G.R. No.

L-12859

November 18, 1959

CEBU UNITED ENTERPRISES, plaintiff-appellee,

vs.
JOSE GALLOFIN, Collector of Customs, Cebu
Port, defendant-appellant.
Manuel A. Zoza for appellee.
First Assistant Solicitor General Guillermo E. Torres and
Solicitors Frine C. Zaballero and Pedro Ocampo for appellant.
REYES, J.B.L., J.:
This suit for mandatory injunction was instituted in the Court
of First Instance of Cebu United Enterprise to compel Jose
Gallofin, as collector of Customs, Cebu Port, to release and
deliver to the plaintiff two imported shipments of 7,834 bales
of over issue newspapers purchased by the latter from the
United States. As ancillary relief during the pendency of the
action, the plaintiff prayed for the issuance of a writ of
preliminary mandatory injunction, which was granted by the
court after the plaintiff posted a bond in the amount of
P60,000.00 in favor of the defendant. Thereafter, the goods
were released to the plaintiff, it appearing further that the
advance sales tax due on the same had been duly paid upon
arrival of the merchandise at port.
The importation of the aforesaid shipments was made under
and by virtue of an Import Control Commission License No.
1225, issued by the defunct Import Control Commission.
Under the terms of the license, the plaintiff could import, on a
no-dollar remittance basis, over issue newspapers up to the
amount or value of $118,000.00.
The refusal of the defendant to deliver the imported items is
premised on his contention that while the five bills of lading
covering the two shipments of the over issue newspapers
were all dated at Los Angeles, U.S.A. December 17, 1953, or
one day before the expiration of the import license in
question, the vessels M/S VENTURA and M/S BATAAN, carrying
on board the said merchandise, actually left the ports of
embarkation, Los Angeles, and San Francisco, on January 12
and January 16, 1954 respectively. Hence, according to the
defendant, the importation must be considered as having
been made without a valid import license, because under the
regulations issued by the Central Bank and the Monetary
Board, "all shipments that left the port of origin after June 30,
1953, and are covered by ICC licenses, may be released by
the Bureau of Customs without the need of a Central Bank
release certificate; provided they left the port of origin within
the period of validity of the licenses". No Central Bank
certificate for the release of the goods having been shown or
presented to the defendant, the latter refused to make the
delivery.
The lower court was thus conformed with the issue of
determining whether the valid period of the license in
question should be counted up to the time when the vessels
carrying the imported items left the ports of origin on January
12 and January 16, 1954, or when the corresponding bills of
lading were dated, or December 17, 1953. The court chose
the latter date, and held:
In view therefore, this Court pronounces judgment
making writ of preliminary mandatory injunction
issued against defendant permanent, with orders for
the cancellation of plaintiff's bond, this after
whatever advance sales tax or any taxes, surcharges
and so forth might be due on the goods shall have
been paid, without costs.
The defendant appealed to the Court of Appeals. The question
raised, however, being purely one of law, the appeal was
certified to us pursuant to a resolution of said court dated July
19, 1957. The appeal has no merit.
The authority of the appellee to import was contained in the
Import Control Commission License No. 17225, validated on
June 18, 1953, and under Resolution 70 of the Commission
(adopted March 27, 1952), the same had a six-month period

of validity counted from the said date June 18, 1953. This
license states, among other conditions, that
Commodities covered by this license must be
shipped from the country of origin before the expiry
date of the license, and are subject to sec. 13 of
Republic Act. No. 650.
Although Republic Act No. 650, creating the Import Control
Commission, expired on July 31, 1953, it is to be conceded
that its duly executed acts can have valid effects even beyond
the life span of said governmental agency.
What is important to consider only is the legal connotation of
the word "shipped" as the term was used in the license.
Defendant maintains that it is when the vessel leaves the port
of embarkation, while plaintiff holds that it is the dates of the
bills of lading, which are usually issued after the cargo is
placed on board the vessel. The date of the shipment is the
date when the goods for dispatch are loaded on board the
vessel, and not necessarily when the ship puts to sea, is
clearly implied from our ruling in the case of U.S Tobacco
Corporation vs. Rufino Luna, et al., (87 Phil., 4), wherein we
said:
By section 6 of Act No. 426, all goods including leaf tobacco
have been placed under control. Petitioner's
merchandise left the port of departure before the passage
of that Act but arrived in Manila after its approval. For the
purpose of enforcing or applying said section 6, there can
only be one date of importation. Which was the date? The
date the goods were ordered, the date they were put on
board vessel, or the date they reached the port of
destination? We are of the opinion that the date of
importation is the date of shipment and not the date of
Arrival in Manila. (Emphasis supplied)
The issuance of the bill of lading, furthermore, presupposes or
carries the presumption that the goods were delivered to the
carrier for immediate shipment (13 C.J.S. sec. 123 (2), p. 235,
and cases cited therein). It does not appear here that the bill
of lading specified any designated day on which the vessel
were to lift anchor, nor was it shown that plaintiff had any
knowledge that the vessel M/S VENTURA and M/S BATAAN
were not to depart soon after he placed his cargo on board
and the corresponding bills of lading issued to him. From this
latter time, the goods in contemplation of law, are deemed
already in transit (New Civil Code, Arts. 1531 and 1736).
It should also be considered that it is entirely outside the
shipper's hands to fix the dates of departure, route or arrival
of a vessel (unless he charters the whole ship [see Art. 656,
Code of Commerce]).
Defendant's reliance upon Central Bank regulations that the
shipment licensed must have "left the port of origin within the
period of validity of the "license" is not maintainable in the
present case, because the regulations came onto effect only
on July 1, 1953 already after issuance of the appellee' license
and cannot be read into the same.
The Solicitor General's contention that, assuming the six
months are counted up to the date the imports goods were
placed on board the vessels for shipment the period of validity
had likewise already elapsed because, legally six months
mean 180 days, which in this case expired on December 15,
cannot now be entertained because the defendant-appellant,
under paragraph 3 of his answer to the Complaint, expressly
admitted that the date appearing on the bills of lading
(December 17, 1953) as the date of loading on board the
vessels "is one day before the expiration of the validity of the
import license". What he only questioned in the court below is
the legal connotation of the word "shipped" under the import
license.
In the light of the resolution we have taken on the main issue,
it becomes unnecessary for us to dwell further upon the other
questions raised by the parties.

Wherefore, the appeal should be dismissed and the judgment

of the lower court affirmed. So rendered.
G.R. No. 106296 July 5, 1996
ISABELO T. CRISOSTOMO, petitioner,
vs.
THE COURT OF APPEALS and the PEOPLE OF THE
PHILIPPINES, respondents.

MENDOZA, J.:p
This is a petition to review the decision of the Court of Appeals
dated July 15, 1992, the dispositive portion of which reads:
WHEREFORE, the present petition is partially granted. The
questioned Orders and writs directing (1) "reinstatement"
of respondent Isabelo T. Crisostomo to the position of
"President of the Polytechnic University of the Philippines",
and (2) payment of "salaries and benefits" which said
respondent failed to receive during his suspension insofar
as such payment includes those accruing after the
abolition of the PCC and its transfer to the PUP, are hereby
set aside. Accordingly, further proceedings consistent with
this decision may be taken by the court a quo to determine
the correct amounts due and payable to said respondent
by the said university.
The background of this case is as follows:
Petitioner Isabelo Crisostomo was President of the Philippine
College of Commerce (PCC), having been appointed to that
position by the President of the Philippines on July 17, 1974.
During his incumbency as president of the PCC, two
administrative cases were filed against petitioner for illegal
use of government vehicles, misappropriation of construction
materials belonging to the college, oppression and
harassment, grave misconduct, nepotism and dishonesty. The
administrative cases, which were filed with the Office of the
President, were subsequently referred to the Office of the
Solicitor General for investigation.
Charges of violations of R.A. No. 3019, 3(e) and R.A. No. 992,
20-21 and R.A. No. 733, 14 were likewise filed against him
with the Office of Tanodbayan.
On June 14, 1976, three (3) informations for violation of Sec.
3(e) of the Anti-Graft and Corrupt Practices Act (R.A. No. 3019,
as amended) were filed against him. The informations alleged
that he appropriated for himself a bahay kubo, which was
intended for the College, and construction materials worth
P250,000.00, more or less. Petitioner was also accused of
using a driver of the College as his personal and family
driver. 1
On October 22, 1976, petitioner was preventively suspended
from office pursuant to R.A. No. 3019, 13, as amended. In his
place Dr. Pablo T. Mateo, Jr. was designated as officer-incharge on November 10, 1976, and then as Acting President
on May 13, 1977.
On April 1, 1978, P.D. No. 1341 was issued by then President
Ferdinand E. Marcos, CONVERTING THE PHILIPPINE COLLEGE
OF COMMERCE INTO A POLYTECHNIC UNIVERSITY, DEFINING
ITS OBJECTIVES, ORGANIZATIONAL STRUCTURE AND
FUNCTIONS, AND EXPANDING ITS CURRICULAR OFFERINGS.
Mateo continued as the head of the new University. On April 3,
1979, he was appointed Acting President and on March 28,
1980, as President for a term of six (6) years.
On July 11, 1980, the Circuit Criminal Court of Manila rendered
judgment acquitting petitioner of the charges against him.
The dispositive portion of the decision reads:

WHEREFORE, the Court finds the accused, Isabelo T.

Crisostomo, not guilty of the violations charged in all these
three cases and hereby acquits him therefrom, with
costs de officio. The bail bonds filed by said accused for his
provisional liberty are hereby cancelled and released.
Pursuant to the provisions of Section 13, R.A. No. 3019, as
amended, otherwise known as The Anti-Graft and Corrupt
Practices Act, and under which the accused has been
suspended by this Court in an Order dated October 22,
1976, said accused is hereby ordered reinstated to the
position of President of the Philippine College of Commerce,
now known as the Polytechnic University of the Philippines,
from which he has been suspended. By virtue of said
reinstatement, he is entitled to receive the salaries and
other benefits which he failed to receive during suspension,
unless in the meantime administrative proceedings have
been filed against him.
The bail bonds filed by the accused for his provisional
liberty in these cases are hereby cancelled and released.
SO ORDERED.
The cases filed before the Tanodbayan (now the Ombudsman)
were likewise dismissed on August 8, 1991 on the ground that
they had become moot and academic. On the other hand, the
administrative cases were dismissed for failure of the
complainants to prosecute them.
On February 12, 1992, petitioner filed with the Regional Trial
Court a motion for execution of the judgment, particularly the
part ordering his reinstatement to the position of president of
the PUP and the payment of his salaries and other benefits
during the period of suspension.
The motion was granted and a partial writ of execution was
issued by the trial court on March 6, 1992. On March 26, 1992,
however, President Corazon C. Aquino appointed Dr. Jaime
Gellor as acting president of the PUP, following the expiration
of the term of office of Dr. Nemesio Prudente, who had
succeeded Dr. Mateo. Petitioner was one of the five nominees
considered by the President of the Philippines for the position.
On April 24, 1992, the Regional Trial Court, through
respondent Judge Teresita Dy-Liaco Flores, issued another
order, reiterating her earlier order for the reinstatement of
petitioner to the position of PUP president. A writ of execution,
ordering the sheriff to implement the order of reinstatement,
was issued.
In his return dated April 28, 1992, the sheriff stated that he
had executed the writ by installing petitioner as President of
the PUP, although Dr. Gellor did not vacate the office as he
wanted to consult with the President of the Philippines first.
This led to a contempt citation against Dr. Gellor. A hearing
was set on May 7, 1992. On May 5, 1992, petitioner also
moved to cite Department of Education, Culture and Sports
Secretary Isidro Cario in contempt of court. Petitioner
assumed the office of president of the PUP.
On May 18, 1992, therefore, the People of the Philippines filed
a petition for certiorari and prohibition (CA G.R. No. 27931),
assailing the two orders and the writs of execution issued by
the trial court. It also asked for a temporary restraining order.
On June 25, 1992, the Court of Appeals issued a temporary
restraining order, enjoining petitioner to cease and desist from
acting as president of the PUP pursuant to the reinstatement
orders of the trial court, and enjoining further proceedings in
Criminal Cases Nos. VI-2329-2331.

On July 15, 1992, the Seventh Division of the Court of Appeals

rendered a decision, 2 the dispositive portion of which is set
forth at the beginning of this opinion. Said decision set aside
the orders and writ of reinstatement issued by the trial court.
The payment of salaries and benefits to petitioner accruing
after the conversion of the PCC to the PUP was disallowed.
Recovery of salaries and benefits was limited to those
accruing from the time of petitioner's suspension until the
conversion of the PCC to the PUP. The case was remanded to
the trial court for a determination of the amounts due and
payable to petitioner.
Hence this petition. Petitioner argues that P.D. No. 1341,
which converted the PCC into the PUP, did not abolish the
PCC. He contends that if the law had intended the PCC to lose
its existence, it would have specified that the PCC was being
"abolished" rather than "converted" and that if the PUP was
intended to be a new institution, the law would have said it
was being "created." Petitioner claims that the PUP is merely a
continuation of the existence of the PCC, and, hence, he could
be reinstated to his former position as president.
In part the contention is well taken, but, as will presently be
explained, reinstatement is no longer possible because of the
promulgation of P.D. No. 1437 by the President of the
Philippines on June 10, 1978.
P.D. No. 1341 did not abolish, but only changed, the former
Philippine College of Commerce into what is now the
Polytechnic University of the Philippines, in the same way that
earlier in 1952, R.A. No. 778 had converted what was then the
Philippine School of Commerce into the Philippine College of
Commerce. What took place was a change in academic status
of the educational institution, not in its corporate life. Hence
the change in its name, the expansion of its curricular
offerings, and the changes in its structure and organization.
As petitioner correctly points out, when the purpose is to
abolish a department or an office or an organization and to
replace it with another one, the lawmaking authority says so.
He cites the following examples:

90. Status of Present NAPOLCOM, PC-INP. - Upon the

effectivity of this Act, the present National Police
Commission, and the Philippine Constabulary-Integrated
National Police shall cease to exist. The Philippine
Constabulary, which is the nucleus of the integrated
Philippine Constabulary-Integrated National Police, shall
cease to be a major service of the Armed Forces of the
Philippines. The Integrated National Police, which is the
civilian component of the Philippine ConstabularyIntegrated National Police, shall cease to be the national
police force and in lieu thereof, a new police force shall be
established and constituted pursuant to this Act.
In contrast, P.D. No. 1341, provides:
1. The present Philippine College of Commerce is hereby
converted into a university to be known as the "Polytechnic
University of the Philippines," hereinafter referred to in this
Decree as the University.
As already noted, R.A. No. 778 earlier provided:
1. The present Philippine School of Commerce, located in
the City of Manila, Philippines, is hereby granted full college
status and converted into the Philippine College of
Commerce, which will offer not only its present one-year
and two-year vocational commercial curricula, the latter
leading to the titles of Associate in Business Education
and/or Associate in Commerce, but also four-year courses
leading to the degrees of Bachelor of Science in Business in
Education and Bachelor of Science in Commerce, and fiveyear courses leading to the degrees of Master of Arts in
Business Education and Master of Arts in Commerce,
respectively.
The appellate court ruled, however, that the PUP and the PCC
are not "one and the same institution" but "two different
entities" and that since petitioner Crisostomo's term was
coterminous with the legal existence of the PCC, petitioner's
term expired upon the abolition of the PCC. In reaching this
conclusion, the Court of Appeals took into account the
following:

E.O. No. 709:

1. There is hereby created a Ministry of Trade and Industry,
hereinafter referred to as the Ministry. The existing Ministry
of Trade established pursuant to Presidential Decree No.
721 as amended, and the existing Ministry established
pursuant to Presidential Decree No. 488 as amended, are
abolished together with their services, bureaus and similar
agencies, regional offices, and all other entities under their
supervision and control.
E.O. No. 710:
1. There is hereby created a Ministry of Public Works and
Highways, hereinafter referred to as the Ministry. The
existing Ministry of Public Works established pursuant to
Executive Order No. 546 as amended, and the existing
Ministry of Public Highways established pursuant to
Presidential Decree No. 458 as amended, are abolished
together with their services, bureaus and similar agencies,
regional offices, and all other entities within their
supervision and control. . . .
R.A. No. 6975:
13. Creation and Composition. -- A National Police
Commission, hereinafter referred to as the Commission, is
hereby created for the purpose of effectively discharging
the functions prescribed in the Constitution and provided in
this Act. The Commission shall be a collegial body within the
Department. It shall be composed of a Chairman and four
(4) regular commissioners, one (1) of whom shall be
designated as Vice-Chairman by the President. The
Secretary of the Department shall be the exofficio Chairman of the Commission, while the ViceChairman shall act as the executive officer of the
Commission.
xxx xxx xxx

a) After respondent Crisostomo's suspension, P.D. No. 1341

(entitled "CONVERTING THE PHILIPPINE COLLEGE OF
COMMERCE INTO A POLYTECHNIC UNIVERSITY, DEFINING ITS
OBJECTIVES, ORGANIZATIONAL STRUCTURE AND
FUNCTIONS, AND EXPANDING ITS CURRICULAR
OFFERINGS") was issued on April 1, 1978. This decree
explicitly provides that PUP's objectives and purposes cover
not only PCC's offering of programs "in the field of
commerce and business administration" but also "programs
in other polytechnic areas" and "in other fields such as
agriculture, arts and trades and fisheries . . ." (section 2).
Being a university, PUP was conceived as a bigger
institution absorbing, merging and integrating the entire
PCC and other "national schools" as may be "transferred" to
this new state university.
b) The manner of selection and appointment of the
university head is substantially different from that provided
by the PCC Charter. The PUP President "shall be appointed
by the President of the Philippines upon recommendation of
the Secretary of Education and Culture after consultation
with the University Board of Regents" (section 4, P.D. 1341).
The President of PCC, on the other hand, was appointed "by
the President of the Philippines upon recommendation of
the Board of Trustees" (Section 4, R.A. 778).
c) The composition of the new university's Board of Regents
in likewise different from that of the PCC Board of Trustees
(which included the chairman of the Senate Committee on
Education and the chairman of the House Committee on
Education, the President of the PCC Alumni Association as
well as the President of the Chamber of Commerce of the
Philippines). Whereas, among others, the NEDA DirectorGeneral, the Secretary of Industry and the Secretary of
Labor are members of the PUP Board of Regents. (section 6,
P.D. 1341)
d) The decree moreover transferred to the new university
all the properties including "equipment and facilities:"

". . . owned by the Philippine College of

Commerce and such other National Schools as may
be integrated . . . including
their obligations and appropriations . . ." (sec. 12;
emphasis supplied) 3
But these are hardly indicia of an intent to abolish an existing
institution and to create a new one. New course offerings can
be added to the curriculum of a school without affecting its
legal existence. Nor will changes in its existing structure and
organization bring about its abolition and the creation of a
new one. Only an express declaration to that effect by the
lawmaking authority will.

WHEREFORE, the decision of the Court of Appeals is MODIFIED

by SETTING ASIDE the questioned orders of the Regional Trial
Court directing the reinstatement of the petitioner Isabelo T.
Crisostomo to the position of president of the Polytechnic
University of the Philippines and the payment to him of
salaries and benefits which he failed to receive during his
suspension in so far as such payment would include salaries
accruing after March 28, 1980 when petitioner Crisostomo's
term was terminated. Further proceedings in accordance with
this decision may be taken by the trial court to determine the
amount due and payable to petitioner by the university up to
March 28, 1980.
SO ORDERED.

The Court of Appeals also cites the provision of P.D. No. 1341
as allegedly implying the abolition of the PCC and the creation
of a new one - the PUP - in its stead:
12. All parcels of land, buildings, equipment and facilities
owned by the Philippine College of Commerce and such
other national schools as may be integrated by virtue of this
decree, including their obligations and appropriations
thereof, shall stand transferred to the Polytechnic University
of the Philippines, provided, however, that said national
schools shall continue to receive their corresponding shares
from the special education fund of the
municipal/provincial/city government concerned as are now
enjoyed by them in accordance with existing laws and/or
decrees.

G.R. No. 115844 August 15, 1997

CESAR G. VIOLA, Chairman, Brgy. 167, Zone 15, District
II, Manila, petitioner,
vs.
HON. RAFAEL M. ALUNAN III, Secretary DILG, ALEX L.
DAVID, President/Secretary General, National Liga ng
mga Barangay, LEONARDO L. ANGAT, President, City of
Manila, Liga ng mga Barangay, respondents.

MENDOZA, J.:

The law does not state that the lands, buildings and
equipment owned by the PCC were being "transferred" to the
PUP but only that they "stand transferred" to it. "Stand
transferred" simply means, for example, that lands transferred
to the PCC were to be understood as transferred to the PUP as
the new name of the institution.

This is a petition for prohibition challenging the validity of Art.

III, 1-2 of the Revised Implementing Rules and Guidelines
for the General Elections of the Liga ng mga Barangay Officers
so far as they provide for the election of first, second and third
vice presidents and for auditors for the National Liga ng mga
Barangay and its chapters. The provisions in question read:

But the reinstatement of petitioner to the position of president

of the PUP could not be ordered by the trial court because on
June 10, 1978, P.D. No. 1437 had been promulgated fixing the
term of office of presidents of state universities and colleges
at six (6) years, renewable for another term of six (6) years,
and authorizing the President of the Philippines to terminate
the terms of incumbents who were not reappointed. P.D. No.
1437 provides:

1. Local Liga Chapters. The Municipal, City,

Metropolitan and Provincial Chapters shall
directly elect the following officers and
directors to constitute their respective Board
of Directors, namely:

6. The head of the university or college shall be known as

the President of the university or college. He shall be
qualified for the position and appointed for a term of six (6)
years by the President of the Philippines upon
recommendation of the Secretary of Education and Culture
after consulting with the Board which may be renewed for
another term upon recommendation of the Secretary of
Education and Culture after consulting the Board. In case of
vacancy by reason of death, absence or resignation, the
Secretary of Education and Culture shall have the authority
to designate an officer in charge of the college or university
pending the appointment of the President.

1.1 President
1.2 Executive Vice-President
1.3 First Vice-President
1.4 Second Vice-President
1.5 Third Vice-President
1.6 Auditor
1.7 Five (5) Directors

The powers and duties of the President of the university or

college, in addition to those specifically provided for in this
Decree shall be those usually pertaining to the office of the
president of a university or college.

2. National Liga. The National Liga shall

directly elect the following officers and
directors to constitute the National Liga
Board of Directors namely:

7. The incumbent president of a chartered state college or

university whose term may be terminated according to this
Decree, shall be entitled to full retirement
benefits: provided that he has served the government for at
least twenty (20) years; and provided, further that in case
the number of years served is less than 20 years, he shall
be entitled to one month pay for every year of service.

2.1 President

In this case, Dr. Pablo T. Mateo Jr., who had been acting
president of the university since April 3, 1979, was appointed
president of PUP for a term of six (6) years on March 28, 1980,
with the result that petitioner's term was cut short. In
accordance with 7 of the law, therefore, petitioner became
entitled only to retirement benefits or the payment of
separation pay. Petitioner must have recognized this fact, that
is why in 1992 he asked then President Aquino to consider
him for appointment to the same position after it had become
vacant in consequence of the retirement of Dr. Prudente.

2.2 Executive Vice-President

2.3 First Vice-President
2.4 Second Vice-President
2.5 Third Vice-President
2.6 Secretary General
2.7 Auditor
2.8 Five (5) Directors

Petitioner Cesar G. Viola brought this action as barangay

chairman of Brgy. 167, Zone 15, District II, Manila against then
Secretary of Interior and Local Government Rafael M. Alunan
III, Alex L. David, president/secretary general of the National
Liga ng mga Barangay, and Leonardo L. Angat, president of
the City of Manila Liga ng mga Barangay, to restrain them
from carrying out the elections for the questioned positions on
July 3, 1994.
Petitioner's contention is that the positions in question are in
excess of those provided in the Local Government Code (R.A.
No. 7160), 493 of which mentions as elective positions only
those of president, vice president, and five members of the
board of directors in each chapter at the municipal, city,
provincial, metropolitan political subdivision, and national
levels. Petitioner argues that, in providing for the positions of
first, second and third vice presidents and auditor for each
chapter, 1-2 of the Implementing Rules expand the number
of positions authorized in 493 of the Local Government Code
in violation of the principle that implementing rules and
regulations cannot add or detract from the provisions of the
law they are designed to implement.
Although the elections are now over, the issues raised in this
case are likely to arise again in future elections of officers of
the Liga ng mga Barangay. For one thing, doubt may be cast
on the validity of the acts of those elected. For another, this
comes within the rule that courts will decide a question which
is otherwise moot and academic if it is "capable of repetition,
yet evading review." 1
We will therefore proceed to the merits of this case.
Petitioner's contention that the additional positions in
question have been created without authority of law is
untenable. To begin with, the creation of these positions was
actually made in the Constitution and By-laws of the Liga ng
Mga Barangay, which was adopted by the First Barangay
National Assembly on January 11, 1994. This Constitution and
By-laws provide in pertinent parts:
ARTICLE VI
OFFICERS AND DIRECTORS
Sec. 1. Organization of Board of Directors of Local Chapters.
The chapters shall directly elect their respective officers,
namely, a president; executive vice president; first, second,
and third vice presidents; auditor; and five (5) members to
constitute the Board of Directors of their respective chapter.
Thereafter, the Board shall appoint a secretary, treasurer,
and public relations officer from among the five (5)
members, with the rest serving as Directors of Board. The
Board may create such other positions as it may deem
necessary for the management of the chapter. Pending
elections of the president of the municipal, city, provincial
and metropolitan chapters of the Liga, the incumbent
presidents of the ABCs of the municipality, city province and
Metropolitan Manila shall continue to act as presidents of
the corresponding Liga chapters, subject to the provisions
of the Local Government Code of 1991.
Sec. 2. Organization of Board of Directors of the National
Liga. The National Liga shall be composed of the
presidents of the provincial Liga chapters, highly urbanized
and independent component city chapters, and the
metropolitan chapter who shall directly elect their
respective officers, namely, a president, executive vice
president; first, second, and third vice president, auditor,
secretary general; and five (5) members to constitute the
Board of Directors of the National Liga. Thereafter, the
Board shall appoint a treasurer, secretary and public
relations officers from among the five (5) members with the
rest serving as directors of the Board. The Board may create
such other positions as it may deem necessary for the
management of the National Liga. Pending election of
Secretary-General, the incumbent president of the
Pambansang Katipunan ng mga Barangay (PKB) shall act as
the Secretary-General. The incumbent members of the
Board of the PKB, headed by the Secretary-General who
continue to be presidents of the respective chapters of the
Liga to which they belong, shall constitute a committee to

exercise the powers and duties of the National Liga and with
the primordial responsibility of drafting a Constitution and
By-Laws needed for the organization of the Liga as a whole
pursuant to the provisions of the Local Government Code of
1991.
The post of executive vice president is in reality that of the
vice president in 493 of the LGC, so that the only additional
positions created for each chapter in the Constitution and Bylaws are those of first, second and third vice presidents and
auditor. Contrary to petitioner's contention, the creation of the
additional positions is authorized by the LGC which provides
as follows:
493. Organization. The liga at the municipal, city,
provincial, Metropolitan political subdivision, and national
levels directly elect a president, a vice-president, and five
(5) members of the board of directors. The board
shall appoint its secretary and treasurer and create such
other positions as it may deem necessary for the
management of the chapter. A secretary-general shall be
elected form among the members of the national liga and
shall be charged with the overall operation of the liga on
the national level. The board shall coordinate the activities
of the chapters of the liga. (emphasis added)
This provision in fact requires and not
merely authorizes the board of directors to "create such other
positions as it may deem necessary for the management of
the chapter" and belies petitioner's claim that said provision
(493) limits the officers of a chapter to the president, vice
president, five members of the board of directors, secretary,
and treasurer. That Congress can delegate the power to
create positions such as these has been settled by our
decisions upholding the validity of reorganization statutes
authorizing the President of the Philippines to create, abolish
or merge officers in the executive department. 2 The question
is whether, in making a delegation of this power to the board
of directors of each chapter of the Liga ng Mga Barangay,
Congress provided a sufficient standard so that, in the phrase
of Justice Cardozo, administrative discretion may be
"canalized within proper banks that keep it from
overflowing." 3
Statutory provisions authorizing the President of the
Philippines to make reforms and changes in government
owned or controlled corporations for the purpose of promoting
"simplicity, economy and efficiency" 4 in their operations and
empowering the Secretary of Education to prescribe minimum
standards of "adequate and efficient instruction" 5 in private
schools and colleges have been found to be sufficient for the
purpose of valid delegation. Judged by these cases, we hold
that 493 of the Local Government Code, in directing the
board of directors of the liga to "create such other positions as
may be deemed necessary for the management of the
chapter[s]," embodies a fairly intelligible standard. There is no
undue delegation of power by Congress.
Justice Davide contends in dissent, however, that "only the
Board of Directors and not any other body is vested with
the power to create other positions as may be necessary for
the management of the chapter" and that, in any case, there
is no showing that the Barangay National Assembly was
authorized to draft the Constitution and By-laws because he is
unable to find any creating it. The Barangay National
Assembly is actually the Pambansang Katipunan ng mga
Barangay (PKB) referred to in Art. 210(f)(2)(3) of the Rules and
Regulations Implementing the Local Government Code of
1991, which Justice Davide's dissent cites. It will be helpful to
quote these provisions:
(2) A secretary-general shall be elected from among the
members of the national liga who shall be responsible for
the overall operation of the liga. Pending election of a
secretary-general under this rule, the incumbent president
of the pambansang katipunan ng mga barangay shall act as
the secretary-general. The incumbent members of the
board of the pambansang katipunan ng mga barangay,
headed by the secretary-general, who continue to be
presidents of the respective chapters of the liga to which
they belong, shall constitute a committee to exercise the
powers and duties of the national liga and draft or amend

the constitution and by-laws of the national liga to conform

to the provisions of this Rule.
(3) The board of directors shall coordinate the activities of
the various chapters of the liga.
(Emphasis added)
Pursuant to these provisions, pending the organization of the
Liga ng mga Barangay, the board of directors of the PKB was
constituted into a committee, headed by the PKB president,
who acted as secretary general, with a two-fold mandate: "[I]
exercise the powers and duties of the national liga and [2]
draft or amend the constitution and by-laws of the national
liga to conform to the provisions of this Rule." The board of
directors of the PKB, functioning in place of the board of
directors of the National Liga ng mga Barangay, exercised one
of these powers of the National Liga board, namely, to create
additional positions which it deemed necessary for the
management of a chapter. There is therefore no basis for the
claim that because the power to create additional positions in
the Liga on its chapters is vested only in the board of directors
the exercise of this power by the Barangay National Assembly
is unauthorized and illegal and positions created are void. The
Barangay National Assembly was actually the Pambansang
Katipunan ng mga Barangay or PKB. Pending the organization
of the Liga ng mga Barangay, it served as the Liga.
But it is contended in the dissent that "Section 493 of the LGC
. . . vests the power to create additional positions in the Board
of Directors of the chapter." The implication seems to be that
the board of the directors at the national level did not have
that power. It is necessary to consider the organizational
structure of the Liga ng mga Barangay as provided in the LGC,
as follows:
492. Representation, Chapters, National Liga. Every
barangay shall be represented in said liga by the punong
barangay, or in his absence or incapacity, by a sangguniang
member duly elected for the purpose among its members,
who shall attend all meetings or deliberations called by the
different chapters of the liga.
The liga shall have chapters at the municipal, city,
provincial and metropolitan political subdivision levels.
The municipal and city chapters of the liga shall be
composed of the barangay representatives of municipal and
city barangays, respectively. The duly elected presidents of
component municipal and city chapters shall constitute the
provincial chapter or the metropolitan political subdivision
chapter. The duly elected presidents of highly-urbanized
cities, provincial chapters, the Metropolitan Manila chapter
and metropolitan political subdivision chapters shall
constitute the National Liga ng mga Barangay.

by denying to the board of directors at the National Liga the

power to create additional positions in the local chapters,
would reduce such board to a board of a local chapter. The
fact is that 493 grants the power to create positions not only
to the boards of the local chapters but to the board of the Liga
at the national level as well.
Indeed what was done in the Constitution and By-laws of their
liga was to create additional positions in each chapters,
whether national or local, without however precluding the
boards of directors of the chapters as well as that of the
national liga from creating other positions for their peculiar
needs. The creation by the board of the National Liga of the
positions of first, second and third vice presidents, auditors
and public relations officers was intended to provide uniform
officers for the various chapters in line with the mandate in
Art. 210(g)(2) of the Rules and Regulations Implementing the
Local Government Code of 1991 to the Barangay National
Assembly to "formulate uniform constitution and by-laws
applicable to the national liga and all local chapters." The
various chapters could have different minor officers
depending on their local needs, but they must have the same
major elective officers, meaning to say, the additional vicepresidents and auditors.
The dissent further argues that, following the rule
of ejusdem generis, what may be created as additional
positions can only be appointive ones because the positions of
secretary and treasurer are appointive positions. The rule
might apply if what is involved is the appointment of other
officers. But what we are dealing with in this case is
the creation of additional positions. Section 493 actually gives
the board the power to "[1] appoint its secretary and treasurer
and [2] create such other positions as it may deem necessary
for the management of the chapter." The additional positions
to be created need not therefore be appointive positions.
Nor is it correct to say that 493, in providing that additional
positions to be created must be those which are "deemed
necessary for the management of the chapter," contemplates
only appointive positions. Management positions are not
necessarily limited to appointive positions. Elective officers,
such as the president and vice-president, can be expected to
be involved in the general administration or management of
the chapter. Hence, the creation of other elective positions
which may be deemed necessary for the management of the
chapter is within the purview of 493.
WHEREFORE, the petition for prohibition is DISMISSED for lack
of merit.
SO ORDERED.

G.R. No. 112745 October 16, 1997

493. Organization. The liga at the municipal, city,
provincial, metropolitan political subdivision, and national
levels directly elect a president, a vice-president, and five
(5) members of the board of directors. The board shall
appoint its secretary and treasurer and create such other
positions as it may deem necessary for the management of
the chapter. A secretary-general shall be elected from
among the members of the national liga and shall be
charged with the overall operation of the liga on the
national level. The board shall coordinate the activities of
the chapters of the liga.

AQUILINO T. LARIN, petitioner,

vs.
THE EXECUTIVE SECRETARY, SECRETARY OF FINANCE,
COMMISSIONER OF THE BUREAU OF INTERNAL
REVENUE AND THE COMMITTEE CREATED TO
INVESTIGATE THE ADMINISTRATIVE COMPLAINT
AGAINST AQUILINO T. LARIN, COMPOSED OF
FRUMENCIO A. LAGUSTAN, JOSE B. ALEJANDRINO AND
JAIME M. MAZA, respondents.

(Emphasis added)
While the board of directors of a local chapter can create
additional positions to provide for the needs of the chapter,
the board of directors of the National Liga must be deemed to
have the power to create additional positions not only for its
management but also for that of all the chapters at the
municipal, city, provincial and metropolitan political
subdivision levels. Otherwise the National Liga would be no
different from the local chapters. There would then be only so
many local chapters without a national one, when what is
contemplated in the above-quoted provisions of the LGC is
that there should be one Liga ng mga Barangay with local
chapters at all levels of local government units. The dissent,

TORRES, JR., J.:

Challenged in this petition is the validity of petitioner's
removal from service as Assistant Commissioner of the Excise
Tax Service of the Bureau of Internal Revenue. Incidentally, he
questions Memorandum Order No. 164 issued by the Office of
the President, which provides for the creation of "A Committee
to Investigate the Administrative Complaint Against Aquilino T.
Larin, Assistant Commissioner, Bureau of Internal Revenue" as
well as the investigation made in pursuance thereto, and
Administrative Order No. 101 dated December 2, 1993 which
found him guilty of grave misconduct in the administrative

charge and imposed upon him the penalty of dismissal from

office.

Atty. Frumencio A. Lagustan Chairman

Assistant Executive Secretary for Legislation

Likewise, petitioner seeks to assail the legality of Executive

Order No. 132, issued by President Ramos on October 26,
1993, which provides for the "Streamlining of the Bureau of
Internal Revenue," and of its implementing rules issued by the
Bureau of Internal Revenue, namely: a) Administrative Order
No. 4-93, which provides for the "Organizational Structure and
Statement of General Functions of Offices in the National
Office" and b) Administrative Order No. 5-93, which provides
for "Redefining the Areas of Jurisdiction and Renumbering of
Regional And District Offices."

Mr. Jose B. Alejandro Member

Presidential Assistant

The antecedent facts of the instant case as succinctly related

by the Solicitor General are as follows:
On September 18, 1992, 1 a decision was rendered by the
Sandiganbayan convicting herein petitioner Aquilino T. Larin,
Revenue Specific Tax Officer, then Assistant Commissioner of
the Bureau of Internal Revenue and his co-accused (except
Justino E. Galban, Jr.) of the crimes of violation of Section 268
(4) of the National Internal Revenue Code and Section 3 (e) of
R.A. 3019 in Criminal Cases Nos. 14208-14209, entitled
"People of the Philippines, Plaintiff vs. Aquilino T. Larin,
Teodoro T. Pareno, Justino E. Galban, Jr. and Potenciana N.
Evangelista, Accused," the dispositive portion of the judgment
reads:
WHEREFORE, judgment is now rendered in
Criminal Cases Nos. 14208 and 14209
convicting accused Assistant Commissioner
for Specific Tax AQUILINO T. LARIN, Chief of
the Alcohol Tax Division TEODORO P.
PARENO, and Chief of the Revenue
Accounting Division POTENCIANA M.
EVANGELISTA:
xxx xxx xxx
SO ORDERED.
The fact of petitioner's conviction was reported to the
President of the Philippines by the then Acting Finance
Secretary Leong through a memorandum dated June 4, 1993.
The memorandum states, inter alia:
This is a report in the case of Assistant Commissioner
AQUILINO T. LARIN of the Excise Tax Service, Bureau of
Internal Revenue, a presidential appointee, one of those
convicted in Criminal Case Nos. 14208-14209, entitled
"People of the Philippines vs. Aquilino T. Larin, et. al."
referred to the Department of Finance by the Commissioner
of Internal Revenue.
The cases against Pareno and Evangelista are being acted
upon by the Bureau of Internal Revenue as they are nonpresidential appointees.
xxx xxx xxx
It is clear from the foregoing that Mr. Larin has been found
beyond reasonable doubt to have committed acts
constituting grave misconduct. Under the Civil Service Laws
and Rules which require only preponderance of evidence,
grave misconduct is punishable by dismissal.
Acting by authority of the President, Sr. Deputy Executive
Secretary Leonardo A. Quisumbing issued Memorandum Order
No. 164 dated August 25, 1993 which provides for the
creation of an Executive Committee to investigate the
administrative charge against herein petitioner Aquilino T.
Larin. It states thus:
A Committee is hereby created to investigate the
administrative complaint filed against Aquilino T. Larin,
Assistant Commissioner, Bureau of Internal Revenue, to
be composed of:

Atty. Jaime M. Maza Member

Assistant Commissioner for Inspector Services
Bureau of Internal Revenue
The Committee shall have all the powers and prerogatives
of (an) investigating committee under the Administrative
Code of 1987 including the power to summon witnesses,
administer oath or take testimony or evidence relevant to
the investigation by subpoena ad testificandum and
subpoena duces tecum.
xxx xxx xxx
The Committee shall convene immediately, conduct the
investigation in the most expeditious manner, and
terminate the same as soon as practicable from its first
scheduled date of hearing.
xxx xxx xxx
Consequently, the Committee directed the petitioner to
respond to the administrative charge leveled against him
through a letter dated September 17, 1993, thus:
Presidential Memorandum Order No. 164 dated August 25,
1993, a xerox copy of which is hereto attached for your
ready reference, created an Investigation Committee to look
into the charges against you which are also the subject of
the Criminal Cases No. 14208 and 14209 entitled People of
the Philippines vs. Aquilino T . Larin, et. al.
The Committee has in its possession a certified true copy of
the Decision of the Sandiganbayan in the above-mentioned
cases.
Pursuant to Presidential Memorandum Order No. 164, you
are hereby directed to file your position paper on the
aforementioned charges within seven (7) days from receipt
hereof . . . .
Failure to file the required position paper shall be
considered as a waiver on your part to submit such paper or
to be heard, in which case, the Committee shall deem the
case submitted on the basis of the documents and records
at hand.
In compliance, petitioner submitted a letter dated September
30, 1993 which was addressed to Atty. Frumencio A. Lagustan,
the Chairman of the Investigating Committee. In said latter,
he asserts that,
The case being sub-judice, I may not, therefore, comment
on the merits of the issues involved for fear of being cited in
contempt of Court. This position paper is thus limited to
furnishing the Committee pertinent documents submitted
with the Supreme Court and other tribunal which took
cognizance of the case in the past, as follows:
xxx xxx xxx
The foregoing documents readily show that am not
administratively liable or criminally culpable of the charges
leveled against me, and that the aforesaid cases are mere
persecutions caused to be filed and are being orchestrated
by taxpayers who were prejudiced by multi-million peso
assessments I caused to be issued against them in my
official capacity as Assistant Commissioner, Excise Tax
Office of the Bureau of Internal Revenue.
In the same letter, petitioner claims that the administrative
complaint against him is already barred: a) on jurisdictional
ground as the Office of the Ombudsman had already taken
cognizance of the case and had caused the filing only of the

criminal charges against him, b) by res judicata, c) by double

jeopardy, and d) because to proceed with the case would be
redundant, oppressive and a plain persecution against him.
Meanwhile, the President issued the challenged Executive
Order No. 132 dated October 26, 1993 which mandates for
the streamlining of the Bureau of Internal Revenue. Under said
order, some positions and functions are either abolished,
renamed, decentralized or transferred to other offices, while
other offices are also created. The Excise Tax Service or the
Specific Tax Service, of which petitioner was the Assistant
Commissioner, was one of those offices that was abolished by
said executive order.
The corresponding implementing rules of Executive Order No.
132, namely, Revenue Administrative Orders Nos. 4-93 and 593, were subsequently issued by the Bureau of Internal
Revenue.
On October 27, 1993, or one day after the promulgation of
Executive Order No. 132, the President appointed the
following as BIR Assistant Commissioners:
1. Bernardo A. Frianeza
2. Dominador L. Galura
3. Jaime D. Gonzales
4. Lilia C. Guillermo
5. Rizalina S. Magalona
6. Victorino C. Mamalateo
7. Jaime M. Maza
8. Antonio N. Pangilinan
9. Melchor S. Ramos
10. Joel L. Tan-Torres
Consequently, the President, in the assailed Administrative
Order No. 101 dated December 2, 1993, found petitioner
guilty of grave misconduct in the administrative charge and
imposed upon him the penalty of dismissal with forfeiture of
his leave credits and retirement benefits including
disqualification for reappointment in the government service.
Aggrieved, petitioner filed directly with this Court the instant
petition on December 13, 1993 to question basically his
alleged unlawful removal from office.
On April 17, 1996 and while the instant petition is pending,
this Court set aside the conviction of petitioner in Criminal
Case Nos. 14208 and 14209.
In his petition, petitioner challenged the authority of the
President to dismiss him from office. He argued that in so far
as presidential appointees who are Career Executive Service
Officers are concerned, the President exercises only the power
of control not the power to remove. He also averred that the
administrative investigation conducted under Memorandum
Order No. 164 is void as it violated his right to due process.
According to him, the letter of the Committee dated
September 17, 1993 and his position paper dated September
30, 1993 are not sufficient for purposes of complying with the
requirements of due process. He alleged that he was not
informed of the administrative charges leveled against him
nor was he given official notice of his dismissal.
Petitioner likewise claimed that he was removed as a result of
the reorganization made by the Executive Department in the
BIR pursuant to Executive Order No. 132. Thus, he assailed
said Executive Order No. 132 and its implementing rules,
namely, Revenue Administrative Orders 4-93 and 5-93 for
being ultra vires. He claimed that there is yet no law enacted

by Congress which authorizes the reorganization by the

Executive Department of executive agencies, particularly the
Bureau of Internal Revenue. He said that the reorganization
sought to be effected by the Executive Department on the
basis of E.O. No. 132 is tainted with bad faith in apparent
violation of Section 2 of R.A. 6656, otherwise known as the Act
Protecting the Security of Tenure of Civil Service Officers and
Employees in the Implementation of Government
Reorganization.
On the other hand. respondents contended that since
petitioner is a presidential appointee, he falls under the
disciplining authority of the President. They also contended
that E.O. No. 132 and its implementing rules were validly
issued pursuant to Sections 48 and 62 of Republic Act No.
7645. Apart from this, the other legal bases of E.O. No. 132 as
stated in its preamble are Section 63 of E.O. No. 127
(Reorganizing the Ministry of Finance), and Section 20, Book III
of E.O. No. 292, otherwise known as the Administrative Code
of 1987. In addition, it is clear that in Section 11 of R.A. No.
6656 future reorganization is expressly contemplated and
nothing in said law that prohibits subsequent reorganization
through an executive order. Significantly, respondents clarified
that petitioner was not dismissed by virtue of EO 132.
Respondents claimed that he was removed from office
because he was found guilty of grave misconduct in the
administrative cases filed against him.
The ultimate issue to be resolved in the instant case falls on
the determination of the validity of petitioner's dismissal from
office. Incidentally, in order to resolve this matter, it is
imperative that We consider these questions: a) Who has the
power to discipline the petitioner?, b) Were the proceedings
taken pursuant to Memorandum Order No. 164 in accord with
due process?, c) What is the effect of petitioner's acquittal in
the criminal case to his administrative charge?, d) Does the
President have the power to reorganize the BIR or to issue the
questioned E.O. NO. 132?, and e) Is the reorganization of BIR
pursuant to E.O. No. 132 tainted with bad faith?
At the outset, it is worthy to note that the position of Assistant
Commissioner of the BIR is part of the Career Executive
Service. 2 Under the law, 3 Career Executive Service officers,
namely, Undersecretary, Assistant Secretary, Bureau Director,
Assistant Bureau Director, Regional Director, Assistant
Regional Director, Chief of Department Service and other
officers of equivalent rank as may be identified by the Career
Executive Service Board, are all appointed by the President.
Concededly, petitioner was appointed as Assistant
Commissioner in January, 1987 by then President Aquino.
Thus, petitioner is a presidential appointee who belongs to
career service of the Civil Service. Being a presidential
appointee, he comes under the direct disciplining authority of
the President. This is in line with the well settled principle that
the "power to remove is inherent in the power to appoint"
conferred to the President by Section 16, Article VII of the
Constitution. Thus, it is ineluctably clear that Memorandum
Order No. 164, which created a committee to investigate the
administrative charge against petitioner, was issued pursuant
to the power of removal of the President. This power of
removal, however, is not an absolute one which accepts no
reservation. It must be pointed out that petitioner is a career
service officer. Under the Administrative Code of 1987, career
service is characterized by the existence of security of tenure,
as contra-distinguished from non-career service whose tenure
is co-terminus with that of the appointing authority or subject
to his pleasure, or limited to a period specified by law or to
the duration of a particular project for which purpose the
employment was made. As a career service officer, petitioner
enjoys the right to security of tenure. No less than the 1987
Constitution guarantees the right of security of tenure of the
employees of the civil service. Specifically, Section 36 of P.D.
No. 807, as amended, otherwise known as Civil Service
Decree of the Philippines, is emphatic that career service
officers and employees who enjoy security of tenure may be
removed only for any of the causes enumerated in said law. In
other words, the fact that petitioner is a presidential
appointee does not give the appointing authority the license
to remove him at will or at his pleasure for it is an admitted
fact that he is likewise a career service officer who under the
law is the recipient of tenurial protection, thus, may only be
removed for a cause and in accordance with procedural due
process.

