respect to Her Excellency, we submit that
while the authority necessarily includes the authority to
merge, the authority to merge does not include the
authority to reorganize. ThereIore, the President's
authority under RA 6734 to "merge existing regions"
cannot be construed to include the authority to
reorganize them. To do so will violate the rules oI
statutory construction.chanroblesvirtualawlib rary chanrob les virtual law lib rary
The transIer oI regional centers under Executive Order
429 is actually a restructuring (reorganization) oI
administrative regions. While this reorganization, as in
Executive Order 429, does not aIIect the apportionment
oI congressional representatives, the same is not valid
under the penultimate paragraph oI Sec. 13, Art. XIX oI
R.A. 6734 and Ordinance appended to the 1986
Constitution apportioning the seats oI the House oI
Representatives oI Congress oI the Philippines to the
diIIerent legislative districts in provinces and cities.
1
chanrobles virtual law libra ry
As their protest went unheeded, while Inauguration Ceremonies oI the
New Administrative Region IX were scheduled on January 26, 1991,
petitioners brought this suit Ior certiorari and prohibition.chanroblesvirtualawlib rary chanrob les virtual law lib rary
On the other hand, the petitioner in G.R. No. 96673, Immanuel Jaldon,
is a resident oI Zamboanga City, who is suing in the capacity oI
taxpayer and citizen oI the Republic oI the Philippines.chanroblesvirtualawlib rary chanrob les virtual law li brary
Petitioners in both cases contend that Art. XIX, 13 oI R.A. No. 6734
is unconstitutional because (1) it unduly delegates legislative power to
the President by authorizing him to "merge |by administrative
determination| the existing regions" or at any rate provides no standard
Ior the exercise oI the power delegated and (2) the power granted is
not expressed in the title oI the law.chanroblesvirtua lawlibrary chanrobles virtual law libra ry
In addition, petitioner in G.R. No. 96673 challenges the validity oI
E.O. No. 429 on the ground that the power granted by Art. XIX, 13
to the President is only to "merge regions IX and XII" but not to
reorganize the entire administrative regions in Mindanao and certainly
not to transIer the regional center oI Region IX Irom Zamboanga City
to Pagadian City.chanroblesvir tualawlibra ry chanrobles vir tual law lib rary
The Solicitor General deIends the reorganization oI regions in
Mindanao by E.O. No. 429 as merely the exercise oI a power
"traditionally lodged in the President," as held in bbas v. Comelec,
2

and as a mere incident oI his power oI general supervision over local
governments and control oI executive departments, bureaus and
oIIices under Art. X, 16 and Art. VII, 17, respectively, oI the
Constitution.chanroblesvir tualawlibra ry chanrobles vir tual law libra ry
He contends that there is no undue delegation oI legislative power but
only a grant oI the power to "Iill up" or provide the details oI
legislation because Congress did not have the Iacility to provide Ior
them. He cites by analogy the case oI unicipality of Cardona v.
unicipality of Binanonan,
3
in which the power oI the Governor-
General to Iix municipal boundaries was sustained on the ground that -
|such power| is simply a transIerence oI certain details
with respect to provinces, municipalities, and
townships, many oI them newly created, and all oI them
subject to a more or less rapid change both in
development and centers oI population, the proper
regulation oI which might require not only prompt
action but action oI such a detailed character as not to
permit the legislative body, as such, to take it
eIIiciently.
The Solicitor General justiIies the grant to the President oI the power
"to merge the existing regions" as something Iairly embraced in the
title oI R.A. No. 6734, to wit, "An Act Providing Ior an Organic Act
Ior the Autonomous Region in Muslim Mindanao," because it is
germane to it.chanroblesvirtualawlibrary chanr obles virtual law l ibrary
He argues that the power is not limited to the merger oI those regions
in which the provinces and cities which took part in the plebiscite are
located but that it extends to all regions in Mindanao as necessitated by
the establishment oI the autonomous region.chanroblesvir tualawlibra ry chanrobles vir tual law lib rary
Finally, he invokes P.D. No. 1416, as amended by P.D. No. 1772
which provides:
1. The President oI the Philippines shall have the
continuing authority to reorganize the National
Government. In exercising this authority, the President
shall be guided by generally acceptable principles oI
good government and responsive national government,
including but not limited to the Iollowing guidelines Ior
a more eIIicient, eIIective, economical and
development-oriented governmental Iramework:
(a) More eIIective planning
implementation, and review Iunctions;chanrob les virtual law lib rary
(b) Greater decentralization and
responsiveness in decision-making
process;chanrobles vi rtual law lib rary
(c) Further minimization, iI not,
elimination, oI duplication or
overlapping oI purposes, Iunctions,
activities, and programs;chanrobles vi rtual law lib rary
(d) Further development oI as
standardized as possible ministerial, sub-
ministerial and corporate organizational
structures;chanrobles virtual law library
(e) Further development oI the
regionalization process; andchanrobles vi rtual law lib rary
(I) Further rationalization oI the
Iunctions oI and administrative
relationships among government
entities.chanroblesvi rtualawlibra ry chanrobles vi rtual law lib rary
For purposes oI this Decree, the
coverage oI the continuing authority oI
the President to reorganize shall be
interpreted to encompass all agencies,
entities, instrumentalities, and units oI
the National Government, including all
government owned or controlled
corporations as well as the entire range
oI the powers, Iunctions, authorities,
administrative relationships, acid related
aspects pertaining to these agencies,
entities, instrumentalities, and units.
2. |T|he President may, at his discretion, take the
Iollowing actions:
xxx xxx xxx
I. Create, abolish, group, consolidate,
merge, or integrate entities, agencies,
instrumentalities, and units oI the
National Government, as well as expand,
amend, change, or otherwise modiIy
their powers, Iunctions and authorities,
including, with respect to government-
owned or controlled corporations, their
corporate liIe, capitalization, and other
relevant aspects oI their charters.chanroblesvirtualawlibrary chanr obles virtual law l ibrary
g. Take such other related actions as may
be necessary to carry out the purposes
and objectives oI this Decree.
Considering the arguments oI the parties, the issues are: chanrobles virtual law lib rary
(1) whether the power to "merge" administrative regions is legislative
in character, as petitioners contend, or whether it is executive in
character, as respondents claim it is, and, in any event, whether Art.
XIX, 13 is invalid because it contains no standard to guide the
President's discretion;chanro bles virtual law li brary
(2) whether the power given is Iairly expressed in the title oI the
statute; andchanro bles virtual law li brary
(3) whether the power granted authorizes the reorganization even oI
regions the provinces and cities in which either did not take part in the
plebiscite on the creation oI the Autonomous Region or did not vote in
Iavor oI it; and chanrobles virtual law libra ry
(4) whether the power granted to the President includes the power to
transIer the regional center oI Region IX Irom Zamboanga City to
Pagadian City.chan roblesvirtualawli brary chan robles virtual law library
It will be useIul to recall Iirst the nature oI administrative regions and
the basis and purpose Ior their creation. On September 9, 1968, R.A.
No. 5435 was passed "authorizing the President oI the Philippines,
with the help oI a Commission on Reorganization, to reorganize the
diIIerent executive departments, bureaus, oIIices, agencies and
instrumentalities oI the government, including banking or Iinancial
institutions and corporations owned or controlled by it." The purpose
was to promote "simplicity, economy and eIIiciency in the
government."
4
The Commission on Reorganization created under the
law was required to submit an integrated reorganization plan not later
than December 31, 1969 to the President who was in turn required to
submit the plan to Congress within Iorty days aIter the opening oI its
next regular session. The law provided that any reorganization plan
submitted would become eIIective only upon the approval oI
Congress.
5

Accordingly, the Reorganization Commission prepared an Integrated
Reorganization Plan which divided the country into eleven
administrative regions.
6
By P.D. No. 1, the Plan was approved and
made part oI the law oI the land on September 24, 1972. P.D. No. 1
was twice amended in 1975, Iirst by P.D. No. 742 which
"restructur|ed| the regional organization oI Mindanao, Basilan, Sulu
and Tawi-Tawi" and later by P.D. No. 773 which Iurther
"restructur|ed| the regional organization oI Mindanao and divid|ed|
Region IX into two sub-regions." In 1978, P.D. No. 1555 transIerred
the regional center oI Region IX Irom Jolo to Zamboanga City.chan roblesvirtualawl ibrary chan robles virtual law librar y
Thus the creation and subsequent reorganization oI administrative
regions have been by the President pursuant to authority granted to
him by law. In conIerring on the President the power "to merge |by
administrative determination| the existing regions" Iollowing the
establishment oI the Autonomous Region in Muslim Mindanao,
Congress merely Iollowed the pattern set in previous legislation dating
back to the initial organization oI administrative regions in 1972. The
choice oI the President as delegate is logical because the division oI
the country into regions is intended to Iacilitate not only the
administration oI local governments but also the direction oI executive
departments which the law requires should have regional oIIices. As
this Court observed in bbas, "while the power to merge
administrative regions is not expressly provided Ior in the
Constitution, it is a power which has traditionally been lodged with the
President to Iacilitate the exercise oI the power oI general supervision
over local governments |see Art. X, 4 oI the Constitution|." The
regions themselves are not territorial and political divisions like
provinces, cities, municipalities and barangays but are "mere
groupings oI contiguous provinces Ior administrative purposes."
7
The
power conIerred on the President is similar to the power to adjust
municipal boundaries
8
which has been described in Pelae: v. uditor
General
9
or as "administrative in nature."chanrobles virtual law lib rary
There is, thereIore, no abdication by Congress oI its legislative power
in conIerring on the President the power to merge administrative
regions. The question is whether Congress has provided a suIIicient
standard by which the President is to be guided in the exercise oI the
power granted and whether in any event the grant oI power to him is
included in the subject expressed in the title oI the law.chanroblesvir tualawlibrar y chanrobles virt ual law libra ry
First, the question oI standard. A legislative standard need not be
expressed. It may simply be gathered or implied.
10
Nor need it be
Iound in the law challenged because it may be embodied in other
statutes on the same subject as that oI the challenged legislation.
11

With respect to the power to merge existing administrative regions, the
standard is to be Iound in the same policy underlying the grant to the
President in R.A. No. 5435 oI the power to reorganize the Executive
Department, to wit: "to promote simplicity, economy and eIIiciency in
the government to enable it to pursue programs consistent with
national goals Ior accelerated social and economic development and to
improve the service in the transaction oI the public business."
12

Indeed, as the original eleven administrative regions were established
in accordance with this policy, it is logical to suppose that in
authorizing the President to "merge |by administrative determination|
the existing regions" in view oI the withdrawal Irom some oI those
regions oI the provinces now constituting the Autonomous Region, the
purpose oI Congress was to reconstitute the original basis Ior the
organization oI administrative regions.chanroblesvirt ualawlibrar y chanrobles virt ual law libra ry
Nor is Art. XIX, 13 susceptible to charge that its subject is not
embraced in the title oI R.A. No. 6734. The constitutional requirement
that "every bill passed by the Congress shall embrace only one subject
which shall be expressed in the title thereoI"
13
has always been given
a practical rather than a technical construction. The title is not required
to be an index oI the content oI the bill. It is a suIIicient compliance
with the constitutional requirement iI the title expresses the general
subject and all provisions oI the statute are germane to that subject.
14

Certainly the reorganization oI the remaining administrative regions is
germane to the general subject oI R.A. No. 6734, which is the
establishment oI the Autonomous Region in Muslim Mindanao.chanroblesvirtualawlibrary chanrobles virtual law libra ry
Finally, it is contended that the power granted to the President is
limited to the reorganization oI administrative regions in which some
oI the provinces and cities which voted in Iavor oI regional autonomy
are Iound, because Art. XIX, 13 provides that those which did not
vote Ior autonomy "shall remain in the existing administrative
regions." More speciIically, petitioner in G.R. No. 96673 claims:
The questioned Executive Order No. 429 distorted and,
in Iact, contravened the clear intent oI this provision by
moving out or transIerring certain political subdivisions
(provinces/cities) out oI their legally designated
regions. Aggravating this unacceptable or untenable
situation is EO No. 429's eIIecting certain movements
on areas which did not even participate in the
November 19, 1989 plebiscite. The unauthorized action
oI the President, as eIIected by and under the
questioned EO No. 429, is shown by the Iollowing
dispositions: (1) Misamis Occidental, Iormerly oI
Region X and which did not even participate in the
plebiscite, was moved Irom said Region X to Region
IX; (2) the cities oI Ozamis, Oroquieta, and Tangub, all
Iormerly belonging to Region X, which likewise did not
participate in the said plebiscite, were transIerred to
Region IX; (3) South Cotobato, Irom Region XI to
Region XII; (4) General Santos City: Irom Region XI to
Region XII; (5) Lanao del Norte, Irom Region XII to
Region IX; and (6) the cities oI Marawi and Iligan Irom
Region XII to Region IX. All oI the said provinces and
cities voted "NO", and thereby rejected their entry into
the Autonomous Region in Muslim Mindanao, as
provided under RA No. 6734.
15
chanrobles virtual law library
The contention has no merit. While Art. XIX, 13 provides that "The
provinces and cities which do not vote Ior inclusion in the
Autonomous Region shall remain in the existing administrative
regions," this provision is subject to the qualiIication that "the
President may by administrative determination merge the existing
regions." This means that while non-assenting provinces and cities are
to remain in the regions as designated upon the creation oI the
Autonomous Region, they may nevertheless be regrouped with
contiguous provinces Iorming other regions as the exigency oI
administration may require.chanroblesvi rtualawlibra ry chanrobles vi rtual law lib rary
The regrouping is done only on paper. It involves no more than are
deIinition or redrawing oI the lines separating administrative regions
Ior the purpose oI Iacilitating the administrative supervision oI local
government units by the President and insuring the eIIicient delivery
oI essential services. There will be no "transIer" oI local governments
Irom one region to another except as they may thus be regrouped so
that a province like Lanao del Norte, which is at present part oI Region
XII, will become part oI Region IX.chanroblesvirtualawlib rary chanrob les virtual law li brary
The regrouping oI contiguous provinces is not even analogous to a
redistricting or to the division or merger oI local governments, which
all have political consequences on the right oI people residing in those
political units to vote and to be voted Ior. It cannot be overemphasized
that administrative regions are mere groupings oI contiguous provinces
Ior administrative purposes, not Ior political representation.chanroblesvirtualawl ibrary chan robles virtual law libra ry
Petitioners nonetheless insist that only those regions, in which the
provinces and cities which voted Ior inclusion in the Autonomous
Region are located, can be "merged" by the President.chanroblesvirtualawlibrary chan robles virtual law libra ry
To be Iundamental reason Art. XIX, 13 is not so limited. But the
more Iundamental reason is that the President's power cannot be so
limited without neglecting the necessities oI administration. It is
noteworthy that the petitioners do not claim that the reorganization oI
the regions in E.O. No. 429 is irrational. The Iact is that, as they
themselves admit, the reorganization oI administrative regions in E.O.
No. 429 is based on relevant criteria, to wit: (1) contiguity and
geographical Ieatures; (2) transportation and communication Iacilities;
(3) cultural and language groupings; (4) land area and population; (5)
existing regional centers adopted by several agencies; (6) socio-
economic development programs in the regions and (7) number oI
provinces and cities.chanroblesvirtualawl ibrary chan robles virtual law libra ry
What has been said above applies to the change oI the regional center
Irom Zamboanga City to Pagadian City. Petitioners contend that the
determination oI provincial capitals has always been by act oI
Congress. But as, this Court said in Abbas,
16
administrative regions
are mere "groupings oI contiguous provinces Ior administrative
purposes, . . . |They| are not territorial and political subdivisions like
provinces, cities, municipalities and barangays." There is, thereIore, no
basis Ior contending that only Congress can change or determine
regional centers. To the contrary, the examples oI P.D. Nos. 1, 742,
773 and 1555 suggest that the power to reorganize administrative
regions carries with it the power to determine the regional center.chanroblesvirtualawlibrary chanro bles virtual law l ibrary
It may be that the transIer oI the regional center in Region IX Irom
Zamboanga City to Pagadian City may entail the expenditure oI large
sums oI money Ior the construction oI buildings and other
inIrastructure to house regional oIIices. That contention is addressed to
the wisdom oI the transIer rather than to its legality and it is settled
that courts are not the arbiters oI the wisdom or expediency oI
legislation. In any event this is a question that we will consider only iI
Iully brieIed and upon a more adequate record than that presented by
petitioners.chanroblesvirtualawl ibrary chan robles virtual law libra ry
WHEREFORE, the petitions Ior certiorari and prohibition are
DISMISSED Ior lack oI merit.chanroblesvirtualawlib rary chanrob les virtual law lib rary
SO ORDERED.
Narvasa, C.J., Feliciano, Padilla, Realado, Davide, Jr., Romero,
Bellosillo, elo, Quiason, Puno, Jitu, Kapunan and Francisco, JJ.,
concur.





