Was petitioner then removed from office for a legal cause

under a valid proceeding?
Although the proceedings taken complied with the
requirements of procedural due process, this Court, however,
considers that petitioner was not dismissed for a valid cause.
It should be noted that what precipitated the creation of the
investigative committee to look into the administrative charge
against petitioner is his conviction by the Sandiganbayan in
Criminal Case Nos. 14208 and 14209. As admitted by the
respondents, the administrative case against petitioner is
based on the Sandiganbayan Decision of September 18, 1992.
Thus, in the Administrative Order No. 101 issued by Senior
Deputy Executive Secretary Quisumbing which found
petitioner guilty of grave misconduct, it clearly states that:
This pertains to the administrative charge against Assistant
Commissioner Aquilino T. Larin of the Bureau of Internal
Revenue, for grave misconduct by virtue of a Memorandum
signed by Acting Secretary Leong of the Department of
Finance, on the basis of a decision handed down by the
Hon. Sandiganbayan convicting Larin, et. al. in Criminal
Case Nos. 14208 and 14209. 4
In a nutshell, the criminal cases against petitioner refer to his
alleged violation of Section 268 (4) of the National Internal
Revenue Code and of Section 3 (e) of R.A. No. 3019 as a
consequence of his act of favorably recommending the grant
of tax credit to Tanduay Distillery, Inc.. The pertinent portion
of the judgment of the Sandiganbayan reads:
As above pointed out, the accused had conspired in
knowingly preparing false memoranda and certification in
order to effect a fraud upon taxes due to the government.
By their separate acts which had resulted in an appropriate
tax credit of P180,701,682.00 in favor of Tanduay. The
government had been defrauded of a tax revenue for the
full amount, if one is to look at the availments or utilization
thereof (Exhibits "AA" to "AA- 31-a"), or for a substantial
portion thereof (P73,000,000.00) if we are to rely on the
letter of Deputy Commissioner Eufracio D. Santos (Exhibits
"21" for all the accused).
As pointed out above, the confluence of acts and omissions
committed by accused Larin, Pareno and Evangelista
adequately prove conspiracy among them for no other
purpose than to bring about a tax credit which Tanduay did
not deserve. These misrepresentations as to how much
Tanduay had paid in ad valorem taxes obviously constituted
a fraud of tax revenue of the government . . . . 5
However, it must be stressed at this juncture that the
conviction of petitioner by the Sandiganbayan was set asideby
this Court in our decision promulgated on April 17, 1996 in
G.R. Nos. 108037-38 and 107119-20. We specifically ruled in
no uncertain terms that: a) petitioner can not be held
negligent in relying on the certification of a co-equal unit in
the BIR, b) it is not incumbent upon Larin to go beyond the
certification made by the Revenue Accounting Division that
Tanduay Distillery, Inc. had paid the ad valorem taxes, c) there
is nothing irregular or anything false in Larin's marginal note
on the memorandum addressed to Pareno, the Chief of
Alcohol Tax Division who was also one of the accused, but
eventually acquitted, in the said criminal cases, and d) there
is no proof of actual agreement between the accused,
including petitioner, to commit the illegal acts charged. We
are emphatic in our resolution in said cases that there is
nothing "illegal with the acts committed by the petitioner(s)."
We also declare that "there is no showing that petitioner(s)
had acted irregularly, or performed acts outside of his (their)
official functions." Significantly, these acts which. We
categorically declare to be not unlawful and improper in G.R.
Nos. 108037-38 and G.R. Nos. 107119-20 are the very same
acts for which petitioner is held to be administratively
responsible. Any charge of malfeasance or misfeasance on the
part of the petitioner is clearly belied by our conclusion in said
cases. In the light of this decisive pronouncement, We see no
reason for the administrative charge to continue it must,
thus, be dismissed.

We are not unaware of the rule that since administrative

cases are independent from criminal actions for the same act
or omission, the dismissal or acquittal of the criminal charge
does not foreclose the institution of administrative action nor
carry with it the relief from administrative liability. 6 However,
the circumstantial setting of the instant case sets it miles
apart from the foregoing rule and placed it well within the
exception. Corollarily, where the very basis of the
administrative case against petitioner is his conviction in the
criminal action which was later on set aside by this Court
upon a categorical and clear finding that the acts for which he
was administratively held liable are not unlawful and irregular,
the acquittal of the petitioner in the criminal case necessarily
entails the dismissal of the administrative action against him,
because in such a case, there is no more basis nor justifiable
reason to maintain the administrative suit.
On the aspect of procedural due process, suffice it to say that
petitioner was given every chance to present his side. The
rule is well settled that the essence of due process in
administrative proceedings is that a party be afforded a
reasonable opportunity to be heard and to submit any
evidence he may have in support of his defense. 7 The records
clearly show that on October 1, 1993 petitioner submitted his
letter-response dated September 30, 1993 to the
administrative charge filed against him. Aside from his letter,
he also submitted various documents attached as annexes to
his letter, all of which are evidences supporting his defense.
Prior to this, he received a letter dated September 17, 1993
from the Investigation Committee requiring him to explain his
side concerning the charge. It can not therefore be argued
that petitioner was denied of due process.
Let us now examine Executive Order No. 132.
As stated earlier, with the issuance of Executive Order No.
132, some of the positions and offices, including the office of
Excise Tax Services of which petitioner was the Assistant
Commissioner, were abolished or otherwise decentralized.
Consequently, the President released the list of appointed
Assistant Commissioners of the BIR. Apparently, petitioner
was not included.
We do not agree.
Under its preamble, E.O. No. 132 lays down the legal bases of
its issuance, namely: a) Section 48 and 62 of R.A. No. 7645, b)
Section 63 of E.O. No. 127, and c) Section 20, Book III of E.O.
No. 292.
Section 48 of R.A. 7645 provides that:
Sec. 48. Scaling Down and Phase Out of Activities of
Agencies Within the Executive Branch. The heads of
departments, bureaus and offices and agencies are hereby
directed to identify their respective activities which are no
longer essential in the delivery of public services and which
may be scaled down, phased out or abolished, subject to
civil service rules and regulations. . . . Actual scaling down,
phasing out or abolition of the activities shall be effected
pursuant to Circulars or Orders issued for the purpose by
the Office of the President. (emphasis ours)
Said provision clearly mentions the acts of "scaling down,
phasing out and abolition" of offices only and does not cover
the creation of offices or transfer of functions. Nevertheless,
the act of creating and decentralizing is included in the
subsequent provision of Section 62, which provides that:
Sec. 62. Unauthorized organizational charges. Unless
otherwise created by law or directed by the President of the
Philippines, no organizational unit of charges in key
positions in any department or agency shall be authorized
in their respective organization structures and be funded
from appropriations by this Act. (emphasis ours)
The foregoing provision evidently shows that the President is
authorized to effect organizational charges including the
creation of offices in the department or agency concerned.

The contention of petitioner that the two provisions are riders

deserves scant consideration. Well settled is the rule that
every law has in its favor the presumption of
constitutionality. 8 Unless and until a specific provision of the
law is declared invalid and unconstitutional, the same is valid
and biding for all intents and purposes.
Another legal basis of E.O. No. 132 is Section 20, Book III of
E.O. No. 292 which states:
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 specifically
enumerated above or which are not delegated by the
President in accordance with law. (emphasis ours)
This provision speaks of such other powers vested in the
President under the law. What law then which gives him the
power to reorganize? It is Presidential Decree No. 1772 9 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 of these two
decrees are unquestionable. The 1987 Constitution clearly
provides that "all laws, decrees, executive orders,
proclamations, letters of instructions and other executive
issuances not inconsistent with this Constitution shall remain
operative until amended, repealed or revoked." 10 So far, there
is yet no law amending or repealing said decrees.
Significantly, the Constitution itself recognizes future
reorganizations in the government as what is revealed in
Section 16 of Article XVIII, thus:
Sec. 16. Career civil service employees separated from
service not for cause but as a result of the . . .
reorganization following the ratification of this Constitution
shall be entitled to appropriate separation pay . . .
However, We can not consider E.O. No. 127 signed on January
30, 1987 as a legal basis for the reorganization of the BIR. E.O.
No. 127 should be related to the second paragraph of Section
11 of Republic Act No. 6656.

is done for political reasons or purposely to defeat security

of tenure, or otherwise not in good faith, no valid abolition
takes place and whatever abolition is done is void ab initio.
There is an invalid abolition as where there is merely a
change of nomenclature of positions or where claims of
economy are belied by the existence of ample funds. 11
In this regard, it is worth mentioning that Section 2 of R. A. No.
6656 lists down the circumstances evidencing bad faith in the
removal of employees as a result of the reorganization, thus:
Sec. 2. No officer or employee in the career service shall be
removed except for a valid cause and after due notice and
hearing. A valid cause for removal exists when, pursuant to
a bona fide reorganization, a position has been abolished or
rendered redundant or there is a need to merge, divide, or
consolidate positions in order to meet the exigencies of the
service, or other lawful causes allowed by the Civil Service
Law. The existence of any or some of the following
circumstances may be considered as evidence of bad faith
in the removals made as a result of the reorganization,
giving rise to a claim for reinstatement or reappointment by
an aggrieved party:
a) Where there is a significant increase in the number of
positions in the new staffing pattern of the department or
agency concerned;
b) Where an office is abolished and another performing
substantially the same functions is created;
c) Where incumbents are replaced by those less qualified in
terms of status of appointment, performance and merit;
d) Where there is a reclassification of offices in the
department or agency concerned and the reclassified
offices perform substantially the same functions as the
original offices;
e) Where the removal violates the order of separation
provided in Section 3 hereof.
A reading of some of the provisions of the questioned E.O. No.
132 clearly leads us to an inescapable conclusion that there
are circumstances considered as evidences of bad faith in the
reorganization of the BIR.

Section 11 provides inter alia:

Section 1.1.2 of said executive order provides that:
xxx xxx xxx
In the case of the 1987 reorganization of the executive
branch, all departments and agencies which are authorized
by executive orders promulgated by the President to
reorganize shall have ninety days from the approval of this
act within which to implement their respective
reorganization plans in accordance with the provisions of
this Act. (emphasis ours)
Executive Order No. 127 was part of the 1987 reorganization
contemplated under said provision. Obviously, it had become
stale by virtue of the expiration of the ninety day deadline
period. It can not thus be used as a proper basis for the
reorganization of the BIR. Nevertheless, as shown earlier,
there are other legal bases to sustain the authority of the
President to issue the questioned E.O. NO. 132.
While the President's power to reorganize can not be denied,
this does not mean however that the reorganization itself is
properly made in accordance with law. Well-settled is the rule
that reorganization is regarded as valid provided it is pursued
in good faith. Thus, in Dario vs. Mison, this Court has had the
occasion to clarify that:
As a general rule, a reorganization is carried out in "good
faith" if it is for the purpose of economy or to make
bureaucracy more efficient. In that event no dismissal or
separation actually occurs because the position itself
ceases to exist. And in that case the security of tenure
would not be a Chinese wall. Be that as it may, if the
abolition which is nothing else but a separation or removal,

1.1.2 The Intelligence and Investigation Office and the

Inspection Service are abolished. An Intelligence and
Investigation Service is
hereby created to absorb the same functions of the
abolished office and service. . . . (emphasis ours)
This provision is a clear illustration of the circumstance
mentioned in Section 2 (b) of R.A. No. 6656 that an office is
abolished and another one performing substantially the same
function is created.
Another circumstance is the creation of services and divisions
in the BIR resulting to a significant increase in the number of
positions in the said bureau as contemplated in paragraph (a)
of Section 2 of R.A. No. 6656. Under Section 1.3 of E.O. No.
132, the Information Systems Group has two newly created
Systems Services. Aside from this, six new divisions are also
created. Under Section 1.2.1, three more divisions of the
Assessment Service are formed. With these newly created
offices, there is no doubt that a significant increase of
positions will correspondingly follow.
Furthermore, it is perceivable that the non-reappointment of
the petitioner as Assistant Commissioner violates Section 4 of
R.A. No. 6656. Under said provision, officers holding
permanent appointments are given preference for
appointment to the new positions in the approved staffing
pattern comparable to their former positions or in case there
are not enough comparable positions to positions next lower
in rank. It is undeniable that petitioner is a career executive
officer who is holding a permanent position. Hence, he should

have been given preference for appointment in the position of

Assistant Commissioner. As claimed by petitioner, Antonio
Pangilinan who was one of those appointed as Assistant
Commissioner, "is an outsider of sorts to the Bureau, not
having been an incumbent officer of the Bureau at the time of
the reorganization." We should not lose sight of the second
paragraph of Section 4 of R.A. No. 6656 which explicitly states
that no new employees shall be taken in until all permanent
officers shall have been appointed for permanent position.
IN VIEW OF THE FOREGOING, the petition is granted, and
petitioner is hereby reinstated to his position as Assistant
Commissioner without loss of seniority rights and shall be
entitled to full backwages from the time of his separation from
service until actual reinstatement unless, in the meanwhile,
he would have reached the compulsory retirement age of
sixty-five years in which case, he shall be deemed to have
retired at such age and entitled thereafter to the
corresponding retirement benefits.
SO ORDERED.
G.R. No. 167324

July 17, 2007

TONDO MEDICAL CENTER EMPLOYEES ASSOCIATION,

RESEARCH INSTITUTE FOR TROPICAL MEDICINE
EMPLOYEES ASSOCIATION, NATIONAL ORTHOPEDIC
WORKERS UNION, DR. JOSE R. REYES MEMORIAL
HOSPITAL EMPLOYEES UNION, SAN LAZARO HOSPITAL
EMPLOYEES ASSOCIATION, ALLIANCE OF HEALTH
WORKERS, INC., HEALTH ALLIANCE FOR DEMOCRACY,
COUNCIL FOR HEALTH DEVELOPMENT, NETWORK
OPPOSED TO PRIVATIZATION, COMMUNITY MEDICINE
DEVELOPMENT FOUNDATION INC., PHILIPPINE SOCIETY
OF SANITARY ENGINEERS INC., KILUSANG MAYO UNO,
GABRIELA, KILUSANG MAGBUBUKID NG PILIPINAS,
KALIPUNAN NG DAMAYAN NG MGA MARALITA, ELSA O.
GUEVARRA, ARCADIO B. GONZALES, JOSE G. GALANG,
DOMINGO P. MANAY, TITO P. ESTEVES, EDUARDO P.
GALOPE, REMEDIOS M. YSMAEL, ALFREDO BACUATA,
EDGARDO J. DAMICOG, REMEDIOS M. MALTU AND
REMEGIO S. MERCADO, Petitioners,
vs.
THE COURT OF APPEALS, EXECUTIVE SECRETARY
ALBERTO G. ROMULO, SECRETARY OF HEALTH MANUEL
M. DAYRIT, SECRETARY OF BUDGET AND MANAGEMENT
EMILIA T. BONCODIN, Respondents.

and (5) expand the coverage of the National Health Insurance

Program (NHIP).2
Petitioners questioned the first reform agenda involving the
fiscal autonomy of government hospitals, particularly the
collection of socialized user fees and the corporate
restructuring of government hospitals. The said provision
under the HSRA reads:
Provide fiscal autonomy to government hospitals. Government
hospitals must be allowed to collect socialized user fees so
they can reduce the dependence on direct subsidies from the
government. Their critical capacities like diagnostic
equipment, laboratory facilities and medical staff capability
must be upgraded to effectively exercise fiscal autonomy.
Such investment must be cognizant of complimentary
capacity provided by public-private networks. Moreover such
capacities will allow government hospitals to supplement
priority public health programs. Appropriate institutional
arrangement must be introduced such as allowing them
autonomy towards converting them into government
corporations without compromising their social
responsibilities. As a result, government hospitals are
expected to be more competitive and responsive to health
needs.
Petitioners also assailed the issuance of a draft administrative
order issued by the DOH, dated 5 January 2001, entitled
"Guidelines and Procedure in the Implementation of the
Corporate Restructuring of Selected DOH Hospitals to Achieve
Fiscal Autonomy, and Managerial Flexibility to Start by January
2001;"3 and Administrative Order No. 172 of the DOH, entitled
"Policies and Guidelines on the Private Practice of Medical and
Paramedical Professionals in Government Health
Facilities,"4 dated 9 January 2001, for imposing an added
burden to indigent Filipinos, who cannot afford to pay for
medicine and medical services.5
Petitioners alleged that the implementation of the
aforementioned reforms had resulted in making free medicine
and free medical services inaccessible to economically
disadvantaged Filipinos. Thus, they alleged that the HSRA is
void for being in violation of the following constitutional
provisions:6
ART. III, SEC. 1. No person shall be deprived of life, liberty or
property without due process of law, nor shall any person be
denied the equal protection of the law.

DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari, under Rule 45 of the
Rules of Court, assailing the Decision,1promulgated by the
Court of Appeals on 26 November 2004, denying a petition for
the nullification of the Health Sector Reform Agenda (HSRA)
Philippines 1999-2004 of the Department of Health (DOH);
and Executive Order No. 102, "Redirecting the Functions and
Operations of the Department of Health," which was issued by
then President Joseph Ejercito Estrada on 24 May 1999.
Prior hereto, petitioners originally filed a Petition for Certiorari,
Prohibition and Mandamus under Rule 65 of the 1997 Revised
Rules of Civil Procedure before the Supreme Court on 15
August 2001. However, the Supreme Court, in a Resolution
dated 29 August 2001, referred the petition to the Court of
Appeals for appropriate action.
HEALTH SECTOR REFORM AGENDA (HSRA)
In 1999, the DOH launched the HSRA, a reform agenda
developed by the HSRA Technical Working Group after a series
of workshops and analyses with inputs from several
consultants, program managers and technical staff possessing
the adequate expertise and experience in the health sector. It
provided for five general areas of reform: (1) to provide fiscal
autonomy to government hospitals; (2) secure funding for
priority public health programs; (3) promote the development
of local health systems and ensure its effective performance;
(4) strengthen the capacities of health regulatory agencies;

ART II, SEC. 5. The maintenance of peace and order, the

protection of life, liberty, and property, and the promotion of
the general welfare are essential for the enjoyment of all the
people of the blessings of democracy.
ART II, SEC. 9. The State shall promote a just and dynamic
social order that will ensure the prosperity and independence
of the nation and free the people from poverty through
policies that provide adequate social services, promote full
employment, a rising standard of living and an improved
quality of life for all.
ART II, SEC. 10. The State shall promote social justice in all
phases of national development.
ART II, SEC. 11. The State values the dignity of every human
person and guarantees full respect for human rights.
ART II, SEC. 13. The State recognizes the vital role of the
youth in nation-building and shall promote and protect their
physical, moral, spiritual, intellectual and social well-being x x
x.
ART II, SEC. 18. The State affirms labor as a primary social
economic force. It shall protect the rights of workers and
promote their welfare.
ART XV, SEC. 1. The State recognizes the Filipino family as the
foundation of the nation. Accordingly, it shall strengthen its
solidarity and actively promote its total development.

ART XV, SEC. 3. The State shall defend:

pattern shall not exceed available funds for Personnel

Services.

xxxx
(2) the right of children to assistance, including proper care
and nutrition, and special protection from all forms of neglect,
abuse, cruelty, exploitation and other conditions prejudicial to
their development.
xxxx
ART XIII, SEC. 14. The State shall protect working women by
providing safe and healthful working conditions, taking into
account their maternal functions, and such facilities and
opportunities that will enhance their welfare and enable them
to realize their full potential in the service of the nation.
ART II, SEC. 15. The State shall protect and promote the right
to health of the people and instill health consciousness among
them.
ART XIII, SEC. 11. The State shall adopt an integrated and
comprehensive approach to health development which shall
endeavor to make essential goods, health and other social
services available to all people at affordable cost. There shall
be priority for the needs of the underprivileged sick, elderly,
disabled, women, and children. The State shall endeavor to
provide free medical care to paupers.
EXECUTIVE ORDER NO. 102
On 24 May 1999, then President Joseph Ejercito Estrada issued
Executive Order No. 102, entitled "Redirecting the Functions
and Operations of the Department of Health," which provided
for the changes in the roles, functions, and organizational
processes of the DOH. Under the assailed executive order, the
DOH refocused its mandate from being the sole provider of
health services to being a provider of specific health services
and technical assistance, as a result of the devolution of basic
services to local government units. The provisions for the
streamlining of the DOH and the deployment of DOH
personnel to regional offices and hospitals read:
Sec. 4. Preparation of a Rationalization and Streamlining Plan.
In view of the functional and operational redirection in the
DOH, and to effect efficiency and effectiveness in its activities,
the Department shall prepare a Rationalization and
Streamlining Plan (RSP) which shall be the basis of the
intended changes. The RSP shall contain the following:
a) the specific shift in policy directions, functions, programs
and activities/strategies;
b) the structural and organizational shift, stating the
specific functions and activities by organizational unit and
the relationship of each units;
c) the staffing shift, highlighting and itemizing the existing
filled and unfilled positions; and
d) the resource allocation shift, specifying the effects of the
streamline set-up on the agency budgetary allocation and
indicating where possible, savings have been generated.
The RSP shall [be] submitted to the Department of Budget
and Management for approval before the corresponding shifts
shall be affected (sic) by the DOH Secretary.
Sec. 5. Redeployment of Personnel. The redeployment of
officials and other personnel on the basis of the approved RSP
shall not result in diminution in rank and compensation of
existing personnel. It shall take into account all pertinent Civil
Service laws and rules.
Section 6. Funding. The financial resources needed to
implement the Rationalization and Streamlining Plan shall be
taken from funds available in the DOH, provided that the total
requirements for the implementation of the revised staffing

Section 7. Separation Benefits. Personnel who opt to be

separated from the service as a consequence of the
implementation of this Executive Order shall be entitled to the
benefits under existing laws. In the case of those who are not
covered by existing laws, they shall be entitled to separation
benefits equivalent to one month basic salary for every year
of service or proportionate share thereof in addition to the
terminal fee benefits to which he/she is entitled under existing
laws.
Executive Order No. 102 was enacted pursuant to Section 17
of the Local Government Code (Republic Act No. 7160), which
provided for the devolution to the local government units of
basic services and facilities, as well as specific health-related
functions and responsibilities.7
Petitioners contended that a law, such as Executive Order No.
102, which effects the reorganization of the DOH, should be
enacted by Congress in the exercise of its legislative function.
They argued that Executive Order No. 102 is void, having
been issued in excess of the Presidents authority. 8
Moreover, petitioners averred that the implementation of the
Rationalization and Streamlining Plan (RSP) was not in
accordance with law. The RSP was allegedly implemented
even before the Department of Budget and Management
(DBM) approved it. They also maintained that the Office of the
President should have issued an administrative order to carry
out the streamlining, but that it failed to do so. 9
Furthermore, petitioners Elsa O. Guevarra, Arcadio B.
Gonzales, Jose G. Galang, Domingo P. Manay, Eduardo P.
Galope, Remedios M. Ysmael, Alfredo U. Bacuata and
Edgardo J. Damicog, all DOH employees, assailed the validity
of Executive Order No. 102 on the ground that they were likely
to lose their jobs, and that some of them were suffering from
the inconvenience of having to travel a longer distance to get
to their new place of work, while other DOH employees had to
relocate to far-flung areas.10
Petitioners also pointed out several errors in the
implementation of the RSP. Certain employees allegedly
suffered diminution of compensation,11 while others were
supposedly assigned to positions for which they were neither
qualified nor suited.12 In addition, new employees were
purportedly hired by the DOH and appointed to positions for
which they were not qualified, despite the fact that the
objective of the ongoing streamlining was to cut back on
costs.13 It was also averred that DOH employees were
deployed or transferred even during the three-month period
before the national and local elections in May 2001,14 in
violation of Section 2 of the Republic Act No. 7305, also known
as "Magna Carta for Public Health Workers."15 Petitioners,
however, failed to identify the DOH employees referred to
above, much less include them as parties to the petition.
The Court of Appeals denied the petition due to a number of
procedural defects, which proved fatal: 1) Petitioners failed to
show capacity or authority to sign the certification of nonforum shopping and the verification; 2) Petitioners failed to
show any particularized interest for bringing the suit, nor any
direct or personal injury sustained or were in the immediate
danger of sustaining; 3) the Petition, brought before the
Supreme Court on 15 August 1999, was filed out of time, or
beyond 60 days from the time the reorganization methods
were implemented in 2000; and 4) certiorari, Prohibition and
Mandamus will not lie where the President, in issuing the
assailed Executive Order, was not acting as a tribunal, board
or officer exercising judicial or quasi-judicial functions.
In resolving the substantial issues of the case, the Court of
Appeals ruled that the HSRA cannot be declared void for
violating Sections 5, 9, 10, 11, 13, 15, 18 of Article II; Section
1 of Article III; Sections 11 and 14 of Article XIII; and Sections
1 and 3(2) of Article XV, all of the 1987 Constitution, which
directly or indirectly pertain to the duty of the State to protect
and promote the peoples right to health and well-being. It
reasoned that the aforementioned provisions of the
Constitution are not self-executing; they are not judicially

enforceable constitutional rights and can only provide

guidelines for legislation.

self-executing and ruled that such broad principles need

legislative enactments before they can be implemented:

Moreover, the Court of Appeals held that the petitioners

assertion that Executive Order No. 102 is detrimental to the
health of the people cannot be made a justiciable issue. The
question of whether the HSRA will bring about the
development or disintegration of the health sector is within
the realm of the political department.

By its very title, Article II of the Constitution is a "declaration

of principles and state policies." x x x. These principles in
Article II are not intended to be self-executing principles ready
for enforcement through the courts. They are used by the
judiciary as aids or as guides in the exercise of its power of
judicial review, and by the legislature in its enactment of laws.

Furthermore, the Court of Appeals decreed that the President

was empowered to issue Executive Order No. 102, in
accordance with Section 17 Article VII of the 1987
Constitution. It also declared that the DOH did not implement
Executive Order No. 102 in bad faith or with grave abuse of
discretion, as alleged by the petitioners, as the DOH issued
Department Circular No. 275-C, Series of 2000, which created
the different committees tasked with the implementation of
the RSP, only after both the DBM and Presidential Committee
on Effective Governance (PCEG) approved the RSP on 8 July
2000 and 17 July 2000, respectively.1avvphi1

In Basco v. Philippine Amusement and Gaming

Corporation,20 this Court declared that Sections 11, 12, and 13
of Article II; Section 13 of Article XIII; and Section 2 of Article
XIV of the 1987 Constitution are not self-executing provisions.
In Tolentino v. Secretary of Finance,21 the Court referred to
Section 1 of Article XIII and Section 2 of Article XIV of the
Constitution as moral incentives to legislation, not as judicially
enforceable rights. These provisions, which merely lay down a
general principle, are distinguished from other constitutional
provisions as non self-executing and, therefore, cannot give
rise to a cause of action in the courts; they do not embody
judicially enforceable constitutional rights.22

Petitioners filed with the Court of Appeals a Motion for

Reconsideration of the Decision rendered on 26 November
2004, but the same was denied in a Resolution dated 7 March
2005.
Hence, the present petition, where the following issues are
raised:
I.
THE HONORABLE COURT OF APPEALS COMMITTED
MANIFEST ERROR IN RULING THAT ANY QUESTION ON THE
WISDOM AND EFFICACY OF THE HEALTH SECTOR REFORM
AGENDA IS NOT A JUSTICIABLE CONTROVERSY AND THAT
THE CONSTITUTIONAL PROVISIONS PROTECTING THE
HEALTH OF THE FILIPINO PEOPLE ARE NOT JUDICIALLY
ENFORCEABLE;
II.
THE HONORABLE COURT OF APPEALS COMMITTED
MANIFEST ERROR IN RULING THAT PETITIONERS
COMPLAINT THAT EXECUTIVE ORDER NO. 102 IS
DETRIMENTAL TO THE FILIPINO IS LIKEWISE NOT A
JUSTICIABLE CONTROVERSY AND THAT THE PRESIDENT HAS
THE AUTHORITY TO ISSUE SAID ORDER; AND
III.
THE HONORABLE COURT OF APPEALS COMMITTED
MANIFEST ERROR IN UPHOLDING TECHNICALITIES OVER
AND ABOVE THE ISSUES OF TRANSCENDENTAL IMPORTANCE
RAISED IN THE PETITION BELOW. 16

Some of the constitutional provisions invoked in the present

case were taken from Article II of the Constitution -specifically, Sections 5, 9, 10, 11, 13, 15 and 18 -- the
provisions of which the Court categorically ruled to be non
self-executing in the aforecited case of Taada v. Angara.23
Moreover, the records are devoid of any explanation of how
the HSRA supposedly violated the equal protection and due
process clauses that are embodied in Section 1 of Article III of
the Constitution. There were no allegations of discrimination
or of the lack of due process in connection with the HSRA.
Since they failed to substantiate how these constitutional
guarantees were breached, petitioners are unsuccessful in
establishing the relevance of this provision to the petition, and
consequently, in annulling the HSRA.
In the remaining provisions, Sections 11 and 14 of Article XIII
and Sections 1 and 3 of Article XV, the State accords
recognition to the protection of working women and the
provision for safe and healthful working conditions; to the
adoption of an integrated and comprehensive approach to
health; to the Filipino family; and to the right of children to
assistance and special protection, including proper care and
nutrition. Like the provisions that were declared as non selfexecutory in the cases of Basco v. Philippine Amusement and
Gaming Corporation24 and Tolentino v. Secretary of
Finance,25 they are mere statements of principles and policies.
As such, they are mere directives addressed to the executive
and the legislative departments. If unheeded, the remedy will
not lie with the courts; but rather, the electorates displeasure
may be manifested in their votes.
The rationale for this is given by Justice Dante Tinga in his
Separate Opinion in the case of Agabon v. National Labor
Relations Commission26 :

The Court finds the present petition to be without merit.

Petitioners allege that the HSRA should be declared void,
since it runs counter to the aspiration and ideals of the Filipino
people as embodied in the Constitution.17 They claim that the
HSRAs policies of fiscal autonomy, income generation, and
revenue enhancement violate Sections 5, 9, 10, 11, 13, 15
and 18 of Article II, Section 1 of Article III; Sections 11 and 14
of Article XIII; and Sections 1 and 3 of Article XV of the 1987
Constitution. Such policies allegedly resulted in making
inaccessible free medicine and free medical services. This
contention is unfounded.

x x x However, to declare that the constitutional provisions

are enough to guarantee the full exercise of the rights
embodied therein, and the realization of the ideals therein
expressed, would be impractical, if not unrealistic. The
espousal of such view presents the dangerous tendency of
being overbroad and exaggerated. x x x Subsequent
legislation is still needed to define the parameters of these
guaranteed rights. x x x Without specific and pertinent
legislation, judicial bodies will be at a loss, formulating their
own conclusion to approximate at least the aims of the
Constitution.

As a general rule, the provisions of the Constitution are

considered self-executing, and do not require future legislation
for their enforcement. For if they are not treated as selfexecuting, the mandate of the fundamental law can be easily
nullified by the inaction of Congress.18 However, some
provisions have already been categorically declared by this
Court as non self-executing.

The HSRA cannot be nullified based solely on petitioners bare

allegations that it violates the general principles expressed in
the non self-executing provisions they cite herein. There are
two reasons for denying a cause of action to an alleged
infringement of broad constitutional principles: basic
considerations of due process and the limitations of judicial
power.27

In Tanada v. Angara,19 the Court specifically set apart the

sections found under Article II of the 1987 Constitution as non

Petitioners also claim that Executive Order No. 102 is void on

the ground that it was issued by the President in excess of his
authority. They maintain that the structural and functional

reorganization of the DOH is an exercise of legislative

functions, which the President usurped when he issued
Executive Order No. 102.28 This line of argument is without
basis.
This Court has already ruled in a number of cases that the
President may, by executive or administrative order, direct the
reorganization of government entities under the Executive
Department.29 This is also sanctioned under the Constitution,
as well as other statutes.
Section 17, Article VII of the 1987 Constitution, clearly states:
"[T]he president shall have control of all executive
departments, bureaus and offices." Section 31, Book III,
Chapter 10 of Executive Order No. 292, also known as the
Administrative Code of 1987 reads:
SEC. 31. Continuing Authority of the President to Reorganize
his Office - The President, subject to the policy in the
Executive Office and in order to achieve simplicity, economy
and efficiency, shall have continuing authority to reorganize
the administrative structure of the Office of the President. For
this purpose, he may take any of the following actions:

President.32 Indubitably, the DOH is an agency which is under

the supervision and control of the President and, thus, part of
the Office of the President. Consequently, Section 31, Book III,
Chapter 10 of the Administrative Code, granting the President
the continued authority to reorganize the Office of the
President, extends to the DOH.
The power of the President to reorganize the executive
department is likewise recognized in general appropriations
laws. As early as 1993, Sections 48 and 62 of Republic Act No.
7645, the "General Appropriations Act for Fiscal Year 1993,"
already contained a provision stating that:
Sec. 48. Scaling Down and Phase Out of Activities Within the
Executive Branch.The heads of departments, bureaus and
offices and agencies are hereby directed to identify their
respective activities which are no longer essential in the
delivery of public services and which may be scaled down,
phased out, or abolished, subject to civil service rules and
regulations. x x x. Actual scaling down, phasing out, or
abolition of activities shall be effected pursuant to Circulars or
Orders issued for the purpose by the Office of the President.
(Emphasis provided.)

(1) Restructure the internal organization of the Office of the

President Proper, including the immediate offices, the
Presidential Special Assistants/Advisers System and the
Common Staff Support System, by abolishing consolidating
or merging units thereof or transferring functions from one
unit to another;

Sec. 62. Unauthorized Organizational Changes. Unless

otherwise created by law or directed by the President of the
Philippines, no organizational unit or changes in key positions
in any department or agency shall be authorized in their
respective organizational structures and be funded form
appropriations by this Act.

(2) Transfer any function under the Office of the President to

any other Department or Agency as well as transfer
functions to the Office of the President from other
Departments or Agencies; and

Again, in the year when Executive Order No. 102 was issued,
"The General Appropriations Act of Fiscal Year 1999" (Republic
Act No. 8745) conceded to the President the power to make
any changes in any of the key positions and organizational
units in the executive department thus:

(3) Transfer any agency under the Office of the President to

any other department or agency as well as transfer
agencies to the Office of the President from other
Departments or agencies.
In Domingo v. Zamora,30 this Court explained the rationale
behind the Presidents continuing authority under the
Administrative Code to reorganize the administrative structure
of the Office of the President. The law grants the President the
power to reorganize the Office of the President in recognition
of the recurring need of every President to reorganize his or
her office "to achieve simplicity, economy and efficiency." To
remain effective and efficient, it must be capable of being
shaped and reshaped by the President in the manner the
Chief Executive deems fit to carry out presidential directives
and policies.
The Administrative Code provides that the Office of the
President consists of the Office of the President Proper and the
agencies under it.31 The agencies under the Office of the
President are identified in Section 23, Chapter 8, Title II of the
Administrative Code:
Sec. 23. The Agencies under the Office of the President.The
agencies under the Office of the President refer to those
offices placed under the chairmanship of the President, those
under the supervision and control of the President, those
under the administrative supervision of the Office of the
President, those attached to it for policy and program
coordination, and those that are not placed by law or order
creating them under any specific department. (Emphasis
provided.)
Section 2(4) of the Introductory Provisions of the
Administrative Code defines the term "agency of the
government" as follows:
Agency of the Government refers to any of the various units of
the Government, including a department, bureau, office,
instrumentality, or government-owned or controlled
corporation, or a local government or a distinct unit therein.
Furthermore, the DOH is among the cabinet-level departments
enumerated under Book IV of the Administrative Code, mainly
tasked with the functional distribution of the work of the

Sec. 77. Organized Changes. 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 funded from appropriations provided by this
Act.
Clearly, Executive Order No. 102 is well within the
constitutional power of the President to issue. The President
did not usurp any legislative prerogative in issuing Executive
Order No. 102. It is an exercise of the Presidents
constitutional power of control over the executive department,
supported by the provisions of the Administrative Code,
recognized by other statutes, and consistently affirmed by this
Court.
Petitioners also pointed out several flaws in the
implementation of Executive Order No. 102, particularly the
RSP. However, these contentions are without merit and are
insufficient to invalidate the executive order.
The RSP was allegedly implemented even before the DBM
approved it. The facts show otherwise. It was only after the
DBM approved the Notice of Organization, Staffing and
Compensation Action on 8 July 2000,33 and after the
Presidential Committee on Effective Governance (PCEG)
issued on 17 July 2000 Memorandum Circular No.
62,34 approving the RSP, that then DOH Secretary Alberto G.
Romualdez issued on 28 July 2000 Department Circular No.
275-C, Series of 2000,35 creating the different committees to
implement the RSP.
Petitioners also maintain that the Office of the President
should have issued an administrative order to carry out the
streamlining, but that it failed to do so. Such objection cannot
be given any weight considering that the acts of the DOH
Secretary, as an alter ego of the President, are presumed to
be the acts of the President. The members of the Cabinet are
subject at all times to the disposition of the President since
they are merely his alter egos.36Thus, their acts, performed
and promulgated in the regular course of business, are, unless
disapproved by the President, presumptively acts of the
President.37 Significantly, the acts of the DOH Secretary were
clearly authorized by the President, who, thru the PCEG,

issued the aforementioned Memorandum Circular No. 62,

sanctioning the implementation of the RSP.
Petitioners Elsa Odonzo Guevarra, Arcadio B. Gonzales, Jose G.
Galang, Domingo P. Manay, Eduardo P. Galope, Remedios M.
Ysmael, Alfredo U. Bacuata, and Edgardo Damicog, all DOH
employees, assailed the validity of Executive Order No. 102 on
the ground that they were likely to lose their jobs, and that
some of them were suffering from the inconvenience of
having to travel a longer distance to get to their new place of
work, while other DOH employees had to relocate to far-flung
areas.
In several cases, this Court regarded reorganizations of
government units or departments as valid, for so long as they
are pursued in good faiththat is, for the purpose of economy
or to make bureaucracy more efficient.38 On the other hand, if
the reorganization is done for the purpose of defeating
security of tenure or for ill-motivated political purposes, any
abolition of position would be invalid. None of these
circumstances are applicable since none of the petitioners
were removed from public service, nor did they identify any
action taken by the DOH that would unquestionably result in
their dismissal. The reorganization that was pursued in the
present case was made in good faith. The RSP was clearly
designed to improve the efficiency of the department and to
implement the provisions of the Local Government Code on
the devolution of health services to local governments. While
this Court recognizes the inconvenience suffered by public
servants in their deployment to distant areas, the executive
departments finding of a need to make health services
available to these areas and to make delivery of health
services more efficient and more compelling is far from being
unreasonable or arbitrary, a determination which is well within
its authority. In all, this Court finds petitioners contentions to
be insufficient to invalidate Executive Order No. 102.
Without identifying the DOH employees concerned, much less
including them as parties to the petition, petitioners went on
identifying several errors in the implementation of Executive
Order No. 102. First, they alleged that unidentified DOH
employees suffered from a diminution of compensation by
virtue of the provision on Salaries and Benefits found in
Department Circular No. 312, Series of 2000, issued on 23
October 2000, which reads:
2. Any employee who was matched to a position with lower
salary grade (SG) shall not suffer a reduction in salary except
where his/her current salary is higher than the maximum step
of the SG of the new position, in which case he/she shall be
paid the salary corresponding to the maximum step of the SG
of the new position. RATA shall no longer be received, if
employee was matched to a Non-Division Chief Position.
Incidentally, the petition shows that none of the petitioners,
who are working in the DOH, were entitled to receive RATA at
the time the petition was filed. Nor was it alleged that they
suffered any diminution of compensation. Secondly, it was
claimed that certain unnamed DOH employees were matched
with unidentified positions for which they were supposedly
neither qualified nor suited. New employees, again unnamed
and not included as parties, were hired by the DOH and
appointed to unidentified positions for which they were
purportedly not qualified, despite the fact that the objective of
the ongoing streamlining was to cut back on costs. Lastly,
unspecified DOH employees were deployed or transferred
during the three-month period before the national and local
elections in May 2001, in violation of Section 2 of the Republic
Act No. 7305, also known as "Magna Carta for Public Health
Workers."
Petitioners allegations are too general and unsubstantiated
by the records for the Court to pass upon. The persons
involved are not identified, details of their appointments and
transfers such as position, salary grade, and the date they
were appointed - are not given; and the circumstances which
attended the alleged violations are not specified.
Even granting that these alleged errors were adequately
proven by the petitioners, they would still not invalidate
Executive Order No. 102. Any serious legal errors in laying
down the compensation of the DOH employees concerned can
only invalidate the pertinent provisions of Department Circular

No. 312, Series of 2000. Likewise, any questionable

appointments or transfers are properly addressed by an
appeal process provided under Administrative Order No. 94,
series of 2000;39 and if the appeal is meritorious, such
appointment or transfer may be invalidated. The validity of
Executive Order No. 102 would, nevertheless, remain
unaffected. Settled is the rule that courts are not at liberty to
declare statutes invalid, although they may be abused or
misabused, and may afford an opportunity for abuse in the
manner of application. The validity of a statute or ordinance is
to be determined from its general purpose and its efficiency to
accomplish the end desired, not from its effects in a particular
case.40
In a number of cases,41 the Court upheld the standing of
citizens who filed suits, wherein the "transcendental
importance" of the constitutional question justified the
granting of relief. In spite of these rulings, the Court, in
Domingo v. Carague,42 dismissed the petition when petitioners
therein failed to show any present substantial interest. It
demonstrated how even in the cases in which the Court
declared that the matter of the case was of transcendental
importance, the petitioners must be able to assert substantial
interest. Present substantial interest, which will enable a party
to question the validity of the law, requires that a party
sustained or will sustain direct injury as a result of its
enforcement.43 It is distinguished from a mere expectancy or
future, contingent, subordinate, or inconsequential interest.44
In the same way, the Court, in Telecommunications &
Broadcast Attorneys of the Philippines, Inc. v. Comelec, 45ruled
that a citizen is allowed to raise a constitutional question only
when he can show that he has personally suffered some
actual or threatened injury as a result of the allegedly illegal
conduct of the government; the injury is fairly traceable to the
challenged action; and the injury is likely to be redressed by a
favorable action. This case likewise stressed that the rule on
constitutional questions which are of transcendental
importance cannot be invoked where a partys substantive
claim is without merit. Thus, a partys standing is determined
by the substantive merit of his case or a preliminary estimate
thereof. After a careful scrutiny of the petitioners substantive
claims, this Court finds that the petitioners miserably failed to
show any merit to their claims.
IN VIEW OF THE FOREGOING, the instant Petition is DENIED.
This Court AFFIRMS the assailed Decision of the Court of
Appeals, promulgated on 26 November 2004, declaring both
the HSRA and Executive Order No. 102 as valid. No costs.
SO ORDERED.
G.R. No. 166620

April 20, 2010

ATTY. SYLVIA BANDA, CONSORICIA O. PENSON, RADITO

V. PADRIGANO, JEAN R. DE MESA, LEAH P. DELA CRUZ,
ANDY V. MACASAQUIT, SENEN B. CORDOBA, ALBERT
BRILLANTES, GLORIA BISDA, JOVITA V. CONCEPCION,
TERESITA G. CARVAJAL, ROSANNA T. MALIWANAG,
RICHARD ODERON, CECILIA ESTERNON, BENEDICTO
CABRAL, MA. VICTORIA E. LAROCO, CESAR ANDRA,
FELICISIMO GALACIO, ELSA R. CALMA, FILOMENA A.
GALANG, JEAN PAUL MELEGRITO, CLARO G. SANTIAGO,
JR., EDUARDO FRIAS, REYNALDO O. ANDAL, NEPHTALIE
IMPERIO, RUEL BALAGTAS, VICTOR R. ORTIZ,
FRANCISCO P. REYES, JR., ELISEO M. BALAGOT, JR., JOSE
C. MONSALVE, JR., ARTURO ADSUARA, F.C. LADRERO,
JR., NELSON PADUA, MARCELA C. SAYAO, ANGELITO
MALAKAS, GLORIA RAMENTO, JULIANA SUPLEO,
MANUEL MENDRIQUE, E. TAYLAN, CARMELA BOBIS,
DANILO VARGAS, ROY-LEO C. PABLO, ALLAN
VILLANUEVA, VICENTE R. VELASCO, JR., IMELDA ERENO,
FLORIZA M. CATIIS, RANIEL R. BASCO, E. JALIJALI,
MARIO C. CARAAN, DOLORES M. AVIADO, MICHAEL P.
LAPLANA, GUILLERMO G. SORIANO, ALICE E. SOJO,
ARTHUR G. NARNE, LETICIA SORIANO, FEDERICO
RAMOS, JR., PETERSON CAAMPUED, RODELIO L.
GOMEZ, ANTONIO D. GARCIA, JR., ANTONIO GALO, A.
SANCHEZ, SOL E. TAMAYO, JOSEPHINE A.M. COCJIN,
DAMIAN QUINTO, JR., EDLYN MARIANO, M.A. MALANUM,
ALFREDO S. ESTRELLA, and JESUS MEL
SAYO, Petitioners,
vs.