Republic oI the Philipppines
SUPREME COURT
Manila
EN BANC
G.R. No. 125350. December 3, 2002]
HON. RTC 1UDGES MERCEDES G. DADOLE (Executive
1udge, Branch 28), ULRIC R. CAETE (Presiding 1udge, Branch
25), AGUSTINE R. VESTIL (Presiding 1udge, Branch 56), HON.
MTC 1UDGES TEMISTOCLES M. BOHOLST (Presiding 1udge,
Branch 1), VICENTE C. FANILAG (1udge Designate, Branch 2),
and WILFREDO A. DAGATAN (Presiding 1udge, Branch 3), all
of Mandaue City, petitioners vs COMMISSION ON AUDIT,
respondent.
D E C I S I O N
CORONA, 1.:chanroblesvirtuallawlibrary
BeIore us is a petition Ior certiorari under Rule 64 to annul the
decision[1] and resolution[2], dated September 21, 1995 and May 28,
1996, respectively, oI the respondent Commission on Audit (COA)
aIIirming the notices oI the Mandaue City Auditor which diminished
the monthly additional allowances received by the petitioner judges oI
the Regional Trial Court (RTC) and Municipal Trial Court (MTC)
stationed in Mandaue City. chanroblesvirtuallawlibrary
The undisputed Iacts are as Iollows:chanroblesvirtuallawlibrary
In 1986, the RTC and MTC judges oI Mandaue City started receiving
monthly allowances oI P1,260 each through the yearly appropriation
ordinance enacted by the Sangguniang Panlungsod oI the said city. In
1991, Mandaue City increased the amount to P1,500 Ior each judge.
chanroblesvirtuallawlibrary
On March 15, 1994, the Department oI Budget and Management
(DBM) issued the disputed Local Budget Circular No. 55 (LBC 55)
which provided that:chanroblesvirtuallawlibrary
xxx xxx xxxchanroblesvirtuallawlibrary
2.3.2. In the light oI the authority granted to the local government units
under the Local Government Code to provide Ior additional
allowances and other beneIits to national government oIIicials and
employees assigned in their locality, such additional allowances in the
form of honorarium at rates not exceedin P1,000.00 in provinces and
cities and P700.00 in municipalities may be ranted subject to the
Iollowing conditions:chanroblesvirtuallawlibrary
a) That the grant is not mandatory on the part oI the
LGUs;chanroblesvirtuallawlibrary
b) That all contractual and statutory obligations oI the LGU including
the implementation oI R.A. 6758 shall have been Iully provided in the
budget;chanroblesvirtuallawlibrary
c) That the budgetary requirements/limitations under Section 324 and
325 oI R.A. 7160 should be satisIied and/or complied with;
andchanroblesvirtuallawlibrary
d) That the LGU has Iully implemented the devolution oI
Iunctions/personnel in accordance with R.A. 7160.|3| (italics
supplied)chanroblesvirtuallawlibrary
xxx xxx xxxchanroblesvirtuallawlibrary
The said circular likewise provided Ior its immediate eIIectivity
without need oI publication:chanroblesvirtuallawlibrary
5.0 EFFECTIVITYchanroblesvirtuallawlibrary
This Circular shall take eIIect immediately.chanroblesvirtuallawlibrary
Acting on the DBM directive, the Mandaue City Auditor issued
notices oI disallowance to herein petitioners, namely, Honorable RTC
Judges Mercedes G. Dadole, Ulric R. Caete, Agustin R. Vestil,
Honorable MTC Judges Temistocles M. Boholst, Vicente C. Fanilag
and WilIredo A. Dagatan, in excess oI the amount authorized by LBC
55. Beginning October, 1994, the additional monthly allowances oI the
petitioner judges were reduced to P1,000 each. They were also asked
to reimburse the amount they received in excess oI P1,000 Irom April
to September, 1994. chanroblesvirtuallawlibrary
The petitioner judges Iiled with the OIIice oI the City Auditor a protest
against the notices oI disallowance. But the City Auditor treated the
protest as a motion Ior reconsideration and indorsed the same to the
COA Regional OIIice No. 7. In turn, the COA Regional OIIice
reIerred the motion to the head oIIice with a recommendation that the
same be denied. chanroblesvirtuallawlibrary
On September 21, 1995, respondent COA rendered a decision denying
petitioners motion Ior reconsideration. The COA held
that:chanroblesvirtuallawlibrary
The issue to be resolved in the instant appeal is whether or not the City
Ordinance oI Mandaue which provides a higher rate oI allowances to
the appellant judges may prevail over that Iixed by the DBM under
Local Budget Circular No. 55 dated March 15, 1994.chanroblesvirtuallawlibrary
xxx xxx xxxchanroblesvirtuallawlibrary
Applying the Ioregoing doctrine, appropriation ordinance oI local
government units is subject to the organizational, budgetary and
compensation policies oI budgetary authorities (COA 5
th
Ind., dated
March 17, 1994 re: Province oI Antique; COA letter dated May 17,
1994 re: Request oI Hon. Renato Leviste, Cong. 1
st
Dist. Oriental
Mindoro). In this regard, attention is invited to Administrative Order
No. 42 issued on March 3, 1993 by the President oI the Philippines
clariIying the role oI DBM in the compensation and classiIication oI
local government positions under RA No. 7160 vis-avis the provisions
oI RA No. 6758 in view oI the abolition oI the JCLGPA. Section 1 oI
said Administrative Order provides that:chanroblesvirtuallawlibrary
Section 1. The Department oI Budget and Management as the lead
administrator oI RA No. 6758 shall, through its Compensation and
Position ClassiIication Bureau, continue to have the Iollowing
responsibilities in connection with the implementation oI the Local
Government Code oI 1991:
a) Provide guidelines on the classiIication oI local
government positions and on the speciIic rates oI pay
thereIore;
b) Provide criteria and guidelines Ior the grant oI all
allowances and additional Iorms oI compensation to
local government employees; xxx. (underscoring
supplied)chanroblesvirtuallawlibrary
To operationalize the aIorecited presidential directive, DBM issued
LBC No. 55, dated March 15, 1994, whose eIIectivity clause provides
that:chanroblesvirtuallawlibrary
xxx xxx xxxchanroblesvirtuallawlibrary
5.0 EFFECTIVITYchanroblesvirtuallawlibrary
This Circular shall take eIIect immediately.chanroblesvirtuallawlibrary
It is a well-settled rule that implementing rules and regulations
promulgated by administrative or executive oIIicer in accordance with,
and as authorized by law, has the Iorce and eIIect oI law or partake the
nature oI a statute (Victorias Milling Co., Inc., vs. Social Security
Commission, 114 Phil. 555, cited in Agpalos Statutory Construction,
2
nd
Ed. P. 16; Justice Cruzs Phil. Political Law, 1984 Ed., p. 103;
Espanol vs. Phil Veterans Administration, 137 SCRA 314; Antique
Sawmills Inc. vs. Tayco, 17 SCRA 316).chanroblesvirtuallawlibrary
xxx xxx xxxchanroblesvirtuallawlibrary
There being no statutory basis to grant additional allowance to judges
in excess oI P1,000.00 chargeable against the local government units
where they are stationed, this Commission Iinds no substantial grounds
or cogent reason to disturb the decision oI the City Auditor, Mandaue
City, disallowing in audit the allowances in question. Accordingly, the
above-captioned appeal oI the MTC and RTC Judges oI Mandaue
City, insoIar as the same is not covered by Circular Letter No. 91-7, is
hereby dismissed Ior lack oI merit.chanroblesvirtuallawlibrary
xxx xxx xxx|4|chanroblesvirtuallawlibrary
On November 27, 1995, Executive Judge Mercedes Gozo-Dadole, Ior
and in behalI oI the petitioner judges, Iiled a motion Ior
reconsideration oI the decision oI the COA. In a resolution dated May
28, 1996, the COA denied the motion. chanroblesvirtuallawlibrary
Hence, this petition Ior certiorari by the petitioner judges, submitting
the Iollowing questions Ior resolution:
Ichanroblesvirtuallawlibrary
HAS THE CITY OF MANDAUE STATUTORY AND
CONSTITUTIONAL BASIS TO PROVIDE ADDITIONAL
ALLOWANCES AND OTHER BENEFITS TO JUDGES
STATIONED IN AND ASSIGNED TO THE CITY?
IIchanroblesvirtuallawlibrary
CAN AN ADMINISTRATIVE CIRCULAR OR GUIDELINE SUCH
AS LOCAL BUDGET CIRCULAR NO. 55 RENDER
INOPERATIVE THE POWER OF THE LEGISLATIVE BODY OF
A CITY BY SETTING A LIMIT TO THE EXTENT OF THE
EXERCISE OF SUCH POWER?
IIIchanroblesvirtuallawlibrary
HAS THE COMMISSION ON AUDIT CORRECTLY
INTERPRETED LOCAL BUDGET CIRCULAR NO. 55 TO
INCLUDE MEMBERS OF THE JUDICIARY IN FIXING THE
CEILING OF ADDITIONAL ALLOWANCES AND BENEFITS TO
BE PROVIDED TO JUDGES STATIONED IN AND ASSIGNED TO
MANDAUE CITY BY THE CITY GOVERNMENT AT P1,000.00
PER MONTH NOTWITHSTANDING THAT THEY HAVE BEEN
RECEIVING ALLOWANCES OF P1,500.00 MONTHLY FOR THE
PAST FIVE YEARS?
IVchanroblesvirtuallawlibrary
IS LOCAL BUDGET CIRCULAR NO. 55 DATED MARCH 15,
1994 ISSUED BY THE DEPARTMENT OF BUDGET AND
MANAGEMENT VALID AND ENFORCEABLE CONSIDERING
THAT IT WAS NOT DULY PUBLISHED IN ACCODANCE WITH
LAW?|5|chanroblesvirtuallawlibrary
Petitioner judges argue that LBC 55 is void Ior inIringing on the local
autonomy oI Mandaue City by dictating a uniIorm amount that a local
government unit can disburse as additional allowances to judges
stationed therein. They maintain that said circular is not supported by
any law and thereIore goes beyond the supervisory powers oI the
President. They Iurther allege that said circular is void Ior lack oI
publication. chanroblesvirtuallawlibrary
On the other hand, the yearly appropriation ordinance providing Ior
additional allowances to judges is allowed by Section 458, par.
(a)(1)|xi|, oI RA 7160, otherwise known as the Local Government
Code oI 1991, which provides that:chanroblesvirtuallawlibrary
Sec. 458. Powers, Duties, Functions and Compensation. (a) The
sangguniang panlungsod, as the legislative body oI the city, shall enact
ordinances, approve resolutions and appropriate Iunds Ior the general
welIare oI the city and its inhabitants pursuant to Section 16 oI this
Code and in the proper exercise oI the corporate powers oI the city as
provided Ior under Section 22 oI this Code, and shall:chanroblesvirtuallawlibrary
(1) Approve ordinances and pass resolutions necessary Ior an eIIicient
and eIIective city government, and in this connection, shall:
xxx xxx xxx
(xi) hen the finances of the city overnment allow, provide for
additional allowances and other benefits to fudes, prosecutors, public
elementary and hih school teachers, and other national overnment
officials stationed in or assined to the city, (italics
supplied)chanroblesvirtuallawlibrary
Instead oI Iiling a comment on behalI oI respondent COA, the
Solicitor General Iiled a maniIestation supporting the position oI the
petitioner judges. The Solicitor General argues that (1) DBM only
enjoys the power to review and determine whether the disbursements
oI Iunds were made in accordance with the ordinance passed by a local
government unit while (2) the COA has no more than auditorial
visitation powers over local government units pursuant to Section 348
oI RA 7160 which provides Ior the power to inspect at any time the
Iinancial accounts oI local government units. chanroblesvirtuallawlibrary
Moreover, the Solicitor General opines that the DBM and the
respondent are only authorized under RA 7160 to promulgate a Budget
Operations Manual Ior local government units, to improve and
systematize methods, techniques and procedures employed in budget
preparation, authorization, execution and accountability pursuant to
Section 354 oI RA 7160. The Solicitor General points out that LBC 55
was not exercised under any oI the aIorementioned provisions.
chanroblesvirtuallawlibrary
Respondent COA, on the other hand, insists that the constitutional and
statutory authority oI a city government to provide allowances to
judges stationed therein is not absolute. Congress may set limitations
on the exercise oI autonomy. It is Ior the President, through the DBM,
to check whether these legislative limitations are being Iollowed by the
local government units. chanroblesvirtuallawlibrary
One such law imposing a limitation on a local government units
autonomy is Section 458, par. (a) (1) |xi|, oI RA 7160, which
authorizes the disbursement oI additional allowances and other
beneIits to judges subfect to the condition that the finances of the city
overnment should allow the same. Thus, DBM is merely enIorcing
the condition oI the law when it sets a uniIorm maximum amount Ior
the additional allowances that a city government can release to judges
stationed therein. chanroblesvirtuallawlibrary
Assuming aruendo that LBC 55 is void, respondent COA maintains
that the provisions oI the yearly approved ordinance granting
additional allowances to judges are still prohibited by the
appropriation laws passed by Congress every year. COA argues that
Mandaue City gets the Iunds Ior the said additional allowances oI
judges Irom the Internal Revenue Allotment (IRA). But the General
Appropriations Acts oI 1994 and 1995 do not mention the
disbursement oI additional allowances to judges as one oI the
allowable uses oI the IRA. Hence, the provisions oI said ordinance
granting additional allowances, taken Irom the IRA, to herein
petitioner judges are void Ior being contrary to law. chanroblesvirtuallawlibrary
To resolve the instant petition, there are two issues that we must
address: (1) whether LBC 55 oI the DBM is void Ior going beyond the
supervisory powers oI the President and Ior not having been published
and (2) whether the yearly appropriation ordinance enacted by the City
oI Mandaue that provides Ior additional allowances to judges
contravenes the annual appropriation laws enacted by Congress.
chanroblesvirtuallawlibrary
We rule in Iavor oI the petitioner judges.chanroblesvirtuallawlibrary
On the Iirst issue, we declare LBC 55 to be null and void.
chanroblesvirtuallawlibrary
We recognize that, although our Constitution[6] guarantees autonomy
to local government units, the exercise oI local autonomy remains
subject to the power oI control by Congress and the power oI
supervision by the President. Section 4 oI Article X oI the 1987
Philippine Constitution provides that:chanroblesvirtuallawlibrary
Sec. 4. The President oI the Philippines shall exercise general
supervision over local governments. x x xchanroblesvirtuallawlibrary
In Pimentel vs. uirre[7], we deIined the supervisory power oI the
President and distinguished it Irom the power oI control exercised by
Congress. Thus:chanroblesvirtuallawlibrary
This provision (Section 4 oI Article X oI the 1987 Philippine
Constitution) has been interpreted to exclude the power oI control. In
ondano v. Silvosa,
|i||5|
the Court contrasted the President's power oI
supervision over local government oIIicials with that oI his power oI
control over executive oIIicials oI the national government. It was
emphasized that the two terms -- supervision and control -- diIIered in
meaning and extent. The Court distinguished them as
Iollows:chanroblesvirtuallawlibrary
"x x x In administrative law, supervision means overseeing or the
power or authority oI an oIIicer to see that subordinate oIIicers
perIorm their duties. II the latter Iail or neglect to IulIill them, the
Iormer may take such action or step as prescribed by law to make them
perIorm their duties. Control, on the other hand, means the power oI
an oIIicer to alter or modiIy or nulliIy or set aside what a subordinate
oIIicer ha|s| done in the perIormance oI his duties and to substitute the
judgment oI the Iormer Ior that oI the latter."
|ii||6|
chanroblesvirtuallawlibrary
In %aule v. Santos,
|iii||7|
we Iurther stated that the ChieI Executive
wielded no more authority than that oI checking whether local
governments or their oIIicials were perIorming their duties as provided
by the Iundamental law and by statutes. He cannot interIere with local
governments, so long as they act within the scope oI their authority.
"Supervisory power, when contrasted with control, is the power oI
mere oversight over an inIerior body; it does not include any
restraining authority over such body,"
|iv||8|
we said.chanroblesvirtuallawlibrary
In a more recent case, Drilon v. Lim,
|v||9|
the diIIerence between
control and supervision was Iurther delineated. OIIicers in control lay
down the rules in the perIormance or accomplishment oI an act. II
these rules are not Iollowed, they may, in their discretion, order the act
undone or redone by their subordinates or even decide to do it
themselves. On the other hand, supervision does not cover such
authority. Supervising oIIicials merely see to it that the rules are
Iollowed, but they themselves do not lay down such rules, nor do they
have the discretion to modiIy or replace them. II the rules are not
observed, they may order the work done or redone, but only to
conIorm to such rules. They may not prescribe their own manner oI
execution oI the act. They have no discretion on this matter except to
see to it that the rules are Iollowed.chanroblesvirtuallawlibrary
Under our present system oI government, executive power is vested in
the President.
|vi||10|
The members oI the Cabinet and other executive
oIIicials are merely alter egos. As such, they are subject to the power
oI control oI the President, at whose will and behest they can be
removed Irom oIIice; or their actions and decisions changed,
suspended or reversed.
|vii||11|
In contrast, the heads oI political
subdivisions are elected by the people. Their sovereign powers
emanate Irom the electorate, to whom they are directly accountable.
By constitutional Iiat, they are subject to the Presidents supervision
only, not control, so long as their acts are exercised within the sphere
oI their legitimate powers. By the same token, the President may not
withhold or alter any authority or power given them by the
Constitution and the law.chanroblesvirtuallawlibrary
Clearly then, the President can only interIere in the aIIairs and
activities oI a local government unit iI he or she Iinds that the latter has
acted contrary to law. This is the scope oI the Presidents supervisory
powers over local government units. Hence, the President or any oI his
or her alter eos cannot interIere in local aIIairs as long as the
concerned local government unit acts within the parameters oI the law
and the Constitution. Any directive thereIore by the President or any oI
his or her alter eos seeking to alter the wisdom oI a law-conIorming
judgment on local aIIairs oI a local government unit is a patent nullity
because it violates the principle oI local autonomy and separation oI
powers oI the executive and legislative departments in governing
municipal corporations.chanroblesvirtuallawlibrary
Does LBC 55 go beyond the law it seeks to implement? Yes.
chanroblesvirtuallawlibrary
LBC 55 provides that the additional monthly allowances to be given
by a local government unit should not exceed P1,000 in provinces and
cities and P700 in municipalities. Section 458, par. (a)(1)(xi), oI RA
7160, the law that supposedly serves as the legal basis oI LBC 55,
allows the grant oI additional allowances to judges when the Iinances
oI the city government allow. The said provision does not authorize
setting a deIinite maximum limit to the additional allowances granted
to judges. Thus, we need not belabor the point that the Iinances oI a
city government may allow the grant oI additional allowances higher
than P1,000 iI the revenues oI the said city government exceed its
annual expenditures. Thus, to illustrate, a city government with locally
generated annual revenues oI P40 million and expenditures oI P35
million can aIIord to grant additional allowances oI more than P1,000
each to, say, ten judges inasmuch as the Iinances oI the city can aIIord
it. chanroblesvirtuallawlibrary
Setting a uniIorm amount Ior the grant oI additional allowances is an
inappropriate way oI enIorcing the criterion Iound in Section 458, par.
(a)(1)(xi), oI RA 7160. The DBM over-stepped its power oI
supervision over local government units by imposing a prohibition that
did not correspond with the law it sought to implement. In other
words, the prohibitory nature oI the circular had no legal basis.
chanroblesvirtuallawlibrary
Furthermore, LBC 55 is void on account oI its lack oI publication, in
violation oI our ruling in %aada vs. %uvera[8] where we held
that:chanroblesvirtuallawlibrary
xxx. Administrative rules and regulations must also be published iI
their purpose is to enIorce or implement existing law pursuant to a
valid delegation.chanroblesvirtuallawlibrary
Interpretative regulations and those merely internal in nature, that is,
regulating only the personnel oI an administrative agency and the
public, need not be published. Neither is publication required oI the
so-called letters oI instruction issued by administrative superiors
concerning the rules or guidelines to be Iollowed by their subordinates
in the perIormance oI their duties. chanroblesvirtuallawlibrary
Respondent COA claims that publication is not required Ior LBC 55
inasmuch as it is merely an interpretative regulation applicable to the
personnel oI an LGU. We disagree. In De Jesus vs. Commission on
udit[9] where we dealt with the same issue, this Court declared void,
Ior lack oI publication, a DBM circular that disallowed payment oI
allowances and other additional compensation to government oIIicials
and employees. In reIuting respondent COAs argument that said
circular was merely an internal regulation, we ruled
that:chanroblesvirtuallawlibrary
On the need Ior publication oI subject DBM-CCC No. 10, we rule in
the aIIirmative. Following the doctrine enunciated in %aada v. %uvera,
publication in the OIIicial Gazette or in a newspaper oI general
circulation in the Philippines is required since DBM-CCC No. 10 is in
the nature of an administrative circular the purpose of which is to
enforce or implement an existing law. Stated diIIerently, to be
eIIective and enIorceable, DBM-CCC No. 10 must go through the
requisite publication in the OIIicial Gazette or in a newspaper oI
general circulation in the Philippines. chanroblesvirtuallawlibrary
In the present case under scrutiny, it is decisively clear that DBM-CCC
No. 10, which completely disallows payment oI allowances and other
additional compensation to government oIIicials and employees,
starting November 1, 1989, is not a mere interpretative or internal
regulation. It is something more than that. And why not, when it tends
to deprive government workers oI their allowance and additional
compensation sorely needed to keep body and soul together. At the
very least, before the said circular under attack may be permitted
to substantially reduce their income, the government officials and
employees concerned should be apprised and alerted by the
publication of subject circular in the Official Gazette or in a
newspaper of general circulation in the Philippines to the end that
they be given amplest opportunity to voice out whatever
opposition they may have, and to ventilate their stance on the
matter. This approach is more in keeping with democratic
precepts and rudiments of fairness and transparency (emphasis
supplied)chanroblesvirtuallawlibrary
In Philippine International %radin Corporation vs. Commission on
udit[10], we again declared the same circular as void, Ior lack oI
publication, despite the Iact that it was re-issued and then submitted
Ior publication. Emphasizing the importance oI publication to the
eIIectivity oI a regulation, we therein held that:chanroblesvirtuallawlibrary
It has come to our knowledge that DBM-CCC No. 10 has been re-
issued in its entirety and submitted Ior publication in the OIIicial
Gazette per letter to the National Printing OIIice dated March 9, 1999.
Would the subsequent publication thereoI cure the deIect and retroact
to the time that the above-mentioned items were disallowed in
audit?chanroblesvirtuallawlibrary
The answer is in the negative, precisely Ior the reason that publication
is required as a condition precedent to the eIIectivity oI a law to
inIorm the public oI the contents oI the law or rules and regulations
beIore their rights and interests are aIIected by the same. From the
time the COA disallowed the expenses in audit up to the Iiling oI
herein petition the subject circular remained in legal limbo due to its
non-publication. As was stated in %aada v. %uvera, prior publication oI
laws beIore they become eIIective cannot be dispensed with, Ior the
reason that it would deny the public knowledge oI the laws that are
supposed to govern it.|11|chanroblesvirtuallawlibrary
We now resolve the second issue oI whether the yearly appropriation
ordinance enacted by Mandaue City providing Ior Iixed allowances Ior
judges contravenes any law and should thereIore be struck down as
null and void. chanroblesvirtuallawlibrary
According to respondent COA, even iI LBC 55 were void, the
ordinances enacted by Mandaue City granting additional allowances to
the petitioner judges would still (be) bereIt oI legal basis Ior want oI a
lawIul source oI Iunds considering that the IRA cannot be used for
such purposes. Respondent COA showed that Mandaue Citys Iunds
consisted oI locally generated revenues and the IRA. From 1989 to
1995, Mandaue Citys yearly expenditures exceeded its locally
generated revenues, thus resulting in a deIicit. During all those years, it
was the IRA that enabled Mandaue City to incur a surplus. Respondent
avers that Mandaue City used its IRA to pay Ior said additional
allowances and this violated paragraph 2 oI the Special Provisions,
page 1060, oI RA 7845 (The General Appropriations Act oI 1995)[12]
and paragraph 3 oI the Special Provision, page 1225, oI RA 7663 (The
General Appropriations Act oI 1994)[13] which speciIically identiIied
the objects oI expenditure oI the IRA. Nowhere in said provisions oI
the two budgetary laws does it say that the IRA can be used Ior
additional allowances oI judges. Respondent COA thus argues that the
provisions in the ordinance providing Ior such disbursement are
against the law, considering that the grant oI the subject allowances is
not within the speciIied use allowed by the aIoresaid yearly
appropriations acts. chanroblesvirtuallawlibrary
We disagree.chanroblesvirtuallawlibrary
Respondent COA Iailed to prove that Mandaue City used the IRA to
spend Ior the additional allowances oI the judges. There was no
evidence submitted by COA showing the breakdown oI the expenses
oI the city government and the Iunds used Ior said expenses. All the
COA presented were the amounts expended, the locally generated
revenues, the deIicit, the surplus and the IRA received each year.
Aside Irom these items, no data or Iigures were presented to show that
Mandaue City deducted the subject allowances Irom the IRA. In other
words, just because Mandaue Citys locally generated revenues were
not enough to cover its expenditures, this did not mean that the
additional allowances oI petitioner judges were taken Irom the IRA
and not Irom the citys own revenues. chanroblesvirtuallawlibrary
Moreover, the DBM neither conducted a Iormal review nor ordered a
disapproval oI Mandaue Citys appropriation ordinances, in accordance
with the procedure outlined by Sections 326 and 327 oI RA 7160
which provide that:chanroblesvirtuallawlibrary
Section 326. Review oI Appropriation Ordinances oI Provinces,
Highly Urbanized Cities, Independent Component Cities, and
Municipalities within the Metropolitan Manila Area. The Department
oI Budget and Management shall review ordinances authorizing the
annual or supplemental appropriations oI provinces, highly-urbanized
cities, independent component cities, and municipalities within the
Metropolitan Manila Area in accordance with the immediately
succeeding Section.chanroblesvirtuallawlibrary
Section 327. Review oI Appropriation Ordinances oI Component
Cities and Municipalities.- The sangguninang panlalawigan shall
review the ordinance authorizing annual or supplemental
appropriations oI component cities and municipalities in the same
manner and within the same period prescribed Ior the review oI other
ordinances. chanroblesvirtuallawlibrary
If within ninety (90) days from receipt of copies of such ordinance,
the sangguniang panlalawigan takes no action thereon, the same
shall be deemed to have been reviewed in accordance with law and
shall continue to be in full force and effect. (emphasis supplied)
chanroblesvirtuallawlibrary
Within 90 days Irom receipt oI the copies oI the appropriation
ordinance, the DBM should have taken positive action. Otherwise,
such ordinance was deemed to have been properly reviewed and
deemed to have taken eIIect. Inasmuch as, in the instant case, the
DBM did not Iollow the appropriate procedure Ior reviewing the
subject ordinance oI Mandaue City and allowed the 90-day period to
lapse, it can no longer question the legality oI the provisions in the said
ordinance granting additional allowances to judges stationed in the
said city. chanroblesvirtuallawlibrary
WHEREFORE, the petition is hereby GRANTED, and the assailed
decision and resolution, dated September 21, 1995 and May 28, 1996,
respectively, oI the Commission on Audit are hereby set aside.
chanroblesvirtuallawlibrary
No costs. chanroblesvirtuallawlibrary
SO ORDERED.chanroblesvirtuallawlibrary
avide r C Bellosillo Jitug Mendoza Panganiban
Quisumbing Ynares-Santiago Sandoval-Cutierrez Carpio ustria-
Martinez Carpio-Morales and Callejo Sr
concurchanroblesvirtuallawlibrary
Puno on official businesschanroblesvirtuallawlibrary
zcuna on leave























EN BANC


LEAGUE OF CITIES OF THE G.R. No. 176951
PHILIPPINES (LCP) represented
by LCP National President
JERRY P. TREAS, CITY OF
ILOILO represented by
MAYOR JERRY P. TREAS,
CITY OF CALBAYOG
represented by MAYOR
MEL SENEN S. SARMIENTO,
and JERRY P. TREAS in his
personal capacity as taxpayer,
Petitioners,

- versus -
COMMISSION ON ELECTIONS;
MUNICIPALITY OF BAYBAY,
PROVINCE OF LEYTE;
MUNICIPALITY OF BOGO,
PROVINCE OF CEBU;
MUNICIPALITY OF CATBALOGAN,
PROVINCE OF WESTERN SAMAR;
MUNICIPALITY OF TANDAG,
PROVINCE OF SURIGAO DEL SUR;
MUNICIPALITY OF BORONGAN,
PROVINCE OF EASTERN SAMAR;
and MUNICIPALITY OF TAYABAS,
PROVINCE OF QUEZON,
Respondents.

CITY OF TARLAC, CITY OF SANTIAGO,
CITY OF IRIGA, CITY OF LIGAO,
CITY OF LEGAZPI, CITY OF
TAGAYTAY, CITY OF SURIGAO,
CITY OF BAYAWAN, CITY OF
SILAY, CITY OF GENERAL SANTOS,
CITY OF ZAMBOANGA, CITY OF
GINGOOG, CITY OF CAUAYAN,
CITY OF PAGADIAN, CITY OF
SAN CARLOS, CITY OF
SAN FERNANDO, CITY OF
TACURONG, CITY OF TANGUB,
CITY OF OROQUIETA, CITY OF
URDANETA, CITY OF VICTORIAS,
CITY OF CALAPAN, CITY OF
HIMAMAYLAN, CITY OF
BATANGAS, CITY OF BAIS,
CITY OF CADIZ, and
CITY OF TAGUM,
Petitioners-In-Intervention.
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

LEAGUE OF CITIES OF THE G.R. No. 177499
PHILIPPINES (LCP) represented
by LCP National President
JERRY P. TREAS, CITY OF
ILOILO represented by
MAYOR JERRY P. TREAS,
CITY OF CALBAYOG
represented by MAYOR
MEL SENEN S. SARMIENTO,
and JERRY P. TREAS in his
personal capacity as taxpayer,
Petitioners,

- versus -

COMMISSION ON ELECTIONS;
MUNICIPALITY OF LAMITAN,
PROVINCE OF BASILAN;
MUNICIPALITY OF TABUK,
PROVINCE OF KALINGA;
MUNICIPALITY OF BAYUGAN,
PROVINCE OF AGUSAN DEL SUR;
MUNICIPALITY OF BATAC,
PROVINCE OF ILOCOS NORTE;
MUNICIPALITY OF MATI,
PROVINCE OF DAVAO ORIENTAL;
and MUNICIPALITY OF GUIHULNGAN,
PROVINCE OF NEGROS ORIENTAL,
Respondents.




CITY OF TARLAC, CITY OF
SANTIAGO, CITY OF IRIGA,
CITY OF LIGAO, CITY OF LEGAZPI,
CITY OF TAGAYTAY, CITY OF SURIGAO,
CITY OF BAYAWAN, CITY OF
SILAY, CITY OF GENERAL SANTOS,
CITY OF ZAMBOANGA, CITY OF
GINGOOG, CITY OF CAUAYAN,
CITY OF PAGADIAN, CITY OF
SAN CARLOS, CITY OF
SAN FERNANDO, CITY OF
TACURONG, CITY OF TANGUB,
CITY OF OROQUIETA, CITY OF
URDANETA, CITY OF VICTORIAS,
CITY OF CALAPAN, CITY OF
HIMAMAYLAN, CITY OF
BATANGAS, CITY OF BAIS,
CITY OF CADIZ, and
CITY OF TAGUM,
Petitioners-In-Intervention.
x - - - - - - - - - - - - - - - - - - - - - - - - - - --x

LEAGUE OF CITIES OF THE G.R. No. 178056
PHILIPPINES (LCP) represented
by LCP National President Present:
JERRY P. TREAS, CITY OF
ILOILO represented by CORONA, C.J.,
MAYOR JERRY P. TREAS, CARPIO,
CITY OF CALBAYOG CARPIO MORALES,
represented by MAYOR VELASCO, JR.,
MEL SENEN S. SARMIENTO, NACHURA,
and JERRY P. TREAS in his LEONARDO-DE CASTRO,
personal capacity as taxpayer,BRION,
Petitioners, PERALTA,
BERSAMIN,
DEL CASTILLO,
- versus - ABAD,
VILLARAMA, JR.,
PEREZ,
MENDOZA, and
COMMISSION ON ELECTIONS; SERENO, JJ.
MUNICIPALITY OF CABADBARAN,
PROVINCE OF AGUSAN
DEL NORTE; MUNICIPALITY
OF CARCAR, PROVINCE OF
CEBU; and MUNICIPALITY OF
EL SALVADOR, MISAMIS
ORIENTAL,
Respondents.


CITY OF TARLAC, CITY OF
SANTIAGO, CITY OF IRIGA,
CITY OF LIGAO, CITY OF LEGAZPI,
CITY OF TAGAYTAY, CITY OF SURIGAO,
CITY OF BAYAWAN, CITY OF SILAY,
CITY OF GENERAL SANTOS,
CITY OF ZAMBOANGA, CITY OF
GINGOOG, CITY OF CAUAYAN,
CITY OF PAGADIAN, CITY OF
SAN CARLOS, CITY OF
SAN FERNANDO, CITY OF
TACURONG, CITY OF TANGUB,
CITY OF OROQUIETA, CITY OF
URDANETA, CITY OF VICTORIAS,
CITY OF CALAPAN, CITY OF
HIMAMAYLAN, CITY OF
BATANGAS, CITY OF BAIS,
CITY OF CADIZ, and Promulgated:
CITY OF TAGUM,
Petitioners-In-Intervention. August 24, 2010
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - x


R E S O L U T I O N


CARPIO, .:
For resolution are (1) the ad cautelam motion Ior
reconsideration and (2) motion to annul the Decision oI 21
December 2009 Iiled by petitioners League oI Cities oI the
Philippines, et al. and (3) the ad cautelam motion Ior
reconsideration Iiled by petitioners-in-intervention Batangas
City, Santiago City, Legazpi City, Iriga City, Cadiz City,
and Oroquieta City.
On 18 November 2008, the Supreme Court En Banc, by a
majority vote, struck down the subject 16 Cityhood Laws Ior
violating Section 10, Article X oI the 1987 Constitution and
the equal protection clause. On 31 March 2009, the Supreme
Court En Banc, again by a majority vote, denied the
respondents' Iirst motion Ior reconsideration. On 28 April
2009, the Supreme Court En Banc, by a split vote, denied
the respondents' second motion Ior reconsideration.
Accordingly, the 18 November 2008 Decision became Iinal
and executory and was recorded, in due course, in the Book
oI Entries oI Judgments on 21 May 2009.
However, aIter the Iinality oI the 18 November 2008
Decision and without any exceptional and compelling
reason, the Court En Banc unprecedentedly reversed the 18
November 2008 Decision by upholding the constitutionality
oI the Cityhood Laws in the Decision oI 21 December 2009.

Upon reexamination, the Court Iinds the motions Ior
reconsideration meritorious and accordingly reinstates the
18 November 2008 Decision declaring the 16 Cityhood
Laws unconstitutional.

. Jiolation of Section 10, rticle X of the Constitution
Section 10, Article X oI the 1987 Constitutionprovides:
No province, city, municipality, or barangay shall be created, divided,
merged, abolished or its boundary substantially altered, except in
accordance with the criteria established in the local government code
and subject to approval by a majority oI the votes cast in a plebiscite in
the political units directly aIIected. (Emphasis supplied)

The Constitution is clear. The creation oI local government
units must Iollow the criteria established in the Local
Government Code and not in any other law. There is only
one Local Government Code.
1
The Constitution requires
Congress to stipulate in the Local Government Code all the
criteria necessary Ior the creation oI a city, including the
conversion oI a municipality into a city. Congress cannot
write such criteria in any other law, like the Cityhood Laws.

The clear intent oI the Constitution is to insure that the
creation oI cities and other political units must Iollow the
same uniform, non-discriminatory criteria found solely
in the Local Government Code. Any derogation or
deviation Irom the criteria prescribed in the Local
Government Code violates Section 10, Article X oI the
Constitution.

RA 9009 amended Section 450 oI the Local Government
Code to increase the income requirement Irom P20 million
to P100 million Ior the creation oI a city. This took effect
on 30 1une 2001. Hence, from that moment theLocal
Government Code required that any municipality
desiring to become a city must satisfy the P100 million
income requirement. Section 450 oI the Local Government
Code, as amended by RA 9009, does not contain any
exemption Irom this income requirement.

In enacting RA 9009, Congress did not grant any exemption
to respondent municipalities, even though their cityhood
bills were pending in Congress when Congress passed RA
9009. The Cityhood Laws, all enacted after the eIIectivity oI
RA 9009, explicitly exempt respondent municipalities Irom
the increased income requirement in Section 450 oI the
Local Government Code, as amended by RA 9009. Such
exemption clearly violates Section 10, Article X of the
Constitution and is thus patently unconstitutional. To be
valid, such exemption must be written in the Local
Government Code and not in any other law, including
the Cityhood Laws.

RA 9009 is not a law different from the Local
Government Code. Section 1 of RA 9009 pertinently
provides: "Section 450 of Republic Act No. 7160,
otherwise known as the Local Government Code of 1991,
is hereby amended to read as follows: x x x." RA 9009
amended Section 450 of the Local Government Code. RA
9009, by amending Section 450 of the Local Government
Code, embodies the new and prevailing Section 450 of
the Local Government Code. Considering the
Legislature's primary intent to curtail "the mad rush of
municipalities wanting to be converted into cities," RA
9009 increased the income requirement for the creation
of cities. To repeat, RA 9009 is not a law different from
the Local Government Code, as it expressly amended
Section 450 of the Local Government Code.

The language of RA 9009 is plain, simple, and clear.
Nothing is unintelligible or ambiguous; not a single word
or phrase admits of two or more meanings. RA 9009
amended Section 450 of the Local Government Code of
1991 by increasing the income requirement for the
creation of cities. There are no exemptions from this
income requirement. Since the law is clear, plain and
unambiguous that any municipality desiring to convert
into a city must meet the increased income requirement,
there is no reason to go beyond the letter of the law.
Moreover, where the law does not make an exemption,
the Court should not create one.
2
cIa


B Operative Fact octrine
Under the operative fact doctrine, the law is recognized
as unconstitutional but the effects of the unconstitutional
law, prior to its declaration of nullity, may be left
undisturbed as a matter of equity and fair play. In fact,
the invocation of the operative fact doctrine is an
admission that the law is unconstitutional.

However, the minority's novel theory, invoking the
operative fact doctrine, is that the enactment of the
Cityhood Laws and the functioning of the 16
municipalities as new cities with new sets of officials and
employees operate to contitutionalize the
unconstitutional Cityhood Laws. This novel theory
misapplies the operative fact doctrine and sets a gravely
dangerous precedent.

Under the minority's novel theory, an unconstitutional
law, if already implemented prior to its declaration of
unconstitutionality by the Court, can no longer be
revoked and its implementation must be continued
despite being unconstitutional. This view will open the
floodgates to the wanton enactment of unconstitutional
laws and a mad rush for their immediate implementation
before the Court can declare them unconstitutional. This
view is an open invitation to serially violate the
Constitution, and be quick about it, lest the violation be
stopped by the Court.

The operative fact doctrine is a rule of equity. As such, it
must be applied as an exception to the general rule that
an unconstitutional law produces no effects. It can never
be invoked to validate as constitutional an
unconstitutional act. In Planters Products Inc v
Fertiphil Corporation,
3
cIa the Court stated:

The general rule is that an unconstitutional law is
void. It produces no rights, imposes no duties and
affords no protection. It has no legal effect. It is, in
legal contemplation, inoperative as if it has not been
passed. Being void, Fertiphil is not required to pay
the levy. All levies paid should be refunded in
accordance with the general civil code principle
against unjust enrichment. The general rule is
supported by Article 7 of the Civil Code, which
provides:
ART. 7. Laws are repealed only by
subsequent ones, and their violation or non-
observance shall not be excused by disuse or
custom or practice to the contrary.
When the courts declare a law to be
inconsistent with the Constitution, the
former shall be void and the latter shall
govern.
The doctrine of operative fact, as an exception to the
general rule, only applies as a matter of equity and
fair play. It nullifies the effects of an unconstitutional
law by recognizing that the existence of a statute
prior to a determination of unconstitutionality is an
operative fact and may have consequences which
cannot always be ignored. The past cannot always be
erased by a new judicial declaration.
The doctrine is applicable when a declaration of
unconstitutionality will impose an undue burden on
those who have relied on the invalid law. Thus, it was
applied to a criminal case when a declaration of
unconstitutionality would put the accused in double
jeopardy or would put in limbo the acts done by a
municipality in reliance upon a law creating it.
(mphasis supplied)

The operative fact doctrine never validates or
constitutionalizes an unconstitutional law. Under the
operative fact doctrine, the unconstitutional law remains
unconstitutional, but the effects of the unconstitutional
law, prior to its judicial declaration of nullity, may be
left undisturbed as a matter of equity and fair play. In
short, the operative fact doctrine affects or modifies only
the effects of the unconstitutional law, not the
unconstitutional law itself.