EDUARDO R. ERMITA, in his capacity as Executive

Secretary, The Director General of the Philippine
Information Agency and The National
Treasurer, Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
The present controversy arose from a Petition
for Certiorari and prohibition challenging the constitutionality
of Executive Order No. 378 dated October 25, 2004, issued by
President Gloria Macapagal Arroyo (President Arroyo).
Petitioners characterize their action as a class suit filed on
their own behalf and on behalf of all their co-employees at the
National Printing Office (NPO).
The NPO was formed on July 25, 1987, during the term of
former President Corazon C. Aquino (President Aquino), by
virtue of Executive Order No. 2851 which provided, among
others, the creation of the NPO from the merger of the
Government Printing Office and the relevant printing units of
the Philippine Information Agency (PIA). Section 6 of Executive
Order No. 285 reads:
SECTION 6. Creation of the National Printing Office. There is
hereby created a National Printing Office out of the merger of
the Government Printing Office and the relevant printing units
of the Philippine Information Agency. The Office shall have
exclusive printing jurisdiction over the following:
a. Printing, binding and distribution of all standard
and accountable forms of national, provincial, city
and municipal governments, including government
corporations;
b. Printing of officials ballots;
c. Printing of public documents such as the Official
Gazette, General Appropriations Act, Philippine
Reports, and development information materials of
the Philippine Information Agency.
The Office may also accept other government printing jobs,
including government publications, aside from those
enumerated above, but not in an exclusive basis.
The details of the organization, powers, functions, authorities,
and related management aspects of the Office shall be
provided in the implementing details which shall be prepared
and promulgated in accordance with Section II of this
Executive Order.
The Office shall be attached to the Philippine Information
Agency.
On October 25, 2004, President Arroyo issued the herein
assailed Executive Order No. 378, amending Section 6 of
Executive Order No. 285 by, inter alia, removing the exclusive
jurisdiction of the NPO over the printing services requirements
of government agencies and instrumentalities. The pertinent
portions of Executive Order No. 378, in turn, provide:
SECTION 1. The NPO shall continue to provide printing
services to government agencies and instrumentalities as
mandated by law. However, it shall no longer enjoy exclusive
jurisdiction over the printing services requirements of the
government over standard and accountable forms. It shall
have to compete with the private sector, except in the
printing of election paraphernalia which could be shared with
the Bangko Sentral ng Pilipinas, upon the discretion of the
Commission on Elections consistent with the provisions of the
Election Code of 1987.
SECTION 2. Government agencies/instrumentalities may
source printing services outside NPO provided that:
2.1 The printing services to be provided by the
private sector is superior in quality and at a lower
cost than what is offered by the NPO; and

2.2 The private printing provider is flexible in terms

of meeting the target completion time of the
government agency.
SECTION 3. In the exercise of its functions, the amount to be
appropriated for the programs, projects and activities of the
NPO in the General Appropriations Act (GAA) shall be limited
to its income without additional financial support from the
government. (Emphases and underscoring supplied.)
Pursuant to Executive Order No. 378, government agencies
and instrumentalities are allowed to source their printing
services from the private sector through competitive bidding,
subject to the condition that the services offered by the
private supplier be of superior quality and lower in cost
compared to what was offered by the NPO. Executive Order
No. 378 also limited NPOs appropriation in the General
Appropriations Act to its income.
Perceiving Executive Order No. 378 as a threat to their
security of tenure as employees of the NPO, petitioners now
challenge its constitutionality, contending that: (1) it is
beyond the executive powers of President Arroyo to amend or
repeal Executive Order No. 285 issued by former President
Aquino when the latter still exercised legislative powers; and
(2) Executive Order No. 378 violates petitioners security of
tenure, because it paves the way for the gradual abolition of
the NPO.
We dismiss the petition.
Before proceeding to resolve the substantive issues, the Court
must first delve into a procedural matter. Since petitioners
instituted this case as a class suit, the Court, thus, must first
determine if the petition indeed qualifies as one. In Board of
Optometry v. Colet,2 we held that "[c]ourts must exercise
utmost caution before allowing a class suit, which is the
exception to the requirement of joinder of all indispensable
parties. For while no difficulty may arise if the decision
secured is favorable to the plaintiffs, a quandary would result
if the decision were otherwise as those who were deemed
impleaded by their self-appointed representatives would
certainly claim denial of due process."
Section 12, Rule 3 of the Rules of Court defines a class suit, as
follows:
Sec. 12. Class suit. When the subject matter of the
controversy is one of common or general interest to many
persons so numerous that it is impracticable to join all as
parties, a number of them which the court finds to be
sufficiently numerous and representative as to fully protect
the interests of all concerned may sue or defend for the
benefit of all. Any party in interest shall have the right to
intervene to protect his individual interest.
From the foregoing definition, the requisites of a class suit are:
1) the subject matter of controversy is one of common or
general interest to many persons; 2) the parties affected are
so numerous that it is impracticable to bring them all to court;
and 3) the parties bringing the class suit are sufficiently
numerous or representative of the class and can fully protect
the interests of all concerned.
In Mathay v. The Consolidated Bank and Trust Company, 3 the
Court held that:
An action does not become a class suit merely because it is
designated as such in the pleadings. Whether the suit is or is
not a class suit depends upon the attending facts, and the
complaint, or other pleading initiating the class action should
allege the existence of the necessary facts, to wit, the
existence of a subject matter of common interest, and the
existence of a class and the number of persons in the alleged
class, in order that the court might be enabled to determine
whether the members of the class are so numerous as to
make it impracticable to bring them all before the court, to
contrast the number appearing on the record with the number
in the class and to determine whether claimants on record
adequately represent the class and the subject matter of
general or common interest. (Emphases ours.)

Here, the petition failed to state the number of NPO

employees who would be affected by the assailed Executive
Order and who were allegedly represented by petitioners. It
was the Solicitor General, as counsel for respondents, who
pointed out that there were about 549 employees in the
NPO.4 The 67 petitioners undeniably comprised a small
fraction of the NPO employees whom they claimed to
represent. Subsequently, 32 of the original petitioners
executed an Affidavit of Desistance, while one signed a letter
denying ever signing the petition,5 ostensibly reducing the
number of petitioners to 34. We note that counsel for the
petitioners challenged the validity of the desistance or
withdrawal of some of the petitioners and insinuated that such
desistance was due to pressure from people "close to the seat
of power."6 Still, even if we were to disregard the affidavit of
desistance filed by some of the petitioners, it is highly
doubtful that a sufficient, representative number of NPO
employees have instituted this purported class suit. A perusal
of the petition itself would show that of the 67 petitioners who
signed the Verification/Certification of Non-Forum Shopping,
only 20 petitioners were in fact mentioned in the jurat as
having duly subscribed the petition before the notary public.
In other words, only 20 petitioners effectively instituted the
present case.
Indeed, in MVRS Publications, Inc. v. Islamic Dawah Council of
the Philippines, Inc.,7 we observed that an element of a class
suit or representative suit is the adequacy of representation.
In determining the question of fair and adequate
representation of members of a class, the court must consider
(a) whether the interest of the named party is coextensive
with the interest of the other members of the class; (b) the
proportion of those made a party, as it so bears, to the total
membership of the class; and (c) any other factor bearing on
the ability of the named party to speak for the rest of the
class.
Previously, we held in Ibaes v. Roman Catholic Church 8 that
where the interests of the plaintiffs and the other members of
the class they seek to represent are diametrically opposed,
the class suit will not prosper.
It is worth mentioning that a Manifestation of Desistance,9 to
which the previously mentioned Affidavit of Desistance10 was
attached, was filed by the President of the National Printing
Office Workers Association (NAPOWA). The said manifestation
expressed NAPOWAs opposition to the filing of the instant
petition in any court. Even if we take into account the
contention of petitioners counsel that the NAPOWA President
had no legal standing to file such manifestation, the said
pleading is a clear indication that there is a divergence of
opinions and views among the members of the class sought to
be represented, and not all are in favor of filing the present
suit. There is here an apparent conflict between petitioners
interests and those of the persons whom they claim to
represent. Since it cannot be said that petitioners sufficiently
represent the interests of the entire class, the instant case
cannot be properly treated as a class suit.
As to the merits of the case, the petition raises two main
grounds to assail the constitutionality of Executive Order No.
378:
First, it is contended that President Arroyo cannot amend or
repeal Executive Order No. 285 by the mere issuance of
another executive order (Executive Order No. 378). Petitioners
maintain that former President Aquinos Executive Order No.
285 is a legislative enactment, as the same was issued while
President Aquino still had legislative powers under the
Freedom Constitution;11 thus, only Congress through
legislation can validly amend Executive Order No. 285.
Second, petitioners maintain that the issuance of Executive
Order No. 378 would lead to the eventual abolition of the NPO
and would violate the security of tenure of NPO employees.
Anent the first ground raised in the petition, we find the same
patently without merit.
It is a well-settled principle in jurisprudence that the President
has the power to reorganize the offices and agencies in the
executive department in line with the Presidents

constitutionally granted power of control over executive

offices and by virtue of previous delegation of the legislative
power to reorganize executive offices under existing statutes.
In Buklod ng Kawaning EIIB v. Zamora,12 the Court pointed out
that Executive Order No. 292 or the Administrative Code of
1987 gives the President continuing authority to reorganize
and redefine the functions of the Office of the President.
Section 31, Chapter 10, Title III, Book III of the said Code, is
explicit:
Sec. 31. Continuing Authority of the President to Reorganize
his Office. The President, subject to the policy in the
Executive Office and in order to achieve simplicity, economy
and efficiency, shall have continuing authority to reorganize
the administrative structure of the Office of the President. For
this purpose, he may take any of the following actions:
(1) Restructure the internal organization of the Office of the
President Proper, including the immediate Offices, the
President Special Assistants/Advisers System and the
Common Staff Support System, by abolishing, consolidating
or merging units thereof or transferring functions from one
unit to another;
(2) Transfer any function under the Office of the President to
any other Department or Agency as well as transfer
functions to the Office of the President from other
Departments and Agencies; and
(3) Transfer any agency under the Office of the President to
any other department or agency as well as transfer
agencies to the Office of the President from other
Departments or agencies. (Emphases ours.)
Interpreting the foregoing provision, we held in Buklod ng
Kawaning EIIB, thus:
But of course, the list of 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 of
the very source of the power that which constitutes an
express grant of power. Under Section 31, Book III of
Executive Order No. 292 (otherwise known as the
Administrative 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 transfer the
functions of other Departments or Agencies to the Office of
the President. In Canonizado v. Aguirre [323 SCRA 312
(2000)], 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 of the existing structure of
government offices or units therein, including the lines of
control, authority and responsibility between them. The EIIB is
a bureau attached to the Department of Finance. It falls under
the Office of the President. Hence, it is subject to the
Presidents continuing authority to reorganize.13 (Emphasis
ours.)
It is undisputed that the NPO, as an agency that is part of the
Office of the Press Secretary (which in various times has been
an agency directly attached to the Office of the Press
Secretary or as an agency under the Philippine Information
Agency), is part of the Office of the President. 14
Pertinent to the case at bar, Section 31 of the Administrative
Code of 1987 quoted above authorizes the President (a) to
restructure the internal organization of the Office of the
President Proper, including the immediate Offices, the
President Special Assistants/Advisers System and the
Common Staff Support System, by abolishing, consolidating or
merging units thereof or transferring functions from one unit
to another, and (b) to transfer functions or offices from the
Office of the President to any other Department or Agency in
the Executive Branch, and vice versa.
Concomitant to such power to abolish, merge or consolidate
offices in the Office of the President Proper and to transfer
functions/offices not only among the offices in the Office of

President Proper but also the rest of the Office of the President
and the Executive Branch, the President implicitly has the
power to effect less radical or less substantive changes to the
functional and internal structure of the Office of the President,
including the modification of functions of such executive
agencies as the exigencies of the service may require.

The contention of petitioner that the two provisions are riders

deserves scant consideration. Well settled is the rule that
every law has in its favor the presumption of constitutionality.
Unless and until a specific provision of the law is declared
invalid and unconstitutional, the same is valid and binding for
all intents and purposes.17(Emphases ours)

In the case at bar, there was neither an abolition of the NPO

nor a removal of any of its functions to be transferred to
another agency. Under the assailed Executive Order No. 378,
the NPO remains the main printing arm of the government for
all kinds of government forms and publications but in the
interest of greater economy and encouraging efficiency and
profitability, it must now compete with the private sector for
certain government printing jobs, with the exception of
election paraphernalia which remains the exclusive
responsibility of the NPO, together with the Bangko Sentral ng
Pilipinas, as the Commission on Elections may determine. At
most, there was a mere alteration of the main function of the
NPO by limiting the exclusivity of its printing responsibility to
election forms.15

Buklod ng Kawaning EIIB v. Zamora,18 where the Court upheld

as valid then President Joseph Estradas Executive Order No.
191 "deactivating" the Economic Intelligence and
Investigation Bureau (EIIB) of the Department of Finance,
hewed closely to the reasoning in Larin. The Court, among
others, also traced from the General Appropriations Act 19 the
Presidents authority to effect organizational changes in the
department or agency under the executive structure, thus:

There is a view that the reorganization actions that the

President may take with respect to agencies in the Office of
the President are strictly limited to transfer of functions and
offices as seemingly provided in Section 31 of the
Administrative Code of 1987.
However, Section 20, Chapter 7, Title I, Book III of the same
Code significantly provides:
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 specifically enumerated above, or
which are not delegated by the President in accordance with
law. (Emphasis ours.)
Pursuant to Section 20, the power of the President to
reorganize the Executive Branch under Section 31 includes
such powers and functions that may be provided for under
other laws. To be sure, an inclusive and broad interpretation of
the Presidents power to reorganize executive offices has been
consistently supported by specific provisions in general
appropriations laws.
In the oft-cited Larin v. Executive Secretary,16 the Court
likewise adverted to certain provisions of Republic Act No.
7645, the general appropriations law for 1993, as among the
statutory bases for the Presidents power to reorganize
executive agencies, to wit:
Section 48 of R.A. 7645 provides that:
"Sec. 48. Scaling Down and Phase Out of Activities of Agencies
Within the Executive Branch. The heads of departments,
bureaus and offices and agencies are hereby directed to
identify their respective activities which are no longer
essential in the delivery of public services and which may be
scaled down, phased out or abolished, subject to civil [service]
rules and regulations. x x x. Actual scaling down, phasing out
or abolition of the activities shall be effected pursuant to
Circulars or Orders issued for the purpose by the Office of the
President."
Said provision clearly mentions the acts of "scaling down,
phasing out and abolition" of offices only and does not cover
the creation of offices or transfer of functions. Nevertheless,
the act of creating and decentralizing is included in the
subsequent provision of Section 62, which provides that:
"Sec. 62. Unauthorized organizational changes. Unless
otherwise created by law or directed by the President of 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 funded from
appropriations by this Act."
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.

We adhere to the precedent or ruling in Larin that this

provision recognizes the authority of the President to effect
organizational changes in the department or agency under
the executive structure. Such a ruling further finds support in
Section 78 of Republic Act No. 8760. Under this law, the heads
of departments, bureaus, offices and agencies and other
entities in the Executive Branch are directed (a) to conduct a
comprehensive review of their respective mandates, missions,
objectives, functions, programs, projects, activities and
systems and procedures; (b) identify activities which are no
longer essential in the delivery of 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 performance of their respective agencies.
Section 78 ends up with the mandate that the actual
streamlining and productivity improvement in agency
organization and operation shall be effected pursuant to
Circulars or Orders issued for the purpose by the Office of the
President. x x x.20 (Emphasis ours)
Notably, in the present case, the 2003 General Appropriations
Act, which was reenacted in 2004 (the year of the issuance of
Executive Order No. 378), likewise gave the President the
authority to effect a wide variety of organizational changes in
any department or agency in the Executive Branch. Sections
77 and 78 of said Act provides:
Section 77. Organized Changes. 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 funded from appropriations
provided by this Act.
Section 78. Institutional Strengthening and Productivity
Improvement in Agency Organization and Operations and
Implementation of Organization/Reorganization Mandated by
Law. The Government shall adopt institutional strengthening
and productivity improvement measures to improve service
delivery and enhance productivity in the government, as
directed by the President of the Philippines. The heads of
departments, bureaus, offices, agencies, and other entities of
the Executive Branch shall accordingly conduct a
comprehensive review of their respective mandates, missions,
objectives, functions, programs, projects, activities and
systems and procedures; identify areas where improvements
are necessary; and implement corresponding structural,
functional and operational adjustments that will result in
streamlined organization and operations and improved
performance and productivity: PROVIDED, That actual
streamlining and productivity improvements in agency
organization and operations, as authorized by the President of
the Philippines for the purpose, including the utilization of
savings generated from such activities, shall be in accordance
with the rules and regulations to be issued by the DBM, upon
consultation with the Presidential Committee on Effective
Governance: PROVIDED, FURTHER, That in the implementation
of organizations/reorganizations, or specific changes in
agency structure, functions and operations as a result of
institutional strengthening or as mandated by law, the
appropriation, including the functions, projects, purposes and
activities of agencies concerned may be realigned as may be
necessary: PROVIDED, FINALLY, That any unexpended
balances or savings in appropriations may be made available
for payment of retirement gratuities and separation benefits
to affected personnel, as authorized under existing laws.
(Emphases and underscoring ours.)

Implicitly, the aforequoted provisions in the appropriations law

recognize the power of the President to reorganize even
executive offices already funded by the said appropriations
act, including the power to implement structural, functional,
and operational adjustments in the executive bureaucracy
and, in so doing, modify or realign appropriations of funds as
may be necessary under such reorganization. Thus, insofar as
petitioners protest the limitation of the NPOs appropriations
to its own income under Executive Order No. 378, the same is
statutorily authorized by the above provisions.
In the 2003 case of Bagaoisan v. National Tobacco
Administration,21 we upheld the "streamlining" of the National
Tobacco Administration through a reduction of its personnel
and deemed the same as included in the power of the
President to reorganize executive offices granted under the
laws, notwithstanding that such streamlining neither involved
an abolition nor a transfer of functions of an office. To quote
the relevant portion of that decision:
In the recent case of Rosa Ligaya C. Domingo, et al. vs. Hon.
Ronaldo D. Zamora, in his capacity as the Executive
Secretary, et al., this Court has had occasion to also delve on
the Presidents power to reorganize the Office of the President
under Section 31(2) and (3) of Executive Order No. 292 and
the power to reorganize the Office of the President Proper. x x
x
xxxx
The first sentence of the law is an express grant to the
President of a continuing authority to reorganize the
administrative structure of the Office of the President. The
succeeding numbered paragraphs are not in the nature
of provisos that unduly limit the aim and scope of the grant to
the President of the power to reorganize but are to be viewed
in consonance therewith. Section 31(1) of Executive Order No.
292 specifically refers to the Presidents power to restructure
the internal organization of the Office of the President Proper,
by abolishing, consolidating or merging units hereof or
transferring functions from one unit to another, while Section
31(2) and (3) concern executive offices outside the Office of
the President Proper allowing the President to transfer any
function under the Office of the President to any other
Department or Agency and vice-versa, and the transfer of any
agency under the Office of the President to any other
department or agency and vice-versa.
In the present instance, involving neither an abolition nor
transfer of offices, the assailed action is a mere reorganization
under the general provisions of the law consisting mainly of
streamlining the NTA in the interest of simplicity, economy
and efficiency. It is an act well within the authority of the
President motivated and carried out, according to the findings
of the appellate court, in good faith, a factual assessment that
this Court could only but accept.22 (Emphases and
underscoring supplied.)
In the more recent case of Tondo Medical Center Employees
Association v. Court of Appeals,23 which involved a structural
and functional reorganization of the Department of Health
under an executive order, we reiterated the principle that the
power of the President to reorganize agencies under the
executive department by executive or administrative order is
constitutionally and statutorily recognized. We held in that
case:
This Court has already ruled in a number of cases that the
President may, by executive or administrative order, direct the
reorganization of government entities under the Executive
Department. This is also sanctioned under the Constitution, as
well as other statutes.
Section 17, Article VII of the 1987 Constitution, clearly states:
"[T]he president shall have control of all executive
departments, bureaus and offices." Section 31, Book III,
Chapter 10 of Executive Order No. 292, also known as the
Administrative Code of 1987 reads:
SEC. 31. Continuing Authority of the President to Reorganize
his Office - The President, subject to the policy in the
Executive Office and in order to achieve simplicity, economy

and efficiency, shall have continuing authority to reorganize

the administrative structure of the Office of the President. For
this purpose, he may take any of the following actions:
xxxx
In Domingo v. Zamora [445 Phil. 7 (2003)], this Court
explained the rationale behind the Presidents continuing
authority under the Administrative Code to reorganize the
administrative structure of the Office of the President. The law
grants the President the power to reorganize the Office of the
President in recognition of the recurring need of every
President to reorganize his or her office "to achieve simplicity,
economy and efficiency." To remain effective and efficient, it
must be capable of being shaped and reshaped by the
President in the manner the Chief Executive deems fit to carry
out presidential directives and policies.
The Administrative Code provides that the Office of the
President consists of the Office of the President Proper and the
agencies under it. The agencies under the Office of the
President are identified in Section 23, Chapter 8, Title II of the
Administrative Code:
Sec. 23. The Agencies under the Office of the President.The
agencies under the Office of the President refer to those
offices placed under the chairmanship of the President, those
under the supervision and control of the President,
those under the administrative supervision of the Office of the
President, those attached to it for policy and program
coordination, and those that are not placed by law or order
creating them under any specific department.
xxxx
The power of the President to reorganize the executive
department is likewise recognized in general appropriations
laws. x x x.
xxxx
Clearly, Executive Order No. 102 is well within the
constitutional power of the President to issue. The President
did not usurp any legislative prerogative in issuing Executive
Order No. 102. It is an exercise of the Presidents
constitutional power of control over the executive department,
supported by the provisions of the Administrative Code,
recognized by other statutes, and consistently affirmed by this
Court.24 (Emphases supplied.)
Subsequently, we ruled in Anak Mindanao Party-List Group v.
Executive Secretary25 that:
The Constitutions express grant of the power of control in the
President justifies an executive action to carry out
reorganization measures under a broad authority of law.
In enacting a statute, the legislature is presumed to have
deliberated with full knowledge of all existing laws and
jurisprudence on the subject. It is thus reasonable to conclude
that in passing a statute which places an agency under the
Office of the President, it was in accordance with existing laws
and jurisprudence on the Presidents power to reorganize.
In establishing an executive department, bureau or office, the
legislature necessarily ordains an executive agencys position
in the scheme of administrative structure. Such determination
is primary, but subject to the Presidents continuing authority
to reorganize the administrative structure. As far as bureaus,
agencies or offices in the executive department are
concerned, the power of control may justify the President to
deactivate the functions of a particular office. Or a law may
expressly grant the President the broad authority to carry out
reorganization measures. The Administrative Code of 1987 is
one such law.26
The issuance of Executive Order No. 378 by President Arroyo
is an exercise of a delegated legislative power granted by the
aforementioned Section 31, Chapter 10, Title III, Book III of the
Administrative Code of 1987, which provides for the

continuing authority of the President to reorganize the Office

of the President, "in order to achieve simplicity, economy and
efficiency." This is a matter already well-entrenched in
jurisprudence. The reorganization of such an office through
executive or administrative order is also recognized in the
Administrative Code of 1987. Sections 2 and 3, Chapter 2,
Title I, Book III of the said Code provide:
Sec. 2. Executive Orders. - Acts of the President providing for
rules of a general or permanent character in implementation
or execution of constitutional or statutory powers shall be
promulgated in executive orders.
Sec. 3. Administrative Orders. - Acts of the President which
relate to particular aspects of governmental operations in
pursuance of his duties as administrative head shall be
promulgated in administrative orders. (Emphases supplied.)
To reiterate, we find nothing objectionable in the provision in
Executive Order No. 378 limiting the appropriation of the NPO
to its own income. Beginning with Larin and in subsequent
cases, the Court has noted certain provisions in the general
appropriations laws as likewise reflecting the power of the
President to reorganize executive offices or agencies even to
the extent of modifying and realigning appropriations for that
purpose.
Petitioners contention that the issuance of Executive Order
No. 378 is an invalid exercise of legislative power on the part
of the President has no legal leg to stand on.
In all, Executive Order No. 378, which purports to institute
necessary reforms in government in order to improve and
upgrade efficiency in the delivery of public services by
redefining the functions of the NPO and limiting its funding to
its own income and to transform it into a self-reliant agency
able to compete with the private sector, is well within the
prerogative of President Arroyo under her continuing
delegated legislative power to reorganize her own office. As
pointed out in the separate concurring opinion of our learned
colleague, Associate Justice Antonio T. Carpio, the objective
behind Executive Order No. 378 is wholly consistent with the
state policy contained in Republic Act No. 9184 or the
Government Procurement Reform Act to encourage
competitiveness by extending equal opportunity to private
contracting parties who are eligible and qualified.271avvphi1
To be very clear, this delegated legislative power to
reorganize pertains only to the Office of the President and the
departments, offices and agencies of the executive branch
and does not include the Judiciary, the Legislature or the
constitutionally-created or mandated bodies. Moreover, it
must be stressed that the exercise by the President of the
power to reorganize the executive department must be in
accordance with the Constitution, relevant laws and prevailing
jurisprudence.
In this regard, we are mindful of the previous pronouncement
of this Court in Dario v. Mison28 that:
Reorganizations in this jurisdiction have been regarded as
valid provided they are pursued in good faith. As a general
rule, a reorganization is carried out in "good faith" if it is for
the purpose of economy or to make bureaucracy more
efficient. In that event, no dismissal (in case of a 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, if the "abolition," which is
nothing else but a separation or removal, is done for political
reasons or purposely to defeat security of tenure, or otherwise
not in good faith, no valid "abolition" takes place and
whatever "abolition" is done, is void ab initio. There is an
invalid "abolition" as where there is merely a change of
nomenclature of positions, or where claims of economy are
belied by the existence of ample funds. (Emphasis ours.)
Stated alternatively, the presidential power to reorganize
agencies and offices in the executive branch of government is
subject to the condition that such reorganization is carried out
in good faith.

If the reorganization is done in good faith, the abolition of

positions, which results in loss of security of tenure of affected
government employees, would be valid. In Buklod ng
Kawaning EIIB v. Zamora,29 we even observed that there was
no such thing as an absolute right to hold office. Except those
who hold constitutional offices, which provide for special
immunity as regards salary and tenure, no one can be said to
have any vested right to an office or salary. 30
This brings us to the second ground raised in the petition
that Executive Order No. 378, in allowing government
agencies to secure their printing requirements from the
private sector and in limiting the budget of the NPO to its
income, will purportedly lead to the gradual abolition of the
NPO and the loss of security of tenure of its present
employees. In other words, petitioners avow that the
reorganization of the NPO under Executive Order No. 378 is
tainted with bad faith. The basic evidentiary rule is that he
who asserts a fact or the affirmative of an issue has the
burden of proving it.31
A careful review of the records will show that petitioners
utterly failed to substantiate their claim. They failed to allege,
much less prove, sufficient facts to show that the limitation of
the NPOs budget to its own income would indeed lead to the
abolition of the position, or removal from office, of any
employee. Neither did petitioners present any shred of proof
of their assertion that the changes in the functions of the NPO
were for political considerations that had nothing to do with
improving the efficiency of, or encouraging operational
economy in, the said agency.
In sum, the Court finds that the petition failed to show any
constitutional infirmity or grave abuse of discretion amounting
to lack or excess of jurisdiction in President Arroyos issuance
of Executive Order No. 378.
WHEREFORE, the petition is hereby DISMISSED and the prayer
for a Temporary Restraining Order and/or a Writ of Preliminary
Injunction is hereby DENIED. No costs.
SO ORDERED.
G.R. No. 188056

January 8, 2013

SPOUSES AUGUSTO G. DACUDAO AND OFELIA R.

DACUDAO, Petitioners,
vs.
SECRETARY OF JUSTICE RAUL M. GONZALES OF THE
DEPARTMENT OF JUSTICE, Respondent.
DECISION
BERSAMIN, J.:
Petitioners - residents of Bacaca Road, Davao City - were
among the investors whom Celso G. Delos Angeles, Jr. and his
associates in the Legacy Group of Companies (Legacy Group)
allegedly defrauded through the Legacy Group's "buy back
agreement" that earned them check payments that were
dishonored. After their written demands for the return of their
investments went unheeded, they initiated a number of
charges for syndicated estafa against Delos Angeles, Jr., et al.
in the Office of the City Prosecutor of Davao City on February
6, 2009. Three of the cases were docketed as NPS Docket No.
XI-02-INV.-09-A-00356, Docket No. XI-02-INV.-09-C-00752, and
Docket No. XI-02-INV.-09-C-00753.1
On March 18, 2009, the Secretary of Justice issued
Department of Justice (DOJ) Order No. 182 (DO No. 182),
directing all Regional State Prosecutors, Provincial
Prosecutors, and City Prosecutors to forward all cases already
filed against Delos Angeles, Jr., et al. to the Secretariat of the
DOJ Special Panel in Manila for appropriate action.
DO No. 182 reads:2
All cases against Celso G. delos Angeles, Jr., et al. under
Legacy Group of Companies, may be filed with the docket
section of the National Prosecution Service, Department of

Justice, Padre Faura, Manila and shall be forwarded to the

Secretariat of the Special Panel for assignment and
distribution to panel members, per Department Order No. 84
dated February 13, 2009.
However, cases already filed against Celso G. delos Angeles,
Jr. et al. of Legacy group of Companies in your respective
offices with the exemption of the cases filed in Cagayan de
Oro City which is covered by Memorandum dated March 2,
2009, should be forwarded to the Secretariat of the Special
Panel at Room 149, Department of Justice, Padre Faura,
Manila, for proper disposition.
For information and guidance.
Pursuant to DO No. 182, the complaints of petitioners were
forwarded by the Office of the City Prosecutor of Davao City to
the Secretariat of the Special Panel of the DOJ.3
Aggrieved by such turn of events, petitioners have directly
come to the Court via petition for certiorari, prohibition and
mandamus, ascribing to respondent Secretary of Justice grave
abuse of discretion in issuing DO No. 182. They claim that DO
No. 182 violated their right to due process, their right to the
equal protection of the laws, and their right to the speedy
disposition of cases. They insist that DO No. 182 was an
obstruction of justice and a violation of the rule against
enactment of laws with retroactive effect.
Petitioners also challenge as unconstitutional the issuance of
DOJ Memorandum dated March 2, 2009 exempting from the
coverage of DO No. No. 182 all the cases for syndicated estafa
already filed and pending in the Office of the City Prosecutor
of Cagayan de Oro City. They aver that DOJ Memorandum
dated March 2, 2009 violated their right to equal protection
under the Constitution.
The Office of the Solicitor General (OSG), representing
respondent Secretary of Justice, maintains the validity of DO
No. 182 and DOJ Memorandum dated March 2, 2009, and
prays that the petition be dismissed for its utter lack of merit.
Issues
The following issues are now to be resolved, to wit:
1. Did petitioners properly bring their petition for certiorari,
prohibition and mandamus directly to the Court?
2. Did respondent Secretary of Justice commit grave abuse
of discretion in issuing DO No. 182?
3. Did DO No. 182 and DOJ Memorandum dated March 2,
2009 violate petitioners constitutionally guaranteed rights?
Ruling
The petition for certiorari, prohibition and mandamus, being
bereft of substance and merit, is dismissed.
Firstly, petitioners have unduly disregarded the hierarchy of
courts by coming directly to the Court with their petition for
certiorari, prohibition and mandamus without tendering
therein any special, important or compelling reason to justify
the direct filing of the petition.
We emphasize that the concurrence of jurisdiction among the
Supreme Court, Court of Appeals and the Regional Trial Courts
to issue the writs of certiorari, prohibition, mandamus, quo
warranto, habeas corpus and injunction did not give
petitioners the unrestricted freedom of choice of court
forum.4 An undue disregard of this policy against direct resort
to the Court will cause the dismissal of the recourse. In Baez,
Jr. v. Concepcion,5 we explained why, to wit:
The Court must enjoin the observance of the policy on the
hierarchy of courts, and now affirms that the policy is not to
be ignored without serious consequences. The strictness of
the policy is designed to shield the Court from having to deal

with causes that are also well within the competence of the
lower courts, and thus leave time to the Court to deal with the
more fundamental and more essential tasks that the
Constitution has assigned to it. The Court may act on petitions
for the extraordinary writs of certiorari, prohibition and
mandamus only when absolutely necessary or when serious
and important reasons exist to justify an exception to the
policy. This was why the Court stressed in Vergara, Sr. v.
Suelto:
x x x. The Supreme Court is a court of last resort, and must so
remain if it is to satisfactorily perform the functions assigned
to it by the fundamental charter and immemorial tradition. It
cannot and should not be burdened with the task of dealing
with causes in the first instance. Its original jurisdiction to
issue the so-called extraordinary writs should be exercised
only where absolutely necessary or where serious and
important reasons exist therefor. Hence, that jurisdiction
should generally be exercised relative to actions or
proceedings before the Court of Appeals, or before
constitutional or other tribunals, bodies or agencies whose
acts for some reason or another are not controllable by the
Court of Appeals. Where the issuance of an extraordinary writ
is also within the competence of the Court of Appeals or a
Regional Trial Court, it is in either of these courts that the
specific action for the writs procurement must be presented.
This is and should continue to be the policy in this regard, a
policy that courts and lawyers must strictly observe.
(Emphasis supplied)
In People v. Cuaresma, the Court has also amplified the need
for strict adherence to the policy of hierarchy of courts. There,
noting "a growing tendency on the part of litigants and
lawyers to have their applications for the so-called
extraordinary writs, and sometimes even their appeals,
passed upon and adjudicated directly and immediately by the
highest tribunal of the land," the Court has cautioned lawyers
and litigants against taking a direct resort to the highest
tribunal, viz:
x x x. This Courts original jurisdiction to issue writs of
certiorari (as well as prohibition, mandamus, quo warranto,
habeas corpus and injunction) is not exclusive. It is shared by
this Court with Regional Trial Courts x x x, which may issue
the writ, enforceable in any part of their respective regions. It
is also shared by this Court, and by the Regional Trial Court,
with the Court of Appeals x x x, although prior to the
effectivity of Batas Pambansa Bilang 129 on August 14, 1981,
the latter's competence to issue the extraordinary writs was
restricted to those "in aid of its appellate jurisdiction." This
concurrence of jurisdiction is not, however, to be taken as
according to parties seeking any of the writs an absolute,
unrestrained freedom of choice of the court to which
application therefor will be directed. There is after all a
hierarchy of courts. That hierarchy is determinative of the
venue of appeals, and should also serve as a general
determinant of the appropriate forum for petitions for the
extraordinary writs. A becoming regard for that judicial
hierarchy most certainly indicates that petitions for the
issuance of extraordinary writs against first level ("inferior")
courts should be filed with the Regional Trial Court, and those
against the latter, with the Court of Appeals. A direct
invocation of the Supreme Court's original jurisdiction to issue
these writs should be allowed only when there are special and
important reasons therefor, clearly and specifically set out in
the petition. This is established policy. It is a policy that is
necessary to prevent inordinate demands upon the Courts
time and attention which are better devoted to those matters
within its exclusive jurisdiction, and to prevent further overcrowding of the Court's docket. Indeed, the removal of the
restriction on the jurisdiction of the Court of Appeals in this
regard, supra resulting from the deletion of the qualifying
phrase, "in aid of its appellate jurisdiction" was evidently
intended precisely to relieve this Court pro tanto of the burden
of dealing with applications for the extraordinary writs which,
but for the expansion of the Appellate Court corresponding
jurisdiction, would have had to be filed with it.1wphi1
xxxx
The Court therefore closes this decision with the declaration
for the information and evidence of all concerned, that it will
not only continue to enforce the policy, but will require a more
strict observance thereof. (Emphasis supplied)

Accordingly, every litigant must remember that the Court is

not the only judicial forum from which to seek and obtain
effective redress of their grievances. As a rule, the Court is a
court of last resort, not a court of the first instance. Hence,
every litigant who brings the petitions for the extraordinary
writs of certiorari, prohibition and mandamus should ever be
mindful of the policy on the hierarchy of courts, the
observance of which is explicitly defined and enjoined in
Section 4 of Rule 65, Rules of Court, viz:
Section 4. When and where petition filed. - The petition shall
be filed not later than sixty (60) days from notice of the
judgment, order or resolution. In case a motion for
reconsideration or new trial is timely filed, whether such
motion is required or not, the sixty (60) day period shall be
counted from notice of the denial of the said motion.
The petition shall be filed in the Supreme Court or, if it relates
to the acts or omissions of a lower court or of a corporation,
board, officer or person, in the Regional Trial Court exercising
jurisdiction over the territorial area as defined by the Supreme
Court. It may also be filed in the Court of Appeals whether or
not the same is in the aid of its appellate jurisdiction, or in the
Sandiganbayan if it is in aid of its appellate jurisdiction. If it
involves the acts or omissions of a quasi-judicial agency,
unless otherwise provided by law or these rules, the petition
shall be filed in and cognizable only by the Court of Appeals.
In election cases involving an act or an omission of a
municipal or a regional trial court, the petition shall be filed
exclusively with the Commission on Elections, in aid of its
appellate jurisdiction.6
Secondly, even assuming arguendo that petitioners direct
resort to the Court was permissible, the petition must still be
dismissed.
The writ of certiorari is available only when any tribunal,
board or officer exercising judicial or quasi-judicial functions
has acted without or in excess of its or his jurisdiction, or with
grave abuse of discretion amounting to lack or excess of
jurisdiction, and there is no appeal, nor any plain, speedy, and
adequate remedy in the ordinary course of law.7 "The sole
office of the writ of certiorari," according to Delos Santos v.
Metropolitan Bank and Trust Company:8
x x x is the correction of errors of jurisdiction, which includes
the commission of grave abuse of discretion amounting to
lack of jurisdiction. In this regard, mere abuse of discretion is
not enough to warrant the issuance of the writ. The abuse of
discretion must be grave, which means either that the judicial
or quasi-judicial power was exercised in an arbitrary or
despotic manner by reason of passion or personal hostility, or
that the respondent judge, tribunal or board evaded a positive
duty, or virtually refused to perform the duty enjoined or to
act in contemplation of law, such as when such judge, tribunal
or board exercising judicial or quasi-judicial powers acted in a
capricious or whimsical manner as to be equivalent to lack of
jurisdiction.
For a special civil action for certiorari to prosper, therefore,
the following requisites must concur, namely: (a) it must be
directed against a tribunal, board or officer exercising judicial
or quasi-judicial functions; (b) the tribunal, board, or officer
must have acted without or in excess of jurisdiction or with
grave abuse of discretion amounting to lack or excess of
jurisdiction; and (c) there is no appeal nor any plain, speedy,
and adequate remedy in the ordinary course of law.9 The
burden of proof lies on petitioners to demonstrate that the
assailed order was issued without or in excess of jurisdiction
or with grave abuse of discretion amounting to lack or excess
of jurisdiction.
Yet, petitioners have not shown a compliance with the
requisites. To start with, they merely alleged that the
Secretary of Justice had acted without or in excess of his
jurisdiction. Also, the petition did not show that the Secretary
of Justice was an officer exercising judicial or quasi-judicial
functions. Instead, the Secretary of Justice would appear to be
not exercising any judicial or quasi-judicial functions because
his questioned issuances were ostensibly intended to ensure
his subordinates efficiency and economy in the conduct of

the preliminary investigation of all the cases involving the

Legacy Group. The function involved was purely executive or
administrative.
The fact that the DOJ is the primary prosecution arm of the
Government does not make it a quasi-judicial office or agency.
Its preliminary investigation of cases is not a quasi-judicial
proceeding. Nor does the DOJ exercise a quasi-judicial
function when it reviews the findings of a public prosecutor on
the finding of probable cause in any case. Indeed, in Bautista
v. Court of Appeals,10 the Supreme Court has held that a
preliminary investigation is not a quasi-judicial proceeding,
stating:
x x x the prosecutor in a preliminary investigation does not
determine the guilt or innocence of the accused. He does not
exercise adjudication nor rule-making functions. Preliminary
investigation is merely inquisitorial, and is often the only
means of discovering the persons who may be reasonably
charged with a crime and to enable the fiscal to prepare his
complaint or information. It is not a trial of the case on the
merits and has no purpose except that of determining
whether a crime has been committed and whether there is
probable cause to believe that the accused is guilty thereof.
While the fiscal makes that determination, he cannot be said
to be acting as a quasi-court, for it is the courts, ultimately,
that pass judgment on the accused, not the fiscal.11
There may be some decisions of the Court that have
characterized the public prosecutors power to conduct a
preliminary investigation as quasi-judicial in nature. Still, this
characterization is true only to the extent that the public
prosecutor, like a quasi-judicial body, is an officer of the
executive department exercising powers akin to those of a
court of law.
But the limited similarity between the public prosecutor and a
quasi-judicial body quickly endsthere. For sure, a quasi-judicial
body is an organ of government other than a court of law or a
legislative office that affects the rights of private parties
through either adjudication or rule-making; it performs
adjudicatory functions, and its awards and adjudications
determine the rights of the parties coming before it; its
decisions have the same effect as the judgments of a court of
law. In contrast, that is not the effect whenever a public
prosecutor conducts a preliminary investigation to determine
probable cause in order to file a criminal information against a
person properly charged with the offense, or whenever the
Secretary of Justice reviews the public prosecutors orders or
resolutions.
Petitioners have self-styled their petition to be also for
prohibition. However, we do not see how that can be. They
have not shown in their petition in what manner and at what
point the Secretary of Justice, in handing out the assailed
issuances, acted without or in excess of his jurisdiction, or
with grave abuse of discretion amounting to lack or excess of
jurisdiction. On the other hand, we already indicated why the
issuances were not infirmed by any defect of jurisdiction.
Hence, the blatant omissions of the petition transgressed
Section 2, Rule 65 of the Rules of Court, to wit:
Section 2. Petition for prohibition. When the proceedings of
any tribunal, corporation, board, officer or person, whether
exercising judicial, quasi-judicial or ministerial functions, are
without or in excess of its or his jurisdiction, or with grave
abuse of discretion amounting to lack or excess of jurisdiction,
and there is no appeal or any other plain, speedy, and
adequate remedy in the ordinary course of law, a person
aggrieved thereby may file a verified petition in the proper
court, alleging the facts with certainty and praying that
judgment be rendered commanding the respondent to desist
from further proceedings in the action or matter specified
therein, or otherwise granting such incidental reliefs as law
and justice may require.
The petition shall likewise be accompanied by a certified true
copy of the judgment, order or resolution subject thereof,
copies of all pleadings and documents relevant and pertinent
thereto, and a sworn certification of non-forum shopping as
provided in the third paragraph of section 3, Rule 46. (2a)
Similarly, the petition could not be one for mandamus, which
is a remedy available only when "any tribunal, corporation,

board, officer or person unlawfully neglects the performance

of an act which the law specifically enjoins as a duty resulting
from an office, trust, or station, or unlawfully excludes another
from the use and enjoyment of a right or office to which such
other is entitled, and there is no other plain, speedy and
adequate remedy in the ordinary course of law, the person
aggrieved thereby may file a verified petition in the proper
court."12 The main objective of mandamus is to compel the
performance of a ministerial duty on the part of the
respondent. Plainly enough, the writ of mandamus does not
issue to control or review the exercise of discretion or to
compel a course of conduct,13 which, it quickly seems to us,
was what petitioners would have the Secretary of Justice do in
their favor. Consequently, their petition has not indicated how
and where the Secretary of Justices assailed issuances
excluded them from the use and enjoyment of a right or office
to which they were unquestionably entitled.
Thirdly, there is no question that DO No. 182 enjoyed a strong
presumption of its validity. In ABAKADA Guro Party List v.
Purisima,14 the Court has extended the presumption of validity
to legislative issuances as well as to rules and regulations
issued by administrative agencies, saying:
Administrative regulations enacted by administrative agencies
to implement and interpret the law which they are entrusted
to enforce have the force of law and are entitled to respect.
Such rules and regulations partake of the nature of a statute
and are just as binding as if they have been written in the
statute itself. As such, they have the force and effect of law
and enjoy the presumption of constitutionality and legality
until they are set aside with finality in an appropriate case by
a competent court.15

Anent the foregoing, you are hereby directed to conduct

preliminary investigation of all cases involving the Legacy
Group of Companies filed in your office with dispatch and to
file the corresponding informations if evidence warrants and
to prosecute the same in court.
Petitioners attack deserves no consideration. The equal
protection clause of the Constitution does not require the
universal application of the laws to all persons or things
without distinction; what it requires is simply equality among
equals as determined according to a valid
classification.18 Hence, the Court has affirmed that if a law
neither burdens a fundamental right nor targets a suspect
class, the classification stands as long as it bears a rational
relationship to some legitimate government end. 19
That is the situation here. In issuing the assailed DOJ
Memorandum dated March 2, 2009, the Secretary of Justice
took into account the relative distance between Cagayan de
Oro, where many complainants against the Legacy Group
resided, and Manila, where the preliminary investigations
would be conducted by the special panel. He also took into
account that the cases had already been filed in the City
Prosecutors Office of Cagayan de Oro at the time he issued
DO No. 182. Given the considerable number of complainants
residing in Cagayan de Oro City, the Secretary of Justice was
fully justified in excluding the cases commenced in Cagayan
de Oro from the ambit of DO No. 182. The classification taken
into consideration by the Secretary of Justice was really valid.
Resultantly, petitioners could not inquire into the wisdom
behind the exemption upon the ground that the nonapplication of the exemption to them would cause them some
inconvenience.