Thus, applying the operative fact doctrine to the present
case, the Cityhood Laws remain unconstitutional because
they violate Section 10, Article X of the Constitution.
However, the effects of the implementation of the
Cityhood Laws prior to the declaration of their nullity,
such as the payment of salaries and supplies by the "new
cities" or their issuance of licenses or execution of
contracts, may be recognized as valid and effective. This
does not mean that the Cityhood Laws are valid for they
remain void. Only the effects of the implementation of
these unconstitutional laws are left undisturbed as a
matter of equity and fair play to innocent people who
may have relied on the presumed validity of the
Cityhood Laws prior to the Court's declaration of their
unconstitutionality.

C 6ual Protection Clause

As the Court held in the 18 November 2008 Decision,
there is no substantial distinction between municipalities
with pending cityhood bills in the 11
th
Congress and
municipalities that did not have pending bills. The mere
pendency of a cityhood bill in the 11
th
Congress is not a
material difference to distinguish one municipality from
another for the purpose of the income requirement. The
pendency of a cityhood bill in the 11
th
Congress does not
affect or determine the level of income of a municipality.
Municipalities with pending cityhood bills in the 11
th

Congress might even have lower annual income than
municipalities that did not have pending cityhood bills.
In short, the classification criterion mere pendency of a
cityhood bill in the 11
th
Congress is not rationally
related to the purpose of the law which is to prevent
fiscally non-viable municipalities from converting into
cities.

Moreover, the Iact oI pendency oI a cityhood bill in the 11
th

Congress limits the exemption to a speciIic condition
existing at the time oI passage oI RA 9009. That speciIic
condition will never happen again. This violates the
requirement that a valid classiIication must not be limited to
existing conditions only. In Iact, the minority concedes that
"the conditions (pendency oI the cityhood bills) adverted to
can no longer be repeated."

Further, the exemption provision in the Cityhood Laws
gives the 16 municipalities a unique advantage based on an
arbitrary date the Iiling oI their cityhood bills beIore the
end oI the 11
th
Congress - as against all other municipalities
that want to convert into cities aIter the eIIectivity oI RA
9009.

In addition, limiting the exemption only to the 16
municipalities violates the requirement that the classiIication
must apply to all similarly situated. Municipalities with the
same income as the 16 respondent municipalities cannot
convert into cities, while the 16 respondent municipalities
can. Clearly, as worded, the exemption provision Iound in
the Cityhood Laws, even iI it were written in Section 450 oI
the Local Government Code, would still be unconstitutional
Ior violation oI the equal protection clause.


%ie-Jote on a Motion for Reconsideration
Section 7, Rule 56 oI the Rules oI Court provides:

SEC. 7. Procedure if opinion is equally divided. - Where the
court en banc is equally divided in opinion, or the necessary
majority cannot be had, the case shall again be deliberated
on, and iI aIter such deliberation no decision is reached, the
original action commenced in the court shall be dismissed;
in appealed cases, the judgment or order appealed Irom shall
stand aIIirmed; and on all incidental matters, the petition or
motion shall be denied. (Emphasis supplied)

The En Banc Resolution oI 26 January 1999 in A.M. No.
99-1-09-SC, reads:
A MOTION FOR THE CONSIDERATION OF A D E C I S
I O N OR RESOLUTION OF THE COURT EN BNC OR
OF A DIVISION MAY BE GRANTED UPON A VOTE
OF A MAJORITY OF THE MEMBERS OF THE EN
BNC OR OF A DIVISION, AS THE CASE MAY BE,
WHO ACTUALLY TOOK PART IN THE
DELIBERATION OF THE MOTION.
IF THE VOTING RESULTS IN A TIE, THE MOTION
FOR RECONSIDERATION IS DEEMED DENIED.
(Emphasis supplied)


The clear and simple language oI the clariIicatory en banc
Resolution requires no Iurther explanation. II the voting oI
the Court en banc results in a tie, the motion Ior
reconsideration is deemed denied. The Court's prior majority
action on the main decision stands aIIirmed.
4
cIa This
clariIicatory Resolution applies to all cases heard by the
Court en banc, which includes not only cases involving the
constitutionality oI a law, but also, as expressly stated in
Section 4(2), Article VIII oI the Constitution, "all other
cases which under the Rules oI Court are required to be
heard en banc."

The 6-6 tie-vote by the Court en banc on the second motion
Ior reconsideration necessarily resulted in the denial oI the
second motion Ior reconsideration. Since the Court was
evenly divided, there could be no reversal oI the 18
November 2008 Decision, for a tie-vote cannot result in any
court order or directive.
5
cIa The judgment stands in Iull Iorce.
6
cIa
Undeniably, the 6-6 tie-vote did not overrule the prior
majority en banc Decision oI 18 November 2008, as well as
the prior majority en banc Resolution oI 31 March 2009
denying reconsideration. The tie-vote on the second motion
Ior reconsideration is not the same as a tie-vote on the main
decision where there is no prior decision. Here, the tie-vote
plainly signiIies that there is no majority to overturn the
prior 18 November 2008 Decision and 31 March 2009
Resolution, and thus the second motion Ior reconsideration
must be denied.

Further, the tie-vote on the second motion Ior
reconsideration did not mean that the present cases were leIt
undecided because there remain the Decision oI 18
November 2008 and the Resolution oI 31 March 2009 where
a majority oI the Court en banc concurred in declaring the
unconstitutionality oI the sixteen Cityhood Laws. In short,
the 18 November 2008 Decision and the 31 March 2009
Resolution, which were both reached with the concurrence
oI a majority oI the Court en banc, are not reconsidered but
stand aIIirmed.
7
These prior majority actions oI the Court
en banc can only be overruled by a new majority vote, not a
tie-vote because a tie-vote cannot overrule a prior
aIIirmative action.

The denial, by a split vote, oI the second motion Ior
reconsideration inevitably rendered the 18 November 2008
Decision Iinal. In Iact, in its Resolution oI 28 April 2009,
denying the second motion Ior reconsideration, the Court en
banc reiterated that no Iurther pleadings shall be entertained
and stated that entry oI judgment be made in due course.

The dissenting opinion stated that "a deadlocked vote oI six
is not a majority and a non-majority does not constitute a
rule with precedential value."
8


Indeed, a tie-vote is a non-majority - a non-majority which
cannot overrule a prior aIIirmative action, that is the 18
November 2008 Decision striking down the Cityhood Laws.
In short, the 18 November 2008 Decision stands aIIirmed.
And assuming a non-majority lacks any precedential value,
the 18 November 2008 Decision, which was unreversed as a
result oI the tie-vote on the respondents' second motion Ior
reconsideration, nevertheless remains binding on the
parties.
9



Conclusion


Section 10, Article X oI the Constitution expressly provides
that "no x x x city shall be created x x x except in
accordance with the criteria established in the local
government code." This provision can only be interpreted in
one way, that is, all the criteria Ior the creation oI cities must
be embodied exclusively in the Local Government Code. In
this case, the Cityhood Laws, which are unmistakably laws
other than the Local Government Code, provided an
exemption Irom the increased income requirement Ior the
creation oI cities under Section 450 oI the Local
Government Code, as amended by RA 9009. Clearly, the
Cityhood Laws contravene the letter and intent oI Section
10, Article X oI the Constitution.

Adhering to the explicit prohibition in Section 10, Article X
oI the Constitution does not cripple Congress' power to
make laws. In Iact, Congress is not prohibited Irom
amending the Local Government Code itselI, as what
Congress did by enacting RA 9009. Indisputably, the act oI
amending laws comprises an integral part oI the
Legislature's law-making power. The unconstitutionality oI
the Cityhood Laws lies in the Iact that Congress provided an
exemption contrary to the express language oI the
Constitution that "|n|o x x x city x x x shall be created
except in accordance with the criteria established in the local
government code."In other words, Congress exceeded and
abused its law-making power, rendering the challenged
Cityhood Laws void Ior being violative oI the Constitution.

WHEREFORE, we GRANT the motions Ior reconsideration
oI the 21 December 2009 Decision and REINSTATE the 18
November 2008 Decision declaring
UNCONSTITUTIONAL the Cityhood Laws, namely:
Republic Act Nos. 9389, 9390, 9391, 9392, 9393, 9394,
9398, 9404, 9405, 9407, 9408, 9409, 9434, 9435, 9436, and
9491.

We NOTE petitioners' motion to annul the Decision oI 21
December 2009.

SO ORDERED.























N BANC
G.R. No. 130775.September 27, 2004]
THE NATIONAL LIGA NG MGA BARANGAY, represented by
ALEX L. DAVID in his capacity as National President and for his
own Person, President ALEX L. DAVID, Petitioners vs HON.
VICTORIA ISABEL A. PAREDES, Presiding 1udge, Regional
Trial Court, Branch 124, Caloocan City, and THE
DEPARTMENT OF INTERIOR and LOCAL GOVERNMENT,
represented the HON. SECRETARY ROBERT Z. BARBERS and
MANUEL A. RAYOS, respondents
G.R. No.131939.September 27, 2004]
LEANDRO YANGOT, BONIFACIO LACWASAN and BONY
TACIO, Petitioners vs DILG Secretary ROBERT Z. BARBERS
and DILG Undersecretary MANUEL SANCHEZ, Respondents
D E C I S I O N
Tinga : chanroblesvirtuallawlibrary
At bottom, the present petition inquires into the essential nature of
the Liga ng mga Barangay and questions the extent of the power of
Secretary of the Department of Interior and Local Government
(DILG), as alter ego of the President.More immediately, the
petition disputes the validity of the appointment of the DILG as
the interim caretaker of the Liga ng mga
Barangaychanroblesvirtuallawlibrary
On 11 1une 1997, private respondent Manuel A. Rayos as
petitioner therein], Punong Barangay of Barangay 52, District II,
Zone 5, District II, Caloocan City, filed a petition for prohibition
and mandamus, with prayer for a writ of preliminary injunction
and/or temporary restraining order and damages before the
Regional Trial Court (RTC) of Caloocan,1] alleging that
respondent therein Alex L. David now petitioner], Punong
Barangay of Barangay 77, Zone 7, Caloocan City and then
president of the Liga Chapter of Caloocan City and of the Liga ng
mga Barangay National Chapter, committed certain irregularities
in the notice, venue and conduct of the proposed synchronized
Liga ng mga Barangay elections in 1997.According to the petition,
the irregularities consisted of the following: (1) the publication of
the notice in the Manila Bulletin but without notifying in writing
the individual punong barangays of Caloocan City;2] (2) the Notice
of Meeting dated 08 1une 1997 for the Liga Chapter of Caloocan
City did not specify whether the meeting scheduled on 14 1une
1997 was to be held at 8:00 a.m. or 8:00 p.m., and worse, the
meeting was to be held in Lingayen, Pangasinan;3] and (3) the
deadline for the filing of the Certificates of Candidacy having been
set at 5:00 p.m. of the third day prior to the above election day, or
on 11 1une 1997,4] Rayos failed to meetsaid deadline since he was
not able to obtain a certified true copy of the COMELEC
Certificate of Canvas and Proclamation of Winning Candidate,
which were needed to be a delegate, to vote and be voted for in the
Liga election.On 13 1une 1997, the Executive 1udge issued a
temporary restraining order (TRO), effective for seventy-two (72)
hours, enjoining the holding of the general membership and
election meeting of Liga Chapter of Caloocan City on 14 1une
1975.5]chanroblesvirtuallawlibrary
However, the TRO was allegedly not properly served on herein
petitioner David, and so the election for the officers of the Liga-
Caloocan was held as scheduled.6] Petitioner David was
proclaimed President of the Liga-Caloocan, and thereafter took
his oath and assumed the position of e-officio member of the
Sangguniang Panlungsod of Caloocan.chanroblesvirtuallawlibrary
On 17 1uly 1997, respondent Rayos filed a second petition, this
time for 6uo warranto, mandamus and prohibition, with prayer for
a writ of preliminary injunction and/or temporary restraining
order and damages, against David, Nancy Quimpo, Presiding
Officer of the Sangguniang Panlungsod of Caloocan City, and
Secretary Barbers.7] Rayos alleged that he was elected President
of the Liga Caloocan Chapter in the elections held on 14 1une 1997
by the members of the Caloocan Chapter pursuant to their
Resolution/Petition No. 001-97.8] On 18 1uly 1997, the presiding
judge granted the TRO, enjoining therein respondents David,
Quimpo and Secretary Barbers from proceeding with the
synchronized elections for the Provincial and Metropolitan
Chapters of the Liga scheduled on 19 1uly 1997, but only for the
purpose of maintaining the status 6uo and effective for a period
not exceeding seventy-two (72) hours.9]chanroblesvirtuallawlibrary
Eventually, on 18 1uly 1997, at petitioner Davids instance, Special
Civil Action (SCA) No. C-512 pending before Branch 126 was
consolidated with SCA No. C-508 pending before Branch
124.10]chanroblesvirtuallawlibrary
Before the consolidation of the cases, on 25 1uly 1997, the DILG
through respondent Secretary Barbers, filed in SCA No. C-512 an
&rgent Motion,11] invoking the Presidents power of general
supervision over all local government units and seeking the
following reliefs:chanroblesvirtuallawlibrary
WHEREFORE, in the interest of the much-needed delivery of
basic services to the people, the maintenance of public order and
to further protect the interests of the forty-one thousand
barangays all over the country, herein respondent respectfully
prays:chanroblesvirtuallawlibrary
a) That the Department of the Interior and Local Government
(DILG), pursuant to its delegated power of general supervision, be
appointed as the Interim Caretaker to manage and administer the
affairs of the Liga, until such time that the new set of National
Liga Officers shall have been duly elected and assumed office;
...12]chanroblesvirtuallawlibrary
The prayer for injunctive reliefs was anchored on the following
grounds: (1) the DILG Secretary exercises the power of general
supervision over all governmentunits by virtue of Administrative
Order No. 267 dated 18 February 1992; (2) the Liga ng mga
Barangay is a government organization; (3) undue interference by
some local elective officials during the Municipal and City
Chapter electionsof the Liga ng mga Barangay; (4) improper
issuance of confirmations of the elected Liga Chapter officers by
petitioner David and the National Liga Board; (5) the need for the
DILG to provide remedies measured in view of the confusion and
chaos sweeping the Liga ng mga Barangay and the incapacity of
the National Liga Board to address theproblems
properly.chanroblesvirtuallawlibrary
On 31 1uly 1997, petitioner David opposed the DILGs &rgent
Motion, claiming that the DILG, being a respondent in the case, is
not allowed to seek any sanction against a co-respondent like
David, such as by filing a cross-claim, without first seeking leave of
court.13] He also alleged that the DILGs request to be appointed
interim caretaker constitutes undue interference in the internal
affairs of the Liga, since the Liga is not subject to DILG control
and supervision.14]chanroblesvirtuallawlibrary
Three (3) days after filing its &rgent Motion, on 28 1uly 1997, and
before it was acted upon by the lower court, the DILG through
then Undersecretary Manuel Sanchez, issued Memorandum
Circular No. 97-176.15] It cited the reported violations of the Liga
ng mga Barangay Constitution and By-Laws by David and
widespread chaos and confusion among local government officials
as to who were the qualified e-officio Liga members in their
respective sangunians16] Pending the appointment of the DILG as
the Interim Caretaker of the Liga ng mga Barangay by the court
and until the officers and board members of the national Liga
Chapter have been elected and have assumed office, the
Memorandum Circular directed all provincial governors, vice
governors, city mayors, city vice mayors, members of the
sangguniang panlalawigan and panlungsod, DILG regional
directors and other concerned officers, as
follows:chanroblesvirtuallawlibrary
1. All concerned are directed not to recognize and/or honor any
Liga Presidents of the Provincial and Metropolitan Chapters as
ex-officio members of the sanggunian concerned until further
notice from the Courts or this Department;chanroblesvirtuallawlibrary
2.All concerned are directed to disregard any pronouncement
and/or directive issued by Mr. Alex David on any issue or matter
relating to the affairs of the Liga ng mga Barangay until further
notice from the Courts or this Department.17]chanroblesvirtuallawlibrary
On 04 August 1997, public respondent 1udge Victoria Isabel A.
Paredes issued the assailed order,18] the pertinent portions of
which read, thus:chanroblesvirtuallawlibrary
The authority of the DILG to exercise general supervisory
jurisdiction over local government units, including the different
leagues created under the Local Government Code of 1991 (RA
7160) finds basis in Administrative Order No. 267 dated February
18, 1992.Specifically, Section 1 (a) of the said Administrative
Order provides a broad premise for the supervisory power of the
DILG.Administratively, the DILGs supervision has been tacitly
recognized by the local barangays, municipalities, cities and
provinces as shown by the evidences presented by respondent
David himself (See Annexes A to C).The fact that the DILG has
sought to refer the matters therein to the National Liga
Board/Directorate does not ipso facto mean that it has lost
jurisdiction to act directly therein.1urisdiction is conferred by law
and cannot be claimed or lost through agreements or inaction by
individuals.What respondent David may term as interference
should caretakership be allowed, this Court would rather view as
a necessary and desirable corollary to the exercise of
supervision.19]chanroblesvirtuallawlibrary
Political motivations must not preclude, hamper, or obstruct the
delivery of basic services and the perquisites of public service.In
this case, the fact of confusion arising from conflicting
appointments, non-action, and uninformed or wavering decisions
of the incumbent National Liga Board/Directorate, having been
satisfactorily established, cannot simply be brushed aside as being
politically motivated or arising therefrom.It is incumbent,
therefore, that the DILG exercise a more active role in the
supervision of the affairs and operations of the National Liga
Board/ Directorate at least until such time that the regular
National Liga Board/Directorate may have been elected, qualified
and assumed office.20]chanroblesvirtuallawlibrary
xxxchanroblesvirtuallawlibrary
WHEREFORE, premises considered, the Urgent Motion of the
DILG for appointment as interim caretaker, until such time that
the regularly elected National Liga Board of Directors shall have
qualified and assumed office, to manage and administer the affairs
of the National Liga Board, is hereby
GRANTED.21]chanroblesvirtuallawlibrary
On 11 August 1997, petitioner David filed an urgent motion for the
reconsideration of the assailed order and to declare respondent
Secretary Barbers in contempt of Court.22] David claimed that the
04 August 1997 order divested the duly elected members of the
Board of Directors of the Liga National Directorate of their
positions without due process of law.He also wanted Secretary
Barbers declared in contempt for having issued, through his
Undersecretary, Memorandum Circular No. 97-176, even before
respondent judge issued the questioned order, in mockery of the
justice system.He implied that Secretary Barbers knew about
respondent judges questioned order even before it was
promulgated.23]chanroblesvirtuallawlibrary
On 11 August 1997, the DILG issued Memorandum Circular No.
97-193,24] providing supplemental guidelines for the 1997
synchronized elections of the provincial and metropolitan chapters
and for the election of the national chapter of the Liga ng mga
Barangay. The Memorandum Circular set the synchronized
elections for the provincial and metropolitan chapters on 23
August 1997 and for the national chapter on 06 September
1997.chanroblesvirtuallawlibrary
On 12 August 1997, the DILG issued a Certificate of
Appointment25] in favor of respondent Rayos as president of the
Liga ng mga Barangay of Caloocan City.The appointment
purportedly served as Rayoss legal basis for e-officio membership
in the Sangguniang Panlungsod of Caloocan City and to qualify
and participate in the forthcoming National Chapter Election of
the Liga ng mga Barangay.26]chanroblesvirtuallawlibrary
On 23 August 1997, the DILG conducted the synchronized
elections of Provincial and Metropolitan Liga Chapters.
Thereafter, on 06 September 1997, the National Liga Chapter held
its election of officers and board of directors, wherein 1ames
Marty L. Lim was elected as President of the National
Liga.27]chanroblesvirtuallawlibrary
On 01 October 1997, public respondent judge denied Davids
motion for reconsideration,28] ruling that there was no factual or
legal basis to reconsider the appointment of the DILG as interim
caretaker of the National Liga Board and to cite Secretary Barbers
in contempt of court.29]chanroblesvirtuallawlibrary
On 10 October 1997, petitioners filed the instant Petition for
Certiorari30] under Rule 65 of the Rules of Court, seeking to annul
public respondent judges orders of 04 August 1997 and 01
October 1997.They dispute the latters opinion on the power of
supervision of the President under the Constitution, through the
DILG over local governments, which is the same as that of the
DILGs as shown by its application of the power on the Liga ng
mga Barangay.Specifically, they claim that the public respondent
judgesdesignation of the DILG as interim caretaker and the acts
which the DILGsought to implement pursuant to its designation as
such are beyond the scope of the Chief Executives power of
supervision.chanroblesvirtuallawlibrary
To support the petition, petitioners argue that under
Administrative Order No. 267, Series of 1992, the power of general
supervision of the President over local government units does not
apply to the Liga and its various chapters precisely because the
Liga is not a local government unit, contrary to the stance of the
respondents.31]chanroblesvirtuallawlibrary
Section 507 of the Local Government Code (Republic Act No.
7160)32] provides that the Liga shall be governed by its own
Constitution and By-laws.Petitioners posit that the duly elected
officers and directors of the National Liga elected in 1994 had a
vested right to their positions and could only be removed
therefrom for cause by affirmative vote of two-thirds (2/3) of the
entire membership pursuant to the Liga Constitution and By-
Laws, and not by mere issuances of the DILG, even if bolstered by
the dubious authorization of respondent judge.33] Thus,
petitioners claim that the questioned order divested the then
incumbent officers and directors of the Liga of their right to their
respective offices without due process of law.chanroblesvirtuallawlibrary
Assuming the Liga could be subsumed under the term local
governments, over which the President, through the DILG
Secretary, has the power of supervision,34] petitioners point out
that still there is no legal or constitutional basis for the
appointment of the DILG as interim caretaker.35] They stress that
the actions contemplated by the DILG as interim caretaker go
beyond supervision, as what it had sought and obtained was
authority to alter, modify, nullify or set aside the actions of the
Liga Board of Directorsand even to substitute its judgment over
that of the latter which are all clearly one of control.36] Petitioners
question the appointment of Rayos as Liga-Caloocan President
since at that time petitioner David was occupying that position
which was still the subject of the quo warranto proceedings Rayos
himself had instituted.37] Petitioners likewise claim that DILG
Memorandum Circular No. 97-193, providing supplemental
guidelines for the synchronized elections of the Liga, replaced the
implementing rules adopted by the Liga pursuant to its
Constitution and By-laws.38] In fact, even before its appointment
as interim caretaker, DILG specifically enjoined all heads of
government units from recognizing petitioner David and/or
honoring any of his pronouncements relating to the
Liga.39]chanroblesvirtuallawlibrary
Petitioners rely on decision in %aule v Santos,40] which, they
claim, already passed upon the extent of authority of the then
Secretary of Local Government over the katipunan ng mga
barangay or the barangay councils, as it specifically ruled that the
Secretary of Local Government] has no authority to pass upon
the validity or regularity of the election of officers of the
katipunan.41]chanroblesvirtuallawlibrary
For his part, respondent Rayos avers that since the Secretary of
the DILG supervises the acts of local officials by ensuring that
they act within the scope of their prescribed powers and functions
and since members of the various leagues, such as the Liga in this
case, are themselves officials of local government units, it follows
that the Liga members are subject to the power of supervision of
the DILG.42] He adds that as the DILGs management and
administration of the Liga affairs was limited only to the conduct
of the elections, its actions were consistent with its rule-making
power and power of supervision under existing laws.43] He asserts
that in assailing the appointment of the DILG as interim
caretaker petitioners failed to cite any provision of positive law in
support of their stance. Thus, he adds, if a law is silent, obscure or
insufficient, a judge may apply a rule he sees fit to resolve the
issue, as long as the rule chosen is in harmony with general
interest, order, morals and public policy,44] in consonance with
Article 9 of the Civil Code.45]chanroblesvirtuallawlibrary
On the other hand, it is quite significant that the Solicitor General
has shared petitioners position.He states that the DILGs act of
managing and administering the affairs of the National Liga
Board are not merely acts of supervision but plain manifestations
of control and direct takeover of the functions of the National Liga
Board,46] going beyond the limits of the power of general
supervision of the President over local governments.47] Moreover,
while the Liga may be deemed a government organization, it is not
strictly a local government unit over which the DILG has
supervisory power.48]chanroblesvirtuallawlibrary
Meanwhile, on 24 September 1998, 1ames Marty L. Lim, the
newly elected President of the National Liga, filed a Motion for
Leave to File Comment in Intervention,49] with his Comment in
Intervention attached50] invoking the validity of the DILGs
actions relative to the conduct of the Liga elections.51] In addition,
he sought the dismissal of the instant petition on the following
grounds: (1) the issue of validity or invalidity of the questioned
order has been rendered moot and academic by the election of
Liga officers; (2) the turn-over of the administration and
management of Liga affairs to the Liga officers; and (3) the
recognition and acceptance by the members of the Liga
nationwide.52]chanroblesvirtuallawlibrary
In the interim, another petition, this time for Prohibition with
Prayer for a %emporary Restraining Order, 53] was filed by several
presidents of Liga Chapters, praying that this Court declare the
DILG Secretary and Undersecretary are not vested with any
constitutional or legal power to exercise control or even
supervision over the National Liga ng mga Barangay, nor to take
over the functions of its officers or suspend its constitution; and
declare void any and all acts committed by respondents therein in
connection with their caretakership of the Liga.54] The petition
was consolidated with G.R. No. 130775, but it was eventually
dismissed because the petitioners failed to submit an affidavit of
service and proof of service of the petition.55]chanroblesvirtuallawlibrary
Meanwhile, on 01 December 1998, petitioner David died and was
substituted by his legal representatives.56]chanroblesvirtuallawlibrary
Petitioners have raised a number of issues.57] Integrated and
simplified, these issues boil down to the question of whether or not
respondent 1udge acted with grave abuse of discretion in
appointing the DILG as interim caretaker to administer and
manage the affairs of the National Liga Board, per its order dated
04 August 1997.58] In turn, the resolution of the question of grave
abuse of discretion entails a couple of definitive issues, namely:
(1)whether the Liga ng mga Barangay is a government
organization that is subject to the DILG Secretarys power of
supervision over local governments as the alter ego of the
President, and (2) whether the respondent 1udges designation of
the DILG as interim caretaker of the Liga has invested the DILG
with control over the Liga and whether DILG Memorandum
Circular No. 97-176, issued before it was designated as such
interim caretaker, and DILG Memorandum Circular No. 97-193
and other acts which the DILG made in its capacity as interim
caretaker of the Liga, involve supervision or control of the
Ligachanroblesvirtuallawlibrary
However, the Court should first address the question of mootness
which intervenor Lim raised because, according to him, during the
pendency of the present petition a general election was held; the
new set of officers and directors had assumed their positions; and
that supervening events the DILG had turned-over the
management and administration of the Liga to new Liga officers
and directors.59] Respondent Rayos has joined him in this
regard.60] Forthwith, the Court declares that these supervening
events have not rendered the instant petition moot, nor removed it
from the jurisdiction of this Court.chanroblesvirtuallawlibrary
This case transcends the elections ordered and conducted by the
DILG as interim caretaker of the Liga and the Liga officers and
directors who were elected to replace petitioner David and the
former officers.At the core of the petition is the validity of the
DILGs caretakership of the Liga and the official acts of the DILG
as such caretaker which exceeded the bounds of supervision and
were exercise of control.At stake in this case is the realization of
the constitutionally ensconced principle of local government
autonomy;61] the statutory objective to enhance the capabilities of
barangays and municipalities by providing them opportunities to
participate actively in the implementation of national programs
and projects;62] and the promotion of the avowed aim to ensure
the independence and non-partisanship of the Liga ng mga
Barangay.The mantle of local autonomy would be eviscerated and
remain an empty buzzword if unconstitutional, illegal and
unwarranted intrusions in the affairs of the local governments are
tolerated and left unchecked.chanroblesvirtuallawlibrary
Indeed, it is the declared policy of the State that its territorial and
political subdivisions should enjoy genuine meaningful local
autonomy to enable them to attain their fullest development as
self-reliant communities and make them more effective partners in
the attainment of national goals.63] In the case of e Leon v
sguerra64] the Court ruled that even barangays are meant to
possess genuine and meaningful local autonomy so that they may
develop fully as self-reliant communities.65]chanroblesvirtuallawlibrary
Furthermore, well-entrenched is the rule that courts will decide a
question otherwise moot and academic if it is capable of repetition,
yet evading review.66] For the question of whether the DILG may
validly be appointed as interim caretaker, or assume a similar
position and perform acts pursuant thereto, is likely to resurrect
again, and yet the question may not be decided before the actual
assumption, or the termination of said assumption
even.chanroblesvirtuallawlibrary
So too, dismissing the petition on the ground of mootness could
lead to the wrong impression that the challenged order and
issuances are valid. Verily, that does not appear to be the correct
conclusion to make since by applying opposite precedents to the
issues the outcome points to invalidating the assailed order and
memorandum circulars.chanroblesvirtuallawlibrary
The resolution of the issues of whether the Liga ng mga Barangay
is subject to DILG supervision, and whether the questioned
caretakership order of the respondent judge and the challenged
issuances and acts of the DILG constitute control in derogation of
the Constitution, necessitates a brief overview of the barangay, as
the lowest LGU, and the Liga, as a vehicle of governance and
coordination.chanroblesvirtuallawlibrary
As the basic political unit, the barangay serves as the primary
planning and implementing unit of government policies, plans,
programs, projects and activities in the community, and as a
forum wherein the collective views of the people may be expressed,
crystallized and considered, and where disputes may be amicably
settled.67]chanroblesvirtuallawlibrary
On the other hand, the Liga ng mga Barangay68] is the
organization of all barangays, the primary purpose of which is the
determination of the representation of the Liga in the sanggunians,
and the ventilation, articulation, and crystallization of issues
affecting barangay government administration and securing
solutions thereto, through proper and legal means.69]The Liga ng
mga Barangay shall have chapters at the municipal, city and
provincial and metropolitan political subdivision levels.70] The
municipal and city chapters of the Liga are composed of the
barangay representatives from the municipality or city
concerned.The presidents of the municipal and city chapters of the
Liga form the provincial or metropolitan political subdivision
chapters of the Liga.The presidents of the chapters of the Liga in
highly urbanized cities, provinces and the Metro Manila area and
other metropolitan political subdivisions constitute the National
Liga ng mga Barangay.71]chanroblesvirtuallawlibrary
As conceptualized in the Local Government Code, the barangay is
positioned to influence and direct the development of the entire
country.This was heralded by the adoption of the bottom-to-top
approach process of development which requires the development
plans of the barangay to be considered in the development plans of
the municipality, city or province,72] whose plans in turn are to be
taken into account by the central government73] in its plans for the
development of the entire country.74] The Liga is the vehicle
assigned to make this new development approach materialize and
produce results.chanroblesvirtuallawlibrary
The presidents of the Liga at the municipal, city and provincial
levels, automatically become e-officio members of the
Sangguniang Bayan Sangguniang Panlungsod and Sangguniang
Panlalawigan respectively.They shall serve as such only during
their term of office as presidents of the Liga chapters, which in no
case shall be beyond the term of office of the sanggunian
concerned.75]chanroblesvirtuallawlibrary
The Liga ng mga Barangay has one principal aim, namely: to
promote the development of barangays and secure the general
welfare of their inhabitants.76] In line with this, the Liga is granted
the following functions and duties:chanroblesvirtuallawlibrary
a) Give priority to programs designed for the total development of
the barangays and in consonance with the policies, programs and
projects of the national government;chanroblesvirtuallawlibrary
b) Assist in the education of barangay residents for peoples
participation in local government administration in order to
promote untied and concerted action to achieve country-wide
development goals;chanroblesvirtuallawlibrary
c) Supplement the efforts of government in creating gainful
employment within the barangay;chanroblesvirtuallawlibrary
d) Adopt measures to promote the welfare of barangay
officials;chanroblesvirtuallawlibrary
e) Serve as forum of the barangays in order to forge linkages with
government and non-governmental organizations and thereby
promote the social, economic and political well-being of the
barangays; andchanroblesvirtuallawlibrary
f) Exercise such other powers and perform such other duties and
functions which will bring about stronger ties between barangays
and promote the welfare of the barangay
inhabitants.77]chanroblesvirtuallawlibrary
The Ligas are primarily governed by the provisions of the Local
Government Code.However, they are empowered to make their
own constitution and by-laws to govern their operations. Sec. 507
of the Code provides:chanroblesvirtuallawlibrary
Sec. 507. Constitution and By-Laws of the Liga and the Leagues. -
All other matters not herein otherwise provided for affecting the
internal organization of the leagues of local government units shall
be governed by their respective constitution and by-laws which are
hereby made suppletory to the provision of this Chapter: Provided,
That said Constitution and By-laws shall always conform to the
provision of the Constitution and existing laws.chanroblesvirtuallawlibrary
Pursuant to the Local Government Code, the Liga ng mga
Barangay adopted its own Constitution and By-Laws. It provides
that the corporate powers of the Liga expressed or implied, shall
be vested in the board of directors of each level of the Liga which
shall:chanroblesvirtuallawlibrary
a)Have jurisdiction over all officers, directors and committees of
the said Liga; including the power of appointment, assignment
and delegation;chanroblesvirtuallawlibrary
b)Have general management of the business, property, and funds
of said Liga;chanroblesvirtuallawlibrary
c)Prepare and approve a budget showing anticipated receipts and
expenditures for the year, including the plans or schemes for
funding purposes; andchanroblesvirtuallawlibrary
d)Have the power to suspend or remove from office any officer or
member of the said board on grounds cited and in the manner
provided in hereinunder provisions.78]chanroblesvirtuallawlibrary
The National Liga Board of Directors promulgated the rules for
the conduct of its Ligas general elections.79] And, as early as 28
April 1997, the Liga National Chapter had already scheduled its
general elections on 14 1une 1997.80]chanroblesvirtuallawlibrary
The controlling provision on the issues at hand is Section 4, Article
X of the Constitution, which reads in part:chanroblesvirtuallawlibrary
Sec. The President of the Philippines shall exercise general
supervision over local governments.chanroblesvirtuallawlibrary
The 1935, 1973 and 1987 Constitutions uniformly differentiate the
Presidents power of supervision over local governments and his
power of control of the executive departments bureaus and
offices.81] Similar to the counterpart provisions in the earlier
Constitutions, the provision in the 1987 Constitution provision has
been interpreted to exclude the power of
control.82]chanroblesvirtuallawlibrary
In the early case of Mondano v Silvosa et al,83] this Court defined
supervision as overseeing, or the power or authority of an officer
to see that subordinate officers perform their duties, and to take
such action as prescribed by law to compel his subordinates to
perform their duties.Control, on the other hand, means the power
of an officer to alter or modify or nullify or set aside what a
subordinate officer had done in the performance of his duties and
to substitute the judgment of the former for that of the latter.84] In
%aule v Santos,85]the Court held that the Constitution permits the
President to wield no more authority than that of checking
whether a local government or its officers perform their duties as
provided by statutory enactments.86] Supervisory power, when
contrasted with control, is the power of mere oversight over an
inferior body; it does not include any restraining authority over
such body.87]chanroblesvirtuallawlibrary
The case of rilon v Lim88]clearly defined the extent of
supervisory power, thus:chanroblesvirtuallawlibrary
The supervisor or superintendent merely sees to it that the rules
are followed, but he himself does not lay down such rules, nor does
he have the discretion to modify or replace them.If the rules are
not observed, he may order the work done or re-done but only to
conform to the prescribed rules. He may not prescribe his own
manner for the doing of the act.He has no judgment on this matter
except to see that the rules are followed89]chanroblesvirtuallawlibrary
In Section 4, Article X of the Constitution applicable to the Liga ng
mga Barangay?Otherwise put, is the Liga legally susceptible to
DILG suspension?chanroblesvirtuallawlibrary
This question was resolved inBito-Onon v Fernandez,90] where the
Court ruled that the Presidents power of the general supervision,
as exercised therein by the DILG Secretary as hisalter ego, extends
to theLiga ng mga Barangay.chanroblesvirtuallawlibrary
Does the Presidents power of general supervision extend to the liga
ng mga barangay, which is not a local government
unit?chanroblesvirtuallawlibrary
We rule in the affirmative.In Opinion No. 41, Series of 1995, the
Department of 1ustice ruled that the liga ng mga barangay is a
government organization, being an association, federation, league
or union created by law or by authority of law, whose members
are either appointed or elected government officials.The Local
Government Code defines the liga ng mga barangay as an
organization of all barangays for the primary purpose of
determining the representation of the liga in the sanggunians, and
for ventilating, articulating and crystallizing issues affecting
barangay government administration and securing, through
proper and legal means, solutions thereto.91]chanroblesvirtuallawlibrary
The rationale for making the Liga subject to DILG supervision is
quite evident, whether from the perspectives of logic or of
practicality.The Liga is an aggroupment of barangays which are in
turn represented therein by their respective punong barangaysThe
representatives of the Liga sit in an e officio capacity at the
municipal, city and provincial sangguniansAs such, they enjoy all
the powers and discharge all the functions of regular municipal
councilors, city councilors or provincial board members, as the
case may be.Thus, the Liga is the vehicle through which the
barangay participates in the enactment of ordinances and
formulation of policies at all the legislative local levels higher than
the sangguniang barangay at the same time serving as the
mechanism for the bottom-to-top approach of
development.chanroblesvirtuallawlibrary
In the case at bar, even before the respondent 1udge designated
the DILG as interim caretaker of the Liga, on 28 1uly 1997, it
issued Memorandum Circular No. 97-176, directing local
government officials not to recognize David as the National Liga
President and his pronouncements relating to the affairs of the
LigaNot only was the action premature, it even smacked of
superciliousness and injudiciousness. The DILG is the topmost
government agency which maintains coordination with, and
exercises supervision over local government units and its multi-
level leagues.As such, it should be forthright, circumspect and
supportive in its dealings with the Ligas especially the Liga ng mga
Barangay.The indispensable role played by the latter in the
development of the barangaysand the promotion of the welfare of
the inhabitants thereof deserve no less than the full support and
respect of theother agencies of government.As the Court held in
the case of San uan v Civil Service Commission92] our national
officials should not only comply with the constitutional provisions
on local autonomy but should also appreciate the spirit of liberty
upon which these provisions are based.93]chanroblesvirtuallawlibrary
When the respondent judge eventually appointed the DILG as
interim caretaker to manage and administer the affairs of the
Liga she effectively removed the management from the National
Liga Board and vested control of the Liga on the DILG.Even a
cursory glance at the DILGs prayer for appointment as interim
caretaker of the Liga to manage and administer the affairs of the
Liga until such time that the new set of National Liga officers shall
have been duly elected and assumed office reveals that what the
DILG wanted was to take control over the Liga. Even if said
caretakership was contemplated to last for a limited time, or only
until a new set of officers assume office, the fact remains that it
was a conferment of control in derogation of the
Constitution.chanroblesvirtuallawlibrary
With his Department already appointed as interim caretaker of
the Liga, Secretary Barbers nullified the results of the Liga
elections and promulgated DILG Memorandum Circular No. 97-
193 dated 11 August 1997, where he laid down the supplemental
guidelines for the 1997 synchronized elections of the provincial
and metropolitan chapters and for the election of the national
chapter of the Liga ng mga Barangay; scheduled dates for the new
provincial, metropolitan and national chapter elections; and
appointed respondent Rayos as president of Liga-Caloocan
Chapter.chanroblesvirtuallawlibrary
These acts of the DILG went beyond the sphere of general
supervision and constituted direct interference with the political
affairs, not only of the Liga but more importantly, of the
barangay as an institution.The election of Liga officers is part of
the Ligas internal organization, for which the latter has already
provided guidelines. In succession, the DILG assumed stewardship
and jurisdiction over the Liga affairs, issued supplemental
guidelines for the election, and nullified the effects of the Liga-
conducted elections.Clearly, what the DILG wielded was the
power of control which even the President does not
have.chanroblesvirtuallawlibrary
Furthermore, the DILG assumed control when it appointed
respondent Rayos as president of the Liga-Caloocan Chapter prior
to the newly scheduled general Liga elections, although petitioner
Davids term had not yet expired.The DILG substituted its choice,
who was Rayos, over the choice of majority of the punong
barangay of Caloocan, who was the incumbent President,
petitioner David.The latter was elected and had in fact been sitting
as an e-officio member of the sangguniang panlungsod in
accordance with the Liga Constitution and By-Laws.Yet, the
DILG extended the appointment to respondent Rayos although it
was aware that the position was the subject of a 6uo warranto
proceeding instituted by Rayos himself, thereby preempting the
outcome of that case.It was bad enough that the DILG assumed
the power of control, it was worse when it made use of the power
with evident bias and partiality.chanroblesvirtuallawlibrary
As the entity exercising supervision over the Liga ng mga
Barangay, the DILGs authority over the Liga is limited to seeing to
it that the rules are followed, but it cannot lay down such rules
itself, nor does it have the discretion to modify or replace them.In
this particular case, the most that the DILG could do was review
the acts of the incumbent officers of the Liga in the conduct of the
elections to determine if they committed any violation of the Ligas
Constitution and By-laws and its implementing rules. If the
National Liga Board and its officers had violated Liga rules, the
DILG should have ordered the Liga to conduct another election in
accordance with the Ligas own rules, but not in obeisance to
DILG-dictated guidelines.Neither had the DILG the authority to
remove the incumbent officers of the Liga and replace them, even
temporarily, with unelected Liga officers.chanroblesvirtuallawlibrary
Like the local government units, the Liga ng mga Barangay is not
subject to control by the Chief Executive or his alter
ego.chanroblesvirtuallawlibrary
In theBito-Onon94] case, this Courtheld that DILG Memorandum
Circular No. 97-193, insofar as it authorized the filing of a petition
for review of the decision of the Board of Election Supervisors
(BES) with the regular courts in a post-proclamation electoral
protest, involved the exercise of control as it in effect amended the
guidelines already promulgated by the LigaThe decision reads in
part:chanroblesvirtuallawlibrary
xxx.Officers in control, lay down the rules in the doing of an act.If
they are not followed, it is discretionary on his part to order the
act undone or redone by his subordinate or he may even decide to
do it himself.Supervision does not cover such
authority.Supervising officers merely see to it that the rules are
followed, but he himself does not lay down such rules, nor does he
have the discretion to modify or replace them.If the rules are not
observed, he may order the work done or re-done to conform for
to the prescribed rules. He cannot prescribe his own manner the
doing of the act.chanroblesvirtuallawlibrary
x x xchanroblesvirtuallawlibrary
xxx. The amendment of the GUIDELINES is more than an
exercise of the power of supervision but is an exercise of the power
of control, which the President does not have over the
LIGA.Although the DILG is given the power to prescribe rules,
regulations and other issuances, the Administrative Code limits its
authority to merely monitoring compliance by local government
units of such issuances.To monitor means to watch, observe or
check and is compatible with the power of supervision of the
DILG Secretary over local governments, which is limited to
checking whetherthe local government unit concerned or the
officers thereof perform their duties as per statutory
enactments.Besides, any doubt as to the power of the DILG
Secretary to interfere with local affairs should be resolved in favor
of the greater autonomy of the local
government.95]chanroblesvirtuallawlibrary
In %aule96] the Court ruled that the Secretary of Local
Government had no authority to pass upon the validity or
regularity of the election of officers of katipunan ng mga barangay
or barangay councils. In that case, a protest was lodged before the
Secretary of Local Government regarding several irregularities in,
and seeking the nullification of, the election of officers of the
Federation of Associations of Barangay Councils (FABC) of
Catanduanes. Then Local Government Secretary Luis Santos
issued a resolution nullifying the election of officers and ordered a
new one to be conducted. The Court ruled:chanroblesvirtuallawlibrary
Construing the constitutional limitation on the power of general
supervision of the President over local governments, We hold that
respondent Secretary has no authority to pass upon the validity or
regularity of the officers of the katipunan To allow respondent
Secretary to do so will give him more power than the law or the
Constitution grants.It will in effect give him control over local
government officials for it willpermit him to interfere in a purely
democratic and non-partisan activity aimed at strengthening the
barangay as the basic component of local governments so that the
ultimate goal of fullest autonomy may be achieved.In fact, his
order that the new elections to be conducted be presided by the
Regional Director is a clear and direct interference by the
Department with the political affairs of the barangays which is not
permitted by the limitation of presidential power to general
supervision over local governments.97]chanroblesvirtuallawlibrary
All given, the Court is convinced that the assailed order was issued
with grave abuse of discretion while the acts of the respondent
Secretary, including DILG Memorandum Circulars No. 97-176
and No. 97-193, are unconstitutional and ultra vires, as they all
entailed the conferment or exercise of control a power which is
denied by the Constitution even to the President.chanroblesvirtuallawlibrary
WHEREFORE, the Petition is GRANTED.The Order of the
Regional Trial Court dated 04 August 1997 is SET ASIDE for
having been issued with grave abuse of discretion amounting to
lack or excess of jurisdiction. DILG Memorandum Circulars No.
97-176 and No. 97-193, are declared VOID for being
unconstitutional and ultra vires. chanroblesvirtuallawlibrary
No pronouncements as to costs.chanroblesvirtuallawlibrary
SO ORDERED.chanroblesvirtuallawlibrary
Davide, 1r., C.1., Puno, Panganiban, Quisumbing, Ynares-
Santiago, Sandoval-Gutierrez, Carpio, Austria-Martine

