DO No. 182 was issued pursuant to Department Order No. 84

that the Secretary of Justice had promulgated to govern the
performance of the mandate of the DOJ to "administer the
criminal justice system in accordance with the accepted
processes thereof"16 as expressed in Republic Act No. 10071
(Prosecution Service Act of 2010) and Section 3, Chapter I,
Title III and Section 1, Chapter I, Title III of Book IV of
Executive Order 292 (Administrative Code of 1987).

Fifthly, petitioners contend that DO No. 182 violated their right

to the speedy disposition of cases guaranteed by the
Constitution. They posit that there would be considerable
delay in the resolution of their cases that would definitely be
"a flagrant transgression of petitioners constitutional rights to
speedy disposition of their cases." 20

To overcome this strong presumption of validity of the

questioned issuances, it became incumbent upon petitioners
to prove their unconstitutionality and invalidity, either by
showing that the Administrative Code of 1987 did not
authorize the Secretary of Justice to issue DO No. 182, or by
demonstrating that DO No. 182 exceeded the bounds of the
Administrative Code of 1987 and other pertinent laws. They
did not do so. They must further show that the performance of
the DOJs functions under the Administrative Code of 1987
and other pertinent laws did not call for the impositions laid
down by the assailed issuances. That was not true here, for
DO No 182 did not deprive petitioners in any degree of their
right to seek redress for the alleged wrong done against them
by the Legacy Group. Instead, the issuances were designed to
assist petitioners and others like them expedite the
prosecution, if warranted under the law, of all those
responsible for the wrong through the creation of the special
panel of state prosecutors and prosecution attorneys in order
to conduct a nationwide and comprehensive preliminary
investigation and prosecution of the cases. Thereby, the
Secretary of Justice did not act arbitrarily or oppressively
against petitioners.

In The Ombudsman v. Jurado,21 the Court has clarified that

although the Constitution guarantees the right to the speedy
disposition of cases, such speedy disposition is a flexible
concept. To properly define that concept, the facts and
circumstances surrounding each case must be evaluated and
taken into account. There occurs a violation of the right to a
speedy disposition of a case only when the proceedings are
attended by vexatious, capricious, and oppressive delays, or
when unjustified postponements of the trial are sought and
secured, or when, without cause or justifiable motive, a long
period of time is allowed to elapse without the party having
his case tried.22 It is cogent to mention that a mere
mathematical reckoning of the time involved is not
determinant of the concept.23

Fourthly, petitioners attack the exemption from the

consolidation decreed in DO No. 182 of the cases filed or
pending in the Office of the City Prosecutor of Cagayan de Oro
City, claiming that the exemption traversed the constitutional
guaranty in their favor of the equal protection of law. 17
The exemption is covered by the assailed DOJ Memorandum
dated March 2, 2009, to wit:
It has come to the attention of the undersigned that cases for
syndicated estafa were filed with your office against officers of
the Legacy Group of Companies. Considering the distance of
the place of complainants therein to Manila, your Office is
hereby exempted from the directive previously issued by the
undersigned requiring prosecution offices to forward the
records of all cases involving Legacy Group of Companies to
the Task Force.

We cannot favor their contention.

The consolidation of the cases against Delos Angeles, Jr., et al.

was ordered obviously to obtain expeditious justice for the
parties with the least cost and vexation to them. Inasmuch as
the cases filed involved similar or related questions to be
dealt with during the preliminary investigation, the Secretary
of Justice rightly found the consolidation of the cases to be the
most feasible means of promoting the efficient use of public
resources and of having a comprehensive investigation of the
cases.
On the other hand, we do not ignore the possibility that there
would be more cases reaching the DOJ in addition to those
already brought by petitioners and other parties. Yet, any
delays in petitioners cases occasioned by such other and
subsequent cases should not warrant the invalidation of DO
No. 182. The Constitution prohibits only the delays that are
unreasonable, arbitrary and oppressive, and tend to render
rights nugatory.24 In fine, we see neither undue delays, nor
any violation of the right of petitioners to the speedy
disposition of their cases.
Sixthly, petitioners assert that the assailed issuances should
cover only future cases against Delos Angeles, Jr., et al., not
those already being investigated. They maintain that DO No.

182 was issued in violation of the prohibition against passing

laws with retroactive effect.
Petitioners assertion is baseless.
As a general rule, laws shall have no retroactive effect.
However, exceptions exist, and one such exception concerns a
law that is procedural in nature. The reason is that a remedial
statute or a statute relating to remedies or modes of
procedure does not create new rights or take away vested
rights but only operates in furtherance of the remedy or the
confirmation of already existing rights.25 A statute or rule
regulating the procedure of the courts will be construed as
applicable to actions pending and undetermined at the time of
its passage. All procedural laws are retroactive in that sense
and to that extent. The retroactive application is not violative
of any right of a person who may feel adversely affected, for,
verily, no vested right generally attaches to or arises from
procedural laws.
Finally, petitioners have averred but failed to establish that
DO No. 182 constituted obstruction of justice. This ground of
the petition, being unsubstantiated, was unfounded.
Nonetheless, it is not amiss to reiterate that the authority of
the Secretary of Justice to assume jurisdiction over matters
involving the investigation of crimes and the prosecution of
offenders is fully sanctioned by law. Towards that end, the
Secretary of Justice exercises control and supervision over all
the regional, provincial, and city prosecutors of the country;
has broad discretion in the discharge of the DOJs functions;
and administers the DOJ and its adjunct offices and agencies
by promulgating rules and regulations to carry out their
objectives, policies and functions.
Consequently, unless and until the Secretary of Justice acts
beyond the bounds of his authority, or arbitrarily, or
whimsically, or oppressively, any person or entity who may
feel to be thereby aggrieved or adversely affected should
have no right to call for the invalidation or nullification of the
rules and regulations issued by, as well as other actions taken
by the Secretary of Justice.
WHEREFORE, the Court DISMISSES the omnibus petition for
certiorari, prohibition, and mandamus for lack of merit.
Petitioners shall pay the costs of suit.
SO ORDERED.
G. R. No. 174350

August 13, 2008

SPOUSES BERNYL BALANGAUAN & KATHERENE

BALANGAUAN, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, SPECIAL
NINETEENTH (19TH) DIVISION, CEBU CITY & THE
HONGKONG AND SHANGHAI BANKING CORPORATION,
LTD., respondents.
DECISION
CHICO-NAZARIO, J.:
Before Us is a Petition for Certiorari under Rule 65 of the
Revised Rules of Court assailing the 28 April 2006
Decision1 and 29 June 2006 Resolution2 of the Court of
Appeals in CA-G.R. CEB-SP No. 00068, which annulled and set
aside the 6 April 20043 and 30 August 20044 Resolutions of
the Department of Justice (DOJ) in I.S. No. 02-9230-I,
entitled "The Hongkong and Shanghai Banking Corporation v.
Katherine Balangauan, et al." The twin resolutions of the DOJ
affirmed, in essence, the Resolution of the Office of the City
Prosecutor,5 Cebu City, which dismissed for lack of probable
cause the criminal complaint for Estafa and/or Qualified
Estafa, filed against petitioner-Spouses Bernyl Balangauan
(Bernyl) and Katherene Balangauan (Katherene) by
respondent Hong Kong and Shanghai Banking Corporation,
Ltd. (HSBC).

In this Petition for Certiorari, petitioners Bernyl and Katherene

urge this Court to "reverse and set aside the Decision of the
Court of Appeals, Special nineteenth (sic) [19th] division (sic),
Cebu City (sic) and accordingly, dismiss the complaint against
the [petitioners Bernyl and Katherene] in view of the absence
of probable cause to warrant the filing of an information
before the Court and for utter lack of merit."6
As culled from the records, the antecedents of the present
case are as follows:
Petitioner Katherene was a Premier Customer Services
Representative (PCSR) of respondent bank, HSBC. As a PCSR,
she managed the accounts of HSBC depositors with Premier
Status. One such client and/or depositor handled by her was
Roger Dwayne York (York).
York maintained several accounts with respondent HSBC.
Sometime in April 2002, he went to respondent HSBCs Cebu
Branch to transact with petitioner Katherene respecting his
Dollar and Peso Accounts. Petitioner Katherene being on
vacation at the time, York was attended to by another PCSR.
While at the bank, York inquired about the status of his time
deposit in the amount of P2,500,000.00. The PCSR
representative who attended to him, however, could not find
any record of said placement in the banks data base.
York adamantly insisted, though, that through petitioner
Katherene, he made a placement of the aforementioned
amount in a higher-earning time deposit. York further
elaborated that petitioner Katherene explained to him that the
alleged higher-earning time deposit scheme was supposedly
being offered to Premier clients only. Upon further scrutiny
and examination, respondent HSBCs bank personnel
discovered that: (1) on 18 January 2002, York pre-terminated
a P1,000,000.00 time deposit; (2) there were cash movement
tickets and withdrawal slips all signed by York for the amount
of P1,000,000.00; and (3) there were regular movements in
Yorks accounts, i.e., beginning in the month of January 2002,
monthly deposits in the amount of P12,500.00 and P8,333.33
were made, which York denied ever making, but surmised
were the regular interest earnings from the placement of
the P2,500,000.00.
It was likewise discovered that the above-mentioned deposits
were transacted using petitioner Katherenes computer and
work station using the code or personal password "CEO8." The
significance of code "CEO8," according to the bank personnel
of respondent HSBC, is that, "[i]t is only Ms. Balangauan who
can transact from [the] computer in the work station CEO-8,
as she is provided with a swipe card which she keeps sole
custody of and only she can use, and which she utilizes for
purposes of performing bank transactions from that
computer."7
Bank personnel of respondent HSBC likewise recounted in
their affidavits that prior to the filing of the complaint for
estafa and/or qualified estafa, they were in contact with
petitioners Bernyl and Katherene. Petitioner Bernyl supposedly
met with them on two occasions. At first he disavowed any
knowledge regarding the whereabouts of Yorks money but
later on admitted that he knew that his wife invested the
funds with Shell Company. He likewise admitted that he made
the phone banking deposit to credit Yorks account with
the P12,500.00 and the P8,333.33 using their landline
telephone. With respect to petitioner Katherene, she allegedly
spoke to the bank personnel and York on several occasions
and admitted that the funds were indeed invested with Shell
Company but that York knew about this.
So as not to ruin its name and goodwill among its clients,
respondent HSBC reimbursed York the P2,500,000.00.
Based on the foregoing factual circumstances, respondent
HSBC, through its personnel, filed a criminal complaint for
Estafa and/or Qualified Estafa before the Office of the City
Prosecutor, Cebu City.
Petitioners Bernyl and Katherene submitted their joint
counter-affidavit basically denying the allegations contained in
the affidavits of the aforenamed employees of respondent
HSBC as well as that made by York. They argued that the

allegations in the Complaint-Affidavits were pure fabrications.

Specifically, petitioner Katherene denied 1) having spoken on
the telephone with Dy and York; and 2) having admitted to the
personnel of respondent HSBC and York that she took
the P2,500,000.00 of York and invested the same with Shell
Corporation. Petitioner Bernyl similarly denied 1) having met
with Dy, Iigo, Cortes and Arcuri; and 2) having admitted to
them that York knew about petitioner Katherenes move of
investing the formers money with Shell Corporation.

The other leg on which complainants cause of action

stands rest on its claim for sum of money against
respondents allegedly after it reimbursed Mr. York for his
missing account supposedly taken/withdrawn by Ms.
Balangauan. The banks action against respondents would
be a civil suit against them which apparently it already did
after the bank steps into the shoes of Mr. York and becomes
the creditor of Ms. Balangauan.9
The ACP then concluded that:

Respecting the P12,500.00 and P8,333.33 regular monthly

deposits to Yorks account made using the code "CEO8,"
petitioners Bernyl and Katherene, in their defense, argued
that since it was a deposit, it was her duty to accept the funds
for deposit. As regards Yorks time deposit with respondent
HSBC, petitioners Bernyl and Katherene insisted that the
funds therein were never entrusted to Katherene in the
latters capacity as PCSR Employee of the former because
monies deposited "at any bank would not and will not be
entrusted to specific bank employee but to the bank as a
whole."
Following the requisite preliminary investigation, Assistant
City Prosecutor (ACP) Victor C. Laborte, Prosecutor II of the
OCP, Cebu City, in a Resolution8 dated 21 February 2003,
found no probable cause to hold petitioners Bernyl and
Katherene liable to stand trial for the criminal complaint of
estafa and/or qualified estafa, particularly Article 315 of the
Revised Penal Code. Accordingly, the ACP recommended the
dismissal of respondent HSBCs complaint.
The ACP explained his finding, viz:
As in any other cases, we may never know the ultimate
truth of this controversy. But on balance, the evidence on
record tend to be supportive of respondents contention
rather than that of complaint.
xxxx
First of all, it is well to dwell on what Mr. York said in his
affidavit. Thus:
`18. For purposes of opening these two time deposits
(sic) accounts, Ms. Balangauan asked me to sign several
Bank documents on several occasions, the nature of
which I was unfamiliar with.
`20. I discovered later that these were withdrawal slips
and cash movement tickets, with which documents Ms.
Balangauan apparently was able to withdraw the amount
from my accounts, and take the same from the premises
of the Bank.
In determining the credibility of an evidence, it is well to
consider the probability or improbability of ones
statements for it has been said that there is no test of the
truth of human testimony except its conformity to our
knowledge, observation and experience.
Mr. York could not have been that unwary and unknowingly
innocent to claim unfamiliarity with withdrawal slips and
cash movement tickets which Ms. Balangauan made him to
sign on several occasions. He is a premier client of HSBC
maintaining an account in millions of pesos. A withdrawal
slip and cash movement tickets could not have had such
intricate wordings or terminology so as to render them nonunderstandable even to an ordinary account holder. Mr. York
admittedly is a long-standing client of the bank. Within the
period of long-standing he certainly must have effected
some withdrawals. It goes without saying therefore that the
occasions that Ms. Balangauan caused him to sign
withdrawal slips are not his first encounter with such kinds
of documents.
The one ineluctable conclusion therefore that can be drawn
from the premises is that Mr. York freely and knowingly
knew what was going on with his money, who has in
possession of them and where it was invested. These take
out the elements of deceit, fraud, abuse of confidence and
without the owners consent in the crimes charged.

By and large, the evidence on record do (sic) not

engender enough bases to establish a probable cause
against respondents.10
On 1 July 2003, respondent HSBC appealed the above-quoted
resolution and foregoing comment to the Secretary of the DOJ
by means of a Petition for Review.
In a Resolution dated 6 April 2004, the Chief State Prosecutor,
Jovencito R. Zuo, for the Secretary of the DOJ, dismissed the
petition. In denying respondent HSBCs recourse, the Chief
State Prosecutor held that:
Sec. 12 (c) of Department Circular No. 70 dated July 2,
2000 provides that the Secretary of Justice may, motu
proprio, dismiss outright the petition if there is no
showing of any reversible error in the questioned
resolution.
We carefully examined the petition and its attachments
and found no reversible error that would justify a reversal
of the assailed resolution which is in accord with the law
and evidence on the matter.
Respondent HSBCs Motion for Reconsideration was likewise
denied with finality by the DOJ in a lengthier Resolution dated
30 August 2004.
The DOJ justified its ruling in this wise:
A perusal of the motion reveals no new matter or
argument which was not taken into consideration in our
review of the case. Hence, we find no cogent reason to
reconsider our resolution. Appellant failed to present any
iota of evidence directly showing that respondent
Katherene Balangauan took the money and invested it
somewhere else. All it tried to establish was that
Katherene unlawfully took the money and fraudulently
invested it somewhere else x x x, because after the
withdrawals were made, the money never reached Roger
York as appellant adopted hook, line and sinker the
latters declaration, despite Yorks signatures on the
withdrawal slips covering the total amount
of P2,500,000.00 x x x. While appellant has every reason
to suspect Katherene for the loss of the P2,500,000.00 as
per Yorks bank statements, the cash deposits were
identified by the numerals "CEO8" and it was only
Katherene who could transact from the computer in the
work station CEO-8, plus alleged photographs showing
Katherene "leaving her office at 5:28 p.m. with a bulky
plastic bag presumably containing cash" since
a portion of the funds was withdrawn, we do not,
however, dwell on possibilities, suspicion and speculation.
We rule based on hard facts and solid evidence.
Moreover, an examination of the petition for review
reveals that appellant failed to append thereto all
annexes to respondents urgent manifestations x x x
together with supplementalaffidavits of Melanie de
Ocampo and Rex B. Balucan x x x, which are pertinent
documents required under Section 5 of Department
Circular No. 70 dated July 3, 2000.11
Respondent HSBC then went to the Court of Appeals by
means of a Petition for Certiorari under Rule 65 of the Revised
Rules of Court.
On 28 April 2006, the Court of Appeals promulgated its
Decision granting respondent HSBCs petition, thereby
annulling and setting aside the twin resolutions of the DOJ.

The fallo of the assailed decision reads:

WHEREFORE, in view of the foregoing premises, judgment
is hereby rendered by us GRANTING the petition filed in
this case. The assailed Resolutions dated April 6, 2004
and August 30, 2004 are ANNULLED and SET ASIDE.
The City Prosecutor of Cebu City is hereby ORDERED to
file the appropriate Information against the private
respondents.12
Petitioners Bernyl and Katherenes motion for reconsideration
proved futile, as it was denied by the appellate court in
a Resolution dated 29 June 2006.
Hence, this petition for certiorari filed under Rule 65 of the
Revised Rules of Court.

petition shall raise only questions of law which must be

distinctly set forth. (Emphasis supplied.)
It is elementary in remedial law that a writ of certiorari will not
issue where the remedy of appeal is available to an aggrieved
party. A remedy is considered "plain, speedy and adequate" if
it will promptly relieve the petitioners from the injurious
effects of the judgment and the acts of the lower court or
agency.21 In this case, appeal was not only available but also a
speedy and adequate remedy.22 And while it is true that in
accordance with the liberal spirit pervading the Rules of Court
and in the interest of substantial justice,23 this Court has,
before,24 treated a petition for certiorari as a petition for
review on certiorari, particularly if the petition
for certiorari was filed within the reglementary period within
which to file a petition for review on certiorari;25 this exception
is not applicable to the present factual milieu.
Pursuant to Sec. 2, Rule 45 of the Revised Rules of Court:

Petitioners Bernyl and Katherene filed the present petition on

the argument that the Court of Appeals committed grave
abuse of discretion in reversing and setting aside the
resolutions of the DOJ when: (1) "[i]t reversed the resolution of
the Secretary of Justice, Manila dated August 30, 2004 and
correspondingly, gave due course to the Petition
for Certiorari filed by HSBC on April 28, 2006 despite want of
probable cause to warrant the filing of an information against
the herein petitioners"13; (2) "[i]t appreciated the dubious
evidence adduced by HSBC albeit the absence of legal
standing or personality of the latter"14; (3) "[i]t denied the
motions for reconsideration on June 29, 2006 notwithstanding
the glaring evidence proving the innocence of the
petitioners"15; (4) "[i]t rebuffed the evidence of the herein
petitioners in spite of the fact that, examining such evidence
alone would establish that the money in question was already
withdrawn by Mr. Roger Dwayne York"16; and (5) "[i]t failed to
dismiss outright the petition by HSBC considering that the
required affidavit of service was not made part or attached in
the said petition pursuant to Section 13, Rule 13 in relation to
Section 3, Rule 46, and Section 2, Rule 56 of the Rules of
Court."17
Required to comment on the petition, respondent HSBC
remarked that the filing of the present petition is improper
and should be dismissed. It argued that the correct remedy is
an appeal by certiorari under Rule 45 of the Revised Rules of
Court.
Petitioners Bernyl and Katherene, on the other hand, asserted
in their Reply18 that the petition filed under Rule 65 was
rightfully filed considering that not only questions of law were
raised but questions of fact and error of jurisdiction as well.
They insist that the Court of Appeals "clearly usurped into the
jurisdiction and authority of the Public Prosecutor/Secretary of
justice (sic) x x x."19
Given the foregoing arguments, there is need to address, first,
the issue of the mode of appeal resorted to by petitioners
Bernyl and Katherene. The present petition is one
for certiorari under Rule 65 of the Revised Rules of Court.
Notice that what is being assailed in this recourse is the
decision and resolution of the Court of Appeals dated 28 April
2006 and 29 June 2006, respectively. The Revised Rules of
Court, particularly Rule 45 thereof, specifically provides that
an appeal by certiorarifrom the judgments or final orders or
resolutions of the appellate court is by verified petition for
review on certiorari.20
In the present case, there is no question that the 28 April
2006 Decision and 29 June 2006 Resolutionof the Court of
Appeals granting the respondent HSBCs petition in CA-G.R.
CEB. SP No. 00068 is already a disposition on the merits.
Therefore, both decision and resolution, issued by the Court of
Appeals, are in the nature of a final disposition of the case set
before it, and which, under Rule 45, are appealable to this
Court via a Petition for Review on Certiorari, viz:
SECTION 1. Filing of petition with Supreme Court. A
party desiring to appeal by certiorari from a judgment or
final order or resolution of the Court of Appeals, the
Sandiganbayan, the Regional Trial Court or other courts
whenever authorized by law, may file with the Supreme
Court a verified petition for review on certiorari. The

SEC. 2. Time for filing; extension. The petition shall be

filed within fifteen (15) days from notice of the judgment
or final order or resolution appealed from, or of the denial
of the petitioners motion for new trial or reconsideration
filed in due time after notice of the judgment. x x x.
a party litigant wishing to file a petition for review
on certiorari must do so within 15 days from receipt of the
judgment, final order or resolution sought to be appealed. In
this case, petitioners Bernyl and Katherenes motion for
reconsideration of the appellate courts Resolution was denied
by the Court of Appeals in its Resolution dated 29 June 2006,
a copy of which was received by petitioners on 4 July 2006.
The present petition was filed on 1 September 2006; thus, at
the time of the filing of said petition, 59 days had elapsed,
way beyond the 15-day period within which to file a petition
for review under Rule 45, and even beyond an extended
period of 30 days, the maximum period for extension allowed
by the rules had petitioners sought to move for such extra
time. As the facts stand, petitioners Bernyl and Katherene had
lost the right to appeal via Rule 45.
Be that as it may, alternatively, if the decision of the appellate
court is attended by grave abuse of discretion amounting to
lack or excess of jurisdiction, then such ruling is fatally
defective on jurisdictional ground and may be questioned
even after the lapse of the period of appeal under Rule
4526 but still within the period for filing a petition
for certiorari under Rule 65.
We have previously ruled that grave abuse of discretion may
arise when a lower court or tribunal violates and contravenes
the Constitution, the law or existing jurisprudence. By grave
abuse of discretion is meant such capricious and whimsical
exercise of judgment as is equivalent to lack of jurisdiction.
The abuse of discretion must be grave, as where the power is
exercised in an arbitrary or despotic manner by reason of
passion or personal hostility and must be so patent and gross
as to amount to an evasion of positive duty or to a virtual
refusal to perform the duty enjoined by or to act at all in
contemplation of law.27 The word "capricious," usually used in
tandem with the term "arbitrary," conveys the notion of willful
and unreasoning action. Thus, when seeking the corrective
hand of certiorari, a clear showing of caprice and arbitrariness
in the exercise of discretion is imperative. 28
In reversing and setting aside the resolutions of the DOJ,
petitioners Bernyl and Katherene contend that the Court of
Appeals acted with grave abuse of discretion amounting to
lack or excess of jurisdiction.
The Court of Appeals, when it resolved to grant the petition in
CA-G.R. CEB. SP No. 00068, did so on two grounds, i.e., 1) that
"the public respondent (DOJ) gravely abused his discretion in
finding that there was no reversible error on the part of the
Cebu City Prosecutor dismissing the case against the private
respondent without stating the facts and the law upon which
this conclusion was made"29; and 2) that "the public
respondent (DOJ) made reference to the facts and
circumstances of the case leading to his finding that no
probable cause exists, x x x (the) very facts and
circumstances (which) show that there exists a probable

cause to believe that indeed the private respondents

committed the crimes x x x charged against them." 30
It explained that:
In refusing to file the appropriate information against the
private respondents because he does not dwell on
possibilities, suspicion and speculation and that he rules
based on hard facts and solid evidence, (sic) the public
respondent exceeded his authority and gravely abused
his discretion. It must be remembered that a finding of
probable cause does not require an inquiry into whether
there is sufficient evidence to procure a conviction. It is
enough that it is believed that the act or omission
complained of constitutes the offense charged. The term
does not mean actual or positive cause; (sic) nor does it
import absolute certainty. It is merely based on opinion
and reasonable belief. [Citation omitted.] A trial is there
precisely for the reception of evidence of the prosecution
in support of the charge.
In this case, the petitioner had amply established that it
has a prima facie case against the private respondents.
As observed by the public respondent in his second
assailed resolution, petitioner was able to present
photographs of private respondent Ms. Balangauan
leaving her office carrying a bulky plastic bag. There was
also the fact that the transactions in Mr. Yorks account
used the code CEO8 which presumably point to the
private respondent Ms. Balangauan as the author thereof
for she is the one assigned to such work station.
Furthermore, petitioner was able to establish that it was
Ms. Balangauan who handled Mr. Yorks account and she
was the one authorized to make the placement of the
sum of P2,500,000.00. Since said sum is nowhere to be
found in the records of the bank, then, apparently, Ms.
Balangauan must be made to account for the same.31
The appellate court then concluded that:
These facts engender a well-founded belief that that (sic)
a crime has been committed and that the private
respondents are probably guilty thereof. In refusing to file
the corresponding information against the private
respondents despite the presence of the circumstances
making out a prima facie case against them, the public
respondent gravely abused his discretion amounting to
an evasion of a positive duty or to a virtual refusal either
to perform the duty enjoined or to act at all in
contemplation of law.32
The Court of Appeals found fault in the DOJs failure to identify
and discuss the issues raised by the respondent HSBC in its
Petition for Review filed therewith. And, in support thereof,
respondent HSBC maintains that it is incorrect to argue that
"it was not necessary for the Secretary of Justice to have his
resolution recite the facts and the law on which it was based,"
because courts and quasi-judicial bodies should faithfully
comply with Section 14, Article VIII of the Constitution
requiring that decisions rendered by them should state clearly
and distinctly the facts of the case and the law on which the
decision is based.33
Petitioners Bernyl and Katherene, joined by the Office of the
Solicitor General, on the other hand, defends the DOJ and
assert that the questioned resolution was complete in that it
stated the legal basis for denying respondent HSBCs petition
for review "that (after) an examination (of) the petition and
its attachment [it] found no reversible error that would justify
a reversal of the assailed resolution which is in accord with
the law and evidence on the matter."
It must be remembered that a preliminary investigation is not
a quasi-judicial proceeding, and that the DOJ is not a quasijudicial agency exercising a quasi-judicial function when it
reviews the findings of a public prosecutor regarding the
presence of probable cause. In Bautista v. Court of
Appeals,34 this Court held that a preliminary investigation is
not a quasi-judicial proceeding, thus:

[T]he prosecutor in a preliminary investigation does not

determine the guilt or innocence of the accused. He does
not exercise adjudication nor rule-making functions.
Preliminary investigation is merely inquisitorial, and is often
the only means of discovering the persons who may be
reasonably charged with a crime and to enable the fiscal to
prepare his complaint or information. It is not a trial of the
case on the merits and has no purpose except that of
determining whether a crime has been committed and
whether there is probable cause to believe that the accused
is guilty thereof. While the fiscal makes that determination,
he cannot be said to be acting as a quasi-court, for it is the
courts, ultimately, that pass judgment on the accused, not
the fiscal.
Though some cases35 describe the public prosecutors power
to conduct a preliminary investigation as quasi-judicial in
nature, this is true only to the extent that, like quasi-judicial
bodies, the prosecutor is an officer of the executive
department exercising powers akin to those of a court, and
the similarity ends at this point.36 A quasi-judicial body is an
organ of government other than a court and other than a
legislature which affects the rights of private parties through
either adjudication or rule-making.37 A quasi-judicial agency
performs adjudicatory functions such that its awards,
determine the rights of parties, and their decisions have the
same effect as judgments of a court. Such is not the case
when a public prosecutor conducts a preliminary investigation
to determine probable cause to file an Information against a
person charged with a criminal offense, or when the Secretary
of Justice is reviewing the formers order or resolutions. In this
case, since the DOJ is not a quasi-judicial body, Section 14,
Article VIII of the Constitution finds no application. Be that as
it may, the DOJ rectified the shortness of its first resolution by
issuing a lengthier one when it resolved respondent HSBCs
motion for reconsideration.
Anent the substantial merit of the case, whether or not the
Court of Appeals decision and resolution are tainted with
grave abuse of discretion in finding probable cause, this Court
finds the petition dismissible.
The Court of Appeals cannot be said to have acted with grave
abuse of discretion amounting to lack or excess of jurisdiction
in reversing and setting aside the resolutions of the DOJ. In
the resolutions of the DOJ, it affirmed the recommendation of
ACP Laborte that no probable cause existed to warrant the
filing in court of an Information for estafa and/or qualified
estafa against petitioners Bernyl and Katherene. It was the
reasoning of the DOJ that "[w]hile appellant has every reason
to suspect Katherene for the loss of the P2,500,000.00 as per
Yorks bank statements, the cash deposits were identified by
the numerals CEO8 and it was only Katherene who could
transact from the computer in the work station CEO-8, plus
alleged photographs showing Katherene leaving her office at
5:28 p.m. with a bulky plastic bag presumably containing
cash since a portion of the funds was withdrawn, we do not,
however, dwell on possibilities, suspicion and speculation. We
rule based on hard facts and solid evidence." 38
We do not agree.
Probable cause has been defined as the existence of such
facts and circumstances as would excite belief in a reasonable
mind, acting on the facts within the knowledge of the
prosecutor, that the person charged was guilty of the crime
for which he was prosecuted.39 A finding of probable cause
merely binds over the suspect to stand trial. It is not a
pronouncement of guilt.40
The executive department of the government is accountable
for the prosecution of crimes, its principal obligation being the
faithful execution of the laws of the land. A necessary
component of the power to execute the laws is the right to
prosecute their violators,41 the responsibility for which is
thrust upon the DOJ. Hence, the determination of whether or
not probable cause exists to warrant the prosecution in court
of an accused is consigned and entrusted to the DOJ. And by
the nature of his office, a public prosecutor is under no
compulsion to file a particular criminal information where he is
not convinced that he has evidence to prop up the averments
thereof, or that the evidence at hand points to a different
conclusion.

But this is not to discount the possibility of the commission of

abuses on the part of the prosecutor. It is entirely possible
that the investigating prosecutor has erroneously exercised
the discretion lodged in him by law. This, however, does not
render his act amenable to correction and annulment by the
extraordinary remedy of certiorari, absent any showing of
grave abuse of discretion amounting to excess of
jurisdiction.42
And while it is this Courts general policy not to interfere in
the conduct of preliminary investigations, leaving the
investigating officers sufficient discretion to determine
probable cause,43 we have nonetheless made some
exceptions to the general rule, such as when the acts of the
officer are without or in excess of authority, 44 resulting from a
grave abuse of discretion. Although there is no general
formula or fixed rule for the determination of probable cause,
since the same must be decided in the light of the conditions
obtaining in given situations and its existence depends to a
large degree upon the finding or opinion of the judge
conducting the examination, such a finding should not
disregard the facts before the judge (public prosecutor) or run
counter to the clear dictates of reason.45
Applying the foregoing disquisition to the present petition, the
reasons of DOJ for affirming the dismissal of the criminal
complaints for estafa and/or qualified estafa are determinative
of whether or not it committed grave abuse of discretion
amounting to lack or excess of jurisdiction. In requiring "hard
facts and solid evidence" as the basis for a finding of probable
cause to hold petitioners Bernyl and Katherene liable to stand
trial for the crime complained of, the DOJ disregards the
definition of probable cause that it is a reasonable ground of
presumption that a matter is, or may be, well-founded, such a
state of facts in the mind of the prosecutor as would lead a
person of ordinary caution and prudence to believe, or
entertain an honest or strong suspicion, that a thing is
so.46 The term does not mean "actual and positive cause" nor
does it import absolute certainty.47 It is merely based on
opinion and reasonable belief;48 that is, the belief that the act
or omission complained of constitutes the offense charged.
While probable cause demands more than "bare suspicion," it
requires "less than evidence which would justify conviction."
Herein, the DOJ reasoned as if no evidence was actually
presented by respondent HSBC when in fact the records of the
case were teeming; or it discounted the value of such
substantiation when in fact the evidence presented was
adequate to excite in a reasonable mind the probability that
petitioners Bernyl and Katherene committed the crime/s
complained of. In so doing, the DOJ whimsically and
capriciously exercised its discretion, amounting to grave
abuse of discretion, which rendered its resolutions amenable
to correction and annulment by the extraordinary remedy
of certiorari.
From the records of the case, it is clear that a prima facie case
for estafa/qualified estafa exists against petitioners Bernyl
and Katherene. A perusal of the records, i.e., the affidavits of
respondent HSBCs witnesses, the documentary evidence
presented, as well as the analysis of the factual milieu of the
case, leads this Court to agree with the Court of Appeals that,
taken together, they are enough to excite the belief, in a
reasonable mind, that the Spouses Bernyl Balangauan and
Katherene Balangauan are guilty of the crime complained of.
Whether or not they will be convicted by a trial court based on
the same evidence is not a consideration. It is enough that
acts or omissions complained of by respondent HSBC
constitute the crime of estafa and/or qualified estafa.
Collectively, the photographs of petitioner Katherene leaving
the premises of respondent HSBC carrying a bulky plastic bag
and the affidavits of respondent HSBCs witnesses sufficiently
establish acts adequate to constitute the crime of estafa
and/or qualified estafa. What the affidavits bear out are the
following: that York was a Premier Client of respondent HSBC;
that petitioner Katherene handled all the accounts of York;
that not one of Yorks accounts reflect the P2,500,000.00
allegedly deposited in a higher yielding account; that prior to
the discovery of her alleged acts and omissions, petitioner
Katherene supposedly persuaded York to invest in a "new
product" of respondent HSBC, i.e., a higher interest yielding
time deposit; that York made a total of P2,500,000.00
investment in the "new product" by authorizing petitioner
Balangauan to transfer said funds to it; that petitioner

Katherene supposedly asked York to sign several transaction

documents in order to transfer the funds to the "new product";
that said documents turned out to be withdrawal slips and
cash movement tickets; that at no time did York receive the
cash as a result of signing the documents that turned out to
be withdrawal slips/cash movement tickets; that Yorks
account was regularly credited "loose change" in the amounts
of P12,500.00 and P8,333.33 beginning in the month after the
alleged "transfer" of Yorks funds to the "new product"; that
the regular deposits of loose change were transacted with the
use of petitioner Katherenes work terminal accessed by her
password "CEO8"; that the "CEO8" password was keyed in
with the use of a swipe card always in the possession of
petitioner Katherene; that one of the loose-change deposits
was transacted via the phone banking feature of respondent
HSBC and that when traced, the phone number used was the
landline number of the house of petitioners Bernyl and
Katherene; that respondent HSBCs bank personnel, as well as
York, supposedly a) talked with petitioner Katherene on the
phone, and that she allegedly admitted that the missing funds
were invested with Shell Company, of which York approved,
and that it was only for one year; and b) met with petitioner
Bernyl, and that the latter at first denied having knowledge of
his wifes complicity, but later on admitted that he knew of
the investment with Shell Company, and that he supposedly
made the loose-change deposit via phone banking; that after
23 April 2002, York was told that respondent HSBC had no
"new product" or that it was promoting investment with Shell
Company; that York denied having any knowledge that his
money was invested outside of respondent HSBC; and that
petitioner Katherene would not have been able to facilitate
the alleged acts or omissions without taking advantage of her
position or office, as a consequence of which, HSBC had to
reimburse York the missing P2,500,000.00.
From the above, the alleged circumstances of the case at bar
make up the elements of abuse of confidence, deceit or
fraudulent means, and damage under Art. 315 of the Revised
Penal Code on estafa and/or qualified estafa. They give rise to
the presumption or reasonable belief that the offense of
estafa has been committed; and, thus, the filing of an
Information against petitioners Bernyl and Katherene is
warranted. That respondent HSBC is supposed to have no
personality to file any criminal complaint against petitioners
Bernyl and Katherene does not ipso facto clear them of prima
facie guilt. The same goes for their basic denial of the acts or
omissions complained of; or their attempt at shifting the
doubt to the person of York; and their claim that witnesses of
respondent HSBC are guilty of fabricating the whole scenario.
These are matters of defense; their validity needs to be tested
in the crucible of a full-blown trial. Lest it be forgotten, the
presence or absence of the elements of the crime is
evidentiary in nature and is a matter of defense, the truth of
which can best be passed upon after a full-blown trial on the
merits. Litigation will prove petitioners Bernyl and Katherenes
innocence if their defense be true.
In fine, the relaxation of procedural rules may be allowed only
when there are exceptional circumstances to justify the same.
Try as we might, this Court cannot find grave abuse of
discretion on the part of the Court of Appeals, when it
reversed and set aside the resolutions of the DOJ. There is no
showing that the appellate court acted in an arbitrary and
despotic manner, so patent or gross as to amount to an
evasion or unilateral refusal to perform its legally mandated
duty. On the contrary, we find the assailed decision and
resolution of the Court of Appeals to be more in accordance
with the evidence on record and relevant laws and
jurisprudence than the resolutions of the DOJ.
Considering the allegations, issues and arguments adduced
and our disquisition above, we hereby dismiss the instant
petition for being the wrong remedy under the Revised Rules
of Court, as well as for petitioner Bernyl and Katherenes
failure to sufficiently show that the
challenged Decision and Resolution of the Court of Appeals
were rendered in grave abuse of discretion amounting to lack
or excess of jurisdiction.
WHEREFORE, premises considered, the instant Petition for
Certiorari is DISMISSED for lack of merit. The 28 April
2006 Decision and the 29 June 2006 Resolution of the Court of
Appeals in CA-G.R. CEB- SP No. 00068, are

hereby AFFIRMED. With costs against petitioners -- Spouses

Bernyl Balangauan and Katherene Balangauan.
SO ORDERED.
G.R. No. 81385 February 21, 1989
EDUARDO B. OLAGUER AND CONRADO S. REYES in their
official capacity as FISCAL AGENTS OF THE
PRESIDENTIAL COMMISSION ON GOOD
GOVERNMENT, petitioners,
vs.
THE REGIONAL TRIAL COURT, NATIONAL CAPITAL
JUDICIAL REGION, BRANCH 48, MANILA, PRESIDED BY
THE HONORABLE JUDGE DEMETRIO M. BATARIO, JR.,
M.B. OLIVARES, AUGUSTO VILLANUEVA, ARACELLI
LINSANGAN, LUISA LINSANGAN, ALEJANDRO MARAMAG,
MANUEL SALAK, TURNITA SORIANO, LINO SISON
DOMINGO FLORES, MILAGROS HIZON and CARIDAD
ORPIADA, respondents.
The Solicitor General for petitioners.
Delia L. Hermoso for private respondents.

GANCAYCO, J.:
The parameters of the jurisdiction of the ordinary courts in
relation to the Securities and Exchange Commission (SEC) and
the Sandiganbayan are put into issue in this petition.
On December 17, 1987, private respondents filed a complaint
for injunction and damages, with a prayer for the issuance of
a writ of preliminary injunction and/or temporary restraining
order, in the Regional Trial Court (RTC) of Manila against
petitioners and Winston Marbella, Gaston Ortigas, Robeto
Federis, Manuel C. Villa-Real, Emanuel Soriano, Jack Arroyo
and Benjamin Tulio.
The complaint alleges, among others, that private
respondents are the only stockholders with the right to vote of
the Philippine Journalists, Inc. (PJI) Publisher of several daily
periodicals such as Manila Journal, People's Journal, etc.
Sometime in 1977, PJI obtained from the Development Bank
of the Philippines (DBP) certain financing accommodations
and as security thereof executed a first mortgage in favor of
DBP on its acts enumerated in a list attached to the mortgage.
The PJI stockholders assigned to DBP the voting rights over
67% of the total subscribed and outstanding voting shares of
stock of the company held by them. The DBP appointed said
PJI stockholders as proxies to exercise its right to vote. Due to
some financial difficulty on its part, PJI requested for a
restructuring of its loan obligation with certain conditions. The
request was granted by the DBP in a letter dated August 4,
1986. Due to the default on the part of the PJI the DBP
cancelled the proxies in favor of the assigning stockholders on
September 30, 1986 and designated as its proxies petitioner
Eduardo Olaguer, Jose Mari Velez and Manuel de Leon. DBP
scheduled a special stockholders meeting for the purpose of
electing a new set of directors.
It is also alleged in the complaint that before the special
meeting, petitioner Olaguer asked private respondent Rosario
M. Barreto Olivares to assign qualifying shares not only to the
three proxies of DBP but also to two others to be chosen by
him so as to enable the five of them to sit in the PJI board of
directors, and that, accordingly, they may be able to
coordinate more effectively with DBP as regards the early
evaluation and approval of the request for another
restructuring of the PJI loan. Thus respondent Olivares
assigned her shareholdings covered by Stock Certificate. No.
34 (which were at that time assigned to DBP) to petitioner
Olaguer, Marbella, Ortigas, Mari Velez and De Leon, at one
share each. The deeds of assignment provided that the said
assignment are valid only as long as the nominee is the
person designated by the DBP as its representative to sit in
the board of directors.

The complaint also alleges that although Olaguer was elected

chairman of the board and chief executive officer of PJI he
failed to comply with his commitment and that this gave
private respondents a reason to cancel the assignment.
Olaguer also committed certain illegal acts which gave rise to
the filing of several complaints against him. However, before
these cases could be resolved, Olaguer's appointment as
member of the board of directors of DBP was terminated by
President Corazon C. Aquino effective September 9, 1987. He
was informed about his termination through two letters dated
August 27 and October 12, 1987.
It is likewise alleged that, the termination notwithstanding,
Olaguer continued to exercise and retain full management
and control of PJI The DBP chief legal counsel wrote to
petitioner Reyes informing him of Olaguer's removal from
office and enjoining him from implementing or complying with
any instructions from Olaguer and from disposing of the
properties of PJI and disbursing any funds without prior
approval of the board of directors of PJI which will soon be
elected, except such amounts needed in the ordinary course
of business. Accordingly, the DBP, acting through its
Chairman, Jesus Estanislao and its Director-in-Charge, Jose
Mari Velez, entered into an Interim Agreement with private
respondents. The said agreement called for a special
stockholders meeting for the purpose of electing a new board
of directors which shall hold office until the next regular
stockholders meeting to be held on February 2, 1988.
The complaint further alleges that in a letter dated December
14, 1987, the DBP chief legal counsel informed the private
respondents that the said Interim Agreement cannot be
implemented because Olaguer claims that he has just been
designated the fiscal and team leader of the Presidential
Commission on Good Government (PCGG) assigned to the PJI
and that all his actions are sanctioned and reported to PCGG
Chairman Ramon A. Diaz, and that it is the PCGG which
exercises the voting rights of all PJI common stocks
sequestered since 1986, including those assigned to DBP and
that the PJI qualifying share now held by PJI Directors came
from shares sequestered by the PCGG. These observations are
contained in a letter dated October 31, 1987 written by
petitioner Reyes in his capacity as chief legal counsel and
corporate secretary of PJI It is stated therein that Olaguer,
together with Marbella, Ortigas, Soriano, Federis, Arroyo and
Villa-Real have been acting as corporate officers and/or
members of the board without their having been elected by
the majority vote of stockholders and without their owning in
their own right even a single qualifying share.
In addition, it is alleged that petitioner Reyes had been
sending out notices to private respondents about an alleged
stockholders meeting to be held on December 21, 1987 at the
PJI building, and that in the letter written by the DBP chief
legal counsel, 1 it is stated that petitioner Olaguer and his
associates who claim to be members of the board and
corporate officers of PJI do not represent DBP and that they
are not authorized to act in its behalf.
The complaint emphasizes that the claim of petitioner Reyes
that Olaguer can sit as chairman of the board of directos of PJI
even if he is no longer a director of DBP but as long as he is
the fiscal agent and team leader of the PCGG assigned is
baseless because: (a) the writs of sequestration on the shares
of respondents Hizon, Orpiada, Maramag, Flores and Sison,
served on them on or about February 19, 1987, and on
respondents Linsangan, Salak, Soriano and Villanueva, served
on them on or about April 28, 1987, bad been automatically
lifted last August 19, 1987 and October 28, 1987,
respectively, pursuant to Section 26, Article XVIII of the 1987
Constitution; and only the sequestration on the shares of
respondent Olivares has not been lifted since a complaint was
filed against her before the expiration of the constitutional
deadline for filing cases; (b) the sequestered shares of
respondent Olivares could not be voted upon by petitioners
herein and their companions under their claim of being PCGG
fiscal agents under the recent pronouncement of the Supreme
Court in several cases clearly stating that sequestration does
not involve the right of ownership; (c) no other meeting has
been validly called for the election of a new set of directors
after the members of the board elected last October 2, 1986
had ceased to be such directors, either by virtue of the
cancellation of their qualifying shares or their resignation; (d)
with the filing of Civil Case No. 35 before the Sandiganbayan

where the PJI was listed as one of the involved corporations,

all actions affecting said corporation, including those which
will affect rights of ownership and disposition of assets, must
have the prior approval of the Sandiganbayan which
excercises jurisdiction over these corporations as one of the
properties in litigation; and (e) by order of President Aquino,
petitioner Olaguer's separation from the PJI was called for;
that the acts of all the petitioners and their companions of
either continuing to sit in the board of directors of PJI and/or
representing and acting as its corporate officers are illegal
and are the acts of usurpers and intruders violative of the
rights of private respondents as stockholders and are causing
great damage and prejudice to them as well as to the rights of
the DBP under the Deed of Assignment, and that such acts of
usurpation should be enjoined by the trial court.
Under the second cause of action for damages, it is alleged
that Olaguer acted illegally and outside the authority granted
him as nominee of DBP and, accordingly, Olivares cancelled
the Deed of Assignment of one qualifying share to him as well
as the Deed of Assignment in favor of Marbella and Ortigas.
The notice of cancellation was served upon them on
December 5, 1986. As a consequence of such cancellation,
the three failed to qualify to sit as members of the board of
PJI.
Private respondents also alleged that despite such notice,
petitioner and his associates continued to sit in the board and
that Olaguer took over the complete management of the
corporation and even caused the appointment of other
members of the board and/or corporate officers even if such
appointees do not own PJI shares of stock in their own right. It
is likewise alleged that the petitioner and his associates
should be enjoined from committing further acts of usurpation
and that they should be held liable for all unlawful
disbursements they have made. It is further alleged that some
of the private respondents had been unlawfully dismissed
and/or retired one after another thereby depriving them of all
benefits they are entitled to and subjecting them to great
mental anguish, sleepless nights, deep humiliation and great
anxiety for which they must be paid damages in an amount
left to the sound discretion of the court. Private respondents
also asked for exemplary damages as well as the sum of
P200,000.00 for attorney's fees and expenses of litigation.
Private respondents prayed that pending a hearing on the
merits of the case, a writ of preliminary injunction or a
temporary restraining order be issued against petitioner
Reyes enjoining him from holding the special stockholders
meeting scheduled at 8:00 A.M. on December 21, 1987, and
enjoining Olaguer and his associates from sitting and acting
as members of the board of directors of PJI or as corporate
officers. Private respondents also prayed that such temporary
restraining order and/or writ of preliminary injunction be made
permanent after due hearing and that Petitioner Olaguer and
his associates be made to pay, jointly and severally, actual
damages as may be proved after audit, including moral and
exemplary damages, attorney's fees and litigation expenses in
the amount of P200,000.00, and the costs of the suit. 2
On December 18, 1987, an order was issued by the trial court
setting the petition for the issuance of a writ of preliminary
injunction for bearing on January 4, 1988 at 1:30 in the
afternoon. A temporary restraining order was issued enjoining
petitioner Reyes from holding the special stockholders
meeting scheduled for December 21, 1987 and enjoining all
the other petitioners including Olaguer from sitting and acting
as members of the board and/or corporate officers of PJI until
further orders of the court.
On January 4, 1988, a motion to dismiss was filed by the
petitioners on the ground that the court has no jurisdiction
over the persons of petitioners; that they were not served
summons and that the subject matter of the action involves
controversies arising out of intra-corporate relations between
and among stockholders which are covered by the provisions
of Section 5 of Presidential Decree No. 902-A so that the
matter is within the original and exclusive jurisdiction of the
Securities and Exchange Commission (SEC); that the venue
for a petition seeking injunctive relief should be the
Sandiganbayan where aforesaid PCGG Case No. 0035 against
Benjamin Romualdez, Rosario Olivares, et al. is pending,
pursuant to Executive Order No. 14 defining the jurisdiction
over cases involving the alleged ill-gotten wealth of Former

President Marcos, et al.; that it is the SEC which should

exercise jurisdiction over the case pursuant to Section 6 of
Presidential Decree No. 902-A; and that the complaint states
no cause of action inasmuch as the petitioners and the other
defendants hold shares emanating from the PCGG, and not
from the DBP; that the shares issued to DBP for Olivares, et
al. on the basis of an erroneous DBP legal opinion have been
declared void ab initio and cancelled by the PCGG on
November 4, 1987 so that the DBP is not a stockholder of
record; that the call for the stockholders meeting by petitioner
Reyes was with the approval of the PCGG Chairman; that PJI is
a sequestered corporation listed as item No. 49 under "Shares
of Stock" in "Assets and Other Property of Benjamin
Romualdez" marked Annex "A", in Case No. 0035 for
"Reconveyance, Reversion, Accounting, Restitution and
Damages," entitled "Republic of the Philippines, plaintiff
versus Benjamin (Kokoy) Romualdez, et al.,"; that the PJI
pursuant to its Board Resolution No. 43, dated November 14,
1987, has authorized the filing of criminal complaints against
Benjamin (Kokoy) Romualdez, Rosario Olivares, Tuynita
Soriano, Jose T. Abundo, Evelyn Nicasio, Alejandro Maramag,
Caridad Orpiada and other former and present PJI officers and
employees who defrauded the company by conspiring in
and/or authorizing the illegal disbursements of PJI funds
amounting to P 10.6 million, all for the account and upon
instructions of said Romualdez who was neither an officer,
director, stockholder of record of PJI nor a creditor or supplier
thereof; that regarding the sequestration of PJI pursuant to
orders of the PCGG dated April 22, 1986 and February 19,
1987, the actual sequestration proceedings have not been
terminated upon the filing of PCGG Case No. 0035 before the
Sandiganbayan on July 31, 1987.
Petitioners maintain that under the pertinent provisions of the
1987 Constitution, the commencement of a judicial action
does not ipso facto lift the sequestration order. It is the nonfiling of a judicial action within six months from the ratification
of the 1987 Constitution if the sequestration order is issued
before the ratification, or within six months from the time
sequestration order was issued if the same was issued after
such ratification, which will automatically lift the sequestration
order. Petitioners also stated that while the PJI suffered huge
loses under the administration of private respondents, the
corporation realized profits under the management of
petitioner Olaguer. All the common and preferred stocks of
private respondents have been sequestered pursuant to the
orders of the PCGG dated April 22, 1986 and February 19,
1987 and it is the PCGG which exercises the voting rights
pertaining to said sequestered shares pursuant to the
Memorandum of President Aquino to the PCGG dated June 26,
1986.
A Memorandum in support of the prayer for the issuance of a
writ of preliminary injunction and opposition to the motion to
dismiss was filed by counsel for private respondents.
On January 14, 1988, an order was issued by the trial court
denying the motion to dismiss and issuing a writ of
preliminary injunction as prayed for upon a bond in the
amount of P50,000.00 to be filed by private respondents.
Hence, the herein petition for certiorari and prohibition with a
prayer for the issuance of a temporary restraining order and/
or a writ of preliminary injunction wherein the main issue is
whether or not the trial court has jurisdiction over the subject
matter of the action.
On January 26, 1988, a resolution was issued by this Court
requiring the respondents to comment therein within ten (10)
days from notice. A temporary restraining order was issued
enjoining the respondent judge to cease and desist from
enforcing the order of the trial court dated January 14, 1988 in
Civil Case No. 87-43156 as well as the writ of preliminary
injunction issued against petitioners.
Acting on the manifestation and motion filed by counsel for
private respondents on February 4, 1988, this Court issued a
resolution enjoining petitioner Reyes and/or the corporate
officers of PJI from holding another special stockholders
meeting on February 5, 1988 or at any date thereafter
pending resolution of this case, and directing the parties to
maintain the status quo until further orders from the Court.

The private respondents filed their comment on the petition.

Thereafter, the petitioners filed their reply. On April 5, 1988,
the court resolved to give due course to the petition and
considered the case submitted for decision. Nevertheless, the
private respondents filed a rejoinder.
The petition is impressed with merit. There is no dispute that
the PJI is now under sequestration by the PCGG and that Civil
Case No. 0035 was filed in the Sandiganbayan wherein the PJI
is listed as among the corporations involved in the
unexplained wealth case against former President Marcos,
Romualdez and many others. The records likewise show that
petitioner Olaguer, among others, is a fiscal agent of the
PCGG and that as Chairman of the Board of Directors of the PJI
he was acting for and in behalf of the PCGG. Under Section 2
of Executive Order No. 14, the Sandiganbayan has exclusive
and original jurisdiction over all cases regarding "the funds,
moneys, assets and properties illegally acquired by Former
President Ferdinand E. Marcos, Mrs. Imelda Romualdez
Marcos, their close relatives, subordinates, business
associates, dummies, agents, or nominees," 3civil or criminal,
including incidents arising from such cases. The Decision of
the Sandiganbayan is subject to review on certiorari
exclusively by the Supreme Court. 4
In the exercise of its functions, the PCGG is a co-equal body
with the regional trial courts and co-equal bodies have no
power to control the other. 5 The regional trial courts and the
Court of Appeals have no jurisdiction over the PCGG in the
exercise of its powers under the applicable Executive Orders
and Section 26, Article XVIII of the 1987 Constitution and,
therefore, may not interfere with and restrain or set aside the
orders and actions of the PCGG. 6 By the same token, the
regional trial courts have no jurisdiction over the acts of fiscal
agents of the PCGG acting for and in behalf of said
commission.
The Commission should not be embroiled in and swamped by
legal suits before inferior courts all over the land. Otherwise,
the Commission will be forced to spend valuable time
defending all its actuations in such courts. This will defeat the
very purpose behind the creation of the Commission.
Accordingly, Section 4(a) of Executive Order No. 1 expressly
accorded the Commission and its members immunity from
suit for damages in that: "No civil action shall lie against the
Commission or any member thereof for anything done or
omitted in the discharge of the task contemplated by this
order."
Civil Case No. 87-43156 pending before the respondent judge
is denominated as one for "injunction with prayer for writ of
preliminary injunction and/or temporary restraining order and
damages." Particularly, under paragraph 17(d) of the
complaint, private respondents admitted that the PJI is listed
as one of the involved corporations in Civil Case No. 0035
pending before the Sandiganbayan which now exercises
jurisdiction over the said corporation. Petitioners Olaguer and
Reyes appear to be fiscal agents of the PCGG. There can be
no doubt, therefore, that the subject matter of the action (the
PJI its properties and assets) falls within the exclusive
jurisdiction of the Sandiganbayan.
Petitioners, as fiscal agents of the PCGG, cannot be sued in
such capacity before the ordinary courts. The tribunal for such
purpose is the Sandiganbayan.
It necessarily follows that the issues raised by the private
respondents before the respondent judge to the effect that
petitioners are usurpers and have no right to sit in the board
of directors or act as corporate officers of the PJI are issues
which should be addressed to the Sandiganbayan.
WHEREFORE, the petition is GRANTED. The respondent judge
is permanently enjoined from enforcing the order of the trial
court dated January 14, 1988. The restraining order issued by
this Court dated February 4, 1988 enjoining petitioner Reyes
and/or the corporate officers of the PJI from holding the
special stockholders meeting on February 5, 1988 or at any
date thereafter, and to preserve and maintain the status quo,
is hereby lifted. The order of the trial court dated January 14,
1988 is hereby SET ASIDE and another order is hereby issued
dismissing the complaint, without pronouncement as to costs.
This Decision is immediately executory.

SO ORDERED.
G.R. No. 141949

October 14, 2002

CEFERINO PADUA, petitioner,

vs.
HON. SANTIAGO RANADA, PRESIDING JUDGE OF
MAKATI, RTC, BRANCH 137,
PHILIPPINE NATIONAL CONSTRUCTION CORP.,
TOLL REGULATORY BOARD,
DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS, and
REPUBLIC OF THE PHILIPPINES, respondents.
----------------------------G.R. No. 151108

October 14, 2002

EDUARDO C. ZIALCITA, petitioner,

vs.
TOLL REGULATORY BOARD AND CITRA METRO MANILA
TOLLWAYS CORPORATION, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
The focal point upon which these two consolidated cases
converge is whether Resolution No. 2001-89 issued by the Toll
Regulatory Board (TRB) is valid.
A brief narration of the factual backdrop is imperative, thus:
On November 9, 2001, the TRB issued Resolution No. 2001-89
authorizing provisional toll rate adjustments at the Metro
Manila Skyway, effective January 1, 2002,[1] thus:
"NOW THEREFORE, it is RESOLVED, as it is hereby RESOLVED:
1. That in view of urgent public interest, the Board
hereby GRANTS to the Metro Manila Skyway Project,
Provisional Relief in accordance with Rule 10, Section
3 of the Rules of Practice and Procedure Governing
Hearing before the Toll Regulatory Board which
states, among others "that the Board may grant
(provisional relief)in its own initiativewithout
prejudice to the final decision after completion of the
hearing;"
2. That the Provisional Relief shall be in form of an
interim toll rate adjustment in accordance with
Section 7.04(3) of the Supplemental Toll Operation
Agreement, dated November 27, 1995, referring to
Interim Adjustments in Toll Rates upon the
occurrence of a significant currency devaluation:
"Be APPROVED, as it is hereby APPROVED.
"RESOLVED FURTHER, as it is hereby RESOLVED:
"That the ProvisionalToll Rates, which are not to exceed the
following:

Section

Unround
ed
Toll Rates

Toll Rates for

Implementation
CLAS
S1

CLAS
S2

CLAS
S3

75.00

75.0
0

150.0
0

225.0
0

Magallane
s to
Bicutan

19.35

19.5
0

38.50

58.00

Bicutan to
Sucat

11.21

11.0
0

22.50

34.00

Sucat to
Alabang

10.99

11.0
0

21.00

32.50

Elevated
Portion
At-Grade
Portion

* includes C5 entry/exit and Merville exit.

"For implementation starting January 1, 2002 after its
publication once a week for three (3) consecutive weeks in a
newspaper of general circulation and that said Provisional Toll
Rate Increase shall remain in effect until such time that the
TRB Board has determined otherwise:
"Be APPROVED as it is hereby APPROVED.

"RESOLVED FURTHERMORE, as it is hereby RESOLVED that the

Provisional Toll Rates be implemented in two (2) stages in
accordance with the following schedule:

Section

Elevat
ed
Portio
n

Unroun
ded Toll
Rates
as
Maximu
m for
One (1)
Year

75.00

Toll Rates for

Implementation
For Class 1 as
Reference
JANUA
RY 1,
2002
to
JULY
1,
2002

JUNE
30,
2002 to
DECEM
BER 31,
2002

65.00

75.00

AtGrade
Portio
n

alleged that there was a compelling need for the increase of

the toll rates to meet the loan obligations of the Project and
the substantial increase in debt-service burden.
Due to heavy opposition, CITRAs petition remained
unresolved. This prompted CITRA to file on October 9, 2001 an
"Urgent Motion for Provisional Approval,"[6] this time,
invoking Section 3, Rule 10 of the "Rules of Practice and
Procedure Governing Hearing Before the Toll Regulatory
Board" (TRB Rules of Procedure) which provides:
"SECTION 3. Provisional Relief. Upon the filing of an
application or petition for the approval of the initial toll rate or
toll rate adjustment, or at any stage, thereafter, the Board
may grant on motion of the pleader or in its own initiative, the
relief prayed for without prejudice to a final decision after
completion of the hearing should the Board find that the
pleading, together with the affidavits and supporting
documents attached thereto and such additional evidence as
may have been requested and presented, substantially
support the provisional order; Provided: That the Board may,
motu proprio, continue to issue orders or grant relief in the
exercise of its powers of general supervision under existing
laws. Provided: Finally, that pending finality of the decision,
the Board may require the Petitioner to deposit in whole or in
part in escrow the provisionally approved adjustment or initial
toll rates." (Emphasis supplied)
On October 30, 2001, CITRA moved to withdraw[7] its "Urgent
Motion for Provisional Approval" without prejudice to its right
to seek or be granted provisional relief under the abovequoted provisions of the TRB Rules of Procedure, obviously,
referring to the power of the Board to act on its own initiative.

Magalla
nes to
Bicutan

19.35

15.00

20.00

Bicutan
to
Sucat

11.21

9.00

11.00

Sucat
to
Alaban
g

10.99

9.00

11.00

"PROVIDED that the recovery of the sum from the interim rate
adjustment shall be applied starting the year 2003.
"APPROVED as it is hereby APPROVED."
On December 17, 24 and 31, 2001, the above Resolution
approving provisional toll rate adjustments was published in
the newspapers of general circulation.[2]
Tracing back the events that led to the issuance of the said
Resolution, it appears that on February 27, 2001 the Citra
Metro Manila Tollways Corporation (CITRA) filed with the TRB
an application for an interim adjustment of the toll rates at
the Metro Manila Skyway Project Stage 1.[3] CITRA moored
its petition on the provisions of the "Supplemental Toll
Operation Agreement" (STOA),[4] authorizing it, as the
investor, to apply for and if warranted, to be granted an
interim adjustment of toll rates in the event of a "significant
currency devaluation." The relevant portions of the STOA
read:
a. The Investor and/or the Operator shall be entitled to apply
for and if warranted, to be granted an interim adjustment of
Toll Rates upon the occurrence of any of the following events:
xxx

xxx

(ii) a significant currency devaluation

xxx

xxx

(i) A currency devaluation shall be deemed "significant" if it

results in a depreciation of the value of the Philippine peso
relative to the US dollar by at least 10%. For purposes hereof
the exchange rate between the Philippine peso and the US
dollar which shall be applicable shall be the exchange rate
between the above mentioned currencies in effect as of the
date of approval of the prevailing preceding Toll Rate.
(ii) The Investors right to apply for an interim Toll Rate
adjustment under section 7.04 (3) (a) (ii) shall be effective
only while any Financing is outstanding and have not yet been
paid in full.
xxx

xxx

(iv) An interim adjustment in Toll Rate shall be considered

such amount as may be required to provide interim relief to
the Investor from a substantial increase in debt-service
burden resulting from the devaluation."[5]
Claiming that the peso exchange rate to a U.S. dollar had
devaluated from P26.1671 in 1995 to P48.00 in 2000, CITRA

On November 7, 2001, CITRA wrote a letter[8] to TRB

expressing its concern over the undue delay in the
proceeding, stressing that any further setback would bring the
Projects financial condition, as well as the Philippine banking
system, to a total collapse. CITRA recounted that out of the
US$354 million funding from creditors, two-thirds (2/3) thereof
came from the Philippine banks and financial institutions, such
as the Landbank of the Philippines and the Government
Service Insurance Services. Thus, CITRA requested TRB to find
a timely solution to its predicament.
On November 9, 2001, TRB granted CITRAs motion to
withdraw[9] the Urgent Motion for Provisional Approval and, at
the same time, issued Resolution No. 2001-89,[10] earlier
quoted.
Hence, petitioners Ceferino Padua and Eduardo Zialcita assail
before this Court the validity and legality of TRB Resolution
No. 2001-89.
Petitioner Ceferino Padua, as a toll payer, filed an "Urgent
Motion for a Temporary Restraining Order to Stop Arbitrary Toll
Fee Increases"[11] in G.R. No. 141949,[12] a petition for
mandamus earlier filed by him. In that petition, Padua seeks
to compel respondent Judge Santiago Ranada of the Regional
Trial Court, Branch 137, Makati City, to issue a writ of
execution for the enforcement of the Court of Appeals
Decision dated August 4, 1989 in CA-G.R. SP No. 13235. In its
Decision, the Court of Appeals ordered the exclusion of certain
portions of the expressways (from Villamor Air Base to
Alabang in the South, and from Balintawak to Tabang in the
North) from the franchise of the PNCC.
In his urgent motion, petitioner Padua claims that: (1)
Resolution No. 2001-89 was issued without the required
publication and in violation of due process; (2) alone, TRB
Executive Director Jaime S. Dumlao, Jr., could not authorize
the provisional toll rate adjustments because the TRB is a
collegial body; and (3) CITRA has no standing to apply for a
toll fee increase since it is an "investor" and not a "franchiseeoperator."
On January 4, 2002, petitioner Padua filed a "Supplemental
Urgent Motion for a TRO against Toll Fee Increases,"[13]
arguing further that: (1) Resolution 2001-89 refers exclusively
to the Metro Manila Skyway Project, hence, there is no legal
basis for the imposition of the increased rate at the at-grade
portions; (2) Resolution No. 2001-89 was issued without basis
considering that while it was signed by three (3) of the five
members of the TRB, none of them actually attended the
hearing; and 3) the computation of the rate adjustment under
the STOA is inconsistent with the rate adjustment formula
under Presidential Decree No. 1894.[14]
On January 10, 2002, the Office of the Solicitor General (OSG)
filed, in behalf of public respondent TRB, Philippine National
Construction Corporation (PNCC), Department of Public Works
and Highways (DPWH) and Judge Ranada, a "Consolidated
Comment"[15] contending that: (1) the TRB has the exclusive
jurisdiction over all matters relating to toll rates; (2)
Resolution No. 2001-89 covers both the Skyway and the atgrade level of the South Luzon Expressway as provided under
the STOA; (3) that while Resolution No. 2001-89 does not
mention any factual basis to justify its issuance, however, it

does not mean that TRB's finding of facts is not supported by

evidence; and (4) petitioner Padua cannot assail the validity of
the STOA because he is not a party thereto.

These same provisions are incorporated in the TRB Rules of

Procedure, particularly in Section 6, Rule 5 and Section 1, Rule
12 thereof.[22]

Upon the other hand, on January 9, 2002, petitioner Eduardo

Zialcita, as a taxpayer and as Congressman of Paraaque City,
filed the present petition for prohibition[16] with prayer for a
temporary restraining order and/or writ of preliminary
injunction against TRB and CITRA, docketed as G.R. No.
151108, impugning the same Resolution No. 2001-89.

Obviously, the laws and the TRB Rules of Procedure have

provided the remedies of an interested Expressways user.[23]
The initial proper recourse is to file a petition for review of the
adjusted toll rates with the TRB. The need for a prior resort to
this body is with reason. The TRB, as the agency assigned to
supervise the collection of toll fees and the operation of toll
facilities, has the necessary expertise, training and skills to
judiciously decide matters of this kind. As may be gleaned
from the petition, the main thrust of petitioner Zialcitas
argument is that the provisional toll rate adjustments are
exorbitant, oppressive, onerous and unconscionable. This is
obviously a question of fact requiring knowledge of the
formula used and the factors considered in determining the
assailed rates. Definitely, this task is within the province of
the TRB.

Petitioner Zialcita asserts that the provisional toll rate

adjustments are exorbitant and that the TRB violated its own
Charter, Presidential Decree No. 1112,[17] when it
promulgated Resolution No. 2001-89 without the benefit of
any public hearing. He also maintains that the TRB violated
the Constitution when it did not express clearly and distinctly
the facts and the law on which Resolution No. 2001-89 was
based. And lastly, he claims that Section 3, Rule 10 of the TRB
Rules of Procedure is not sanctioned by P.D. No. 1112.
Private respondent CITRA, in its comment[18] on
Congressman Zialcitas petition, counters that: (1) the TRB
has primary administrative jurisdiction over all matters
relating to toll rates; (2) prohibition is an inappropriate
remedy because its function is to restrain acts about to be
done and not acts already accomplished; (3) Resolution No.
2001-89 was issued in accordance with law; (4) Section 3,
Rule 10 of the TRB Rules is constitutional; and (5) private
respondent and the Republic of the Philippines would suffer
more irreparable damages than petitioner.
The TRB, through the OSG, filed a separate comment[19]
reiterating the same arguments raised by private respondent
CITRA.
On January 11, 2002, this Court resolved to consolidate the
instant petitions, G.R. No. 141949 and G.R. No. 151108.[20]
We rule for the respondents.
In assailing Resolution No. 2001-89, petitioners came to us via
two unconventional remedies one is an urgent motion for a
TRO to stop arbitrary toll fee increases; and the other is a
petition for prohibition. Unfortunately, both are procedurally
impermissible.
I
Petitioner Paduas motion is a leap to a legal contest of
different dimension. As previously stated, G.R. No. 141949 is a
petition for mandamus seeking to compel respondent Judge
Ranada to issue a writ of execution for the enforcement of the
Court of Appeals Decision dated August 4, 1989 in CA-G.R. SP
No. 13235. The issue therein is whether the application for a
writ of execution should be by a mere motion or by an action
for revival of judgment. Thus, for petitioner Padua to suddenly
interject in the same petition the issue of whether Resolution
No. 2001-89 is valid is to drag this Court to his web of legal
convolution. Courts cannot, as a case progresses, resolve the
intrinsic merit of every issue that comes along its way,
particularly those which bear no relevance to the resolution of
the case.
Certainly, petitioner Paduas recourse in challenging the
validity of TRB Resolution No. 2001-89 should have been to
institute an action, separate and independent from G.R. No.
141949.
II
The remedy of prohibition initiated by petitioner Zialcita in
G.R. No. 151108 also suffers several infirmities. Initially, it
violates the twin doctrine of primary administrative
jurisdiction and non-exhaustion of administrative remedies.
P.D. No. 1112 explicitly provides that "the decisions of the TRB
on petitions for the increase of toll rate shall be appealable to
the Office of the President within ten (10) days from the
promulgation thereof."[21] P.D. No. 1894 reiterates this
instruction and further provides:
"SECTION 9. The GRANTEE shall have the right and authority
to adjust any existing toll being charged the users of the
Expressways under the following guidelines:
xxx

xxx

c) Any interested Expressways user shall have the right to file,

within a period of ninety (90) days after the date of
publication of the adjusted toll rate (s), a petition with the Toll
Regulatory Board for a review of the adjusted toll rate (s);
provided, however, that notwithstanding the filing of such
petition and the pendency of the resolution thereof, the
adjusted toll shall be enforceable and collectible by the
GRANTEE effective on the first day of January in accordance
with the immediately preceding paragraph.
xxx

xxx

e) Decisions of the Toll Regulatory Board on petitions for

review of adjusted toll shall be appealable to the Office of the
President within ten (10) days from the promulgation thereof."

We take cognizance of the wealth of jurisprudence on the

doctrine of primary administrative jurisdiction and exhaustion
of administrative remedies. In this era of clogged court
dockets, the need for specialized administrative boards or
commissions with the special knowledge, experience and
capability to hear and determine promptly disputes on
technical matters or intricate questions of facts, subject to
judicial review in case of grave abuse of discretion, is
indispensable. Between the power lodged in an administrative
body and a court, the unmistakable trend is to refer it to the
former."[24] In Industrial Enterprises, Inc. vs. Court of Appeals,
[25] we ruled:
"x x x, if the case is such that its determination requires the
expertise, specialized skills and knowledge of the proper
administrative bodies because technical matters or intricate
questions of facts are involved, then relief must first be
obtained in an administrative proceeding before a remedy will
be supplied by the courts even though the matter is within the
proper jurisdiction of a court."
Moreover, petitioner Zialcitas resort to prohibition is
intrinsically inappropriate. It bears stressing that the office of
this remedy is not to correct errors of judgment but to prevent
or restrain usurpation of jurisdiction or authority by inferior
tribunals and to compel them to observe the limitation of their
jurisdictions. G.R. No. 151108, while designated as a petition
for prohibition, has for its object the setting aside of
Resolution No. 2001-89 on the ground that it was issued
without prior notice, hearing and publication and that the
provisional toll rate adjustments are exorbitant. This is not the
proper subject of prohibition because as long as the inferior
court, tribunal or board has jurisdiction over the person and
subject matter of the controversy, the writ will not lie to
correct errors and irregularities in procedure, or to prevent an
erroneous decision or an enforcement of an erroneous
judgment. And even in cases of encroachment, usurpation,
and improper assumption of jurisdiction, the writ will not issue
where an adequate and applicable remedy by appeal, writ or
error, certiorari, or other prescribed methods of review are
available.[26] In this case, petitioner Zialcita should have
sought a review of the assailed Resolution before the TRB.
III
Even granting that petitioners recourse to the instant
remedies is in order, still, we cannot rule in their favor.
For one, it is not true that the provisional toll rate adjustments
were not published prior to its implementation on January 1,
2002. Records show that they were published on December
17, 24 and 31, 2001[27] in three newspapers of general
circulation, particularly the Philippine Star, Philippine Daily
Inquirer and The Manila Bulletin. Surely, such publications
sufficiently complied with Section 5 of P.D. No. 1112 which
mandates that "no new rates shall be collected unless
published in a newspaper of general publication at least once
a week for three consecutive weeks." At any rate, it must be
pointed out that under Letter of Instruction No. 1334-A,[28]
the TRB may grant and issue ex-parte to any petitioner,
without need of notice, publication or hearing, provisional
authority to collect, pending hearing and decision on the
merits of the petition, the increase in rates prayed for or such
lesser amount as the TRB may in its discretion provisionally
grant. That LOI No. 1334-A has the force and effect of law
finds support in a catena of cases decreeing that "all
proclamations, orders, decrees, instructions, and acts
promulgated, issued, or done by the former President
(Ferdinand E. Marcos) are part of the law of the land, and shall
remain valid, legal, binding, and effective, unless modified,
revoked or superseded by subsequent proclamations, orders,
decrees, instructions, or other acts of the President."[29] In
Association of Small Landowners in the Philippines, Inc. vs.
Secretary of Agrarian Reform,[30] this Court held:
"The Court wryly observes that during the past dictatorship,
every presidential issuance, by whatever name it was called,

had the force and effect of law because it came from

President Marcos. Such are the ways of despots. Hence, it is
futile to argue, as the petitioners do in G.R. No. 79744, that
LOI 474 could not have repealed P.D. No. 27 because the
former was only a letter of instruction. The important thing is
that it was issued by President Marcos, whose word was law
during that time." (Emphasis supplied)
For another, it is not true that it was TRB Executive Director
Dumlao, Jr. alone who issued Resolution No. 2001-89. The
Resolution itself contains the signature of the four TRB
Directors, namely, Simeon A. Datumanong, Emmanuel P.
Bonoan, Ruben S. Reinoso, Jr. and Mario K. Espinosa.[31]
Petitioner Padua would argue that while these Directors
signed the Resolution, none of them personally attended the
hearing. This argument is misplaced. Under our jurisprudence,
an administrative agency may employ other persons, such as
a hearing officer, examiner or investigator, to receive
evidence, conduct hearing and make reports, on the basis of
which the agency shall render its decision. Such a procedure
is a practical necessity.[32] Thus, in Mollaneda vs. Umacob,
[33] we ruled:
" x x x At any rate, it cannot be gainsaid that the term
"administrative body or agency" includes the subordinate
officials upon whose hand the body or agency delegates a
portion of its authority. Included therein are the hearing
officers through whose eyes and ears the administrative body
or agency observes the demeanor, conduct and attitude of
the witnesses and listens to their testimonies.
"It must be emphasized that the appointment of competent
officers to hear and receive evidence is commonly resorted to
by administrative bodies or agencies in the interest of an
orderly and efficient disposition of administrative cases. x x x
"x x x Corollarily, in a catena of cases, this Court laid down the
cardinal requirements of due process in administrative
proceedings, one of which is that "the tribunal or body or any
of its judges must act on its or his own independent
consideration of the law and facts of the controversy, and not
simply accept the views of a subordinate." Thus, it is logical to
say that this mandate was rendered precisely to ensure that
in cases where the hearing or reception of evidence is
assigned to a subordinate, the body or agency shall not
merely rely on his recommendation but instead shall
personally weigh and assess the evidence which the said
subordinate has gathered."
Be that as it may, we must stress that the TRBs authority to
grant provisional toll rate adjustments does not require the
conduct of a hearing. Pertinent laws and jurisprudence
support this conclusion.
It may be recalled that Former President Ferdinand E. Marcos
promulgated P.D. No. 1112 creating the TRB on March 31,
1977. The end in view was to authorize the collection of toll
fees for the use of certain public improvements in order to
attract private sector investment in the government
infrastructure projects. The TRB was tasked to supervise the
collection of toll fees and the operation of toll facilities. One of
its powers is to "issue, modify and promulgate from time to
time the rates of toll that will be charged the direct users of
toll facilities and upon notice and hearing, to approve or
disapprove petitions for the increase thereof."[34]
To clarify the intent of P.D. No. 1112 as to the extent of the
TRBs power,[35] Former President Marcos further issued LOI
No. 1334-A expressly allowing the TRB to grant ex-parte
provisional or temporary increase in toll rates, thus:
"NOW, THEREFORE, I, FERDINAND E. MARCOS, President of
the Republic of the Philippines, by virtue of the powers vested
in me by the Constitution, do hereby direct, order and instruct
the Toll Regulatory Board to grant and issue ex-parte to any
petitioner, without need of notice, publication or hearing,
provisional authority to collect, pending hearing of and
decision on the merits of such petition, the increase in rates
prayed for or such lesser amount as the Board may in its
discretion provisionally grant, upon (a) a finding that the said
petition is sufficient in form and substance, (b) the submission
of an affidavit by the petitioner showing that the increase in
rates substantially conforms to the formula, if any stipulated
in the franchise or toll operation agreement/certificate of the
petitioner and that failure to immediately impose and collect
the increase in rates would result in outright delay or
stoppage of urgently needed improvements, expansion or
repairs of toll facilities and/or in great irreparable injury to the
petitioner, and (c) the submission by the petitioner to the
Board of a bond, in such amount and from such surety or
sureties and under such terms and conditions as the Board
shall fix, to guarantee the refund of the increase in rates to
the affected toll payers in case it is finally determined, after
notice and hearing, that the petitioner is not entitled, in whole
or in part, to the same. Any provisional toll rate increases shall
be effective immediately upon approval without need of
publication."

Thereafter, the TRB promulgated as part of its Rules of

Procedure, the following provision:
"RULE 5
PROCEDURE FOR APPROVAL OF TOLL RATE
"Section 2. Provisional Relief Upon initial findings of the
Board that the Petition for the approval of initial toll rate or
the petition for toll rate adjustment is in accordance with
Sections 1 and 2 of Rule 2, Section 2 of Rule 3 and Section 1
of Rule 4 hereof, the Board within a reasonable time after the
filing of the Petition, may in an en banc decision provisionally
approve the initial toll rate or toll rate adjustment, without the
necessity of any notice and hearing."
From the foregoing, it is clear that a hearing is not necessary
for the grant of provisional toll rate adjustment. The language
of LOI No. 1334-A is not susceptible of equivocation. It
"directs, orders and instructs" the TRB to issue provisional toll
rates adjustment ex-parte without the need of notice, hearing
and publication. All that is necessary is that it be issued upon
(1) a finding that the main petition is sufficient in form and
substance; (2) the submission of an affidavit showing that the
increase in rates substantially conforms to the formula, if any
is stipulated in the franchise or toll operation agreement, and
that failure to immediately impose and collect the increase in
rates would result in great irreparable injury to the petitioner;
and (3) the submission of a bond. Again, whether or not CITRA
complied with these requirements is an issue that must be
addressed to the TRB.
The practice is not something peculiar. We have ruled in a
number of cases that an administrative agency may be
empowered to approve provisionally, when demanded by
urgent public need, rates of public utilities without a hearing.
The reason is easily discerned from the fact that provisional
rates are by their nature temporary and subject to adjustment
in conformity with the definitive rates approved after final
hearing.[36] In Maceda vs. Energy Regulatory Board,[37] we
ruled that while the ERB is not precluded from conducting a
hearing on the grant of provisional authority which is of
course, the better procedure however, it can not be
stigmatized if it failed to conduct one. Citing Citizens Alliance
for Consumer Protection vs. Energy Regulatory Board,[38] this
Court held:
In the light of Section 8 quoted above, public respondent
Board need not even have conducted formal hearings in these
cases prior to issuance of its Order of 14 August 1987
granting a provisional increase of prices. The Board, upon its
own discretion and on the basis of documents and evidence
submitted by private respondents, could have issued an order
granting provisional relief immediately upon filing by private
respondents of their respective applications. In this respect,
the Court considers the evidence presented by private
respondents in support of their applications -.i.e., evidence
showing that importation costs of petroleum products had
gone up; that the peso had depreciated in value; and that the
Oil Price Stabilization Fund (OPSF) had been depleted as
substantial and hence constitutive of at least prima facie basis
for issuance by the Board of a provisional relief order granting
an increase in the prices of petroleum products.
Anent petitioner Paduas contention that CITRA has no
standing to apply for a toll fee increase, suffice it to say that
CITRAs right stems from the STOA which was entered into by
no less than the Republic of the Philippines and by the PNCC.
Section 7.04 of the STOA provides that the Investor, CITRA,
and/or the Operator, PNCC, shall be entitled to apply for and if
warranted, to be granted an interim adjustment of toll rates in
case of force majeure and a significant currency valuation.[39]
Now, unless set aside through proper action, the STOA has the
force and effect of law between the contracting parties, and is
entitled to recognition by this Court. [40] On the same breath,
we cannot sustain Paduas contention that the term "Metro
Manila Skyway" Project excludes the at-grade portions of the
South Luzon Expressway considering that under the same
STOA the "Metro Manila Skyway" includes: "(a) the South
Metro Manila Skyway, coupled with the rehabilitated at-grade
portion of the South Luzon Expressway, from Alabang to
Quirino Avenue; (b) the Central Metro Manila Skyway, from
Quirino Avenue to A. Bonifacio Avenue; x x x."[41]
Petitioner Zialcita faults the TRB for not stating the facts and
the law on which Resolution No. 2001-89 is based. Petitioner is
wrong. Suffice it to state that while Section 14, Article VIII of
the 1987 Constitution provides that "no decision shall be
rendered by any court without expressing therein clearly and
distinctly the facts and the law on which it is based," this rule
applies only to a decision of a court of justice, not TRB.[42]
At this point, let it be stressed that we are not passing upon
the reasonableness of the provisional toll rate adjustments. As
we have earlier mentioned, this matter is best addressed to
the TRB.
IV

In fine, as what we intimated in Philippine National

Construction Corp. vs. Court of Appeals,[43] we commend
petitioners for devoting their time and effort on a matter so
imbued with public interest as in this case. But we can do no
better than to brush aside their chief objections to the
provisional toll rate adjustments, for a different approach
would lead this Court astray into the field of factual conflict
where its pronouncements would not rest on solid grounds.
Time and again, we have impressed that this Court is not a
trier of facts, more so, in the consideration of an extraordinary
remedy of prohibition where only questions of lack or excess
of jurisdiction or grave abuse of discretion is to be
entertained.
And to accord the main petition for mandamus in G.R. No.
141949 the full deliberation it deserves, we deem it
appropriate to discuss its merit on another occasion. Anyway,
G.R. No. 141949 was consolidated with G.R. No. 151108 only
by reason of petitioner Paduas deviant motion assailing
Resolution 2001-89. As we have previously said, the main
petition in G.R. No. 141949 presents an entirely different issue
and is set on a different factual landscape.
WHEREFORE, petitioner Paduas "Urgent Motion for Temporary
Restraining Order to Stop Arbitrary Toll Fee Increases" is
DENIED and petitioner Zialcitas "Petition for Prohibition" is
DISMISSED.
SO ORDERED.
G.R. No. 115863 March 31, 1995
AIDA D. EUGENIO, petitioner,
vs.
CIVIL SERVICE COMMISSION, HON. TEOFISTO T.
GUINGONA, JR. & HON. SALVADOR ENRIQUEZ,
JR.,respondents.

WHEREAS, Section 8 (c), Title I, Subtitle A, Book V of the

administrative Code of 1987 provides that "The third level
shall cover Positions in the Career Executive Service";
WHEREAS, the Commission recognizes the imperative
need to consolidate, integrate and unify the
administration of all levels of positions in the career
service.
WHEREAS, the provisions of Section 17, Title I, Subtitle A.
Book V of the Administrative Code of 1987 confers on the
Commission the power and authority to effect changes in
its organization as the need arises.
WHEREAS, Section 5, Article IX-A of the Constitution
provides that the Civil Service Commission shall enjoy
fiscal autonomy and the necessary implications thereof;
NOW THEREFORE, foregoing premises considered, the
Civil Service Commission hereby resolves to streamline
reorganize and effect changes in its organizational
structure. Pursuant thereto, the Career Executive Service
Board, shall now be known as the Office for Career
Executive Service of the Civil Service Commission.
Accordingly, the existing personnel, budget, properties
and equipment of the Career Executive Service Board
shall now form part of the Office for Career Executive
Service.
The above resolution became an impediment. to the
appointment of petitioner as Civil Service Officer, Rank IV. In a
letter to petitioner, dated June 7, 1994, the Honorable Antonio
T. Carpio, Chief Presidential legal Counsel, stated:
xxx xxx xxx

PUNO, J.:
The power of the Civil Service Commission to abolish the
Career Executive Service Board is challenged in this petition
for certiorari and prohibition.
First the facts. Petitioner is the Deputy Director of the
Philippine Nuclear Research Institute. She applied for a Career
Executive Service (CES) Eligibility and a CESO rank on August
2, 1993, she was given a CES eligibility. On September 15,
1993, she was recommended to the President for a CESO rank
by the Career Executive Service Board. 1
All was not to turn well for petitioner. On October 1, 1993,
respondent Civil Service Commission 2 passed Resolution No.
93-4359, viz:
RESOLUTION NO. 93-4359
WHEREAS, Section 1(1) of Article IX-B provides that Civil
Service shall be administered by the Civil Service
Commission, . . .;
WHEREAS, Section 3, Article IX-B of the 1987 Philippine
Constitution provides that "The Civil Service Commission,
as the central personnel agency of the government, is
mandated to establish a career service and adopt
measures to promote morale, efficiency, integrity,
responsiveness, progresiveness and courtesy in the civil
service, . . .";
WHEREAS, Section 12 (1), Title I, Subtitle A, Book V of the
Administrative Code of 1987 grants the Commission the
power, among others, to administer and enforce the
constitutional and statutory provisions on the merit
system for all levels and ranks in the Civil Service;

On 1 October 1993 the Civil Service Commission issued

CSC Resolution No. 93-4359 which abolished the Career
Executive Service Board.
Several legal issues have arisen as a result of the
issuance of CSC Resolution No. 93-4359, including
whether the Civil Service Commission has authority to
abolish the Career Executive Service Board. Because
these issues remain unresolved, the Office of the
President has refrained from considering appointments of
career service eligibles to career executive ranks.
xxx xxx xxx
You may, however, bring a case before the appropriate
court to settle the legal issues arising from issuance by
the Civil Service Commission of CSC Resolution No. 934359, for guidance of all concerned.
Thank You.
Finding herself bereft of further administrative relief as the
Career Executive Service Board which recommended her
CESO Rank IV has been abolished, petitioner filed the petition
at bench to annul, among others, resolution No. 93-4359. The
petition is anchored on the following arguments:
A.
IN VIOLATION OF THE CONSTITUTION, RESPONDENT
COMMISSION USURPED THE LEGISLATIVE FUNCTIONS OF
CONGRESS WHEN IT ABOLISHED THE CESB, AN OFFICE
CREATED BY LAW, THROUGH THE ISSUANCE OF CSC:
RESOLUTION NO. 93-4359;
B.

WHEREAS, Section 7, Title I, Subtitle A, Book V of the

Administrative Code of 1987 Provides, among others, that
The Career Service shall be characterized by (1) entrance
based on merit and fitness to be determined as far as
practicable by competitive examination, or based highly
technical qualifications; (2) opportunity for advancement
to higher career positions; and (3) security of tenure;

ALSO IN VIOLATION OF THE CONSTITUTION, RESPONDENT

CSC USURPED THE LEGISLATIVE FUNCTIONS OF
CONGRESS WHEN IT ILLEGALLY AUTHORIZED THE
TRANSFER OF PUBLIC MONEY, THROUGH THE ISSUANCE
OF CSC RESOLUTION NO. 93-4359.