EN BANC
|G.R. No. 152774. May 27, 2004|
THE PROVINCE OF BATANGAS, represented by its Governor,
HERMILANDO I. MANDANAS, petitioner, vs. HON. ALBERTO G.
ROMULO, Executive Secretary and Chairman oI the Oversight
Committee on Devolution; HON. EMILIA BONCODIN, Secretary,
Department oI Budget and Management; HON. JOSE D. LINA, JR.,
Secretary, Department oI Interior and Local Government, respondents.
D E C I S I O N
CALLEJO, SR., J.:
The Province oI Batangas, represented by its Governor, Hermilando I.
Mandanas, Iiled the present petition Ior certiorari, prohibition and
mandamus under Rule 65 oI the Rules oI Court, as amended, to
declare as unconstitutional and void certain provisos contained in the
General Appropriations Acts (GAA) oI 1999, 2000 and 2001, insoIar
as they uniIormly earmarked Ior each corresponding year the amount
oI Iive billion pesos (P5,000,000,000.00) oI the Internal Revenue
Allotment (IRA) Ior the Local Government Service Equalization Fund
(LGSEF) and imposed conditions Ior the release thereoI.
Named as respondents are Executive Secretary Alberto G. Romulo, in
his capacity as Chairman oI the Oversight Committee on Devolution,
Secretary Emilia Boncodin oI the Department oI Budget and
Management (DBM) and Secretary Jose Lina oI the Department oI
Interior and Local Government (DILG).
Background
On December 7, 1998, then President Joseph Ejercito Estrada issued
Executive Order (E.O.) No. 48 entitled 'ESTABLISHING A
PROGRAM FOR DEVOLUTION ADJUSTMENT AND
EQUALIZATION. The program was established to 'Iacilitate the
process oI enhancing the capacities oI local government units (LGUs)
in the discharge oI the Iunctions and services devolved to them by the
National Government Agencies concerned pursuant to the Local
Government Code. The Oversight Committee (reIerred to as the
Devolution Committee in E.O. No. 48) constituted under Section
533(b) oI Republic Act No. 7160 (The Local Government Code oI
1991) has been tasked to Iormulate and issue the appropriate rules and
regulations necessary Ior its eIIective implementation. Further, to
address the Iunding shortIalls oI Iunctions and services devolved to the
LGUs and other Iunding requirements oI the program, the 'Devolution
Adjustment and Equalization Fund was created. For 1998, the DBM
was directed to set aside an amount to be determined by the Oversight
Committee based on the devolution status appraisal surveys
undertaken by the DILG. The initial Iund was to be sourced Irom the
available savings oI the national government Ior CY 1998. For 1999
and the succeeding years, the corresponding amount required to
sustain the program was to be incorporated in the annual GAA. The
Oversight Committee has been authorized to issue the implementing
rules and regulations governing the equitable allocation and
distribution oI said Iund to the LGUs.
%he LGSEF in the G of 1999
In Republic Act No. 8745, otherwise known as the GAA oI 1999, the
program was renamed as the LOCAL GOVERNMENT SERVICE
EQUALIZATION FUND (LGSEF). Under said appropriations law,
the amount oI P96,780,000,000 was allotted as the share oI the LGUs
in the internal revenue taxes. Item No. 1, Special Provisions, Title
XXXVI A. Internal Revenue Allotment oI Rep. Act No. 8745
contained the Iollowing proviso:
... PROVIDED, That the amount oI FIVE BILLION PESOS
(P5,000,000,000) shall be earmarked Ior the Local Government
Service Equalization Fund Ior the Iunding requirements oI projects
and activities arising Irom the Iull and eIIicient implementation oI
devolved Iunctions and services oI local government units pursuant to
R.A. No. 7160, otherwise known as the Local Government Code oI
1991: PROVIDED, FURTHER, That such amount shall be released to
the local government units subject to the implementing rules and
regulations, including such mechanisms and guidelines Ior the
equitable allocations and distribution oI said Iund among local
government units subject to the guidelines that may be prescribed by
the Oversight Committee on Devolution as constituted pursuant to
Book IV, Title III, Section 533(b) oI R.A. No. 7160. The Internal
Revenue Allotment shall be released directly by the Department oI
Budget and Management to the Local Government Units concerned.
On July 28, 1999, the Oversight Committee (with then Executive
Secretary Ronaldo B. Zamora as Chairman) passed Resolution Nos.
OCD-99-003, OCD-99-005 and OCD-99-006 entitled as Iollows:
OCD-99-005
RESOLUTION ADOPTING THE ALLOCATION SCHEME FOR
THE PhP5 BILLION CY 1999 LOCAL GOVERNMENT SERVICE
EQUALIZATION FUND (LGSEF) AND REQUESTING HIS
EXCELLENCY PRESIDENT JOSEPH EJERCITO ESTRADA TO
APPROVE SAID ALLOCATION SCHEME.
OCD-99-006
RESOLUTION ADOPTING THE ALLOCATION SCHEME FOR
THE PhP4.0 BILLION OF THE 1999 LOCAL GOVERNMENT
SERVICE EQUALIZATION FUND AND ITS CONCOMITANT
GENERAL FRAMEWORK, IMPLEMENTING GUIDELINES AND
MECHANICS FOR ITS IMPLEMENTATION AND RELEASE, AS
PROMULGATED BY THE OVERSIGHT COMMITTEE ON
DEVOLUTION.
OCD-99-003
RESOLUTION REQUESTING HIS EXCELLENCY PRESIDENT
JOSEPH EJERCITO ESTRADA TO APPROVE THE REQUEST OF
THE OVERSIGHT COMMITTEE ON DEVOLUTION TO SET
ASIDE TWENTY PERCENT (20) OF THE LOCAL
GOVERNMENT SERVICE EQUALIZATION FUND (LGSEF) FOR
LOCAL AFFIRMATIVE ACTION PROJECTS AND OTHER
PRIORITY INITIATIVES FOR LGUs INSTITUTIONAL AND
CAPABILITY BUILDING IN ACCORDANCE WITH THE
IMPLEMENTING GUIDELINES AND MECHANICS AS
PROMULGATED BY THE COMMITTEE.
These OCD resolutions were approved by then President Estrada on
October 6, 1999.
Under the allocation scheme adopted pursuant to Resolution No.
OCD-99-005, the Iive billion pesos LGSEF was to be allocated as
Iollows:
1. The PhP4 Billion oI the LGSEF shall be allocated in accordance
with the allocation scheme and implementing guidelines and
mechanics promulgated and adopted by the OCD. To wit:
a. The Iirst PhP2 Billion oI the LGSEF shall be allocated in
accordance with the codal Iormula sharing scheme as
prescribed under the 1991 Local Government Code;
b. The second PhP2 Billion oI the LGSEF shall be allocated
in accordance with a modiIied 1992 cost oI devolution
Iund (CODEF) sharing scheme, as recommended by the
respective leagues oI provinces, cities and
municipalities to the OCD. The modiIied CODEF
sharing Iormula is as Iollows:
Province : 40
Cities : 20
Municipalities : 40
This is applied to the P2 Billion aIter the approved amounts
granted to individual provinces, cities and municipalities as
assistance to cover decrease in 1999 IRA share due to
reduction in land area have been taken out.
2. The remaining PhP1 Billion oI the LGSEF shall be earmarked to
support local aIIirmative action projects and other priority initiatives
submitted by LGUs to the Oversight Committee on Devolution Ior
approval in accordance with its prescribed guidelines as promulgated
and adopted by the OCD.
In Resolution No. OCD-99-003, the Oversight Committee set aside the
one billion pesos or 20 oI the LGSEF to support Local AIIirmative
Action Projects (LAAPs) oI LGUs. This remaining amount was
intended to 'respond to the urgent need Ior additional Iunds assistance,
otherwise not available within the parameters oI other existing Iund
sources. For LGUs to be eligible Ior Iunding under the one-billion-
peso portion oI the LGSEF, the OCD promulgated the Iollowing:
III. CRITERIA FOR ELIGIBILITY:
1. LGUs (province, city, municipality, or barangay),
individually or by group or multi-LGUs or leagues oI
LGUs, especially those belonging to the 5
th
and 6
th