Required to file its Comment, the Solicitor General agreed with

the contentions of petitioner. Respondent Commission,
however, chose to defend its ground. It posited the following
position:
ARGUMENTS FOR PUBLIC RESPONDENT-CSC
I. THE INSTANT PETITION STATES NO CAUSE OF ACTION
AGAINST THE PUBLIC RESPONDENT-CSC.
II. THE RECOMMENDATION SUBMITTED TO THE
PRESIDENT FOR APPOINTMENT TO A CESO RANK OF
PETITIONER EUGENIO WAS A VALID ACT OF THE CAREER
EXECUTIVE SERVICE BOARD OF THE CIVIL SERVICE
COMMISSION AND IT DOES NOT HAVE ANY DEFECT.
III. THE OFFICE OF THE PRESIDENT IS ESTOPPED FROM
QUESTIONING THE VALIDITY OF THE RECOMMENDATION
OF THE CESB IN FAVOR OF PETITIONER EUGENIO SINCE
THE PRESIDENT HAS PREVIOUSLY APPOINTED TO CESO
RANK FOUR (4) OFFICIALS SIMILARLY SITUATED AS SAID
PETITIONER. FURTHERMORE, LACK OF MEMBERS TO
CONSTITUTE A QUORUM. ASSUMING THERE WAS NO
QUORUM, IS NOT THE FAULT OF PUBLIC RESPONDENT
CIVIL SERVICE COMMISSION BUT OF THE PRESIDENT WHO
HAS THE POWER TO APPOINT THE OTHER MEMBERS OF
THE CESB.
IV. THE INTEGRATION OF THE CESB INTO THE
COMMISSION IS AUTHORIZED BY LAW (Sec. 12 (1), Title I,
Subtitle A, Book V of the Administrative Code of the
1987). THIS PARTICULAR ISSUE HAD ALREADY BEEN
SETTLED WHEN THE HONORABLE COURT DISMISSED THE
PETITION FILED BY THE HONORABLE MEMBERS OF THE
HOUSE OF REPRESENTATIVES, NAMELY: SIMEON A.
DATUMANONG, FELICIANO R. BELMONTE, JR., RENATO V.
DIAZ, AND MANUEL M. GARCIA IN G.R. NO. 114380. THE
AFOREMENTIONED PETITIONERS ALSO QUESTIONED THE
INTEGRATION OF THE CESB WITH THE COMMISSION.
We find merit in the petition. 3
The controlling fact is that the Career Executive Service Board
(CESB) was created in the Presidential Decree (P.D.) No. 1 on
September 1, 1974 4 which adopted the Integrated Plan.
Article IV, Chapter I, Part of the III of the said Plan provides:
Article IV Career Executive Service
1. A Career Executive Service is created to form a
continuing pool of well-selected and development
oriented career administrators who shall provide
competent and faithful service.
2. A Career Executive Service hereinafter referred to in
this Chapter as the Board, is created to serve as the
governing body of the Career Executive Service. The
Board shall consist of the Chairman of the Civil Service
Commission as presiding officer, the Executive Secretary
and the Commissioner of the Budget as exofficio members and two other members from the private
sector and/or the academic community who are familiar
with the principles and methods of personnel
administration.
xxx xxx xxx
5. The Board shall promulgate rules, standards and
procedures on the selection, classification, compensation
and career development of members of the Career
Executive Service. The Board shall set up the organization
and operation of the service. (Emphasis supplied)
It cannot be disputed, therefore, that as the CESB was created
by law, it can only be abolished by the legislature. This follows
an unbroken stream of rulings that the creation and abolition
of public offices is primarily a legislative function. As aptly
summed up in AM JUR 2d on Public Officers and
Employees, 5 viz:

Except for such offices as are created by the Constitution,

the creation of public offices is primarily a legislative
function. In so far as the legislative power in this respect
is not restricted by constitutional provisions, it supreme,
and the legislature may decide for itself what offices are
suitable, necessary, or convenient. When in the
exigencies of government it is necessary to create and
define duties, the legislative department has the
discretion to determine whether additional offices shall be
created, or whether these duties shall be attached to and
become ex-officio duties of existing offices. An office
created by the legislature is wholly within the power of
that body, and it may prescribe the mode of filling the
office and the powers and duties of the incumbent, and if
it sees fit, abolish the office.
In the petition at bench, the legislature has not enacted any
law authorizing the abolition of the CESB. On the contrary, in
all the General Appropriations Acts from 1975 to 1993, the
legislature has set aside funds for the operation of CESB.
Respondent Commission, however, invokes Section 17,
Chapter 3, Subtitle A. Title I, Book V of the Administrative
Code of 1987 as the source of its power to abolish the CESB.
Section 17 provides:
Sec. 17. Organizational Structure. Each office of the
Commission shall be headed by a Director with at least
one Assistant Director, and may have such divisions as
are necessary independent constitutional body, the
Commission may effect changes in the organization as
the need arises.
But as well pointed out by petitioner and the Solicitor General,
Section 17 must be read together with Section 16 of the said
Code which enumerates the offices under the respondent
Commission, viz:
Sec. 16. Offices in the Commission. The Commission
shall have the following offices:
(1) The Office of the Executive Director headed by an
Executive Director, with a Deputy Executive Director shall
implement policies, standards, rules and regulations
promulgated by the Commission; coordinate the
programs of the offices of the Commission and render
periodic reports on their operations, and perform such
other functions as may be assigned by the Commission.
(2) The Merit System Protection Board composed of a
Chairman and two (2) members shall have the following
functions:
xxx xxx xxx
(3) The Office of Legal Affairs shall provide the Chairman
with legal advice and assistance; render counselling
services; undertake legal studies and researches; prepare
opinions and ruling in the interpretation and application
of the Civil Service law, rules and regulations; prosecute
violations of such law, rules and regulations; and
represent the Commission before any court or tribunal.
(4) The Office of Planning and Management shall
formulate development plans, programs and projects;
undertake research and studies on the different aspects
of public personnel management; administer
management improvement programs; and provide fiscal
and budgetary services.
(5) The Central Administrative Office shall provide the
Commission with personnel, financial, logistics and other
basic support services.
(6) The Office of Central Personnel Records shall formulate
and implement policies, standards, rules and regulations
pertaining to personnel records maintenance, security,
control and disposal; provide storage and extension
services; and provide and maintain library services.
(7) The Office of Position Classification and
Compensation shall formulate and implement policies,

standards, rules and regulations relative to the

administration of position classification and compensation.
(8) The Office of Recruitment, Examination and
Placement shall provide leadership and assistance in
developing and implementing the overall Commission
programs relating to recruitment, execution and placement,
and formulate policies, standards, rules and regulations for
the proper implementation of the Commission's
examination and placement programs.
(9) The Office of Career Systems and Standards shall
provide leadership and assistance in the formulation and
evaluation of personnel systems and standards relative to
performance appraisal, merit promotion, and employee
incentive benefit and awards.
(10) The Office of Human Resource Development shall
provide leadership and assistance in the development and
retention of qualified and efficient work force in the Civil
Service; formulate standards for training and staff
development; administer service-wide scholarship
programs; develop training literature and materials;
coordinate and integrate all training activities and evaluate
training programs.
(11) The Office of Personnel Inspection and Audit shall
develop policies, standards, rules and regulations for the
effective conduct or inspection and audit personnel and
personnel management programs and the exercise of
delegated authority; provide technical and advisory services
to Civil Service Regional Offices and government agencies
in the implementation of their personnel programs and
evaluation systems.
(12) The Office of Personnel Relations shall provide
leadership and assistance in the development and
implementation of policies, standards, rules and regulations
in the accreditation of employee associations or
organizations and in the adjustment and settlement of
employee grievances and management of employee
disputes.
(13) The Office of Corporate Affairs shall formulate and
implement policies, standards, rules and regulations
governing corporate officials and employees in the areas of
recruitment, examination, placement, career development,
merit and awards systems, position classification and
compensation, performing appraisal, employee welfare and
benefit, discipline and other aspects of personnel
management on the basis of comparable industry practices.
(14) The Office of Retirement Administration shall be
responsible for the enforcement of the constitutional and
statutory provisions, relative to retirement and the
regulation for the effective implementation of the
retirement of government officials and employees.
(15) The Regional and Field Offices. The Commission
shall have not less than thirteen (13) Regional offices each
to be headed by a Director, and such field offices as may be
needed, each to be headed by an official with at least the
rank of an Assistant Director.
As read together, the inescapable conclusion is that
respondent Commission's power to reorganize is limited to
offices under its control as enumerated in Section 16, supra.
From its inception, the CESB was intended to be an
autonomous entity, albeit administratively attached to
respondent Commission. As conceptualized by the
Reorganization Committee "the CESB shall be autonomous. It
is expected to view the problem of building up executive
manpower in the government with a broad and positive
outlook." 6 The essential autonomous character of the CESB
is not negated by its attachment to respondent Commission.
By said attachment, CESB was not made to fall within the
control of respondent Commission. Under the Administrative
Code of 1987, the purpose of attaching one functionally
inter-related government agency to another is to attain
"policy and program coordination." This is clearly etched out
in Section 38(3), Chapter 7, Book IV of the aforecited Code,
to wit:

(3) Attachment. (a) This refers to the lateral relationship

between the department or its equivalent and attached
agency or corporation for purposes of policy and program
coordination. The coordination may be accomplished by
having the department represented in the governing board
of the attached agency or corporation, either as chairman
or as a member, with or without voting rights, if this is
permitted by the charter; having the attached corporation
or agency comply with a system of periodic reporting which
shall reflect the progress of programs and projects; and
having the department or its equivalent provide general
policies through its representative in the board, which shall
serve as the framework for the internal policies of the
attached corporation or agency.
Respondent Commission also relies on the case
of Datumanong, et al., vs. Civil Service Commission, G. R. No.
114380 where the petition assailing the abolition of the CESB
was dismissed for lack of cause of action. Suffice to state that
the reliance is misplaced considering that the cited case was
dismissed for lack of standing of the petitioner, hence, the
lack of cause of action.
IN VIEW WHEREOF, the petition is granted and Resolution No.
93-4359 of the respondent Commission is hereby annulled
and set aside. No costs.
SO ORDERED.
G.R. No. L-34526 August 9, 1988
HIJO PLANTATION INC., DAVAO FRUITS CORPORATION,
TWIN RIVERS PLANTATION, INC. and MARSMAN & CO.,
INC., for themselves and in behalf of other persons and
entities similarly situated, petitioners,
vs.
CENTRAL BANK OF THE PHILIPPINES, respondent.

PARAS, J.:
This is a petition for certiorari and prohibition which seeks: (1)
to declare Monetary Board Resolution No. 1995, series of
1971, as null and void; (2) to prohibit the Central Bank from
collecting the stabilization tax on banana exports shipped
during the period January 1, 1972 to June 30, 1982; and (3) a
refund of the amount collected as stabilization tax from the
Central Bank.
The facts of this case as culled from the records are as
follows:
Hijo Plantation, Inc., Davao Fruits Corporation, Twin Rivers
Plantation, Inc. and Marsman Plantation (Manifestation, Rollo,
P. 18), collectively referred to herein as petitioners, are
domestic corporations duly organized and existing under the
laws of the Philippines, all of which are engaged in the
production and exportation of bananas in and from Mindanao.
Owing to the difficulty of determining the exchange rate of the
peso to the dollar because of the floating rate and the
promulgation of Central Bank Circular No. 289 which imposes
an 80% retention scheme on all dollar earners, Congress
passed Republic Act No. 6125 entitled "an act imposing
STABILIZATION TAX ON CONSIGNMENTS ABROAD TO
ACCELERATE THE ECONOMIC DEVELOPMENT OF THE
PHILIPPINES AND FOR OTHER PURPOSES," approved and
made effective on May 1, 1970 (Comment on Petition, Rollo, p,
32), to eliminate the necessity for said circular and to stabilize
the peso. Among others, it provides as follows:
SECTION 1. There shall be imposed, assessed and collected
a stabilization tax on the gross F.O.B. peso proceeds, based
on the rate of exchange prevailing at the time of receipt of
such proceeds, whether partial or total, of any exportation
of the following products in accordance with the following
schedule:

a. In the case of logs, copra, centrifugal sugar, and

copper ore and concentrates:
Ten per centum of the F.O.B. peso proceeds of
exports received on or after the date of effectivity of
this Act to June thirty, nineteen hundred seventy one;
Eight per centum of the F.O.B. peso proceeds of
exports received from July first, nineteen hundred
seventy-one to June thirty, nineteen hundred
seventy-two;
Six per centum of the F.O.B. peso proceeds of exports
received from July first, nineteen hundred seventy
two to June thirty, nineteen hundred seventy- three;
and
Four per centum of the F.O.B. peso proceeds of
exports received from July first, nineteen hundred
seventy-three to June thirty, nineteen hundred
seventy-four.
b. In the case of molasses, coconut oil, dessicated coconut,
iron ore and concentrates, chromite ore and concentrates,
copra meal or cake, unmanufactured abaca,
unmanufactured tobacco, veneer core and sheets, plywood
(including plywood panels faced with plastics), lumber,
canned pineapples, and bunker fuel oil;
Eight per centum of the F.O.B. peso proceeds of
exports shipped on or after the date of effectivity of
this Act to June thirty, nineteen hundred seventy-one;
Six per centum of the F.O.B. peso proceeds of exports
shipped from July first, nineteen hundred seventy one
to June thirty nineteen hundred seventy- two;
Four per centum of the F.O.B. peso proceeds of
exports shipped from July first, nineteen hundred
seventy-two to June thirty nineteen hundred seventythree; and
Two per centum of the F.O.B. peso proceeds of
exports shipped from July first, nineteen hundred
seventy three to June thirty nineteen hundred
seventy-four.
Any export product the aggregate annual F.O.B. value of
which shall exceed five million United States dollars in any
one calendar year during the effectivity of this Act shall
likewise be subject to the rates of tax in force during the
fiscal years following its reaching the said aggregate
value. (Emphasis supplied).
During the first nine (9) months of calendar year 1971, the
total banana export amounted to an annual aggregate F.O.B.
value of P8,949,000.00 (Answer, Rollo, p. 73) thus exceeding
the aggregate F.O.B. value of five million United States Dollar,
bringing it within the ambit of Republic Act No. 6125.
Consequently, the banana industry was in a dilemma as to
when the stabilization tax was to become due and collectible
from it and under what schedule of Section 1 (b) of Republic
Act 6125 should said tax be collected. Accordingly, petitioners
through their counsel, by letter dated November 5, 1971,
sought the authoritative pronouncement of the Central Bank
(herein referred to as respondent), therein advancing the
opinion that the stabilization tax does not become due and
collectible from the petitioners until July 1, 1972 at the rate of
4% of the F.O.B. peso proceeds of the exports shipped from
July 1, 1972 to June 30,1973. Replying by letter dated
December 17,1971 (Rollo, p. 11), the Central Bank called
attention to Monetary Board Resolution No. 1995 dated
December 3, 1971 which clarified that:
1) For exports of bananas shipped during the period from
January 1, 1972 to June 30, 1972; the stabilization tax shall
be at the rate of 6%;

2) For exports of bananas shipped during the period from

July 1, 1972 to June 30, 1973, the stabilization tax shall be
at the rate of 4%; and
3) For exports of bananas shipped during the period from
July 1, 1973, to June 30, 1974, the stabilization tax shall be
at the rate of 2%."
Contending that said Board Resolution No. 1995 was
manifestly contrary to the legislative intent, petitioners sought
a reconsideration of said Board Resolution by letter dated
December 27, 1971 (Rollo, p. 12) which request for
reconsideration was denied by the respondent, also by letter
dated January 20, 1972 (Rollo, p. 24). With the denial of
petitioners' request for reconsideration, respondent thru its
agent Bank, Rizal Commercial Banking Corporation has been
collecting from the petitioners who have been forced to pay
under protest, such stabilization tax.
Petitioners view respondent's act as a clear violation of the
provision of Republic Act No. 6125, and as an act in excess of
its jurisdiction, hence, this petition.
The sole issue in this case is whether or not respondent acted
with grave abuse of discretion amounting to lack of
jurisdiction when it issued Monetary Board Resolution No.
1995, series of 1971 which in effect reaffirmed Central Bank
Circular No. 309, enacted pursuant to Monetary Board
Resolution No. 1179.
There is here no dispute that the banana industry is liable to
pay the stabilization tax prescribed under Republic Act No.
1995, it being the admission of both parties, that the Industry
has indeed reached and for the first time in the calendar year
1971, a total banana export exceeding the aggregate annual
F.O.B. value of five million United States dollars. The crux of
the controversy, however, is the manner of implementation of
Republic Act No. 6125.
Section 1 of R.A. 6125 clearly provides as follows:
An export product the aggregate annual F.O.B. value of
which shall exceed five million US dollars in any one
calendar year during the effectivity of the act shall likewise
be subject to the rates of tax in force during the fiscal year
following its reaching the said aggregate value."
Petitioners contend that the stabilization tax to be collected
from the banana industry does not become due and
collectible until July 1, 1972 at the rate of 4% of the F.O.B.
peso proceeds of the export shipped from July 1, 1972 to June
30,1973. They further contend that respondent gave
retroactive effect to the law (RA 6125) by ruling in Monetary
Board Resolution No. 1995 dated December 3, 1 971, that the
export stabilization tax on banana industry would start to
accrue on January 1, 1972 at the rate of 6% of the F.O.B. peso
proceeds of export shipped from July 1, 1971 to June 30, 1972
(Rollo, pp. 3-4).
Respondent, on the other hand, contends that the aforecited
provision of RA 6125 merely prescribes the rates that may be
imposed but does not provide when the tax shall be collected
and makes no reference to any definite fixed period when the
tax shall begin to be collected (Rollo, pp. 77-78).
There is merit in this petition.
In the very nature of things, in many cases it becomes
impracticable for the legislative department of the
Government to provide general regulations for the various and
varying details for the management of a particular
department of the Government. It therefore becomes
convenient for the legislative department of the government,
by law, in a most general way, to provide for the conduct,
control, and management of the work of the particular
department of the government; to authorize certain persons,
in charge of the management and control of such department
(United States v. Tupasi Molina, 29 Phil. 119 [19141).
Such is the case in RA 6125, which provided in its Section 6,
as follows:

All rules and regulations for the purpose of carrying out the
provisions of the act shall be promulgated by the Central
Bank of the Philippines and shall take effect fifteen days after
publication in three newspapers of general circulation
throughout the Philippines, one of which shall be in the
national language.
Such regulations have uniformly been held to have the force
of law, whenever they are found to be in consonance and in
harmony with the general purposes and objects of the law.
Such regulations once established and found to be in
conformity with the general purposes of the law, are just as
binding upon all the parties, as if the regulation had been
written in the original law itself (29 Phil. 119, Ibid). Upon the
other hand, should the regulation conflict with the law, the
validity of the regulation cannot be sustained (Director of
Forestry vs. Muroz 23 SCRA 1183).
Pursuant to the aforecited provision, the Monetary Board
issued Resolution No. 1179 which contained the rules and
regulations for the implementation of said provision which
Board resolution was subsequently embodied in Central Bank
Circular No. 309, dated August 10, 1970 (duly published in the
Official Gazette, Vol. 66, No. 34, August 24, 1940, p. 7855 and
in three newspapers of general circulation throughout the
Philippines namely, the Manila Times, Manila Chronicle and
Manila Daily Bulletin). Section 3 of Central Bank Circular No.
309, "provides that the stabilization tax shall begin to apply
on January first following the calendar year during which such
export products shall have reached the aggregate annual
F.O.B. value of more than $5 million and the applicable tax
rates shall be the rates prescribed in schedule (b) of Section 1
of RA No. 6125 for the fiscal year following the reaching of the
said aggregate value." Central Bank Circular No. 309 was
subsequently reaffirmed in Monetary Board Resolution No.
1995 herein assailed by petitioners for being null and void
(Rollo, pp. 97- 98).
In its comment (Rollo, p. 40), respondent argues that the
request for authoritative pronouncement of petitioners was
made because there was no express provision in Section 1 of
RA 6125 which categorically states, when the stabilization tax
shall begin to accrue on those aggregate annual F.O.B. values
exceeding five (5) million United States dollars in any one
calendar year during the effectivity of said act. For which
reason, the law itself authorized it under Section 7 to
promulgate rules and regulations to carry out the provisions of
said law.
In petitioner's reply (Rollo, p. 154) they argue that since the
Banana Exports reached the aggregate annual F.O.B. value of
US $5 million in August 1971, the stabilization tax on banana
should be imposed only on July 1, 1972, the fiscal year
following the calendar year during which the industry attained
the $5 million mark. Their argument finds support in the very
language of the law and upon congressional record where a
clarification on the applicability of the law was categorically
made by the then Senator Aytona who stated that the tax
shall be applicable only after the $5 million aggregate value is
reached, making such tax prospective in application and for a
period of one year- referring to the fiscal year (Annex 8,
Comment of Respondent; Rollo, p. 60). Clearly such
clarification was indicative of the legislative intent. Further,
they argue that respondent bank through the Monetary Board
clearly overstepped RA 6125 which empowered it to
promulgate rules and regulations for the purpose of carrying
out the provisions of said act, because while Section 1 of the
law authorizes it to levy a stabilization tax on petitioners only
in the fiscal year following their reaching the aggregate
annual F.O.B. value of US $5 million, that is, the fiscal year July
1, 1972 to June 30, 1973, at a tax rate of 4% of the F.O.B. peso
proceeds, respondent in gross violation of the law, instead
issued Resolution No. 1995 which impose a 6% stabilization
tax for the calendar year January 1, 1972 to June 30, 1972,
which obviously is in excess of its jurisdiction. It was further
argued that in directing its agent bank to collect the
stabilization tax in accordance with Monetary Board
Resolution No. 1995, it acted whimsically and capriciously.
(Rollo, p. 155).
It will be observed that while Monetary Board Resolution No.
1995 cannot be said to be the product of grave abuse of
discretion but rather the result of respondent's overzealous
desire to carry into effect the provisions of RA 6125, it is

evident that the Board acted beyond its authority under the
law and the Constitution. Hence, the petition for certiorari and
prohibition in the case at bar, is proper.
Moreover, there is no dispute that in case of discrepancy
between the basic law and a rule or regulation issued to
implement said law, the basic law prevails because said rule
or regulation cannot go beyond the terms and provisions of
the basic law (People vs. Lim, 108 Phil. 1091). Rules that
subvert the statute cannot be sanctioned (University of Sto.
Tomas v. Board of Tax Appeals, 93 Phil. 376; Del Mar v. Phil.
Veterans Administration, 51 SCRA 340). Except for
constitutional officials who can trace their competence to act
to the fundamental law itself, a public official must locate to
the statute relied upon a grant of power before he can
exercise it. Department zeal may not be permitted to outrun
the authority conferred by statute (Radio Communications of
the Philippines, Inc. v. Santiago L-29236, August 21, 1974, 58
SCRA 493; cited in Tayug Rural Bank v. Central Bank, L-46158,
November 28,1986,146 SCRA 120,130).
PREMISES CONSIDERED, this petition is hereby GRANTED.
SO ORDERED.
G.R. No. L-29236 August 21, 1974
RADIO COMMUNICATIONS OF THE PHILIPPINES,
INC., petitioner,
vs.
FRANCISCO SANTIAGO and ENRIQUE MEDINA, as
Commissioner, Public Service Commission,respondents.
G.R. No. L-29247 August 21, 1974
RADIO COMMUNICATIONS OF THE PHILIPPINES,
INC., petitioner,
vs.
CONSTANCIO JAUGAN and ENRIQUE MEDINA,
Commissioner, Public Service Commission, respondents.
Jose B. Trenas & Cecero L. Aligaen for petitioner.
Generoso Almario for respondents.

FERNANDO, J.:p
It is a legal question of significance that was raised in these
two petitions for review, to be decided jointly. It is whether the
Public Service Commission, no longer in existence by virtue of
the Presidential Decree reorganizing the executive branch of
the national government 1 had the jurisdiction to act on
complaints by dissatisfied customers of petitioner Radio
Communications of the Phil., Inc. and thereafter to penalize it
with a fine. In Radio Communications of the Phil., Inc. v.
Francisco Santiago & Enrique Medina, as Commissioner,
Public Service Commission 2 the dispositive portion of the
challenged order insofar as pertinent reads thus:
"[Wherefore], under Section 21 of the Public Service Act as
amended, the respondent operator of Radio Communications
of the Philippines, Inc. (RCPI) is hereby ordered to pay a fine of
[two hundred pesos](P200.00) within fifteen (15) days from
receipt hereof, with the warning that failure to pay the said
fine within the aforecited period of time, will leave the
Commission no other alternative but to suspend the rates
authorized for the operation of respondent herein." 3 In Radio
Communications of the Phil., Inc. v. Constancio Jaugan &
Enrique Medina, Commissioner, Public Service
Commission, 4 the dispositive portion insofar as pertinent is
worded as follows: "[For all the foregoing considerations],
under Section 21 of the Public Service Act as amended, the
respondent, operator of Radio Communications of the
Philippines, Inc. (RCPI) is hereby ordered to pay a fine of Two
Hundred Pesos (P200.00) within fifteen (15) days from receipt
hereof, with a warning that failure to pay the said fine within
the aforecited period of time, will leave the Commission no
other alternative but to suspend and revoke the rates
authorized, for the operation of respondent herein." 5 The
allegation by petitioner that it was devoid of such competence

is based on the express limitation found in the Public Service

Act 6 expressly exempting radio companies from the
jurisdiction, supervision and control of such body "except with
respect to the fixing of rates." 7 In the face of the provision
itself, it is rather apparent that the Public Service Commission
lacked the required power to proceed against petitioner. There
is nothing in Section 21 thereof which impowers it to impose a
fine that calls for a different conclusion. 8 We have to reverse.
There is no dispute as to the facts. The challenged order in
Radio Communications of the Phil., Inc. v. Santiago and
Medina stated: "It is admitted by respondent [now petitioner]
that on July 12, 1966, a telegram was filed with respondentcompany and the amount of P1.50 was paid for the
transmission of said telegram to Zamboanga City .... The
telegram, however, was never transmitted until now. The
respondent not only did not give any valid explanation, but
did not present any evidence to explain why the said telegram
was not forwarded to the addressee until now. This is,
therefore, a clear case where the respondent, taking
advantage of the rates fixed by this Commission collected the
sum of P1.50 and promised to render a service to the
complainant, i.e. the transmission of his telegram filed on July
12, 1966; but, after receiving the sum of P1.50, respondent
failed to render the promised service," 9 in Radio
Communications of the Phil., Inc. v. Jaugan and Medina, the
order sought to be reviewed had this to say: "The evidence
presented shows that on August 1, 1967, complainant
Constancio Jaugan filed a telegram at the branch office of
respondent in Dumaguete City, ... addressed to Commissioner
Enrique Medina, PSC, Manila. The telegram was received by
an employee of the respondent, Mrs. Jesusa A. Orge, as shown
by the receipt ... dated August 1, 1967, and the sum of P2.64
was collected in payment of said telegram. The telegram, ... in
effect, advised Commissioner Medina that the Land
Registration Case where he was cited by subpoena to testify
before the CFI of Oriental Negros on August 14 and 15, 1967,
was transferred and, therefore, there was no necessity for the
said Commissioner to proceed to Negros Oriental on those
dates. It appears that the said telegram received by Jesusa
Orge at Dumaguete City on August 1, 1967, was transmitted
to Manila, on the same date, but was never delivered to the
addressee, and on August 14 and 15, when Commissioner
Medina appeared before the Dumaguete Court, he was
advised that the case was postponed since August 1 and that
a telegram was sent to the said Commissioner. Inquiries were
made, why the telegram was not received by the
Commissioner in Manila; the Dumaguete Office communicated
with the Manila Office, on the same date, August 14, 1967 and
it was only on August 15, 1967 that the telegram was relayed
to the Public Service Commission and was received by one of
the employees of the Commission, in the absence of
Commissioner Medina who was then in Negros
Oriental. ... ." 10 It was the manifest failure in both cases to
render the service expected of a responsible operator that led
to the imposition of the penalty. The motions for
reconsideration in both cases having proved futile, the matter
was elevated to this Court.
As noted at the outset, a reversal is called for.
1. Except for constitutional officials who can trace their
competence to act to the fundamental law itself, a public
official must locate in the statute relied upon a grant of power
before he can exercise it. It need not be express. It may be
implied from the wording of the law. Absent such a requisite,
however, no warrant exists for the assumption of authority.
The act performed, if properly challenged, cannot meet the
test of validity. It must be set aside. So it must be in these two
petitions. That is to defer to a principle reiterated by this
Court time and time again. 11 That doctrine goes back to a
1916 decision, Bautista v. Angeles, 12 where Chief Justice
Arellano stated the following: "It devolves upon the judicial
power to convince the private individual, the party governed,
that he has no right to do what he did in violating orders of
the administrative authorities issued by them in the exercise
of their rights. Once he is convinced, the administrative
authorities, by virtue of their own powers, impose the weight
of their authority upon him. If they, the administrative
authorities of public officials, exceed lawful limits in the
exercise of their power of execution, the law provides what
shall be done before the judicial power can step in and repair
the damage to the private interest, or apply the law by
declaring what was properly or improperly done in exercising

public power." 13 There is likewise this relevant excerpt

from Villegas v. Subido: 14 "Nothing is better settled in the law
than that a public official exercises power, not rights. The
government itself is merely an agency through which the will
of the state is expressed and enforced. Its officers therefore
are likewise agents entrusted with the responsibility of
discharging its functions. As such there is no presumption that
they are empowered to act. There must be a delegation of
such authority, either express or implied. In the absence of a
valid grant, they are devoid of power. What they do suffers
from a fatal infirmity. That principle cannot be sufficiently
stressed. In the appropriate language of Chief Justice Hughes:
'It must be conceded that departmental zeal may not be
permitted to outrun the authority conferred by statute.'
Neither the high dignity of the office nor the righteousness of
the motive then is an acceptable substitute. Otherwise the
rule of law becomes a myth. Such an eventuality, we must
take all pains to avoid." 15Such a fundamental postulate
applies to the Executive itself. So it has been attested by a
number of cases involving the President of the Philippines. 16
There can be no justification then for the Public Service
Commission imposing the fines in these two petitions. The law
cannot be any clearer. The only power it possessed over radio
companies, as noted was the fix rates. 17 It could not take to
task a radio company for any negligence or misfeasance. It
was bereft of such competence. It was not vested with such
authority. What it did then in these two petitions lacked the
impress of validity.
2. The Public Service Commission having been abolished by
virtue of a Presidential Decree, as set forth at the outset, and
a new Board of Communications having been created to take
its place, nothing said in this decision has reference to
whatever powers are now lodged in the latter body. It is to be
understood, likewise, that insofar as the complainants are
concerned, this decision goes no further than to rule
adversely on the exercise of authority by the Public Service
Commission when it took disciplinary action against petitioner.
WHEREFORE, in L-29236, Radio Communications of the Phil.,
Inc. v. Francisco Santiago and Enrique Medina, the order of
former Commissioner Enrique Medina of October 13, 1967 as
affirmed by the order of the Public Service Commission en
banc of May 3, 1968, is reversed and set aside, and in L29247, Radio Communications of the Phil., Inc. v. Constancio
Jaugan and Enrique Medina, the order of former Commissioner
Enrique Medina of October 10, 1967 as affirmed by the order
of the Public Service Commission en banc of April 4, 1968, is
reversed and set aside. No costs.
G.R. No. L-46158 November 28, 1986
TAYUG RURAL BANK, plaintiff-appellee,
vs.
CENTRAL BANK OF THE PHILIPPINES, defendantappellant.
Bengzon, Bengzon, Villaroman & De Vera Law Office for
plaintiff-appellee.
Evangelista, Bautista & Valdehuesa Law Office for
defendant-appellant.

PARAS, J.:p
Submitted on May 20, 1977 for decision by this Court is this
appeal from the decision dated January 6, 1971 rendered by
the Court of First Instance of Manila, Branch III in Civil Case
No. 76920, the decretal portion of which states as follows:
WHEREFORE, judgment is rendered for the plaintiff on the
complaint and the defendant is ordered to further credit the
plaintiff the amounts collected as 10% penalty in the sum of
P19,335.88 or up to July 15, 1969 and to refrain from
collecting the said 10% penalty on the remaining past due
loans of plaintiff with the defendant.

With respect to defendant's counterclaim, judgment is

hereby rendered against the plaintiff and the defendant is
ordered to pay the Central Bank of the Philippines the
outstanding balance of its past overdue accounts in the sum
of P444,809,45 plus accrued interest at the rate of 1/2 of 1
% per annum with respect to the promissory notes
(Annexes 1 to 1-E of defendant's Answer) and 2-1/2% per
annum with respect to the promissory notes (Annexes 1-f to
1-i of the Answer). From this amount shall be deducted the
sum of P19,335.88 collected as 10% penalty.
The facts of the case based on the parties' stipulation of facts
(Record on Appeal p. 67), are as follows:
Plaintiff-Appellee, Tayug Rural Bank, Inc., is a banking
corporation in Tayug, Pangasinan. During the period from
December 28, 1962 to July 30, 1963, it obtained thirteen (13)
loans from Defendant-Appellant, Central Bank of the
Philippines, by way of rediscounting, at the rate of 1/2 of 1%
per annum from 1962 to March 28, 1963 and thereafter at the
rate of 2-1/2% per anum. The loans, amounting to
P813,000.00 as of July 30, 1963, were all covered by
corresponding promissory notes prescribing the terms and
conditions of the aforesaid loans (Record on Appea, pp. 1553). As of July 15, 1969, the outstanding balance was P
444,809.45 (Record on Appeal, p. 56).

failed to pay their accounts on time and ordered the

certification of this case to this Court for proper determination
(Rollo, pp. 34-35).
On April 20, 1977, the entire record of the case was forwarded
to this Court (Rollo, p. 36). In the resolution of May 20, 1977,
the First Division of this Court, ordered the case docketed and
as already stated declared the same submitted for decision
(Rollo, p. 38).
In its Brief, Appellant assigns the following errors:
I. THE LOWER COURT ERRED IN HOLDING THAT IT IS
BEYOND THE REACH OF THE MONETARY BOARD TO METE
OUT PENALTIES ON PAST DUE LOANS OF RURAL BANKS
ESPECIALLY SINCE NO PENAL CLAUSE HAS BEEN INCLUDED
IN THE PROMISSORY NOTES.
II. THE LOWER COURT ERRED IN HOLDING THAT THE
IMPOSITION OF THE PENALTY IS AN IMPAIRMENT OF THE
OBLIGATION OF CONTRACT WITHOUT DUE PROCESS.
III. THE LOWER COURT ERRED IN NOT FINDING JUDGMENT
AGAINST PLAINTIFF FOR 10% COST OF COLLECTION OF THE
PROMISSORY NOTE AS PROVIDED THEREIN.

On December 23, 1964, Appellant, thru the Director of the

Department of Loans and Credit, issued Memorandum Circular
No. DLC-8, informing all rural banks that an additional penalty
interest rate of ten per cent (10%) per annum would be
assessed on all past due loans beginning January 4, 1965.
Said Memorandum Circular was actually enforced on all rural
banks effective July 4, 1965.

It is undisputed that no penal clause has been included in the

promissory notes. For this reason, the trial court is of the view
that Memorandum Circular DLC-8 issued on December 23,
1964 prescribing retroactive effect on all past due loans,
impairs the obligation of contract and deprives the plaintiff of
its property without due process of law. (Record on Appel, p.
40).

On June 27, 1969, Appellee Rural Bank sued Appellant in the

Court of First Instance of Manila, Branch III, to recover the 10%
penalty imposed by Appellant amounting to P16,874.97, as of
September 27, 1968 and to restrain Appellant from continuing
the imposition of the penalty. Appellant filed a counterclaim
for the outstanding balance and overdue accounts of Appellee
in the total amount of P444,809.45 plus accrued interest and
penalty at 10% per annum on the outstanding balance until
full payment. (Record on Appeal, p. 13). Appellant justified the
imposition of the penalty by way of affirmative and special
defenses, stating that it was legally imposed under the
provisions of Section 147 and 148 of the Rules and
Regulations Governing Rural Banks promulgated by the
Monetary Board on September 5, 1958, under authority of
Section 3 of Republic Act No. 720, as amended (Record on
Appeal, p. 8, Affirmative and Special Defenses Nos. 2 and 3).

On the other hand appellant without opposing appellee's right

against impairment of contracts, contends that when the
promissory notes were signed by appellee, it was chargeable
with knowledge of Sections 147 and 148 of the rules and
regulations authorizing the Central Bank to impose additional
reasonable penalties, which became part of the agreement.
(ibid).

In its answer to the counterclaim, Appellee prayed for the

dismissal of the counterclaim, denying Appellant's allegations
stating that if Appellee has any unpaid obligations with
Appellant, it was due to the latter's fault on account of its
flexible and double standard policy in the granting of
rediscounting privileges to Appellee and its subsequent
arbitrary and illegal imposition of the 10% penalty (Record on
Appeal, p. 57). In its Memorandum filed on November 11,
1970, Appellee also asserts that Appellant had no basis to
impose the penalty interest inasmuch as the promissory notes
covering the loans executed by Appellee in favor of Appellants
do not provide for penalty interest rate of 10% per annum on
just due loans beginning January 4, 1965 (Record on Appeal p.
96).

Memorandum Circular No. DLC-8 issued by the Director of

Appellant's Department of Loans and Credit on December 23,
1964, reads as follows:

The lower court, in its Order dated March 3, 1970, stated that
"only a legal question has been raised in the pleadings" and
upholding the stand of plaintiff Rural Bank, decided the case
in its favor. (Rollo, p. 34).
Appellant appealed the decision of the trial court to the Court
of Appeals, for determination of questions of facts and of law.
However, in its decision promulgated April 13, 1977, the Court
of Appeals, finding no controverted facts and taking note of
the statement of the lower court in its pre-trial Order dated
March 3, 1970 that only a legal question has been raised in
the pleadings, (Record on Appeal, p. 61), ruled that the
resolution of the appeal will solely depend on the legal issue
of whether or not the Monetary Board had authority to
authorize Appellant Central Bank to impose a penalty rate of
10% per annum on past due loans of rural banks which had

Accordingly, the issue is reduced to the sole question as to

whether or not the Central Bank can validly impose the 10%
penalty on Appellee's past overdue loans beginning July 4,
1965, by virtue of Memorandum Circular No. DLC-8 dated
December 23, 1964.
The answer is in the negative.

Pursuant to Monetary Board Resolution No. 1813 dated

December 18, 1964, and in consonance with Section 147
and 148 of the Rules and Regulations Governing Rural
Banks concerning the responsibility of a rural bank to remit
immediately to the Central Bank payments received on
papers rediscounted with the latter including the loan value
of rediscounted papers as they mature, and to liquidate
fully its maturing loan obligations with the Central Bank,
personal checks, for purposes of repayment, shall
considered only after such personal checks shall have been
honored at clearing.
In addition, rural banks which shall default in their loan
obligations, thus incurring past due accounts with the
Central Bank, shall be assessed an additional penalty
interest rate of ten per cent (10%) per annum on such past
due accounts with the Central Bank over and above the
customary interest rate(s) at which such loans were
originally secured from the Central Bank. (Record on
Appeal, p. 135).
The above-quoted Memorandum Circular was issued on the
basis of Sections 147 and 148 of the Rules and Regulations
Governing Rural Banks of the Philippines approved on
September 5, 1958, which provide:

Section 147. Duty of Rural Bank to turn over payment

received for papers discounted or used for collateral. A
Rural Bank receiving any payment on account of papers
discounted or used for collateral must turn the same over to
the creditor bank before the close of the banking day next
following the receipt of payment, as long as the aggregate
discounting on loan amount is not fully paid, unless the
Rural Bank substitutes the same with another eligible paper
with at least the same or earlier maturity and the same or
greater value.
A Rural Bank failing to comply with the provisions of the
preceding paragraph shall ipso facto lose its right to the
rediscounting or loan period, without prejudice to the
Central Bank imposing additional reasonable penalties,
including curtailment or withdrawal of financial assistance.
Sec. 148. Default and other violations of obligation by Rural
Bank, effect. A Rural Bank becomes in default upon the
expiration of the maturity period of its note, or that of the
papers discounted or used as collateral, without the
necessity of demand.
A Rural Bank incurring default, or in any other manner,
violating any of the stipulations in its note, shall suffer the
consequences provided in the second paragraph of the
preceding section. (Record on Appeal, p. 136.)
The "Rules and Regulations Governing Rural Banks" was
published in the Official Gazette, 55 O.G., on June 13, 1959,
pp. 5186-5289. It is by virtue of these same Rules that Rural
Banks re-discount their loan papers with the Central Bank at
2-1/2% interest per annum and in turn lend the money to the
public at 12% interest per annum (Defendant's Reply to
Plaintiff's Memorandum, Record on Appeal, p. 130).
Appellant maintains that it is pursuant to Section 3 of R.A. No.
720, as amended, that the Monetary Board has adopted the
set of Rules and Regulations Governing Rural Banks. It reads:
SEC. 3. In furtherance of this policy, the Monetary Board of
the Central Bank of the Philippines shall formulate the
necessary rules and regulations governing the
establishment and operatives of Rural Banks for the
purpose of providing adequate credit facilities to small
farmers and merchants, or to cooperatives of such farmers
or merchants and to supervise the operation of such banks.
The specific provision under the law claimed as basis for
Sections 147 and 148 of the Rules and Regulations Governing
Rural Banks, that is, on Appellant's authority to extend loans
to Rural Banks by way of rediscounting is Section 13 of R.A.
720, as amended, which provides:
SEC. 13. In an emergency or when a
financial crisis is imminent the Central Bank
may give a loan to any Rural Bank against
assets of the Rural Bank which may be
considered acceptable by a concurrent vote
of at least, five members of the Monetary
Board.
In normal times, the Central Bank may re-discount against
papers evidencing a loan granted by a Rural Bank to any of
its customers which can be liquefied within a period of two
hundred and seventy days: PROVIDED, HOWEVER, That for
the purpose of implementing a nationwide program of
agricultural and industrial development, Rural Banks are
hereby authorized under such terms and conditions as the
Central Bank shall prescribe to borrow on a medium or long
term basis, funds that the Central Bank or any other
government financing institutions shall borrow from the
International Bank for Reconstruction and Development or
other international or foreign lending institutions for the
specific purpose of financing the above stated agricultural
and industrial program. Repayment of loans obtained by the
Central Bank of the Philippines or any other government
financing institution from said foreign lending institutions
under this section shall be guaranteed by the Republic of
the Philippines.

As to the supervising authority of the Monetary Board of the

Central Bank over Rural Banks, the same is spelled-out under
Section 10 of R.A. 720, as follows:
SEC. 10. The power to supervise the operation of any Rural
Bank by the Monetary Board of the Central Bank as herein
indicated, shall consist in placing limits to the maximum
credit allowed any individual borrower; in prescribing the
interest rate; in determining the loan period and loan
procedure; in indicating the manner in which technical
assistance shall be extended to Rural Banks; in imposing a
uniform accounting system and manner of keeping the
accounts and records of the Rural Banks; in undertaking
regular credit examination of the Rural Banks: in instituting
periodic surveys of loan and lending procedures, audits, test
check of cash and other transactions of the Rural Banks; in
conducting training courses for personnel of Rural Banks;
and, in general in supervising the business operation of the
Rural Banks.
Nowhere in any of the above-quoted pertinent provisions of
R.A. 720 nor in any other provision of R.A. 720 for that matter,
is the monetary Board authorized to mete out on rural banks
an additional penalty rate on their past due accounts with
Appellant. As correctly stated by the trial court, while the
Monetary Board possesses broad supervisory powers,
nonetheless, the retroactive imposition of administrative
penalties cannot be taken as a measure supervisory in
character. (Record on Appeal, p. 141).
Administrative rules and regulations have the force and effect
of law (Valerio v. Hon. Secretary of Agriculture and Natural
Resources, 7 SCRA 719; Commissioner of Civil Service v. Cruz,
15 SCRA 638; R.B. Industrial Development Company, Ltd. v.
Enage, 24 SCRA 365; Director of Forestry v. Munoz, 23 SCRA
1183; Gonzalo Sy v. Central Bank of the Philippines, 70 SCRA
570).
There are, however, limitations to the rule-making power of
administrative agencies. A rule shaped out by jurisprudence is
that when Congress authorizes promulgation of administrative
rules and regulations to implement given legislation, all that is
required is that the regulation be not in contradiction with it,
but conform to the standards that the law prescribes (Director
of Forestry v. Munoz, 23 SCRA 1183). The rule delineating the
extent of the binding force to be given to administrative rules
and regulations was explained by the Court in Teoxon v.
Member of the Board of Administrators (33 SCRA 588), thus:
"The recognition of the power of administrative officials to
promulgate rules in the implementation of the statute, as
necessarily limited to what is provided for in the legislative
enactment, may be found as early as 1908 in the case
of United States v. Barrias (11 Phil. 327) in 1914 U.S. v. Tupasi
Molina (29 Phil. 119), in 1936 People v. Santos (63 Phil. 300),
in 1951 Chinese Flour Importers Ass. v. Price Stabilization
Board (89 Phil. 439), and in 1962 Victorias Milling Co., Inc. v.
Social Security Commission (4 SCRA 627). The Court held in
the same case that "A rule is binding on the courts so long as
the procedure fixed for its promulgation is followed and its
scope is within the statute granted by the legislature, even if
the courts are not in agreement with the policy stated therein
or its innate wisdom ...." On the other hand, "administrative
interpretation of the law is at best merely advisory, for it is the
courts that finally determine what the law means." Indeed, it
cannot be otherwise as the Constitution limits the authority of
the President, in whom all executive power resides, to take
care that the laws be faithfully executed. No lesser
administrative, executive office, or agency then can, contrary
to the express language of the Constitution, assert for itself a
more extensive prerogative. Necessarily, it is bound to
observe the constitutional mandate. There must be strict
compliance with the legislative enactment. The rule has
prevailed over the years, the latest restatement of which was
made by the Court in the case of Bautista v. Junio (L-50908,
January 31, 1984, 127 SCRA 342).
In case of discrepancy between the basic law and a rule or
regulation issued to implement said law, the basic law prevails
because said rule or regulation cannot go beyond the terms
and provisions of the basic law (People v. Lim, 108 Phil. 1091).
Rules that subvert the statute cannot be sanctioned
(University of St. Tomas v. Board of Tax Appeals, 93 Phil. 376;
Del Mar v. Phil. Veterans Administration, 51 SCRA 340). Except
for constitutional officials who can trace their competence to

act to the fundamental law itself, a public official must locate

in the statute relied upon a grant of power before he can
exercise it. Department zeal may not be permitted to outrun
the authority conferred by statute (Radio Communications of
the Philippines, Inc. v. Santiago, L-29236, August 21, 1974, 58
SCRA 493).

GLOBE WIRELESS LTD., petitioner,

vs.
PUBLIC SERVICE COMMISSION and ANTONIO B.
ARNAIZ, respondents.

When promulgated in pursuance of the procedure or authority

conferred upon the administrative agency by law, the rules
and regulations partake of the nature of a statute, and
compliance therewith may be enforced by a penal sanction
provided in the law (Victorias Milling Co., Inc. v. Social Security
Commission, 114 Phil. 555; People v. Maceren, L-32166,
October 18, 1977, 79 SCRA 462; Daza v. Republic, L-43276,
September 28, 1984, 132 SCRA 267). Conversely, the rule is
likewise clear. Hence an administrative agency cannot impose
a penalty not so provided in the law authorizing the
promulgation of the rules and regulations, much less one that
is applied retroactively.

G.R. No. 27520 [Globe Wireless Ltd., vs. Public Service

Commission and Antonio B. Arnaiz]. Challenged in this
petition for certiorari is the jurisdiction of the defunct Public
Service Commission [PSC] under Section 21 of Commonwealth
Act No. 146, as amended, to discipline and impose a fine upon
petitioner, Globe Wireless, Ltd., a duly organized Philippines
corporation engaged in ;international telecommunication
business under a franchise granted by Public Acts Nos. 3495,
3692 and 4150 as amended by Republic Act No. 4630.

The records show that DLC Form No. 11 (Folder of Exhibits, p.

16) was revised December 23, 1964 to include the penal
clause, as follows:
In the event that this note becomes past due, the
undersigned shall pay a penalty at the rate of _____ per cent
( ) per annum on such past due account over and above the
interest rate at which such loan was originally secured from
the Central Bank.
Such clause was not a part of the promissory notes executed
by Appellee to secure its loans. Appellant inserted the clause
in the revised DLC Form No. 11 to make it a part of the
contractual obligation of rural banks securing loans from the
Central Bank, after December 23, 1964. Thus, while there is
now a basis for the imposition of the 10% penalty rate on
overdue accounts of rural banks, there was none during the
period that Appellee contracted its loans from Appellant, the
last of which loan was on July 30, 1963. Surely, the rule
cannot be given retroactive effect.
Finally, on March 31, 1970, the Monetary Board in its
Resolution No. 475 effective April 1, 1970, revoked its
Resolution No. 1813, dated December 18, 1964 imposing the
questioned 10% per annum penalty rate on past due loans of
rural banks and amended sub-paragraph (a), Section 10 of the
existing guidelines governing rural banks' applications for a
loan or rediscount, dated May 7, 1969 (Folder of Exhibits, p.
19). As stated by the trial court, this move on the part of the
Monetary Board clearly shows an admission that it has no
power to impose the 10% penalty interest through its rules
and regulations but only through the terms and conditions of
the promissory notes executed by the borrowing rural banks.
Appellant evidently hoped that the defect could be adequately
accomplished by the revision of DLC Form No. 11.
The contention that Appellant is entitled to the 10% cost of
collection in case of suit and should therefore, have been
awarded the same by the court below, is well taken. It is
provided in all the promissory notes signed by Appellee that in
case of suit for the collection of the amount of the note or any
unpaid balance thereof, the Appellee Rural Bank shall pay the
Central Bank of the Philippines a sum equivalent to ten (10%)
per cent of the amount unpaid not in any case less than five
hundred (P500.00) pesos as attorney's fees and costs of suit
and collection. Thus, Appellee cannot be allowed to come to
Court seeking redress for an wrong done against it and then
be allowed to renege on its corresponding obligations.

RESOLUTION

A message addressed to Maria Diaz, Monte Esquina 30,

Madrid, Spain, filed by private respondent Antonio B. Arnaiz
with the telegraph office of the Bureau of Telecommunications
in Dumaguete City was transmitted to the Bureau of
Telecommunications in Manila. It was forwarded to petitioner
Globe Wireless Ltd. for transmission to Madrid. Petitioner sent
the message to the American Cable and Radio Corporation in
New York, which, in turn, transmitted the same to the
Empresa Nacional de Telecommunicaciones in Madrid. The
latter, however, mislaid said message, resulting in its nondelivery to the addressee.
After being informed of said fact, private respondent Arnaiz,
sent to then Public Service Commissioner Enrique Medina an
unverified letter-complaint relating the incident. The
complaint was docketed as PSC Case No. 65-39-OC and
petitioner was required to answer the same. Petitioner, in its
answer, questioned PSC's jurisdiction over the subject matter
of the letter-complaint, even as it denied liability for the nondelivery of the message to the addressee.
Hearing ensued, after which the PSC issued an order finding
petitioner "responsible for the inadequate and unsatisfactory
service complained of, in violation of the Public Service Act"
and ordering it "to pay a fine of TWO HUNDRED [P200.00]
PESOS under Sec. 21 of Com. Act 146, as amended."
petitioner was likewise required to refund the sum of P19.14
to the remitter of the undelivered message. [Annex "C",
petition, . 23, Rollo].
Its motion for reconsideration having been denied, petitioner
instituted the instant petition.
We find for petitioner.
Verily, Section 13 of Commonwealth Act No. 146, as amended
otherwise known as the Public Service Act, vested in the
Public Service Commission jurisdiction, supervision and
control over all Public services and their franchises,
equipment and other properties. However, Section 5 of
Republic Act No. 4630, the legislative franchise under which
petitioner was operating, limited respondent Commission's
jurisdiction over petitioner only to the rate which petitioner
may charge the Public. Thus,
Sec. 5. The Public Service Commission is hereby given
jurisdiction over the grantee only with respect to the rates
which the grantee may charge the public subject to
international commitments made or adhered to by the
Republic of the Philippines. (Emphasis supplied.)

PREMISES CONSIDERED, the decision of the trial court is

hereby AFFIRMED with modification that Appellee Rural Bank
is ordered to pay a sum equivalent to 10% of the outstanding
balance of its past overdue accounts, but not in any case less
than P500.00 as attorney's fees and costs of suit and
collection.

The act complained of consisted in petitioner having allegedly

failed to deliver the telegraphic message of private
respondent to the addressee in Madrid, Spain. Obviously, such
imputed negligence had nothing whatsoever to do with the
subject matter of the very limited jurisdiction of the
Commission over petitioner.

SO ORDERED.

Moreover, under Section 21 of C.A. No. 146, as amended, the

Commission was empowered to impose an administrative fine
in cases of violation of or failure by a Public service to comply
with the terms and conditions of any certificate or any orders,
decisions or regulations of the Commission. petitioner
operated under a legislative franchise, so there were no terms

G.R. No. L-27520 January 21, 1987

nor conditions of any certificate issued by the Commission to

violate. Neither was there any order, decision or regulation
from the Commission applicable to petitioner that the latter
had allegedly violated, disobeyed, defied or disregarded.
Too basic in administrative law to need citation of
jurisprudence is the rule that the jurisdiction and powers of
administrative agencies, like respondent Commission, are
limited to those expressly granted or necessarily implied from
those granted in the legislation creating such body; and any
order without or beyond such jurisdiction is void and
ineffective. The order under consideration belonged to this
category.
ACCORDINGLY, the instant petition is hereby granted and the
order of respondent Public Service Commission in PSC Case
No. 65-39-OC is set aside for being null and void.
G.R. No. 140563

July 14, 2000

DANTE M. POLLOSO, petitioner,

vs.
HON. CELSO D. GANGAN, Chairman, COMMISSION ON
AUDIT, HON. RAUL C. FLORES, COMMISSIONER,
COMMISSION ON AUDIT, HON. EMMANUEL M. DALMAN,
COMMISSIONER, COMMISSION ON AUDIT.respondents.
DECISION
KAPUNAN, J.:
Before this Court is a petition for review from the decision of
the Commission on Audit (COA), dated 28 September 1999 of
herein petitioner Dante M. Polloso, from the disallowance by
the COA Unit Auditor of the amount of P283,763.39
representing payment of legal services rendered by Atty.
Benemerito A. Satorre to the National Power Corporation
(NPC).
The facts of the case are undisputed.
In 1994, the National Power Corporation (NPC), represented by
its President Dr. Francisco L. Viray entered into a service
contract with Atty. Benemerito A. Satorre. Under said contract,
Satorre was to perform the following services for the LeyteCebu and Leyte-Luzon Interconnection Projects of the NPC:

2)....The contract was not supported with Certificate of

Availability of Funds as required under Sec. 86 of P.D. 1445.
3)....The contract was not submitted to the Civil Service
Commission for final review and was not forwarded to the
Compensation and Position Confirmation and Classification
Bureau, DBM for appropriate action as required in CSC MC #
5 Series of 1985.3
Accordingly, the following were held to be personally liable for
the amounts due to Atty. Satorre: Dr. Francisco Viray, NPC
contracting party; Manolo C. Marquez, for certifying the claim
as necessary, lawful and authorized; Andrea B. Roa and
Romeo Gallego, for verifying the supporting documents to be
complete and proper; Jesus Alio, for reviewing the supporting
documents to be complete and proper; Dante M. Polloso,
Project Manager II, Leyte-Cebu Interconnection Project (LCIP),
National Power Corporation-Visayas Regional Center, for
approving the claim; and Benemerito Satorre, as the payee. 4
On 27 January 1995, only petitioner Dante Polloso submitted a
letter-explanation refuting the alleged violation contained in
the Notice of Disallowance and sought reconsideration
thereof.5 This was denied by the Unit Auditor in a resolution,
dated 30 March 1995.6
On 10 October 1995, petitioner appealed the denial of the
Unit Auditor to the Regional Director, COA Regional Office No.
VII;7 the latter denied the same.8
On 29 June 1998, a petition for review was filed before the
Commission Proper, Commission on Audit, Central Office. 9 On
29 October 1999, the COA issued the decision assailed before
this Court. The dispositive portion thereof, reads:
Thus, it is crystal clear from the aforequoted provision of law
and regulations that the service contract entered into by and
between the National Power Corporation and Atty. Satorre is in
contravention thereof.
Upon the foregoing considerations, the instant appeal of MR.
DANTE M. POLLOSO, has to be, as it is hereby denied.
Accordingly, the disallowance of P283,763.39 is hereby
affirmed.10
Hence, this appeal, petitioner raising the following issues:
I

1.....Provide services on administrative and legal matters.

2.....Facilitate, coordinate between the Office of the Project
Director and the Project Manager, and the Office of the
Regional Legal Counsel and other NPC Offices, Local
Government Units and Agencies of Government involving
administrative cases and legal problems.
3.....Provide direction, supervision, coordination and control
of right-of-way activities in the project.

DOES THE PROHIBITION UNDER COA CIRCULAR NO. 86-255

DATED APRIL 2, 1986 AND SEC. 212 OF THE GOVERNMENT
ACCOUNTING AND AUDITING MANUAL IMPOSED ON
GOVERNMENT AGENCIES FROM HIRING PRIVATE LAWYERS
"TO HANDLE THEIR LEGAL CASES" APPLY TO A LAWYER
HIRED BY VIRTUE OF A SERVICE CONTRACT BUT WHO
ACTUALLY HANDLE PURELY RIGHT-OF-WAY MATTERS
(EXCLUDING HANDLING OF COURT CASES)?
II

4.....Perform other pertinent services as may be assigned

him by the Project Director and Project Manager from time
to time.1
The contract provided that in consideration for services
rendered, Satorre would receive a monthly salary P21,749.00
plus representation and transportation allowance of P5,300.2
On 12 January 1995, Unit Auditor Alexander A. Tan, NPC-VRC,
Cebu City issued Notice of Disallowance No. 95-0001-135-94
for the payment of the services rendered by Atty. Satorre for
the period covering March to December 1995 in the total
amount of P283,763.39. The following reasons were cited for
said disallowance:
1)....The contract for services did not have the written
conformity and acquiescence of the Solicitor General or the
Corporate Counsel and concurrence of the Commission on
Audit as required under COA Circular No. 86-255 dated April
2, 1986.

WILL COA CIRCULAR NO. 86-255 DATED APRIL 2, 1986 AND

SEC. 212, VOLUME I OF THE GOVERNMENT ACCOUNTING
AND AUDITING MANUAL OPERATE TO RESTRICT THE
PRACTICE OF THE LAW PROFESSION AND THEREFORE
REPUGNANT TO SEC. 5, ARTICLE VII OF THE 1987 PHILIPPINE
CONSTITUTION?
III
DOES SECTION 38, CHAPTER 9, BOOK I OF EXECUTIVE
ORDER NO. 292, OTHERWISE KNOWN AS THE
ADMINISTRATIVE CODE OF 1987 APPLY TO PETITIONER FOR
HAVING ACTED IN GOOD FAITH AND WITHOUT MALICE AND
MERELY IMPLEMENTED A VALID CONTRACT ENTERED INTO BY
THE PRESIDENT OF THE NATIONAL POWER CORPORATION?
IV

DOES THE PRINCIPLE OF "QUANTUM MERUIT" APPLY TO THE

SERVICES RENDERED BY ATTY. SATORRE WHICH BENEFITTED
THE NATIONAL POWER CORPORATION?11
The petition is without merit.
In the main, petitioner posits that the phrase "handling of
legal cases" should be construed to mean as conduct of cases
or handling of court cases or litigation and not to other legal
matters, such as legal documentation, negotiations,
counseling or right of way matters.
To test the accuracy of such an interpretation, an examination
of the subject COA Circular is in order:
SUBJECT: Inhibition against employment by government
agencies and instrumentalities, including government-owned
or controlled corporations, of private lawyers to handle their
legal cases.
It has come to the attention of this Commission that
notwithstanding restrictions or prohibitions on the matter
under existing laws, certain government agencies,
instrumentalities, and government-owned and/or controlled
corporations, notably government banking and financing
institutions, persist in hiring or employing private lawyers or
law practitioners to render legal services for them and/or to
handle their legal cases in consideration of fixed retainer fees,
at times in unreasonable amounts, paid from public funds. In
keeping with the retrenchment policy of the present
administration, this Commission frowns upon such a practice.
Accordingly, it is hereby directed that, henceforth, the
payment out of public funds of retainer fees to private law
practitioners who are so hired or employed without the prior
written conformity and acquiescence of the Office of the
Solicitor General or the Government Corporate Counsel, as
the case may be, as well as the written concurrence of the
Commission on Audit shall be disallowed in audit and the
same shall be a personal liability of the officials concerned.
[underscoring supplied]
What can be gleaned from a reading of the above circular is
that government agencies and instrumentalities are restricted
in their hiring of private lawyers to render legal services or
handle their cases. No public funds will be disbursed for the
payment to private lawyers unless prior to the hiring of said
lawyer, there is a written conformity and acquiescence from
the Solicitor General or the Government Corporate Counsel.
Contrary to the view espoused by petitioner, the prohibition
covers the hiring of private lawyers to render any form of
legal service. It makes no distinction as to whether or not the
legal services to be performed involve an actual legal
controversy or court litigation. Petitioner insists that the
prohibition pertains only to "handling of legal cases," perhaps
because this is what is stated in the title of the circular. To rely
on the title of the circular would go against a basic rule in
statutory construction that a particular clause should not be
studied as a detached and isolated expression, but the whole
and every part of the statute must be considered in fixing the
meaning of any of its part.12 Petitioner, likewise, insists that
the service contract in question falls outside the ambit of the
circular as what is being curtailed is the payment of retainer
fees and not the payment of fees for legal services actually
rendered.
A retainer fee has been defined as a "preliminary fee to an
attorney or counsel to insure and secure his future services,
and induce him to act for the client. It is intended to
remunerate counsel for being deprived, by being retained by
one party, of the opportunity of rendering services to the
other and of receiving pay from him, and payment of such fee,
in the absence of an express understanding to the contrary, is
neither made nor received in payment of the services
contemplated; its payment has no relation to the obligation of
the client to pay his attorney for the services for which he has
retained him to perform."13 To give such a technical
interpretation to the term "retainer fees" would go against the
purpose of the circular and render the same ineffectual. In his
resolution, Unit Auditor Alexander Tan expounded on the
purpose of the circular, as enunciated therein:

On the claim that COA Circular 86-255 is not applicable in this

case because the inhibition provided for in said Circular
relates to the handling of legal cases of a government agency
and that the contractor was not hired in that capacity but to
handle legal matters (sic) involving right-of-way, it is
maintained that the contracted service falls within the scope
of the inhibition which clearly includes "the hiring or
employing private lawyers or law practitioners to render legal
services for them and/or to handle their legal cases"
Moreover, it is important to mention that the intention of said
Circular is to curb the observed and persistent violation of
existing laws and regulations, including CSC MC # 5 series of
1985 pertaining to the employment of private lawyers on a
contractual basis in government agencies which involves the
disbursement of public funds by subjecting the same to the
conformity and concurrence requirements of said Circular.
Being so, the manner of agreed payment or consideration,
whether termed as a fixed retainer basis or a fixed contract
price patterned after existing salary scale of existing and
comparable positions in NPC-VRC is immaterial as both still
involve the outlay of public funds and also the contractual
employment/hiring of a private lawyer.
Hence, while the circular uses the phrase "retainer fees," such
should not be given its technical interpretation but should
mean any "fee" paid for any legal service rendered. As
pointed out by the Office of the Solicitor General, any
interpretation of subject circular to the contrary would open
the floodgate to future circumventions thereof by the simple
expedience of hiring private lawyers to service the legal
needs of the government not on a retainer basis but by way of
service contract akin to that which Atty. Satorre and the NPC
entered into.14 No dictum is more fundamental in statutory
interpretation than that the intent of the law must prevail over
the letter thereof, for whatever is within the spirit of the
statute is within the statute, since adherence to the letter
would result in an absurdity, injustice and contradictions and
would defeat the plain and vital purpose of the statute. 15
It bears repeating that the purpose of the circular is to curtail
the unauthorized and unnecessary disbursement of public
funds to private lawyers for services rendered to the
government. This is in line with the Commission on Audits
constitutional mandate to promulgate accounting and auditing
rules and regulations including those for the prevention and
disallowance of irregular, unnecessary, excessive, extravagant
or unconscionable expenditures or uses of government funds
and properties.16 Having determined the intent of the law, this
Court has the imperative duty to give it effect even if the
policy goes beyond the letter or words of the statute. 17
Hence, as the hiring of Atty. Satorre was clearly done without
the prior conformity and acquiescence of the Office of the
Solicitor General or the Government Corporate Counsel, as
well as the written concurrence of the Commission on Audit,
the payment of fees to Atty. Satorre was correctly disallowed
in audit by the COA.
Thus being said, it is no longer necessary to delve into
whether or not the hiring of Atty. Satorre is in accord with the
rules of the Civil Service Commission.
Petitioners claim that the Circular is unconstitutional for being
an invalid restriction to the practice of the law profession, is
clearly bereft of any merit. The Government has its own
counsel, which is the Office of the Solicitor General headed by
the Solicitor General,18 while the Office of the Government
Corporate Counsel (OGCC) acts as the principal law office of
the government-owned or controlled corporations.19 It is only
in special cases where these government entities may engage
the services of private lawyers because of their expertise in
certain fields. The questioned COA circular simply sets forth
the prerequisites for a government agency instrumentality in
hiring a private lawyer, which are reasonable safeguards to
prevent irregular, unnecessary, excessive, extravagant or
unconscionable expenditures or uses of government funds
and properties. We fail to see how the restrictions contained in
the COA circular can be considered as a curtailment on the
practice of the legal profession.
Anent petitioners argument that he cannot be held liable for
effecting payment of the disallowed amount because he is not
privy to the service contract, we find the same to be

unmeritorious. This is because petitioners liability arose from

the fact that as project manager, he approved the said claim.
In addition, his assertion that a refusal on his part to certify
payment of the same would subject him to criminal and civil
liabilities cannot hold water simply because it was his duty not
to approve the same for payment upon finding that such was
irregular and in contravention of COA Circular No. 86-255,
dated 2 April 1986.

open provided it sells only those goods not sold in other

stores. And if there's only one existing store, 1 the result is a
monopoly.

We cannot grant the prayer of the petitioner that Atty. Satorre

should be compensated based on the principle of quantum
meruit, on the ground that the government will be unjustly
enriched at the expense of another. We do not deny that Atty.
Satorre has indeed rendered legal services to the government.
However to allow the disbursement of public funds to pay for
his services, despite the absence of requisite consent to his
hiring from the OSG or OGCC would precisely allow
circumvention of COA Circular No. 86-255. In any event, it is
not Atty. Satorre who is liable to return the money already
paid him, rather the same shall be the responsibility of the
officials concerned, among whom include herein petitioner.

Apparently, the Commission acted "in the public

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

WHEREFORE, the petition is hereby DENIED for lack of

showing that the respondents committed a reversible error.
SO ORDERED.
G.R. No. L-23004

June 30, 1965

MAKATI STOCK EXCHANGE, INC., petitioner,

vs.
SECURITIES AND EXCHANGE COMMISSION and MANILA
STOCK EXCHANGE, respondents.
Hermenegildo B. Reyes for petitioner.
Office of the Solicitor General for respondent Securities and
Exchange Commission.
Norberto J. Quisumbing and Emma Quisumbing-Fernando for
respondent Manila Stock Exchange.
BENGZON, C.J.:
This is a review of the resolution of the Securities and
Exchange Commission which would deny the Makati Stock
Exchange, Inc., permission to operate a stock exchange
unless it agreed not to list for trading on its board, securities
already listed in the Manila Stock Exchange.
Objecting to the requirement, Makati Stock Exchange, Inc.
contends that the Commission has no power to impose it and
that, anyway, it is illegal, discriminatory and unjust.
Under the law, no stock exchange may do business in the
Philippines unless it is previously registered with the
Commission by filing a statement containing the information
described in Sec. 17 of the Securities Act (Commonwealth Act
83, as amended).
It is assumed that the Commission may permit registration if
the section is complied with; if not, it may refuse. And there is
now no question that the section has been complied with, or
would be complied with, except that the Makati Stock
Exchange, upon challenging this particular requirement of the
Commission (rule against double listing) may be deemed to
have shown inability or refusal to abide by its rules, and
thereby to have given ground for denying registration. [Sec.
17 (a) (1) and (d)].
Such rule provides: "... nor shall a security already listed in
any securities exchange be listed anew in any other securities
exchange ... ."
The objection of Makati Stock Exchange, Inc., to this rule is
understandable. There is actually only one securities
exchange The Manila Stock Exchange that has been
operating alone for the past 25 years; and all or
presumably all available or worthwhile securities for trading
in the market are now listed there. In effect, the Commission
permits the Makati Stock Exchange, Inc., to deal only with
other securities. Which is tantamount to permitting a store to

It is not farfetched to assert as petitioner does 2 that for all

practical purposes, the Commission's order or resolution
would make it impossible for the Makati Stock Exchange to
operate. So, its "permission" amounted to a "prohibition."

At first glance, the answer should be in the negative, because

the law itself contemplated, and, therefore, tacitly permitted
or tolerated at least, the operation of two or more exchanges.
Wherever two or more exchanges exist, the Commission, by
order, shall require and enforce uniformity of trading
regulations in and/or between said exchanges. [Emphasis
Ours] (Sec. 28b-13, Securities Act.)
In fact, as admitted by respondents, there were five stock
exchanges in Manila, before the Pacific War (p. 10, brief),
when the Securities Act was approved or amended.
(Respondent Commission even admits that dual listing was
practiced then.) So if the existence of more than one
exchange were contrary to public interest, it is strange that
the Congress having from time to time enacted legislation
amending the Securities Act, 4 has not barred multiplicity of
exchanges.
Forgetting for the moment the monopolistic aspect of the
Commission's resolution, let us examine the authority of the
Commission to promulgate and implement the rule in
question.
It is fundamental that an administrative officer has only such
powers as are expressly granted to him by the statute, and
those necessarily implied in the exercise thereof.
In its brief and its resolution now subject to review, the
Commission cites no provision expressly supporting its rule.
Nevertheless, it suggests that the power is "necessary for the
execution of the functions vested in it"; but it makes no
explanation, perhaps relying on the reasons advanced in
support of its position that trading of the same securities in
two or more stock exchanges, fails to give protection to the
investors, besides contravening public interest. (Of this, we
shall treat later) .
On the legality of its rule, the Commission's argument is that:
(a) it was approved by the Department Head before the
War; and (b) it is not in conflict with the provisions of the
Securities Act. In our opinion, the approval of the
Department, 5 by itself, adds no weight in a judicial litigation;
and the test is not whether the Act forbids the Commission
from imposing a prohibition, but whether it empowers the
Commission to prohibit. No specific portion of the statute has
been cited to uphold this power. It is not found in sec. 28 (of
the Securities Act), which is entitled "Powers (of the
Commission) with Respect to Exchanges and Securities." 6
According to many court precedents, the general power to
"regulate" which the Commission has (Sec. 33) does not imply
authority to prohibit." 7
The Manila Stock Exchange, obviously the beneficiary of the
disputed rule, contends that the power may be inferred from
the express power of the Commission to suspend trading in a
security, under said sec. 28 which reads partly:
And if in its opinion, the public interest so requires,
summarily to suspend trading in any registered security on
any securities exchange ... . (Sec. 28[3], Securities Act.)

However, the Commission has not acted nor claimed to

have acted in pursuance of such authority, for the simple
reason that suspension under it may only be for ten days.
Indeed, this section, if applicable, precisely argues against the
position of the Commission because the "suspension," if it is,
and as applied to Makati Stock Exchange, continues for an
indefinite period, if not forever; whereas this Section 28
authorizes suspension for ten days only. Besides, the
suspension of trading in the security should not be on one
exchange only, but on allexchanges; bearing in mind that
suspension should be ordered "for the protection of investors"
(first par., sec. 28) in all exchanges, naturally, and if "the
public interest so requires" [sec. 28(3)].
This brings up the Commission's principal conclusions
underlying its determination viz.: (a) that the establishment of
another exchange in the environs of Manila would be inimical
to the public interest; and (b) that double or multiple listing of
securities should be prohibited for the "protection of the
investors."
(a) Public Interest Having already adverted to this aspect of
the matter, and the emerging monopoly of the Manila Stock
Exchange, we may, at this juncture, emphasize that by
restricting free competition in the marketing of stocks, and
depriving the public of the advantages thereof the
Commission all but permits what the lawpunishes as
monopolies as "crimes against public interest." 8
"A stock exchange is essentially monopolistic," the
Commission states in its resolution (p. 14-a, Appendix, Brief
for Petitioner). This reveals the basic foundation of the
Commission's process of reasoning. And yet, a few pages
afterwards, it recalls the benefits to be derived "from the
existence of two or more exchanges," and the desirability of
"a healthy and fair competition in the securities market," even
as it expresses the belief that "a fair field of competition
among stock exchanges should be encouraged only to
resolve, paradoxically enough, that Manila Stock Exchange
shall, in effect, continue to be the only stock exchange in
Manila or in the Philippines.
"Double listing of a security," explains the Commission,
"divides the sellers and the buyers, thus destroying the
essence of a stock exchange as a two-way auction market for
the securities, where all the buyers and sellers in one
geographical area converge in one defined place, and the
bidders compete with each other to purchase the security at
the lowest possible price and those seeking to sell it compete
with each other to get the highest price therefor. In this sense,
a stock exchange is essentially monopolistic."
Inconclusive premises, for sure. For it is debatable
whether the buyer of stock may get the lowest price where all
the sellers assemble in only one place. The price there, in one
sale, will tend to fix the price for the succeeding, sales,
and he has no chance to get a lower price except at another
stock exchange. Therefore, the arrangement desired by the
Commission may, at most, be beneficial to sellers of stock
not to buyers although what applies to buyers should
obtain equally as to sellers (looking for higher prices).
Besides, there is the brokerage fee which must be considered.
Not to mention the personality of the broker.
(b) Protection of investors. At any rate, supposing the
arrangement contemplated is beneficial to investors (as the
Commission says), it is to be doubted whether it is
"necessary" for their "protection" within the purview of the
Securities Act. As the purpose of the Act is to give adequate
and effective protection to the investing public against
fraudulent representations, or false promises and the
imposition of worthless ventures, 9 it is hard to see how the
proposed concentration of the market has a necessary
bearing to the prevention of deceptive devices or unlawful
practices. For it is not mere semantics to declare that acts for
the protection of investors are necessarily beneficial to them;
but not everything beneficial to them is necessary for their
protection.
And yet, the Commission realizes that if there were two or
more exchanges "the same security may sell for more in one
exchange and sell for less in the other. Variance in price of the

same security would be the rule ... ." Needless to add, the
brokerage rates will also differ.
This, precisely, strengthens the objection to the Commission's
ruling. Such difference in prices and rates gives the buyer of
shares alternative options, with the opportunity to invest at
lower expense; and the seller, to dispose at higher prices.
Consequently, for the investors' benefit (protection is not the
word), quality of listing 10 should be permitted, nay,
encouraged, and other exchanges allowed to operate. The
circumstance that some people "made a lot of money due to
the difference in prices of securities traded in the stock
exchanges of Manila before the war" as the Commission
noted, furnishes no sufficient reason to let one exchange
corner the market. If there was undue manipulation or unfair
advantage in exchange trading the Commission should have
other means to correct the specific abuses.
Granted that, as the Commission observes, "what the country
needs is not another" market for securities already listed on
the Manila Stock Exchange, but "one that would focus its
attention and energies on the listing of new securities and
thus effectively help in raising capital sorely needed by our ...
unlisted industries and enterprises."
Nonetheless, we discover no legal authority for it to shore up
(and stifle) free enterprise and individual liberty along
channels leading to that economic desideratum. 11
The Legislature has specified the conditions under which a
stock exchange may legally obtain a permit (sec. 17,
Securities Act); it is not for the Commission to impose others.
If the existence of two competing exchanges jeopardizes
public interest which is doubtful let the Congress
speak. 12 Undoubtedly, the opinion and recommendation of
the Commission will be given weight by the Legislature, in
judging whether or not to restrict individual enterprise and
business opportunities. But until otherwise directed by law,
the operation of exchanges should not be so regulated as
practically to create a monopoly by preventing the
establishment of other stock exchanges and thereby
contravening:
(a) the organizers' (Makati's) Constitutional right to equality
before the law;
(b) their guaranteed civil liberty to pursue any lawful
employment or trade; and
(c) the investor's right to choose where to buy or to sell,
and his privilege to select the brokers in his employment.

13

And no extended elucidation is needed to conclude that for a

licensing officer to deny license solely on the basis of what he
believes is best for the economy of the country may amount
to regimentation or, in this instance, the exercise of
undelegated legislative powers and discretion.
Thus, it has been held that where the licensing statute does
not expressly or impliedly authorize the officer in charge,
he may not refuse to grant a license simply on the ground
that a sufficient number of licenses to serve the needs of the
public have already been issued. (53 C.J.S. p. 636.)
Concerning res judicata. Calling attention to the
Commission's order of May 27, 1963, which Makati Stock did
not appeal, the Manila Stock Exchange pleads the doctrine
of res judicata. 14 (The order now reviewed is dated May 7,
1964.)
It appears that when Makati Stock Exchange, Inc. presented
its articles of incorporation to the Commission, the latter, after
making some inquiries, issued on May 27, 1963, an order
reading as follows.
Let the certificate of incorporation of the MAKATI STOCK
EXCHANGE be issued, and if the organizers thereof are
willing to abide by the foregoing conditions, they may file
the proper application for the registration and licensing of
the said Exchange.

In that order, the Commission advanced the opinion that "it

would permit the establishment and operation of the proposed
Makati Stock Exchange, provided ... it shall not list for trading
on its board, securities already listed in the Manila Stock
Exchange ... ."
Admittedly, Makati Stock Exchange, Inc. has not appealed
from that order of May 27, 1963. Now, Manila Stock insists
on res judicata.
Why should Makati have appealed? It got the certificate
of incorporation which it wanted. The condition or proviso
mentioned would only apply if and when it subsequently
filed the application for registration as stock exchange. It had
not yet applied. It was not the time to question the
condition; 15 Makati was still exploring the convenience of
soliciting the permit to operate subject to that condition. And
it could have logically thought that, since the condition did not
affect its articles of incorporation, it should not appeal the
order (of May 27, 1963) which after all, granted the certificate
of incorporation (corporate existence) it wanted at that time.
And when the Makati Stock Exchange finally found that it
could not successfully operate with the condition attached, it
took the issue by the horns, and expressing its desire for
registration and license, it requested that the condition
(against double listing) be dispensed with. The order of the
Commission denying, such request is dated May 7, 1964, and
is now under, review.
Indeed, there can be no valid objection to the discussion of
this issue of double listing now, 16 because even if the Makati
Stock Exchange, Inc. may be held to have accepted the
permission to operate with the condition against double
listing (for having failed to appeal the order of May 27, 1963),
still it was not precluded from afterwards contesting 17 the
validity of such condition or rule:

On June 18,1989, the Federation of Associations of Barangay

Councils (FABC) of Catanduanes, composed of eleven (11)
members, in their capacities as Presidents of the Association
of Barangay Councils in their respective municipalities,
convened in Virac, Catanduanes with six members in
attendance for the purpose of holding the election of its
officers.
Present were petitioner Ruperto Taule of San Miguel, Allan
Aquino of Viga, Vicente Avila of Virac, Fidel Jacob of
Panganiban, Leo Sales of Caramoran and Manuel Torres of
Baras. The Board of Election Supervisors/Consultants was
composed of Provincial Government Operation Officer (PGOO)
Alberto P. Molina, Jr. as Chairman with Provincial Treasurer Luis
A. Manlapaz, Jr. and Provincial Election Supervisor Arnold
Soquerata as members.
When the group decided to hold the election despite the
absence of five (5) of its members, the Provincial Treasurer
and the Provincial Election Supervisor walked out.
The election nevertheless proceeded with PGOO Alberto P.
Molina, Jr. as presiding officer. Chosen as members of the
Board of Directors were Taule, Aquino, Avila, Jacob and Sales.
Thereafter, the following were elected officers of the FABC:
President Ruperto Taule
Vice-President Allan Aquino
Secretary Vicente Avila
Treasurer Fidel Jacob
Auditor Leo Sales

(1) An agreement (which shall not be construed as a waiver of

any constitutional right or any right to contest the validity of
any rule or regulation) to comply and to enforce so far as is
within its powers, compliance by its members, with the
provisions of this Act, and any amendment thereto, and any
rule or regulation made or to be made thereunder. (See. 17-a1, Securities Act [Emphasis Ours].)
Surely, this petition for review has suitably been coursed. And
making reasonable allowances for the presumption of
regularity and validity of administrative action, we feel
constrained to reach the conclusion that the respondent
Commission possesses no power to impose the condition of
the rule, which, additionally, results in discrimination and
violation of constitutional rights.
ACCORDINGLY, the license of the petition to operate a stock
exchange is approved without such condition. Costs shall be
paid by the Manila Stock Exchange. So ordered.
G.R. No. 90336 August 12, 1991
RUPERTO TAULE, petitioner,
vs.
SECRETARY LUIS T. SANTOS and GOVERNOR LEANDRO
VERCELES, respondents.
Balgos & Perez and Bugaring, Tugonon & Associates Law
Offices for petitioner.
Juan G. Atencia for private respondent.

On June 19, 1989, respondent Leandro I. Verceles, Governor of

Catanduanes, sent a letter to respondent Luis T. Santos, the
Secretary of Local Government,* protesting the election of the
officers of the FABC and seeking its nullification in view of
several flagrant irregularities in the manner it was
conducted. 2
In compliance with the order of respondent Secretary,
petitioner Ruperto Taule as President of the FABC, filed his
comment on the letter-protest of respondent Governor
denying the alleged irregularities and denouncing said
respondent Governor for meddling or intervening in the
election of FABC officers which is a purely non-partisan affair
and at the same time requesting for his appointment as a
member of the Sangguniang Panlalawigan of the province
being the duly elected President of the FABC in Catanduanes.

On August 4, 1989, respondent Secretary issued a resolution

nullifying the election of the officers of the FABC in
Catanduanes held on June 18, 1989 and ordering a new one to
be conducted as early as possible to be presided by the
Regional Director of Region V of the Department of Local
Government. 4
Petitioner filed a motion for reconsideration of the resolution
of August 4, 1989 but it was denied by respondent Secretary
in his resolution of September 5, 1989. 5
In the petition for certiorari before Us, petitioner seeks the
reversal of the resolutions of respondent Secretary dated
August 4, 1989 and September 5, 1989 for being null and
void.
Petitioner raises the following issues:

GANCAYCO, J.:p
The extent of authority of the Secretary of Local Government
over the katipunan ng mga barangay or the barangay councils
is brought to the fore in this case.

1) Whether or not the respondent Secretary has jurisdiction

to entertain an election protest involving the election of the
officers of the Federation of Association of Barangay
Councils;
2) Whether or not the respondent Governor has the legal
personality to file an election protest;

3) Assuming that the respondent Secretary has jurisdiction

over the election protest, whether or not he committed grave
abuse of discretion amounting to lack of jurisdiction in
nullifying the election;
The Katipunan ng mga Barangay is the organization of
all sangguniang barangays in the following levels: in
municipalities to be known as katipunang bayan; in
cities, katipunang panlungsod; in provinces, katipunang
panlalawigan; in regions, katipunang pampook; and on the
national level, katipunan ng mga barangay. 6
The Local Government Code provides for the manner in which
the katipunan ng mga barangay at all levels shall be
organized:
Sec. 110. Organization. (1) The katipunan at all levels
shall be organized in the following manner:
(a) The katipunan in each level shall elect a board of
directors and a set of officers. The president of each level
shall represent the katipunan concerned in the next higher
level of organization.
(b) The katipunan ng mga barangay shall be composed of
the katipunang pampook, which shall in turn be composed
of the presidents of the katipunang panlalawigan and the
katipunang panlungsod. The presidents of the katipunang
bayan in each province shall constitute the katipunang
panlalawigan. The katipunang panlungsod and the
katipunang bayan shall be composed of the punong
barangays of cities and municipalities, respectively.
xxx xxx xxx
The respondent Secretary, acting in accordance with the
provision of the Local Government Code empowering him to
"promulgate in detail the implementing circulars and the rules
and regulations to carry out the various administrative actions
required for the initial implementation of this Code in such a
manner as will ensure the least disruption of on-going
programs and projects 7 issued Department of Local
Government Circular No. 89-09 on April 7, 1989, 8 to provide
the guidelines for the conduct of the elections of officers of
the Katipunan ng mga Barangay at the municipal, city,
provincial, regional and national levels.
It is now the contention of petitioner that neither the
constitution nor the law grants jurisdiction upon the
respondent Secretary over election contests involving the
election of officers of the FABC, the katipunan ng mga
barangay at the provincial level. It is petitioner's theory that
under Article IX, C, Section 2 of the 1987 Constitution, it is the
Commission on Elections which has jurisdiction over all
contests involving elective barangay officials.
On the other hand, it is the opinion of the respondent
Secretary that any violation of the guidelines as set forth in
said circular would be a ground for filing a protest and would
vest upon the Department jurisdiction to resolve any protest
that may be filed in relation thereto.
Under Article IX, C, Section 2(2) of the 1987 Constitution, the
Commission on Elections shall exercise "exclusive original
jurisdiction over all contests relating to the elections, returns,
and qualifications of all elective regional, provincial, and city
officials, and appellate jurisdiction over all contests involving
elective municipal officials decided by trial courts of general
jurisdiction, or involving elective barangay officials decided by
trial courts of limited jurisdiction." The 1987 Constitution
expanded the jurisdiction of the COMELEC by granting it
appellate jurisdiction over all contests involving elective
municipal officials decided by trial courts of general
jurisdiction or elective barangay officials decided by trial
courts of limited jurisdiction. 9
The jurisdiction of the COMELEC over contests involving
elective barangay officials is limited to appellate jurisdiction
from decisions of the trial courts. Under the law, 10 the sworn
petition contesting the election of a barangay officer shall be
filed with the proper Municipal or Metropolitan Trial Court by

any candidate who has duly filed a certificate of candidacy

and has been voted for the same office within 10 days after
the proclamation of the results. A voter may also contest the
election of any barangay officer on the ground of ineligibility
or of disloyalty to the Republic of the Philippines by filing a
sworn petition for quo warranto with the Metropolitan or
Municipal Trial Court within 10 days after the proclamation of
the results of the election. 11 Only appeals from decisions of
inferior courts on election matters as aforestated may be
decided by the COMELEC.
The Court agrees with the Solicitor General that the
jurisdiction of the COMELEC is over popular elections, the
elected officials of which are determined through the will of
the electorate. An election is the embodiment of the popular
will, the expression of the sovereign power of the people. 12 It
involves the choice or selection of candidates to public office
by popular vote. 13 Specifically, the term "election," in the
context of the Constitution, may refer to the conduct of the
polls, including the listing of voters, the holding of the
electoral campaign, and the casting and counting of the
votes 14 which do not characterize the election of officers in
the Katipunan ng mga barangay. "Election contests" would
refer to adversary proceedings by which matters involving the
title or claim of title to an elective office, made before or after
proclamation of the winner, is settled whether or not the
contestant is claiming the office in dispute 15 and in the case
of elections of barangay officials, it is restricted to
proceedings after the proclamation of the winners as no preproclamation controversies are allowed. 16
The jurisdiction of the COMELEC does not cover protests over
the organizational set-up of the katipunan ng mga barangay
composed of popularly elected punong barangays as
prescribed by law whose officers are voted upon by their
respective members. The COMELEC exercises only appellate
jurisdiction over election contests involving elective barangay
officials decided by the Metropolitan or Municipal Trial Courts
which likewise have limited jurisdiction. The authority of the
COMELEC over the katipunan ng mga barangay is limited by
law to supervision of the election of the representative of
the katipunan concerned to the sanggunian in a particular
level conducted by their own respective organization. 17
However, the Secretary of Local Government is not vested
with jurisdiction to entertain any protest involving the election
of officers of the FABC.
There is no question that he is vested with the power to
promulgate rules and regulations as set forth in Section 222 of
the Local Government Code.
Likewise, under Book IV, Title XII, Chapter 1, See. 3(2) of the
Administrative Code of 1987, ** the respondent Secretary has
the power to "establish and prescribe rules, regulations and
other issuances and implementing laws on the general
supervision of local government units and on the promotion of
local autonomy and monitor compliance thereof by said
units."
Also, the respondent Secretary's rule making power is
provided in See. 7, Chapter II, Book IV of the Administrative
Code, to wit:
(3) Promulgate rules and regulations
necessary to carry out department
objectives, policies, functions, plans,
programs and projects;
Thus, DLG Circular No. 89-09 was issued by respondent
Secretary in pursuance of his rule-making power conferred by
law and which now has the force and effect of law. 18
Now the question that arises is whether or not a violation of
said circular vests jurisdiction upon the respondent Secretary,
as claimed by him, to hear a protest filed in relation thereto
and consequently declare an election null and void.
It is a well-settled principle of administrative law that unless
expressly empowered, administrative agencies are bereft of
quasi- judicial powers. 19 The jurisdiction of administrative
authorities is dependent entirely upon the provisions of the

statutes reposing power in them; they cannot confer it upon

themselves. 20 Such jurisdiction is essential to give validity to
their determinations. 21
There is neither a statutory nor constitutional provision
expressly or even by necessary implication conferring upon
the Secretary of Local Government the power to assume
jurisdiction over an election protect involving officers of
the katipunan ng mga barangay. An understanding of the
extent of authority of the Secretary over local governments is
therefore necessary if We are to resolve the issue at hand.
Presidential power over local governments is limited by the
Constitution to the exercise of general supervision 22"to
ensure that local affairs are administered according to
law." 23 The general supervision is exercised by the President
through the Secretary of Local Government. 24
In administrative law, supervision means overseeing or the
power or authority of an officer to see that the subordinate
officers perform their duties. If the latter fails or neglects to
fulfill them the former may take such action or step as
prescribed by law to make them 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. The fundamental
law permits the Chief Executive to wield no more authority
than that of checking whether said local government or the
officers thereof perform their duties as provided by statutory
enactments. Hence, the President cannot interfere with local
governments so long as the same or its officers act within the
scope of their authority. 25 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. 26
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 election 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
will permit him to interfere in a purely democratic and nonpartisan 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. 27
Indeed, it is the policy of the state to ensure the autonomy of
local governments. 28 This state policy is echoed in the Local
Government Code wherein it is declared that "the State shall
guarantee and promote the autonomy of local government
units to ensure their fullest development as self-reliant
communities and make them more effective partners in the
pursuit of national development and social progress." 29 To
deny the Secretary of Local Government the power to review
the regularity of the elections of officers of the katipunan
would be to enhance the avowed state policy of promoting the
autonomy of local governments.
Moreover, although the Department 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. 30 To monitor means "to watch, observe or
check. 31 This is compatible with the power of supervision of
the Secretary over local governments which as earlier
discussed is limited to checking whether the local government
unit concerned or the officers thereof perform their duties as
provided by statutory enactments. Even the Local
Government Code which grants the Secretary power to issue
implementing circulars, rules and regulations is silent as to
how these issuances should be enforced. Since the
respondent Secretary exercises only supervision and not
control over local governments, it is truly doubtful if he could
enforce compliance with the DLG Circular. 32 Any doubt
therefore as to the power of the Secretary to interfere with

local affairs should be resolved in favor of the greater

autonomy of the local government.
Thus, the Court holds that in assuming jurisdiction over the
election protest filed by respondent Governor and declaring
the election of the officers of the FABC on June 18, 1989 as
null and void, the respondent Secretary acted in excess of his
jurisdiction. The respondent Secretary not having the
jurisdiction to hear an election protest involving officers of the
FABC, the recourse of the parties is to the ordinary courts. The
Regional Trial Courts have the exclusive original jurisdiction to
hear the protest. 33
The provision in DLG Circular No. 89-15 amending DLG
Circular No. 89-09 which states that "whenever the guidelines
are not substantially complied with, the election shall be
declared null and void by the Department of Local
Government and an election shall conduct and being invoked
by the Solicitor General cannot be applied. DLG Circular No.
89-15 was issued on July 3, 1989 after the June 18, 1989
elections of the FABC officers and it is the rule in statutory
construction that laws, including circulars and
regulations 34 cannot be applied retrospectively. 35 Moreover,
such provision is null and void for having been issued in
excess of the respondent Secretary's jurisdiction, inasmuch as
an administrative authority cannot confer jurisdiction upon
itself.
As regards the second issue raised by petitioner, the Court
finds that respondent Governor has the personality to file the
protest. Under Section 205 of the Local Government Code, the
membership of the sangguniang panlalawigan consists of the
governor, the vice-governor, elective members of the
said sanggunian and the presidents of the katipunang
panlalawigan and the kabataang barangay provincial
federation. The governor acts as the presiding officer of
the sangguniang panlalawigan. 36
As presiding officer of the sagguniang panlalawigan, the
respondent governor has an interest in the election of the
officers of the FABC since its elected president becomes a
member of the assembly. If the president of the FABC assumes
his presidency under questionable circumstances and is
allowed to sit in the sangguniang panlalawigan the official
actions of the sanggunian may be vulnerable to attacks as to
their validity or legality. Hence, respondent governor is a
proper party to question the regularity of the elections of the
officers of the FABC.
As to the third issue raised by petitioner, the Court has
already ruled that the respondent Secretary has no
jurisdiction to hear the protest and nullify the elections.
Nevertheless, the Court holds that the issue of the validity of
the elections should now be resolved in order to prevent any
unnecessary delay that may result from the commencement
of an appropriate action by the parties.
The elections were declared null and void primarily for failure
to comply with Section 2.4 of DLG Circular No. 89-09 which
provides that "the incumbent FABC President or the VicePresident shall preside over the reorganizational meeting,
there being a quorum." The rule specifically provides that it is
the incumbent FABC President or Vice-President who shall
preside over the meeting. The word "shall" should be taken in
its ordinary signification, i.e., it must be imperative or
mandatory and not merely
permissive, 37 as the rule is explicit and requires no other
interpretation. If it had been intended that any other official
should preside, the rules would have provided so, as it did in
the elections at the town and city levels 38 as well as the
regional level.. 39
It is admitted that neither the incumbent FABC President nor
the Vice-President presided over the meeting and elections
but Alberto P. Molina, Jr., the Chairman of the Board of Election
Supervisors/Consultants. Thus, there was a clear violation of
the aforesaid mandatory provision. On this ground, the
elections should be nullified.
Under Sec. 2.3.2.7 of the same circular it is provided that a
Board of Election Supervisors/Consultants shall be constituted

to oversee and/or witness the canvassing of votes and

proclamation of winners. The rules confine the role of the
Board of Election Supervisors/Consultants to merely
overseeing and witnessing the conduct of elections. This is
consistent with the provision in the Local Government Code
limiting the authority of the COMELEC to the supervision of
the election. 40
In case at bar, PGOO Molina, the Chairman of the Board,
presided over the elections. There was direct participation by
the Chairman of the Board in the elections contrary to what is
dictated by the rules. Worse, there was no Board of Election
Supervisors to oversee the elections in view of the walk out
staged by its two other members, the Provincial COMELEC
Supervisor and the Provincial Treasurer. The objective of
keeping the election free and honest was therefore
compromised.
The Court therefore finds that the election of officers of the
FABC held on June 18, 1989 is null and void for failure to
comply with the provisions of DLG Circular No. 89-09.
Meanwhile, pending resolution of this petition, petitioner filed
a supplemental petition alleging that public respondent Local
Government Secretary, in his memorandum dated June 7,
1990, designated Augusto Antonio as temporary
representative of the Federation to the sangguniang
panlalawigan of Catanduanes. 41 By virtue of this
memorandum, respondent governor swore into said office
Augusto Antonio on June 14, 1990. 42
The Solicitor General filed his comment on the supplemental
petition 43 as required by the resolution of the Court dated
September 13,1990.
In his comment, the Solicitor General dismissed the
supervening event alleged by petitioner as something
immaterial to the petition. He argues that Antonio's
appointment was merely temporary "until such time that the
provincial FABC president in that province has been elected,
appointed and qualified." 44 He stresses that Antonio's
appointment was only a remedial measure designed to cope
with the problems brought about by the absence of a
representative of the FABC to the "sanggunian ang
panlalawigan."
Sec. 205 (2) of the Local Government Code (B.P. Blg. 337)
provides(2) The sangguniang panlalawigan shall be composed of the
governor, the vice-governor, elective members of the said
sanggunian and the presidents of the katipunang
panlalawigan and the kabataang barangay provincial
federation who shall be appointed by the President of the
Philippines. (Emphasis supplied.)
Batas Pambansa Blg. 51, under Sec. 2 likewise states:
xxx xxx xxx
The sangguniang panlalawigan of each province shall be
composed of the governor as chairman and presiding
officer, the vice-governor as presiding officer pro tempore,
the elective sangguniang panlalawigan members, and the
appointive members consisting of the president of the
provincial association of barangay councils, and the
president of the provincial federation of the kabataang
barangay. (Emphasis supplied.)
In Ignacio vs. Banate Jr. 45 the Court, interpreting similarly
worded provisions of Batas Pambansa Blg. 337 and Batas
Pambansa Blg. 51 on the composition of the sangguniang
panlungsod, 46 declared as null and void the appointment of
private respondent Leoncio Banate Jr. as member of
the Sangguniang Panlungsod of the City of Roxas representing
the katipunang panlungsod ng mga barangay for he lacked
the elegibility and qualification required by law, not being a
barangay captain and for not having been elected president of
the association of barangay councils. The Court held that an
unqualified person cannot be appointed a member of the
sanggunian, even in an acting capacity. In Reyes vs.