class, may access the Iund to support any projects or
activities that satisIy any oI the aIorecited purposes. A
barangay may also access this Iund directly or through
their respective municipality or city.
2. The proposed project/activity should be need-based, a local
priority, with high development impact and are
congruent with the socio-cultural, economic and
development agenda oI the Estrada Administration,
such as Iood security, poverty alleviation,
electriIication, and peace and order, among others.
3. Eligible Ior Iunding under this Iund are projects arising
Irom, but not limited to, the Iollowing areas oI concern:
a. delivery oI local health and sanitation services,
hospital services and other tertiary services;
b. delivery oI social welIare services;
c. provision oI socio-cultural services and Iacilities Ior
youth and community development;
d. provision oI agricultural and on-site related research;
e. improvement oI community-based Iorestry projects
and other local projects on environment and
natural resources protection and conservation;
I. improvement oI tourism Iacilities and promotion oI
tourism;
g. peace and order and public saIety;
h. construction, repair and maintenance oI public works
and inIrastructure, including public buildings
and Iacilities Ior public use, especially those
destroyed or damaged by man-made or natural
calamities and disaster as well as Iacilities Ior
water supply, Ilood control and river dikes;
i. provision oI local electriIication Iacilities;
j. livelihood and Iood production services, Iacilities and
equipment;
k. other projects that may be authorized by the OCD
consistent with the aIorementioned objectives
and guidelines;
4. Except on extremely meritorious cases, as may be
determined by the Oversight Committee on Devolution,
this portion oI the LGSEF shall not be used in
expenditures Ior personal costs or beneIits under
existing laws applicable to governments. Generally,
this Iund shall cover the Iollowing objects oI
expenditures Ior programs, projects and activities
arising Irom the implementation oI devolved and
regular Iunctions and services:
a. acquisition/procurement oI supplies and materials
critical to the Iull and eIIective implementation
oI devolved programs, projects and activities;
b. repair and/or improvement oI Iacilities;
c. repair and/or upgrading oI equipment;
d. acquisition oI basic equipment;
e. construction oI additional or new Iacilities;
I. counterpart contribution to joint arrangements or
collective projects among groups oI
municipalities, cities and/or provinces related to
devolution and delivery oI basic services.
5. To be eligible Ior Iunding, an LGU or group oI LGU shall
submit to the Oversight Committee on Devolution
through the Department oI Interior and Local
Governments, within the prescribed schedule and
timeIrame, a Letter Request Ior Funding Support Irom
the AIIirmative Action Program under the LGSEF, duly
signed by the concerned LGU(s) and endorsed by
cooperators and/or beneIiciaries, as well as the duly
signed Resolution oI Endorsement by the respective
Sanggunian(s) oI the LGUs concerned. The LGU-
proponent shall also be required to submit the Project
Request (PR), using OCD Project Request Form No.
99-02, that details the Iollowing:
(a) general description or brieI oI the project;
(b) objectives and justiIications Ior undertaking the
project, which should highlight the beneIits to
the locality and the expected impact to the local
program/project arising Irom the Iull and
eIIicient implementation oI social services and
Iacilities, at the local levels;
(c) target outputs or key result areas;
(d) schedule oI activities and details oI requirements;
(e) total cost requirement oI the project;
(I) proponent`s counterpart Iunding share, iI any, and
identiIied source(s) oI counterpart Iunds Ior the
Iull implementation oI the project;
(g) requested amount oI project cost to be covered by
the LGSEF.
Further, under the guidelines Iormulated by the Oversight Committee
as contained in Attachment - Resolution No. OCD-99-003, the LGUs
were required to identiIy the projects eligible Ior Iunding under the
one-billion-peso portion oI the LGSEF and submit the project
proposals thereoI and other documentary requirements to the DILG Ior
appraisal. The project proposals that passed the DILG`s appraisal
would then be submitted to the Oversight Committee Ior review,
evaluation and approval. Upon its approval, the Oversight Committee
would then serve notice to the DBM Ior the preparation oI the Special
Allotment Release Order (SARO) and Notice oI Cash Allocation
(NCA) to eIIect the release oI Iunds to the said LGUs.
%he LGSEF in the G of 2000
Under Rep. Act No. 8760, otherwise known as the GAA oI 2000, the
amount oI P111,778,000,000 was allotted as the share oI the LGUs in
the internal revenue taxes. As in the GAA oI 1999, the GAA oI 2000
contained a proviso earmarking Iive billion pesos oI the IRA Ior the
LGSEF. This proviso, Iound in Item No. 1, Special Provisions, Title
XXXVII A. Internal Revenue Allotment, was similarly worded as
that contained in the GAA oI 1999.
The Oversight Committee, in its Resolution No. OCD-2000-023 dated
June 22, 2000, adopted the Iollowing allocation scheme governing the
Iive billion pesos LGSEF Ior 2000:
1. The PhP3.5 Billion oI the CY 2000 LGSEF shall be
allocated to and shared by the Iour levels oI LGUs, i.e.,
provinces, cities, municipalities, and barangays, using
the Iollowing percentage-sharing Iormula agreed upon
and jointly endorsed by the various Leagues oI LGUs:
For Provinces 26
or P 910,000,000
For Cities 23 or 805,000,000
For Municipalities 35 or 1,225,000,000
For Barangays 16 or 560,000,000
Provided that the respective Leagues representing the
provinces, cities, municipalities and barangays shall
draw up and adopt the horizontal distribution/sharing
schemes among the member LGUs whereby the
Leagues concerned may opt to adopt direct Iinancial
assistance or project-based arrangement, such that the
LGSEF allocation Ior individual LGU shall be released
directly to the LGU concerned;
Provided Iurther that the individual LGSEF shares to
LGUs are used in accordance with the general purposes
and guidelines promulgated by the OCD Ior the
implementation oI the LGSEF at the local levels
pursuant to Res. No. OCD-99-006 dated October 7,
1999 and pursuant to the Leagues` guidelines and
mechanism as approved by the OCD;
Provided Iurther that each oI the Leagues shall submit
to the OCD Ior its approval their respective allocation
scheme, the list oI LGUs with the corresponding
LGSEF shares and the corresponding project categories
iI project-based;
Provided Iurther that upon approval by the OCD, the
lists oI LGUs shall be endorsed to the DBM as the basis
Ior the preparation oI the corresponding NCAs,
SAROs, and related budget/release documents.
2. The remaining P1,500,000,000 oI the CY 2000 LGSEF
shall be earmarked to support the Iollowing initiatives
and local aIIirmative action projects, to be endorsed to
and approved by the Oversight Committee on
Devolution in accordance with the OCD agreements,
guidelines, procedures and documentary requirements:
On July 5, 2000, then President Estrada issued a Memorandum
authorizing then Executive Secretary Zamora and the DBM to
implement and release the 2.5 billion pesos LGSEF Ior 2000 in
accordance with Resolution No. OCD-2000-023.
ThereaIter, the Oversight Committee, now under the administration oI
President Gloria Macapagal-Arroyo, promulgated Resolution No.
OCD-2001-29 entitled 'ADOPTING RESOLUTION NO. OCD-2000-
023 IN THE ALLOCATION, IMPLEMENTATION AND RELEASE
OF THE REMAINING P2.5 BILLION LGSEF FOR CY 2000.
Under this resolution, the amount oI one billion pesos oI the LGSEF
was to be released in accordance with paragraph 1 oI Resolution No.
OCD-2000-23, to complete the 3.5 billion pesos allocated to the
LGUs, while the amount oI 1.5 billion pesos was allocated Ior the
LAAP. However, out oI the latter amount, P400,000,000 was to be
allocated and released as Iollows: P50,000,000 as Iinancial assistance
to the LAAPs oI LGUs; P275,360,227 as Iinancial assistance to cover
the decrease in the IRA oI LGUs concerned due to reduction in land
area; and P74,639,773 Ior the LGSEF Capability-Building Fund.
%he LGSEF in the G of 2001
In view oI the Iailure oI Congress to enact the general appropriations
law Ior 2001, the GAA oI 2000 was deemed re-enacted, together with
the IRA oI the LGUs therein and the proviso earmarking Iive billion
pesos thereoI Ior the LGSEF.
On January 9, 2002, the Oversight Committee adopted Resolution No.
OCD-2002-001 allocating the Iive billion pesos LGSEF Ior 2001 as
Iollows:
ModiIied Codal Formula P 3.000 billion
Priority Projects 1.900 billion
Capability Building Fund .100 billion
P 5.000 billion
RESOLVED FURTHER, that the P3.0 B oI the CY 2001 LGSEF
which is to be allocated according to the modiIied codal Iormula shall
be released to the Iour levels oI LGUs, i.e., provinces, cities,
municipalities and barangays, as Iollows:
LGUs Percentage Amount
Provinces 25 P 0.750 billion
Cities 25 0.750
Municipalities 35 1.050
Barangays 15 0.450
100 P 3.000 billion
RESOLVED FURTHER, that the P1.9 B earmarked Ior priority
projects shall be distributed according to the Iollowing criteria:
1.0 For projects oI the 4
th
, 5
th
and 6
th
class LGUs; or
2.0 Projects in consonance with the President`s State oI the
Nation Address (SONA)/summit commitments.
RESOLVED FURTHER, that the remaining P100 million LGSEF
capability building Iund shall be distributed in accordance with the
recommendation oI the Leagues oI Provinces, Cities, Municipalities
and Barangays, and approved by the OCD.
Upon receipt oI a copy oI the above resolution, Gov. Mandanas wrote
to the individual members oI the Oversight Committee seeking the
reconsideration oI Resolution No. OCD-2002-001. He also wrote to
Pres. Macapagal-Arroyo urging her to disapprove said resolution as it
violates the Constitution and the Local Government Code oI 1991.
On January 25, 2002, Pres. Macapagal-Arroyo approved Resolution
No. OCD-2002-001.
The Petitioner`s Case
The petitioner now comes to this Court assailing as unconstitutional
and void the provisos in the GAAs oI 1999, 2000 and 2001, relating to
the LGSEF. Similarly assailed are the Oversight Committee`s
Resolutions Nos. OCD-99-003, OCD-99-005, OCD-99-006, OCD-
2000-023, OCD-2001-029 and OCD-2002-001 issued pursuant
thereto. The petitioner submits that the assailed provisos in the GAAs
and the OCD resolutions, insoIar as they earmarked the amount oI Iive
billion pesos oI the IRA oI the LGUs Ior 1999, 2000 and 2001 Ior the
LGSEF and imposed conditions Ior the release thereoI, violate the
Constitution and the Local Government Code oI 1991.
Section 6, Article X oI the Constitution is invoked as it mandates that
the 'just share oI the LGUs shall be automatically released to them.
Sections 18 and 286 oI the Local Government Code oI 1991, which
enjoin that the 'just share oI the LGUs shall be 'automatically and
directly released to them 'without need oI Iurther action are,
likewise, cited.
The petitioner posits that to subject the distribution and release oI the
Iive-billion-peso portion oI the IRA, classiIied as the LGSEF, to
compliance by the LGUs with the implementing rules and regulations,
including the mechanisms and guidelines prescribed by the Oversight
Committee, contravenes the explicit directive oI the Constitution that
the LGUs` share in the national taxes 'shall be automatically released
to them. The petitioner maintains that the use oI the word 'shall
must be given a compulsory meaning.
To Iurther buttress this argument, the petitioner contends that to vest
the Oversight Committee with the authority to determine the
distribution and release oI the LGSEF, which is a part oI the IRA oI
the LGUs, is an anathema to the principle oI local autonomy as
embodied in the Constitution and the Local Government Code oI
1991. The petitioner cites as an example the experience in 2001 when
the release oI the LGSEF was long delayed because the Oversight
Committee was not able to convene that year and no guidelines were
issued thereIor. Further, the possible disapproval by the Oversight
Committee oI the project proposals oI the LGUs would result in the
diminution oI the latter`s share in the IRA.
Another inIringement alleged to be occasioned by the assailed OCD
resolutions is the improper amendment to Section 285 oI the Local
Government Code oI 1991 on the percentage sharing oI the IRA
among the LGUs. Said provision allocates the IRA as Iollows:
Provinces 23; Cities 23; Municipalities 34; and Barangays
20. This Iormula has been improperly amended or modiIied, with
respect to the Iive-billion-peso portion oI the IRA allotted Ior the
LGSEF, by the assailed OCD resolutions as they invariably provided
Ior a diIIerent sharing scheme.
The modiIications allegedly constitute an illegal amendment by the
executive branch oI a substantive law. Moreover, the petitioner
mentions that in the Letter dated December 5, 2001 oI respondent
Executive Secretary Romulo addressed to respondent Secretary
Boncodin, the Iormer endorsed to the latter the release oI Iunds to
certain LGUs Irom the LGSEF in accordance with the handwritten
instructions of President rroyo. Thus, the LGUs are at a loss as to
how a portion oI the LGSEF is actually allocated. Further, there are
still portions oI the LGSEF that, to date, have not been received by the
petitioner; hence, resulting in damage and injury to the petitioner.
The petitioner prays that the Court declare as unconstitutional and void
the assailed provisos relating to the LGSEF in the GAAs oI 1999,
2000 and 2001 and the assailed OCD resolutions (Resolutions Nos.
OCD-99-003, OCD-99-005, OCD-99-006, OCD-2000-023, OCD-
2001-029 and OCD-2002-001) issued by the Oversight Committee
pursuant thereto. The petitioner, likewise, prays that the Court direct
the respondents to rectiIy the unlawIul and illegal distribution and
releases oI the LGSEF Ior the aIorementioned years and release the
same in accordance with the sharing Iormula under Section 285 oI the
Local Government Code oI 1991. Finally, the petitioner urges the
Court to declare that the entire IRA should be released automatically
without Iurther action by the LGUs as required by the Constitution and
the Local Government Code oI 1991.
The Respondents` Arguments
The respondents, through the OIIice oI the Solicitor General, urge the
Court to dismiss the petition on procedural and substantive grounds.
On the latter, the respondents contend that the assailed provisos in the
GAAs oI 1999, 2000 and 2001 and the assailed resolutions issued by
the Oversight Committee are not constitutionally inIirm. The
respondents advance the view that Section 6, Article X oI the
Constitution does not speciIy that the 'just share oI the LGUs shall be
determined solely by the Local Government Code oI 1991. Moreover,
the phrase 'as determined by law in the same constitutional provision
means that there exists no limitation on the power oI Congress to
determine what is the 'just share oI the LGUs in the national taxes.
In other words, Congress is the arbiter oI what should be the 'just
share oI the LGUs in the national taxes.
The respondents Iurther theorize that Section 285 oI the Local
Government Code oI 1991, which provides Ior the percentage sharing
oI the IRA among the LGUs, was not intended to be a Iixed
determination oI their 'just share in the national taxes. Congress may
enact other laws, including appropriations laws such as the GAAs oI
1999, 2000 and 2001, providing Ior a diIIerent sharing Iormula.
Section 285 oI the Local Government Code oI 1991 was merely
intended to be the 'deIault share oI the LGUs to do away with the
need to determine annually by law their 'just share. However, the
LGUs have no vested right in a permanent or Iixed percentage as
Congress may increase or decrease the 'just share oI the LGUs in
accordance with what it believes is appropriate Ior their operation.
There is nothing in the Constitution which prohibits Congress Irom
making such determination through the appropriations laws. II the
provisions oI a particular statute, the GAA in this case, are within the
constitutional power oI the legislature to enact, they should be
sustained whether the courts agree or not in the wisdom oI their
enactment.
On procedural grounds, the respondents urge the Court to dismiss the
petition outright as the same is deIective. The petition allegedly raises
Iactual issues which should be properly threshed out in the lower
courts, not this Court, not being a trier oI Iacts. SpeciIically, the
petitioner`s allegation that there are portions oI the LGSEF that it has
not, to date, received, thereby causing it (the petitioner) injury and
damage, is subject to prooI and must be substantiated in the proper
venue, i.e., the lower courts.
Further, according to the respondents, the petition has already been
rendered moot and academic as it no longer presents a justiciable
controversy. The IRAs Ior the years 1999, 2000 and 2001, have
already been released and the government is now operating under the
2003 budget. In support oI this, the respondents submitted
certiIications issued by oIIicers oI the DBM attesting to the release oI
the allocation or shares oI the petitioner in the LGSEF Ior 1999, 2000
and 2001. There is, thereIore, nothing more to prohibit.
Finally, the petitioner allegedly has no legal standing to bring the suit
because it has not suIIered any injury. In Iact, the petitioner`s 'just
share has even increased. Pursuant to Section 285 oI the Local
Government Code oI 1991, the share oI the provinces is 23. OCD
Nos. 99-005, 99-006 and 99-003 gave the provinces 40 oI P2 billion
oI the LGSEF. OCD Nos. 2000-023 and 2001-029 apportioned 26
oI P3.5 billion to the provinces. On the other hand, OCD No. 2001-
001 allocated 25 oI P3 billion to the provinces. Thus, the petitioner
has not suIIered any injury in the implementation oI the assailed
provisos in the GAAs oI 1999, 2000 and 2001 and the OCD
resolutions.
The Ruling oI the Court
Procedural Issues
BeIore resolving the petition on its merits, the Court shall Iirst rule on
the Iollowing procedural issues raised by the respondents: (1) whether
the petitioner has legal standing or locus standi to Iile the present suit;
(2) whether the petition involves Iactual questions that are properly
cognizable by the lower courts; and (3) whether the issue had been
rendered moot and academic.
%he petitioner has locus standi
to maintain the present suit
The gist oI the question oI standing is whether a party has 'alleged
such a personal stake in the outcome oI the controversy as to assure
that concrete adverseness which sharpens the presentation oI issues
upon which the court so largely depends Ior illumination oI diIIicult
constitutional questions. Accordingly, it has been held that the
interest oI a party assailing the constitutionality oI a statute must be
direct and personal. Such party must be able to show, not only that the
law or any government act is invalid, but also that he has sustained or
is in imminent danger oI sustaining some direct injury as a result oI its
enIorcement, and not merely that he suIIers thereby in some indeIinite
way. It must appear that the person complaining has been or is about
to be denied some right or privilege to which he is lawIully entitled or
that he is about to be subjected to some burdens or penalties by reason
oI the statute or act complained oI.
The Court holds that the petitioner possesses the requisite standing to
maintain the present suit. The petitioner, a local government unit,
seeks relieI in order to protect or vindicate an interest oI its own, and
oI the other LGUs. This interest pertains to the LGUs` share in the
national taxes or the IRA. The petitioner`s constitutional claim is, in
substance, that the assailed provisos in the GAAs oI 1999, 2000 and
2001, and the OCD resolutions contravene Section 6, Article X oI the
Constitution, mandating the 'automatic release to the LGUs oI their
share in the national taxes. Further, the injury that the petitioner
claims to suIIer is the diminution oI its share in the IRA, as provided
under Section 285 oI the Local Government Code oI 1991, occasioned
by the implementation oI the assailed measures. These allegations are
suIIicient to grant the petitioner standing to question the validity oI the
assailed provisos in the GAAs oI 1999, 2000 and 2001, and the OCD
resolutions as the petitioner clearly has 'a plain, direct and adequate
interest in the manner and distribution oI the IRA among the LGUs.
%he petition involves a sinificant
leal issue
The crux oI the instant controversy is whether the assailed provisos
contained in the GAAs oI 1999, 2000 and 2001, and the OCD
resolutions inIringe the Constitution and the Local Government Code
oI 1991. This is undoubtedly a legal question. On the other hand, the
Iollowing Iacts are not disputed:
1. The earmarking oI Iive billion pesos oI the IRA Ior the LGSEF in
the assailed provisos in the GAAs oI 1999, 2000 and re-enacted budget
Ior 2001;
2. The promulgation oI the assailed OCD resolutions providing Ior
the allocation schemes covering the said Iive billion pesos and the
implementing rules and regulations thereIor; and
3. The release oI the LGSEF to the LGUs only upon their
compliance with the implementing rules and regulations, including the
guidelines and mechanisms, prescribed by the Oversight Committee.
Considering that these Iacts, which are necessary to resolve the legal
question now beIore this Court, are no longer in issue, the same need
not be determined by a trial court. In any case, the rule on hierarchy oI
courts will not prevent this Court Irom assuming jurisdiction over the
petition. The said rule may be relaxed when the redress desired cannot
be obtained in the appropriate courts or where exceptional and
compelling circumstances justiIy availment oI a remedy within and
calling Ior the exercise oI this Court`s primary jurisdiction.
The crucial legal issue submitted Ior resolution oI this Court entails the
proper legal interpretation oI constitutional and statutory provisions.
Moreover, the 'transcendental importance oI the case, as it
necessarily involves the application oI the constitutional principle on
local autonomy, cannot be gainsaid. The nature oI the present
controversy, thereIore, warrants the relaxation by this Court oI
procedural rules in order to resolve the case Iorthwith.
%he substantive issue needs to be resolved
notwithstandin the supervenin events
Granting aruendo that, as contended by the respondents, the
resolution oI the case had already been overtaken by supervening
events as the IRA, including the LGSEF, Ior 1999, 2000 and 2001, had
already been released and the government is now operating under a
new appropriations law, still, there is compelling reason Ior this Court
to resolve the substantive issue raised by the instant petition.
Supervening events, whether intended or accidental, cannot prevent
the Court Irom rendering a decision iI there is a grave violation oI the
Constitution. Even in cases where supervening events had made the
cases moot, the Court did not hesitate to resolve the legal or
constitutional issues raised to Iormulate controlling principles to guide
the bench, bar and public.
Another reason justiIying the resolution by this Court oI the
substantive issue now beIore it is the rule that courts will decide a
question otherwise moot and academic iI it is 'capable oI repetition,
yet evading review. For the GAAs in the coming years may contain
provisos similar to those now being sought to be invalidated, and yet,
the question may not be decided beIore another GAA is enacted. It,
thus, behooves this Court to make a categorical ruling on the
substantive issue now.
Substantive Issue
As earlier intimated, the resolution oI the substantive legal issue in this
case calls Ior the application oI a most important constitutional policy
and principle, that oI local autonomy. In Article II oI the Constitution,
the State has expressly adopted as a policy that:
Section 25. The State shall ensure the autonomy oI local governments.
An entire article (Article X) oI the Constitution has been devoted to
guaranteeing and promoting the autonomy oI LGUs. Section 2 thereoI
reiterates the State policy in this wise:
Section 2. The territorial and political subdivisions shall enjoy local
autonomy.
Consistent with the principle oI local autonomy, the Constitution
conIines the President`s power over the LGUs to one oI general
supervision. This provision has been interpreted to exclude the power
oI control. The distinction between the two powers was enunciated in
Drilon v. Lim:
An oIIicer in control lays down the rules in the doing oI an act. II they
are not Iollowed, he may, in his discretion, order the act undone or re-
done by his subordinate or he may even decide to do it himselI.
Supervision does not cover such authority. The supervisor or
superintendent merely sees to it that the rules are Iollowed, but he
himselI does not lay down such rules, nor does he have the discretion
to modiIy or replace them. II the rules are not observed, he may order
the work done or re-done but only to conIorm to the prescribed rules.
He may not prescribe his own manner Ior doing the act. He has no
judgment on this matter except to see to it that the rules are Iollowed.
The Local Government Code oI 1991 was enacted to Ilesh out the
mandate oI the Constitution. The State policy on local autonomy is
ampliIied in Section 2 thereoI:
Sec. 2. Declaration of Policy. (a) It is hereby declared the policy oI
the State that the territorial and political subdivisions oI the State shall
enjoy genuine and meaningIul local autonomy to enable them to attain
their Iullest development as selI-reliant communities and make them
more eIIective partners in the attainment oI national goals. Toward
this end, the State shall provide Ior a more responsive and accountable
local government structure instituted through a system oI
decentralization whereby local government units shall be given more
powers, authority, responsibilities, and resources. The process oI
decentralization shall proceed Irom the National Government to the
local government units.
Guided by these precepts, the Court shall now determine whether the
assailed provisos in the GAAs oI 1999, 2000 and 2001, earmarking Ior
each corresponding year the amount oI Iive billion pesos oI the IRA
Ior the LGSEF and the OCD resolutions promulgated pursuant thereto,
transgress the Constitution and the Local Government Code oI 1991.
%he assailed provisos in the Gs of 1999, 2000
and 2001 and the OCD resolutions violate the
constitutional precept on local autonomy
Section 6, Article X oI the Constitution reads:
Sec. 6. Local government units shall have a just share, as
determined by law, in the national taxes which shall be
automatically released to them.
When parsed, it would be readily seen that this provision mandates
that (1) the LGUs shall have a 'just share in the national taxes; (2) the
'just share shall be determined by law; and (3) the 'just share shall
be automatically released to the LGUs.
The Local Government Code oI 1991, among its salient provisions,
underscores the automatic release oI the LGUs` 'just share in this
wise:
Sec. 18. Power to Generate and pply Resources. Local government
units shall have the power and authority to establish an organization
that shall be responsible Ior the eIIicient and eIIective implementation
oI their development plans, program objectives and priorities; to create
their own sources oI revenue and to levy taxes, Iees, and charges
which shall accrue exclusively Ior their use and disposition and which
shall be retained by them; to have a just share in national taxes which
shall be automatically and directly released to them without need oI
Iurther action;
...
Sec. 286. utomatic Release of Shares. (a) The share oI each local
government unit shall be released, without need oI any Iurther action,
directly to the provincial, city, municipal or barangay treasurer, as the
case may be, on a quarterly basis within Iive (5) days aIter the end oI
each quarter, and which shall not be subject to any lien or holdback
that may be imposed by the national government Ior whatever
purpose.
(b) Nothing in this Chapter shall be understood to diminish the share
oI local government units under existing laws.
Webster`s Third New International Dictionary deIines 'automatic as
'involuntary either wholly or to a major extent so that any activity oI
the will is largely negligible; oI a reIlex nature; without volition;
mechanical; like or suggestive oI an automaton. Further, the word
'automatically is deIined as 'in an automatic manner: without
thought or conscious intention. Being 'automatic, thus, connotes
something mechanical, spontaneous and perIunctory. As such, the
LGUs are not required to perIorm any act to receive the 'just share
accruing to them Irom the national coIIers. As emphasized by the
Local Government Code oI 1991, the 'just share oI the LGUs shall be
released to them 'without need oI Iurther action. Construing Section
286 oI the LGC, we held in Pimentel, Jr. v. uirre, vi::
Section 4 oI AO 372 cannot, however, be upheld. A basic Ieature oI
local Iiscal autonomy is the automatic release oI the shares oI LGUs in
the National internal revenue. This is mandated by no less than the
Constitution. The Local Government Code speciIies Iurther that the
release shall be made directly to the LGU concerned within Iive (5)
days aIter every quarter oI the year and 'shall not be subfect to any
lien or holdback that may be imposed by the national overnment for
whatever purpose. As a rule, the term 'SHALL is a word oI
command that must be given a compulsory meaning. The provision is,
thereIore, IMPERATIVE.
Section 4 oI AO 372, however, orders the withholding, eIIective
January 1, 1998, oI 10 percent oI the LGUs` IRA 'pending the
assessment and evaluation by the Development Budget Coordinating
Committee oI the emerging Iiscal situation in the country. Such
withholding clearly contravenes the Constitution and the law.
Although temporary, it is equivalent to a holdback, which means
'something held back or withheld, oIten temporarily. Hence, the
'temporary nature oI the retention by the national government does
not matter. Any retention is prohibited.
In sum, while Section 1 oI AO 372 may be upheld as an advisory
eIIected in times oI national crisis, Section 4 thereoI has no color oI
validity at all. The latter provision eIIectively encroaches on the Iiscal
autonomy oI local governments. Concededly, the President was well-
intentioned in issuing his Order to withhold the LGUs` IRA, but the
rule oI law requires that even the best intentions must be carried out
within the parameters oI the Constitution and the law. Verily, laudable
purposes must be carried out by legal methods.
The 'just share oI the LGUs is incorporated as the IRA in the
appropriations law or GAA enacted by Congress annually. Under the
assailed provisos in the GAAs oI 1999, 2000 and 2001, a portion oI
the IRA in the amount oI Iive billion pesos was earmarked Ior the
LGSEF, and these provisos imposed the condition that 'such amount
shall be released to the local government units subject to the
implementing rules and regulations, including such mechanisms and
guidelines Ior the equitable allocations and distribution oI said Iund
among local government units subject to the guidelines that may be
prescribed by the Oversight Committee on Devolution. Pursuant
thereto, the Oversight Committee, through the assailed OCD
resolutions, apportioned the Iive billion pesos LGSEF such that:
For 1999
P2 billion - allocated according to Sec. 285 LGC
P2 billion - ModiIied Sharing Formula (Provinces
40;
Cities 20; Municipalities 40)
P1 billion projects (LAAP) approved by OCD.
For 2000
P3.5 billion ModiIied Sharing Formula (Provinces 26;
Cities 23; Municipalities 35; Barangays
16);
P1.5 billion projects (LAAP) approved by the OCD.
For 2001
P3 billion ModiIied Sharing Formula (Provinces 25;
Cities 25; Municipalities 35; Barangays
15)
P1.9 billion priority projects
P100 million capability building Iund.
SigniIicantly, the LGSEF could not be released to the LGUs without
the Oversight Committee`s prior approval. Further, with respect to the
portion oI the LGSEF allocated Ior various projects oI the LGUs (P1
billion Ior 1999; P1.5 billion Ior 2000 and P2 billion Ior 2001), the
Oversight Committee, through the assailed OCD resolutions, laid
down guidelines and mechanisms that the LGUs had to comply with
beIore they could avail oI Iunds Irom this portion oI the LGSEF. The
guidelines required (a) the LGUs to identiIy the projects eligible Ior
Iunding based on the criteria laid down by the Oversight Committee;
(b) the LGUs to submit their project proposals to the DILG Ior
appraisal; (c) the project proposals that passed the appraisal oI the
DILG to be submitted to the Oversight Committee Ior review,
evaluation and approval. It was only upon approval thereoI that the
Oversight Committee would direct the DBM to release the Iunds Ior
the projects.
To the Court`s mind, the entire process involving the distribution and
release oI the LGSEF is constitutionally impermissible. The LGSEF is
part oI the IRA or 'just share oI the LGUs in the national taxes. To
subject its distribution and release to the vagaries oI the implementing
rules and regulations, including the guidelines and mechanisms
unilaterally prescribed by the Oversight Committee Irom time to time,
as sanctioned by the assailed provisos in the GAAs oI 1999, 2000 and
2001 and the OCD resolutions, makes the release not automatic, a
Ilagrant violation oI the constitutional and statutory mandate that the
'just share oI the LGUs 'shall be automatically released to them.
The LGUs are, thus, placed at the mercy oI the Oversight Committee.
Where the law, the Constitution in this case, is clear and unambiguous,
it must be taken to mean exactly what it says, and courts have no
choice but to see to it that the mandate is obeyed. Moreover, as
correctly posited by the petitioner, the use oI the word 'shall connotes
a mandatory order. Its use in a statute denotes an imperative
obligation and is inconsistent with the idea oI discretion.
Indeed, the Oversight Committee exercising discretion, even control,
over the distribution and release oI a portion oI the IRA, the LGSEF, is
an anathema to and subversive oI the principle oI local autonomy as
embodied in the Constitution. Moreover, it Iinds no statutory basis at
all as the Oversight Committee was created merely to Iormulate the
rules and regulations Ior the eIIicient and eIIective implementation oI
the Local Government Code oI 1991 to ensure 'compliance with the
principles oI local autonomy as deIined under the Constitution. In
Iact, its creation was placed under the title oI 'Transitory Provisions,
signiIying its ad hoc character. According to Senator Aquilino Q.
Pimentel, the principal author and sponsor oI the bill that eventually
became Rep. Act No. 7160, the Committee`s work was supposed to be
done a year Irom the approval oI the Code, or on October 10, 1992.
The Oversight Committee`s authority is undoubtedly limited to the
implementation oI the Local Government Code oI 1991, not to
supplant or subvert the same. Neither can it exercise control over the
IRA, or even a portion thereoI, oI the LGUs.
That the automatic release oI the IRA was precisely intended to
guarantee and promote local autonomy can be gleaned Irom the
discussion below between Messrs. Jose N. Nolledo and Regalado M.
Maambong, then members oI the 1986 Constitutional Commission, to
wit:
MR. MAAMBONG. UnIortunately, under Section 198 oI the Local
Government Code, the existence oI subprovinces is still acknowledged
by the law, but the statement oI the Gentleman on this point will have
to be taken up probably by the Committee on Legislation. A second
point, Mr. Presiding OIIicer, is that under Article 2, Section 10 oI the
1973 Constitution, we have a provision which states:
The State shall guarantee and promote the autonomy oI local
government units, especially the barrio, to insure their Iullest
development as selI-reliant communities.
This provision no longer appears in the present conIiguration;
does this mean that the concept oI giving local autonomy to
local governments is no longer adopted as Iar as this Article
is concerned?
MR. NOLLEDO. No. In the report oI the Committee on Preamble,
National Territory, and Declaration oI Principles, that concept is
included and widened upon the initiative oI Commissioner Bennagen.
MR. MAAMBONG. Thank you Ior that.
With regard to Section 6, sources oI revenue, the creation oI sources as
provided by previous law was 'subject to limitations as may be
provided by law, but now, we are using the term 'subject to such
guidelines as may be Iixed by law. In Section 7, mention is made
about the 'unique, distinct and exclusive charges and contributions,
and in Section 8, we talk about 'exclusivity oI local taxes and the
share in the national wealth. Incidentally, I was one oI the authors oI
this provision, and I am very thankIul. Does this indicate local
autonomy, or was the wording oI the law changed to give more
autonomy to the local government units?
MR. NOLLEDO. Yes. In eIIect, those words indicate also
'decentralization because local political units can collect taxes, Iees
and charges subject merely to guidelines, as recommended by the
league oI governors and city mayors, with whom I had a dialogue Ior
almost two hours. They told me that limitations may be questionable
in the sense that Congress may limit and in eIIect deny the right later
on.
MR. MAAMBONG. Also, this provision on 'automatic release oI
national tax share points to more local autonomy. Is this the
intention?
MR. NOLLEDO. Yes, the Commissioner is perIectly right.
The concept oI local autonomy was explained in Gan:on v. Court of
ppeals in this wise:
As the Constitution itselI declares, local autonomy means a more
responsive and accountable local government structure instituted
through a system oI decentralization.` The Constitution, as we
observed, does nothing more than to break up the monopoly oI the
national government over the aIIairs oI local governments and as put
by political adherents, to 'liberate the local governments Irom the
imperialism oI Manila. Autonomy, however, is not meant to end the
relation oI partnership and interdependence between the central
administration and local government units, or otherwise, to usher in a
regime oI Iederalism. The Charter has not taken such a radical step.
Local governments, under the Constitution, are subject to regulation,
however limited, and Ior no other purpose than precisely, albeit
paradoxically, to enhance selI-government.
As we observed in one case, decentralization means devolution oI
national administration but not power to the local levels. Thus:
Now, autonomy is either decentralization oI administration or
decentralization oI power. There is decentralization oI administration
when the central government delegates administrative powers to
political subdivisions in order to broaden the base oI government
power and in the process to make local governments more responsive
and accountable` and ensure their Iullest development as selI-reliant
communities and make them more eIIective partners in the pursuit oI
national development and social progress.` At the same time, it
relieves the central government oI the burden oI managing local aIIairs
and enables it to concentrate on national concerns. The President
exercises general supervision` over them, but only to ensure that
local aIIairs are administered according to law.` He has no control
over their acts in the sense that he can substitute their judgments with
his own.
Decentralization oI power, on the other hand, involves an abdication oI
political power in the |sic| Iavor oI local governments |sic| units
declared to be autonomous. In that case, the autonomous government
is Iree to chart its own destiny and shape its Iuture with minimum
intervention Irom central authorities. According to a constitutional
author, decentralization oI power amounts to selI-immolation,` since
in that event, the autonomous government becomes accountable not to
the central authorities but to its constituency.
Local autonomy includes both administrative and Iiscal autonomy.
The Iairly recent case oI Pimentel v. uirre is particularly
instructive. The Court declared therein that local Iiscal autonomy
includes the power oI the LGUs to, inter alia, allocate their resources
in accordance with their own priorities:
Under existing law, local government units, in addition to having
administrative autonomy in the exercise oI their Iunctions, enjoy Iiscal
autonomy as well. Fiscal autonomy means that local governments
have the power to create their own sources oI revenue in addition to
their equitable share in the national taxes released by the national
government, as well as the power to allocate their resources in
accordance with their own priorities. It extends to the preparation oI
their budgets, and local oIIicials in turn have to work within the
constraints thereoI. They are not Iormulated at the national level and
imposed on local governments, whether they are relevant to local
needs and resources or not ...
Further, a basic Ieature oI local Iiscal autonomy is the constitutionally
mandated automatic release oI the shares oI LGUs in the national
internal revenue.
Following this ratiocination, the Court in Pimentel struck down as
unconstitutional Section 4 oI Administrative Order (A.O.) No. 372
which ordered the withholding, eIIective January 1, 1998, oI ten
percent oI the LGUs` IRA 'pending the assessment and evaluation by
the Development Budget Coordinating Committee oI the emerging
Iiscal situation.
In like manner, the assailed provisos in the GAAs oI 1999, 2000 and
2001, and the OCD resolutions constitute a 'withholding oI a portion
oI the IRA. They put on hold the distribution and release oI the Iive
billion pesos LGSEF and subject the same to the implementing rules
and regulations, including the guidelines and mechanisms prescribed
by the Oversight Committee Irom time to time. Like Section 4 oI A.O.
372, the assailed provisos in the GAAs oI 1999, 2000 and 2001 and
the OCD resolutions eIIectively encroach on the Iiscal autonomy
enjoyed by the LGUs and must be struck down. They cannot,
thereIore, be upheld.
%he assailed provisos in the Gs of 1999, 2000
and 2001 and the OCD resolutions cannot amend
Section 285 of the Local Government Code of 1991
Section 284 oI the Local Government Code provides that, beginning
the third year oI its eIIectivity, the LGUs` share in the national internal
revenue taxes shall be 40. This percentage is Iixed and may not be
reduced except 'in the event the national government incurs an
unmanageable public sector deIicit" and only upon compliance with
stringent requirements set Iorth in the same section:
Sec. 284. ...
Provided, That in the event that the national government incurs an
unmanageable public sector deIicit, the President oI the Philippines is
hereby authorized, upon recommendation oI Secretary oI Finance,
Secretary oI Interior and Local Government and Secretary oI Budget
and Management, and subject to consultation with the presiding
oIIicers oI both Houses oI Congress and the presidents oI the liga, to
make the necessary adjustments in the internal revenue allotment oI
local government units but in no case shall the allotment be less than
thirty percent (30) oI the collection oI the national internal revenue
taxes oI the third Iiscal year preceding the current Iiscal year;
Provided, further That in the Iirst year oI the eIIectivity oI this Code,
the local government units shall, in addition to the thirty percent (30)
internal revenue allotment which shall include the cost oI devolved
Iunctions Ior essential public services, be entitled to receive the
amount equivalent to the cost oI devolved personnel services.
Thus, Irom the above provision, the only possible exception to the
mandatory automatic release oI the LGUs` IRA is iI the national
internal revenue collections Ior the current Iiscal year is less than 40
percent oI the collections oI the preceding third Iiscal year, in which
case what should be automatically released shall be a proportionate
amount oI the collections Ior the current Iiscal year. The adjustment
may even be made on a quarterly basis depending on the actual
collections oI national internal revenue taxes Ior the quarter oI the
current Iiscal year. In the instant case, however, there is no allegation
that the national internal revenue tax collections Ior the Iiscal years
1999, 2000 and 2001 have Iallen compared to the preceding three
Iiscal years.
Section 285 then speciIies how the IRA shall be allocated among the
LGUs:
Sec. 285. llocation to Local Government Units. The share oI local
government units in the internal revenue allotment shall be allocated in
the Iollowing manner:
(a) Provinces Twenty-three (23)
(b) Cities Twenty-three percent (23);
(c) Municipalities Thirty-Iour (34); and
(d) Barangays Twenty percent (20).
However, this percentage sharing is not Iollowed with respect to the
Iive billion pesos LGSEF as the assailed OCD resolutions,
implementing the assailed provisos in the GAAs oI 1999, 2000 and
2001, provided Ior a diIIerent sharing scheme. For example, Ior 1999,
P2 billion oI the LGSEF was allocated as Iollows: Provinces 40;
Cities 20; Municipalities 40. For 2000, P3.5 billion oI the
LGSEF was allocated in this manner: Provinces 26; Cities 23;
Municipalities 35; Barangays 26. For 2001, P3 billion oI the
LGSEF was allocated, thus: Provinces 25; Cities 25;
Municipalities 35; Barangays 15.
The respondents argue that this modiIication is allowed since the
Constitution does not speciIy that the 'just share oI the LGUs shall
only be determined by the Local Government Code oI 1991. That it is
within the power oI Congress to enact other laws, including the GAAs,
to increase or decrease the 'just share oI the LGUs. This contention
is untenable. The Local Government Code oI 1991 is a substantive
law. And while it is conceded that Congress may amend any oI the
provisions therein, it may not do so through appropriations laws or
GAAs. Any amendment to the Local Government Code oI 1991
should be done in a separate law, not in the appropriations law,
because Congress cannot include in a general appropriation bill
matters that should be more properly enacted in a separate legislation.
A general appropriations bill is a special type oI legislation, whose
content is limited to speciIied sums oI money dedicated to a speciIic
purpose or a separate Iiscal unit. Any provision therein which is
intended to amend another law is considered an 'inappropriate
provision. The category oI 'inappropriate provisions includes
unconstitutional provisions and provisions which are intended to
amend other laws, because clearly these kinds oI laws have no place in
an appropriations bill.
Increasing or decreasing the IRA oI the LGUs or modiIying their
percentage sharing therein, which are Iixed in the Local Government
Code oI 1991, are matters oI general and substantive law. To permit
Congress to undertake these amendments through the GAAs, as the
respondents contend, would be to give Congress the unbridled
authority to unduly inIringe the Iiscal autonomy oI the LGUs, and thus
put the same in jeopardy every year. This, the Court cannot sanction.
It is relevant to point out at this juncture that, unlike those oI 1999,
2000 and 2001, the GAAs oI 2002 and 2003 do not contain provisos
similar to the herein assailed provisos. In other words, the GAAs oI
2002 and 2003 have not earmarked any amount oI the IRA Ior the
LGSEF. Congress had perhaps seen Iit to discontinue the practice as it
recognizes its inIirmity. Nonetheless, as earlier mentioned, this Court
has deemed it necessary to make a deIinitive ruling on the matter in
order to prevent its recurrence in Iuture appropriations laws and that
the principles enunciated herein would serve to guide the bench, bar
and public.
Conclusion
In closing, it is well to note that the principle oI local autonomy, while
concededly expounded in greater detail in the present Constitution,
dates back to the turn oI the century when President William
McKinley, in his Instructions to the Second Philippine Commission
dated April 7, 1900, ordered the new Government 'to devote their
attention in the Iirst instance to the establishment oI municipal
governments in which the natives oI the Islands, both in the cities and
in the rural communities, shall be aIIorded the opportunity to manage
their own aIIairs to the Iullest extent oI which they are capable, and
subject to the least degree oI supervision and control in which a careIul
study oI their capacities and observation oI the workings oI native
control show to be consistent with the maintenance oI law, order and
loyalty. While the 1935 Constitution had no speciIic article on local
autonomy, nonetheless, it limited the executive power over local
governments to 'general supervision ... as may be provided by law.
Subsequently, the 1973 Constitution explicitly stated that '|t|he State
shall guarantee and promote the autonomy oI local government units,
especially th