Ferrer, 47 the appointment of Nemesio L. Rasgo Jr. as

representative of the youth sector to the sangguniang
panlungsod of Davao City was declared invalid since he was
never the president of the kabataang barangay city federation
as required by Sec. 173, Batas Pambansa Blg. 337.
In the present controversy involving the sangguniang
panlalawigan, the law is likewise explicit. To be appointed by
the President of the Philippines to sit in the sangguniang
panlalawigan is the president of the katipunang panlalawigan.
The appointee must meet the qualifications set by law. 48 The
appointing power is bound by law to comply with the
requirements as to the basic qualifications of the appointee to
the sangguniang panlalawigan. The President of the
Philippines or his alter ego, the Secretary of Local
Government, has no authority to appoint anyone who does
not meet the minimum qualification to be the president of the
federation of barangay councils.
Augusto Antonio is not the president of the federation. He is a
member of the federation but he was not even present during
the elections despite notice. The argument that Antonio was
appointed as a remedial measure in the exigency of the
service cannot be sustained. Since Antonio does not meet the
basic qualification of being president of the federation, his
appointment to the sangguniang panlalawigan is not justified
notwithstanding that such appointment is merely in a
temporary capacity. If the intention of the respondent
Secretary was to protect the interest of the federation in
the sanggunian, he should have appointed the incumbent
FABC President in a hold-over capacity. For even under the
guidelines, the term of office of officers of the katipunan at all
levels shall be from the date of their election until their
successors shall have been duly elected and qualified, without
prejudice to the terms of their appointments as members of
the sanggunian to which they may be correspondingly
appointed. 49 Since the election is still under protest such that
no successor of the incumbent has as yet qualified, the
respondent Secretary has no choice but to have the
incumbent FABC President sit as member of the sanggunian.
He could even have appointed petitioner since he was elected
the president of the federation but not Antonio. The
appointment of Antonio, allegedly the protege of respondent
Governor, gives credence to petitioner's charge of political
interference by respondent Governor in the organization. This
should not be allowed. The barangays should be insulated
from any partisan activity or political intervention if only to
give true meaning to local autonomy.
WHEREFORE, the petition is GRANTED in that the resolution of
respondent Secretary dated August 4, 1989 is hereby SET
ASIDE for having been issued in excess of jurisdiction.
The election of the officials of the ABC Federation held on June
18, 1989 is hereby annulled. A new election of officers of the
federation is hereby ordered to be conducted immediately in
accordance with the governing rules and regulations.
The Supplemental petition is hereby GRANTED. The
appointment of Augusto Antonio as representative to
the Sangguniang Panlalawigan in a temporary capacity is
declared null and void.
No costs.
SO ORDERED.
G.R. No. 93237 November 6, 1992
RADIO COMMUNICATIONS OF THE PHILIPPINES, INC.
(RCPI), petitioner,
vs.
NATIONAL TELECOMMUNICATIONS COMMISSION (NTC)
and JUAN A. ALEGRE, respondents.

PADILLA, J.:
Private respondent Juan A. Alegre's wife, Dr. Jimena Alegre,
sent two (2) RUSH telegrams through petitioner RCPI's

facilities in Taft Ave., Manila at 9:00 in the morning of 17

March 1989 to his sister and brother-in-law in Valencia, Bohol
and another sister-in-law in Espiritu, Ilocos Norte, with the
following identical texts:
MANONG POLING DIED INTERMENT
TUESDAY 1
Both telegrams did not reach their destinations on the
expected dates. Private respondent filed a letter-complaint
against the RCPI with the National Telecommunications
Commission (NTC) for poor service, with a request for the
imposition of the appropriate punitive sanction against the
company.
Taking cognizance of the complaint, NTC directed RCPI to
answer the complaint and set the initial hearing of the case to
2 May 1989. After two (2) resettings, RCPI moved to dismiss
the case on the following grounds:
1. Juan Alegre is not the real party in interest;
2. NTC has no jurisdiction over the case;
3. the continued hearing of the case violates its
constitutional right to due process of law. 2
RCPI likewise moved for deferment of scheduled hearings until
final determination of its motion to dismiss.
On 15 June 1989, NTC proceeded with the hearing and
received evidence for private respondent Juan Alegre. On 3
October 1989, RCPI's motion to dismiss was denied, thus:
The herein complainant is the husband of the sender of the
"rush" telegram that respondent allegedly failed to deliver
in a manner respondent bound itself to undertake, so his
legal interest in this administrative case cannot be seriously
called in question. As regards the issue of jurisdiction, the
authority of the Commission to hear and decide this case
stems from its power of control and supervision over the
operation of public communication utilities as conferred
upon it by law.

merit; 5 hence, this petition for review invoking C.A. 146 Sec.
19(a) which limits the jurisdiction of the Public Service
Commission (precursor of the NTC) to the fixing of rates. RCPI
submits that its position finds support in two (2) decided
cases 6 identical with the present one. Then Justice (later Chief
Justice) Fernando writing for the Court stated:
. . . There can be no justification then for the Public Service
Commission imposing the fines for these two petitions. The
law cannot be any clearer. The only power it possessed over
radio companies, as noted was the (sic ) fix rates. It could
not take to task a radio company for negligence or
misfeasance. It was bereft of such competence. It was not
vested within such authority. . . .
The Public Service Commission having been abolished by
virtue of a Presidential Decree, as set forth at the outset,
and a new Board of Communications having been created
to take its place, nothing said in its decision has reference
to whatever powers are now lodged in the latter body. . . . . .
. (Footnotes omitted)
Two (2) later cases,

adhering to the above tenet ruled:

Even assuming that the respondent Board of

Communications has the power of jurisdiction over
petitioner in the exercise of its supervision to insure
adequate public service, petitioner cannot be subjected to
payment of fine under sec. 21 of the Public Service Act,
because this provision of the law subjects to a fine every
public service that violates or falls (sic) to comply with the
terms and conditions of any certificate or any orders,
decisions and regulations of the Commission. . . . .
The Office of the Solicitor General now claims that the cited
cases are no longer applicable, that the power and authority
of the NTC to impose fines is incidental to its power to
regulate public service utilities and to supervise
telecommunications facilities, which are now clearly defined in
Section 15, Executive Order No. 546 dated 23 July 1979: thus:
Functions of the Commission. The Commission shall
exercise the following functions:
xxx xxx xxx

Besides, the filing of a motion to dismiss is not allowed by

the rules (Section 1, Rule 12, Rules of Practice and
Procedures). Following, however, the liberal construction of
the rules, respondent (sic) motion shall be treated as its
answer or be passed upon after the conclusion of the
hearing on the merits. . . . 3
Hearings resumed in the absence of petitioner RCPI which
was, however, duly notified thereof. On 27 November 1989,
NTC disposed of the controversy in the following manner:
WHEREFORE, in view of all the foregoing, the Commission
finds respondent administratively liable for deficient and
inadequate service defined under Section 19(a) of C.A. 146
and hereby imposes the penalty of FINE payable within
thirty (30) days from receipt hereof in the aggregate
amount of ONE THOUSAND PESOS (P1,000.00) for:
1. Rush Telegram sent to Valencia, Bohol on March 17, 1989
and received on March 21, 1989
3 days x P200.00 per day = P600.00
2. Rush Telegram sent to Espiritu, Ilocos Norte on March 17,
1989 and received on March 20, 1989
2 days x P200.00 per day = P400.00
Total = P1,000.00
ENTERED. November 27, 1989.

A motion for reconsideration by RCPI reiterating averments in

its earlier motion to dismiss was denied for lack of

b. Establish, prescribe and regulate the areas of operation

of particular operators of the public service
communications;
xxx xxx xxx
h. Supervise and inspect the operation of radio stations and
telecommunications facilities.
Regulatory administrative agencies necessarily impose
sanctions, adds the Office of the Solicitor General. RCPI was
fined based on the finding of the NTC that it failed to
undertake adequate service in delivering two (2) rush
telegrams. NTC takes the view that its power of supervision
was broadened by E. O. No. 546, and that this development
superseded the ruling in RCPI vs. Francisco Santiago and
companion cases.
The issues of due process and real parties in interest do not
have to be discussed in this case. This decision will dwell on
the primary question of jurisdiction of the NTC to
administratively impose fines on a telegraph company which
fails to render adequate service to a consumer.
E. O. 546, it will be observed, is couched in general terms. The
NTC stepped "into the shoes" of the Board of Communications
which exercised powers pursuant to the Public Service Act.
The power to impose fines should therefore be read in the
light of the Francisco Santiago case because subsequent
legislation did not grant additional powers to the Board of
Communications. The Board in other words, did not possess
the power to impose administrative fines on public services
rendering deficient service to customers, ergo its successor
cannot arrogate unto itself such power, in the absence of

legislation. It is true that the decision in RCPI vs. Board of

Communications seems to have modified the Santiago ruling
in that the later case held that the Board of Communications
can impose fines if the public service entity violates or fails to
comply with the terms and conditions of any certificate or any
order, decision or regulation of the Commission. But can
private respondent's complaint be similarly treated when the
complaint seeks redress of a grievance against the
company? 8 NTC has no jurisdiction to impose a fine. Globe
Wireless Ltd. vs. Public Service Commission (G. R. No. L27250, 21 January 1987, 147 SCRA 269) says so categorically.
Verily, Section 13 of Commonwealth Act No. 146, as
amended, otherwise known as the Public Service Act,
vested in the Public Service Commission jurisdiction,
supervision and control over all public services and their
franchises, equipment and other properties.
xxx xxx xxx
The act complained of consisted in petitioner having
allegedly failed to deliver the telegraphic message of
private respondent to the addressee in Madrid, Spain.
Obviously, such imputed negligence has nothing
whatsoever to do with the subject matter of the very limited
jurisdiction of the Commission over petitioner.
Moreover, under Section 21 of C. A. 146, as amended, the
Commission was empowered to impose an administrative
fine in cases of violation of or failure by a public service to
comply with the terms and conditions of any certificate or
any orders, decisions or regulations of the Commission.
Petitioner operated under a legislative franchise, so there
were no terms nor conditions of any certificate issued by
the Commission to violate. Neither was there any order,
decision or regulation from the Commission applicable to
petitioner that the latter had allegedly violated, disobeyed,
defied or disregarded.
No substantial change has been brought about by Executive
Order No. 546 invoked by the Solicitor General's Office to
bolster NTC's jurisdiction. The Executive Order is not an
explicit grant of power to impose administrative fines on
public service utilities, including telegraphic agencies, which
have failed to render adequate service to consumers. Neither
has it expanded the coverage of the supervisory and
regulatory power of the agency. There appears to be no
alternative but to reiterate the settled doctrine in
administrative law that:
Too basic in administrative law to need citation of
jurisprudence is the rule that jurisdiction and powers of
administrative agencies, like respondent Commission, are
limited to those expressly granted or necessarily implied
from those granted in the legislation creating such body;
and any order without or beyond such jurisdiction is void
and ineffective . . . (Globe Wireless case, supra).
WHEREFORE, the decision appealed from is REVERSED and
SET ASIDE for lack of jurisdiction of the NTC to render it. The
temporary restraining order issued on 18 June 1990 is made
PERMANENT without prejudice, however, to the filing by the
party aggrieved by the conduct of RCPI, of the proper action in
the proper forum. No costs.
SO ORDERED.
G.R. No. 84811 August 29, 1989
SOLID HOMES, INC., petitioner,
vs.
TERESITA PAYAWAL and COURT OF
APPEALS, respondents.

CRUZ, J.:
We are asked to reverse a decision of the Court of Appeals
sustaining the jurisdiction of the Regional Trial Court of

Quezon City over a complaint filed by a buyer, the herein

private respondent, against the petitioner, for delivery of title
to a subdivision lot. The position of the petitioner, the
defendant in that action, is that the decision of the trial court
is null and void ab initio because the case should have been
heard and decided by what is now called the Housing and
Land Use Regulatory Board.
The complaint was filed on August 31, 1982, by Teresita
Payawal against Solid Homes, Inc. before the Regional Trial
Court of Quezon City and docketed as Civil Case No. Q-36119.
The plaintiff alleged that the defendant contracted to sell to
her a subdivision lot in Marikina on June 9, 1975, for the
agreed price of P 28,080.00, and that by September 10, 1981,
she had already paid the defendant the total amount of P
38,949.87 in monthly installments and interests. Solid Homes
subsequently executed a deed of sale over the land but failed
to deliver the corresponding certificate of title despite her
repeated demands because, as it appeared later, the
defendant had mortgaged the property in bad faith to a
financing company. The plaintiff asked for delivery of the title
to the lot or, alternatively, the return of all the amounts paid
by her plus interest. She also claimed moral and exemplary
damages, attorney's fees and the costs of the suit.
Solid Homes moved to dismiss the complaint on the ground
that the court had no jurisdiction, this being vested in the
National Housing Authority under PD No. 957. The motion was
denied. The defendant repleaded the objection in its answer,
citing Section 3 of the said decree providing that "the National
Housing Authority shall have exclusive jurisdiction to regulate
the real estate trade and business in accordance with the
provisions of this Decree." After trial, judgment was rendered
in favor of the plaintiff and the defendant was ordered to
deliver to her the title to the land or, failing this, to refund to
her the sum of P 38,949.87 plus interest from 1975 and until
the full amount was paid. She was also awarded P 5,000.00
moral damages, P 5,000.00 exemplary damages, P 10,000.00
attorney's fees, and the costs of the suit. 1
Solid Homes appealed but the decision was affirmed by the
respondent court, 2 which also berated the appellant for its
obvious efforts to evade a legitimate obligation, including its
dilatory tactics during the trial. The petitioner was also
reproved for its "gall" in collecting the further amount of P
1,238.47 from the plaintiff purportedly for realty taxes and
registration expenses despite its inability to deliver the title to
the land.
In holding that the trial court had jurisdiction, the respondent
court referred to Section 41 of PD No. 957 itself providing that:
SEC. 41. Other remedies.-The rights and remedies provided
in this Decree shall be in addition to any and all other rights
and remedies that may be available under existing laws.
and declared that "its clear and unambiguous tenor
undermine(d) the (petitioner's) pretension that the court a
quowas bereft of jurisdiction." The decision also dismissed the
contrary opinion of the Secretary of Justice as impinging on
the authority of the courts of justice. While we are disturbed
by the findings of fact of the trial court and the respondent
court on the dubious conduct of the petitioner, we
nevertheless must sustain it on the jurisdictional issue.
The applicable law is PD No. 957, as amended by PD No.
1344, entitled "Empowering the National Housing Authority to
Issue Writs of Execution in the Enforcement of Its Decisions
Under Presidential Decree No. 957." Section 1 of the latter
decree provides as follows:
SECTION 1. In the exercise of its function to regulate the
real estate trade and business and in addition to its powers
provided for in Presidential Decree No. 957, the National
Housing Authority shall have exclusive jurisdiction to hear
and decide cases of the following nature:
A. Unsound real estate business practices;
B. Claims involving refund and any other claims filed by
subdivision lot or condominium unit buyer against the
project owner, developer, dealer, broker or salesman; and

C. Cases involving specific performance of contractuala

statutory obligations filed by buyers of subdivision lot or
condominium unit against the owner, developer, dealer,
broker or salesman. (Emphasis supplied.)
The language of this section, especially the italicized portions,
leaves no room for doubt that "exclusive jurisdiction" over the
case between the petitioner and the private respondent is
vested not in the Regional Trial Court but in the National
Housing Authority. 3
The private respondent contends that the applicable law is BP
No. 129, which confers on regional trial courts jurisdiction to
hear and decide cases mentioned in its Section 19, reading in
part as follows:
SEC. 19. Jurisdiction in civil cases.-Regional
Trial Courts shall exercise exclusive original
jurisdiction:
(1) In all civil actions in which the subject of the litigation is
incapable of pecuniary estimation;

On the competence of the Board to award damages, we find

that this is part of the exclusive power conferred upon it by PD
No. 1344 to hear and decide "claims involving refund and any
other claims filed by subdivision lot or condominium unit
buyers against the project owner, developer, dealer, broker or
salesman." It was therefore erroneous for the respondent to
brush aside the well-taken opinion of the Secretary of Justice
thatSuch claim for damages which the subdivision/condominium
buyer may have against the owner, developer, dealer or
salesman, being a necessary consequence of an
adjudication of liability for non-performance of contractual
or statutory obligation, may be deemed necessarily
included in the phrase "claims involving refund and any
other claims" used in the aforequoted subparagraph C of
Section 1 of PD No. 1344. The phrase "any other claims" is,
we believe, sufficiently broad to include any and all claims
which are incidental to or a necessary consequence of the
claims/cases specifically included in the grant of jurisdiction
to the National Housing Authority under the subject
provisions.

(2) In all civil actions which involve the title to, or

possession of, real property, or any interest therein, except
actions for forcible entry into and unlawful detainer of lands
or buildings, original jurisdiction over which is conferred
upon Metropolitan Trial Courts, Municipal Trial Courts, and
Municipal Circuit Trial Courts;

The same may be said with respect to claims for attorney's

fees which are recoverable either by agreement of the
parties or pursuant to Art. 2208 of the Civil Code (1) when
exemplary damages are awarded and (2) where the
defendant acted in gross and evident bad faith in refusing
to satisfy the plaintiff 's plainly valid, just and demandable
claim.

xxx xxx xxx

xxx xxx xxx

(8) In all other cases in which the demand, exclusive of

interest and cost or the value of the property in
controversy, amounts to more than twenty thousand pesos
(P 20,000.00).
It stresses, additionally, that BP No. 129 should control as the
later enactment, having been promulgated in 1981, after PD
No. 957 was issued in 1975 and PD No. 1344 in 1978.
This construction must yield to the familiar canon that in case
of conflict between a general law and a special law, the latter
must prevail regardless of the dates of their enactment. Thus,
it has been held thatThe fact that one law is special and the other general
creates a presumption that the special act is to be
considered as remaining an exception of the general act,
one as a general law of the land and the other as the law of
the particular case. 4
xxx xxx xxx
The circumstance that the special law is passed before or
after the general act does not change the principle. Where
the special law is later, it will be regarded as an exception
to, or a qualification of, the prior general act; and where the
general act is later, the special statute will be construed as
remaining an exception to its terms, unless repealed
expressly or by necessary implication. 5
It is obvious that the general law in this case is BP No. 129
and PD No. 1344 the special law.
The argument that the trial court could also assume
jurisdiction because of Section 41 of PD No. 957, earlier
quoted, is also unacceptable. We do not read that provision as
vesting concurrent jurisdiction on the Regional Trial Court and
the Board over the complaint mentioned in PD No. 1344 if
only because grants of power are not to be lightly inferred or
merely implied. The only purpose of this section, as we see it,
is to reserve. to the aggrieved party such other remedies as
may be provided by existing law, like a prosecution for the act
complained of under the Revised Penal Code. 6

Besides, a strict construction of the subject provisions of PD

No. 1344 which would deny the HSRC the authority to
adjudicate claims for damages and for damages and for
attorney's fees would result in multiplicity of suits in that
the subdivision condominium buyer who wins a case in the
HSRC and who is thereby deemed entitled to claim
damages and attorney's fees would be forced to litigate in
the regular courts for the purpose, a situation which is
obviously not in the contemplation of the law. (Emphasis
supplied.) 7
As a result of the growing complexity of the modern society, it
has become necessary to create more and more
administrative bodies to help in the regulation of its ramified
activities. Specialized in the particular fields assigned to them,
they can deal with the problems thereof with more expertise
and dispatch than can be expected from the legislature or the
courts of justice. This is the reason for the increasing vesture
of quasi-legislative and quasi-judicial powers in what is now
not unreasonably called the fourth department of the
government.
Statutes conferring powers on their administrative agencies
must be liberally construed to enable them to discharge their
assigned duties in accordance with the legislative
purpose. 8 Following this policy in Antipolo Realty Corporation
v. National Housing Authority, 9 the Court sustained the
competence of the respondent administrative body, in the
exercise of the exclusive jurisdiction vested in it by PD No. 957
and PD No. 1344, to determine the rights of the parties under
a contract to sell a subdivision lot.
It remains to state that, contrary to the contention of the
petitioner, the case of Tropical Homes v. National Housing
Authority 10 is not in point. We upheld in that case the
constitutionality of the procedure for appeal provided for in PD
No. 1344, but we did not rule there that the National Housing
Authority and not the Regional Trial Court had exclusive
jurisdiction over the cases enumerated in Section I of the said
decree. That is what we are doing now.
It is settled that any decision rendered without jurisdiction is a
total nullity and may be struck down at any time, even on
appeal before this Court. 11 The only exception is where the
party raising the issue is barred by estoppel, 12which does not
appear in the case before us. On the contrary, the issue was
raised as early as in the motion to dismiss filed in the trial
court by the petitioner, which continued to plead it in its
answer and, later, on appeal to the respondent court. We have

no choice, therefore, notwithstanding the delay this decision

will entail, to nullify the proceedings in the trial court for lack
of jurisdiction.

installments on Lot No. 15. For his part, Mr. Yuson replied that
he would conform with the request as soon as he was able to
verify the truth of the representation in the notice.

WHEREFORE, the challenged decision of the respondent court

is REVERSED and the decision of the Regional Trial Court of
Quezon City in Civil Case No. Q-36119 is SET ASIDE, without
prejudice to the filing of the appropriate complaint before the
Housing and Land Use Regulatory Board. No costs.

In a second letter dated 27 November 1976, Antipolo Realty

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

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

FELICIANO, J.:
By virtue of a Contract to Sell dated 18 August 1970, Jose
Hernando acquired prospective and beneficial ownership over
Lot. No. 15, Block IV of the Ponderosa Heights Subdivision in
Antipolo, Rizal, from the petitioner Antipolo Realty
Corporation.
On 28 August 1974, Mr. Hernando transferred his rights over
Lot No. 15 to private respondent Virgilio Yuson. The transfer
was embodied in a Deed of Assignment and Substitution of
Obligor (Delegacion), executed with the consent of Antipolo
Realty, in which Mr. Yuson assumed the performance of the
vendee's obligations under the original contract, including
payment of his predecessor's installments in arrears.
However, for failure of Antipolo Realty to develop the
subdivision project in accordance with its undertaking under
Clause 17 of the Contract to Sell, Mr. Yuson paid only the
arrearages pertaining to the period up to, and including, the
month of August 1972 and stopped all monthly installment
payments falling due thereafter Clause 17 reads:
Clause 17. SUBDIVISION BEAUTIFICATION. To insure the
beauty of the subdivision in line with the modern trend of
urban development, the SELLER hereby obligates itself to
provide the subdivision with:

Mr. Yuson refused to pay the September 1972-October 1976

monthly installments but agreed to pay the post October 1976
installments. Antipolo Realty responded by rescinding the
Contract to Sell, and claiming the forfeiture of all installment
payments previously made by Mr. Yuson.
Aggrieved by the rescission of the Contract to Sell, Mr. Yuson
brought his dispute with Antipolo Realty before public
respondent NHA through a letter-complaint dated 10 May
1977 which complaint was docketed in NHA as Case No. 2123.
Antipolo Realty filed a Motion to Dismiss which was heard on 2
September 1977. Antipolo Realty, without presenting any
evidence, moved for the consolidation of Case No. 2123 with
several other cases filed against it by other subdivision lot
buyers, then pending before the NHA. In an Order issued on 7
February 1978, the NHA denied the motion to dismiss and
scheduled Case No. 2123 for hearing.
After hearing, the NHA rendered a decision on 9 March 1978
ordering the reinstatement of the Contract to Sell under the
following conditions:
l) Antipolo Realty Corporation shall sent [sic] to Virgilio
Yuzon a statement of account for the monthly amortizations
from November 1976 to the present;
m) No penalty interest shall be charged for the period from
November 1976 to the date of the statement of account;
and
n) Virgilio Yuzon shall be given sixty (60) days to pay the
arrears shown in the statement of account. 2

a) Concrete curbs and gutters

b) Underground drainage system
c) Asphalt paved roads
d) Independent water system
e) Electrical installation with concrete posts.
f) Landscaping and concrete sidewall
g) Developed park or amphi-theatre
h) 24-hour security guard service.
These improvements shall be complete within a period of
two (2) years from date of this contract. Failure by the
SELLER shall permit the BUYER to suspend his monthly
installments without any penalties or interest charges until
such time that such improvements shall have been
completed. 1
On 14 October 1976, the president of Antipolo Realty sent a
notice to private respondent Yuson advising that the required
improvements in the subdivision had already been completed,
and requesting resumption of payment of the monthly

Antipolo Realty filed a Motion for Reconsideration asserting:

(a) that it had been denied due process of law since it had not
been served with notice of the scheduled hearing; and (b) that
the jurisdiction to hear and decide Mr. Yuson's complaint was
lodged in the regular courts, not in the NHA, since that
complaint involved the interpretation and application of the
Contract to Sell.
The motion for reconsideration was denied on 28 June 1978
by respondent NHA General Manager G.V. Tobias, who
sustained the jurisdiction of the NHA to hear and decide the
Yuson complaint. He also found that Antipolo Realty had in
fact been served with notice of the date of the hearing, but
that its counsel had failed to attend the hearing. 3 The case
was submitted for decision, and eventually decided, solely on
the evidence presented by the complainant.
On 2 October 1978, Antipolo Realty came to this Court with a
Petition for certiorari and Prohibition with Writ of Preliminary
Injunction, which was docketed as G.R. No. L-49051. Once
more, the jurisdiction of the NHA was assailed. Petitioner
further asserted that, under Clause 7 of the Contract to Sell, it
could validly terminate its agreement with Mr. Yuson and, as a
consequence thereof, retain all the prior installment payments
made by the latter. 4
This Court denied certiorari in a minute resolution issued on
11 December 1978, "without prejudice to petitioner's pursuing

the administrative remedy." 5 A motion for reconsideration

was denied on 29 January 1979.
Thereafter, petitioner interposed an appeal from the NHA
decision with the Office of the President which, on 9 March
1979, dismissed the same through public respondent
Presidential Executive Assistant Jacobo C. Clave. 6
In the present petition, Antipolo Realty again asserts that, in
hearing the complaint of private respondent Yuson and in
ordering the reinstatement of the Contract to Sell between the
parties, the NHA had not only acted on a matter beyond its
competence, but had also, in effect, assumed the
performance of judicial or quasi-judicial functions which the
NHA was not authorized to perform.
We find the petitioner's arguments lacking in merit.
It is by now commonplace learning that many administrative
agencies exercise and perform adjudicatory powers and
functions, though to a limited extent only. Limited delegation
of judicial or quasi-judicial authority to administrative
agencies (e.g., the Securities and Exchange Commission and
the National Labor Relations Commission) is well recognized in
our jurisdiction, 7 basically because the need for special
competence and experience has been recognized as essential
in the resolution of questions of complex or specialized
character and because of a companion recognition that the
dockets of our regular courts have remained crowded and
clogged. In Spouses Jose Abejo and Aurora Abejo, et al. vs.
Hon. Rafael dela Cruz, etc., et al., 8 the Court, through Mr.
Chief Justice Teehankee, said:
In the fifties, the Court taking cognizance of the move to
vest jurisdiction in administrative commissions and boards
the power to resolve specialized disputes in the field of
labor (as in corporations, public transportation and public
utilities) ruled that Congress in requiring the Industrial
Court's intervention in the resolution of labor management
controversies likely to cause strikes or lockouts meant such
jurisdiction to be exclusive, although it did not so expressly
state in the law. The Court held that under the "sensemaking and expeditious doctrine of primary jurisdiction . . .
the courts cannot or will not determine a controversy
involving a question which is within the jurisdiction of an
administrative tribunal where the question demands the
exercise of sound administrative discretion requiring the
special knowledge, experience, and services of the
administrative tribunal to determine technical and intricate
matters of fact, and a uniformity of ruling is essential to
comply with the purposes of the regulatory statute
administered" (Pambujan Sur United Mine Workers v. Samar
Mining Co., Inc., 94 Phil, 932, 941 [1954]).
In this era of clogged court dockets, the need for
specialized administrative boards or commissions with the
special knowledge, experience and capability to hear and
determine promptly disputes on technical matters or
essentially factual matters, subject to judicial review in case
of grave abuse of discretion has become well nigh
indispensable. Thus, in 1984, the Court noted that 'between
the power lodged in an administrative body and a court, the
unmistakeable trend has been to refer it to the former,
"Increasingly, this Court has been committed to the view
that unless the law speaks clearly and unequivocably, the
choice should fall on fan administrative agency]" ' (NFL v.
Eisma, 127 SCRA 419, 428, citing precedents). The Court in
the earlier case of Ebon vs. De Guzman (113 SCRA 52, 56
[1982]), noted that the lawmaking authority, in restoring to
the labor arbiters and the NLRC their jurisdiction to award
all kinds of damages in labor cases, as against the previous
P.D. amendment splitting their jurisdiction with the regular
courts, "evidently, . . . had second thoughts about depriving
the Labor Arbiters and the NLRC of the jurisdiction to award
damages in labor cases because that setup would mean
duplicity of suits, splitting the cause of action and possible
conflicting findings and conclusions by two tribunals on one
and the same claim."
In an even more recent case, Tropical Homes, Inc. vs. National
Housing Authority, et al., 9 Mr. Justice Gutierrez, speaking for
the Court, observed that:

There is no question that a statute may vest exclusive

original jurisdiction in an administrative agency over certain
disputes and controversies falling within the agency's
special expertise. The very definition of an administrative
agency includes its being vested with quasi-judicial
powers. The ever increasing variety of powers and functions
given to administrative agencies recognizes the need for
the active intervention of administrative agencies in
matters calling for technical knowledge and speed in
countless controversies which cannot possibly be handled
by regular courts.
In general the quantum of judicial or quasi-judicial powers
which an administrative agency may exercise is defined in the
enabling act of such agency. In other words, the extent to
which an administrative entity may exercise such powers
depends largely, if not wholly, on the provisions of the statute
creating or empowering such agency. 10 In the exercise of
such powers, the agency concerned must commonly interpret
and apply contracts and determine the rights of private
parties under such contracts. One thrust of the multiplication
of administrative agencies is that the interpretation of
contracts and the determination of private rights thereunder
is no longer a uniquely judicial function, exercisable only by
our regular courts.
Thus, the extent to which the NHA has been vested with
quasi-judicial authority must be determined by referring to the
terms of Presidential Decree No. 957, known as "The
Subdivision and Condominium Buyers' Decree." 11Section 3
of this statute provides as follows:
National Housing Authority. The National Housing
Authority shall have exclusive jurisdiction to regulate the
real estate trade and business in accordance with the
provisions of this decree (emphasis supplied)
The need for and therefore the scope of the regulatory
authority thus lodged in the NHA are indicated in the second
and third preambular paragraphs of the statute which provide:
WHEREAS, numerous reports reveal that many real estate
subdivision owners, developers, operators, and/or sellers
have reneged on their representations and obligations to
provide and maintain properly subdivision roads, drainage,
sewerage, water systems lighting systems and other similar
basic requirements, thus endangering the health and safety
of home and lot buyers;
WHEREAS, reports of alarming magnitude also show cases
of swindling and fraudulent manipulations perpetrated by
unscrupulous subdivision and condominium sellers and
operators, such as failure to deliver titles to the buyers or
titles free from liens and encumbrances, and to pay real
estate taxes, and fraudulent sales of the same subdivision
lots to different innocent purchasers for value .
(emphasis supplied)
Presidential Decree No. 1344 12 clarified and spelled out the
quasi-judicial dimensions of the grant of regulatory authority
to the NHA in the following quite specific terms:
SECTION 1. In the exercise of its functions to regulate the
real estate trade and business and in addition to its powers
provided for in Presidential Decree No. 957, the National
Housing Authority shall have exclusive jurisdiction to hear
and decide cases of the following nature:
A. Unsound real estate business practices:
B. Claims involving refund and any other claims filed by
sub- division lot or condominium unit buyer against the
project owner, developer, dealer, broker or salesman; and
C. Cases involving specific performance of contractual and
statutory obligations filed by buyers of subdivision lots or
condominium units against the owner, developer, dealer,
broker or salesman.(emphasis supplied.)

The substantive provisions being applied and enforced by the

NHA in the instant case are found in Section 23 of Presidential
Decree No. 957 which reads:
Sec. 23. Non-Forfeiture of Payments. No installment
payment made by a buyer in a subdivision or condominium
project for the lot or unit he contracted to buy shall be
forfeited in favor of the owner or developer when the buyer,
after due notice to the owner or developer, desists from
further payment due to the failure of the owner or
developer to develop the subdivision or condominium
project according to the approved plans and within the time
limit for complying with the same. Such buyer may, at his
option, be reimbursed the total amount paid including
amortization and interests but excluding delinquency
interests, with interest thereon at the legal rate. (emphasis
supplied.)
Having failed to comply with its contractual obligation to
complete certain specified improvements in the subdivision
within the specified period of two years from the date of the
execution of the Contract to Sell, petitioner was not entitled to
exercise its options under Clause 7 of the Contract. Hence,
petitioner could neither rescind the Contract to Sell nor treat
the installment payments made by the private respondent as
forfeited in its favor. Indeed, under the general Civil
Law, 13 in view of petitioner's breach of its contract with
private respondent, it is the latter who is vested with the
option either to rescind the contract and receive
reimbursement of an installment payments (with legal
interest) made for the purchase of the subdivision lot in
question, or to suspend payment of further purchase
installments until such time as the petitioner had fulfilled its
obligations to the buyer. The NHA was therefore correct in
holding that private respondent's prior installment payments
could not be forfeited in favor of petitioner.
Neither did the NHA commit any abuse, let alone a grave
abuse of discretion or act in excess of its jurisdiction when it
ordered the reinstatement of the Contract to Sell between the
parties. Such reinstatement is no more than a logical
consequence of the NHA's correct ruling, just noted, that the
petitioner was not entitled to rescind the Contract to Sell.
There is, in any case, no question that under Presidential
Decree No. 957, the NHA was legally empowered to determine
and protect the rights of contracting parties under the law
administered by it and under the respective agreements, as
well as to ensure that their obligations thereunder are
faithfully performed.
We turn to petitioner's assertion that it had been denied the
right to due process. This assertion lacks substance. The
record shows that a copy of the order denying the Motion to
Dismiss and scheduling the hearing of the complaint for the
morning of 6 March 1978, was duly served on counsel for
petitioner, as evidenced by the annotation appearing at the
bottom of said copy indicating that such service had been
effected. 14 But even if it be assumed, arguendo, that such
notice had not been served on the petitioner, nevertheless the
latter was not deprived of due process, for what the
fundamental law abhors is not the absence of previous notice
but rather the absolute lack of opportunity to be heard. 15 In
the instant case, petitioner was given ample opportunity to
present its side and to be heard on a motion for
reconsideration as well, and not just on a motion to dismiss;
the claim of denial of due process must hence sound even
more hollow. 16
We turn finally to the question of the amount of P16,994.73
which petitioner insists had accrued during the period from
September 1972 to October 1976, when private respondent
had suspended payment of his monthly installments on his
chosen subdivision lot. The NHA in its 9 March 1978 resolution
ruled that the regular monthly installments under the Contract
to Sell did not accrue during the September 1972 October
1976 period:

suspension of payment did not become due and

demandable Neither did they accrue Such must be the
case, otherwise, there is no sense in suspending
payments. If the suspension is lifted the debtor shall
resume payments but never did he incur any arrears.
Such being the case, the demand of respondent for
complainant to pay the arrears due during the period of
suspension of payment is null and void. Consequently, the
notice of cancellation based on the refusal to pay the s
that were not due and demandable is also null and
void. 17
The NHA resolution is probably too terse and in need of
certification and amplification. The NHA correctly held that no
installment payments should be considered as having accrued
during the period of suspension of payments. Clearly, the
critical issue is what happens to the installment payments
which would have accrued and fallen due during the period of
suspension had no default on the part of the petitioner
intervened. To our mind, the NHA resolution is most
appropriately read as directing that the original period of
payment in the Contract to Sell must be deemed extended by
a period of time equal to the period of suspension (i.e., by
four (4) years and two (2) months) during which extended
time (tacked on to the original contract period) private
respondent buyer must continue to pay the monthly
installment payments until the entire original contract price
shall have been paid. We think that such is the intent of the
NHA resolution which directed that "[i]f the suspension is
lifted, the debtor shall resume payments" and that such is the
most equitable and just reading that may be given to the NHA
resolution. To permit Antipolo Realty to collect the disputed
amount in a lump sum after it had defaulted on its obligations
to its lot buyers, would tend to defeat the purpose of the
authorization (under Sec. 23 of Presidential Decree No.
957, supra) to lot buyers to suspend installment payments. As
the NHA resolution pointed out, [s]uch must be the case,
otherwise, there is no sense in suspending payments." Upon
the other hand, to condone the entire amount that would have
become due would be an expressively harsh penalty upon the
petitioner and would result in the unjust enrichment of the
private respondent at the expense of the petitioner. It should
be recalled that the latter had already fulfilled, albeit tardily,
its obligations to its lot buyers under their Contracts to Sell. At
the same time, the lot buyer should not be regarded as
delinquent and as such charged penalty interest. The
suspension of installment payments was attributable to the
petitioner, not the private respondent. The tacking on of the
period of suspension to the end of the original period precisely
prevents default on the part of the lot buyer. In the words of
the NHA resolution, "never would [the buyer] incur any
arrears."
WHEREFORE, the Petition for certiorari is DISMISSED. The NHA
decision appealed from is hereby AFFIRMED and clarified as
providing for the lengthening of the original contract period
for payment of installments under the Contract to Sell by four
(4) years and two (2) months, during which extended time
private respondent shall continue to pay the regular monthly
installment payments until the entire original contract price
shall have been paid. No pronouncement as to costs.
SO ORDERED.
G.R. No. 110120 March 16, 1994
LAGUNA LAKE DEVELOPMENT AUTHORITY, petitioner,
vs.
COURT OF APPEALS, HON. MANUEL JN. SERAPIO,
Presiding Judge RTC, Branch 127, Caloocan City, HON.
MACARIO A. ASISTIO, JR., City Mayor of Caloocan
and/or THE CITY GOVERNMENT OF
CALOOCAN,respondents.
Alberto N. Hidalgo and Ma. Teresa T. Oledan for petitioner.

[R]espondent allowed the complainant to suspend

payment of his monthly installments until the
improvements in the subdivision shall have been
completed. Respondent informed complainant on
November 1976 that the improvements have been
completed. Monthly installments during the period of

The City Legal Officer & Chief, Law Department for Mayor
Macario A. Asistio, Jr. and the City Government of Caloocan.

ROMERO, J.:
The clash between the responsibility of the City Government
of Caloocan to dispose off the 350 tons of garbage it collects
daily and the growing concern and sensitivity to a pollutionfree environment of the residents of Barangay Camarin, Tala
Estate, Caloocan City where these tons of garbage are
dumped everyday is the hub of this controversy elevated by
the protagonists to the Laguna Lake Development Authority
(LLDA) for adjudication.
The instant case stemmed from an earlier petition filed with
this Court by Laguna Lake Development Authority (LLDA for
short) docketed as G.R.
No. 107542 against the City Government of Caloocan, et al. In
the Resolution of November 10, 1992, this Court referred G.R.
No. 107542 to the Court of Appeals for appropriate
disposition. Docketed therein as CA-G.R. SP
No. 29449, the Court of Appeals, in a decision 1 promulgated
on January 29, 1993 ruled that the LLDA has no power and
authority to issue a cease and desist order enjoining the
dumping of garbage in Barangay Camarin, Tala Estate,
Caloocan City. The LLDA now seeks, in this petition, a review
of the decision of the Court of Appeals.
The facts, as disclosed in the records, are undisputed.
On March 8, 1991, the Task Force Camarin Dumpsite of Our
Lady of Lourdes Parish, Barangay Camarin, Caloocan City,
filed a letter-complaint 2 with the Laguna Lake Development
Authority seeking to stop the operation of the 8.6-hectare
open garbage dumpsite in Tala Estate, Barangay Camarin,
Caloocan City due to its harmful effects on the health of the
residents and the possibility of pollution of the water content
of the surrounding area.
On November 15, 1991, the LLDA conducted an on-site
investigation, monitoring and test sampling of the
leachate 3 that seeps from said dumpsite to the nearby creek
which is a tributary of the Marilao River. The LLDA Legal and
Technical personnel found that the City Government of
Caloocan was maintaining an open dumpsite at the Camarin
area without first securing an Environmental Compliance
Certificate (ECC) from the Environmental Management Bureau
(EMB) of the Department of Environment and Natural
Resources, as required under Presidential Decree No.
1586, 4 and clearance from LLDA as required under Republic
Act No. 4850, 5 as amended by Presidential Decree No. 813
and Executive Order No. 927, series of 1983. 6
After a public hearing conducted on December 4, 1991, the
LLDA, acting on the complaint of Task Force Camarin
Dumpsite, found that the water collected from the leachate
and the receiving streams could considerably affect the
quality, in turn, of the receiving waters since it indicates the
presence of bacteria, other than coliform, which may have
contaminated the sample during collection or handling. 7 On
December 5, 1991, the LLDA issued a Cease and Desist
Order 8 ordering the City Government of Caloocan,
Metropolitan Manila Authority, their contractors, and other
entities, to completely halt, stop and desist from dumping any
form or kind of garbage and other waste matter at the
Camarin dumpsite.
The dumping operation was forthwith stopped by the City
Government of Caloocan. However, sometime in August 1992
the dumping operation was resumed after a meeting held in
July 1992 among the City Government of Caloocan, the
representatives of Task Force Camarin Dumpsite and LLDA at
the Office of Environmental Management Bureau Director
Rodrigo U. Fuentes failed to settle the problem.
After an investigation by its team of legal and technical
personnel on August 14, 1992, the LLDA issued another order
reiterating the December 5, 1991, order and issued an Alias
Cease and Desist Order enjoining the City Government of
Caloocan from continuing its dumping operations at the
Camarin area.
On September 25, 1992, the LLDA, with the assistance of the
Philippine National Police, enforced its Alias Cease and Desist

Order by prohibiting the entry of all garbage dump trucks into

the Tala Estate, Camarin area being utilized as a dumpsite.
Pending resolution of its motion for reconsideration earlier
filed on September 17, 1992 with the LLDA, the City
Government of Caloocan filed with the Regional Trial Court of
Caloocan City an action for the declaration of nullity of the
cease and desist order with prayer for the issuance of writ of
injunction, docketed as Civil Case No. C-15598. In its
complaint, the City Government of Caloocan sought to be
declared as the sole authority empowered to promote the
health and safety and enhance the right of the people in
Caloocan City to a balanced ecology within its territorial
jurisdiction. 9
On September 25, 1992, the Executive Judge of the Regional
Trial Court of Caloocan City issued a temporary restraining
order enjoining the LLDA from enforcing its cease and desist
order. Subsequently, the case was raffled to the Regional Trial
Court, Branch 126 of Caloocan which, at the time, was
presided over by Judge Manuel Jn. Serapio of the Regional Trial
Court, Branch 127, the pairing judge of the recently-retired
presiding judge.
The LLDA, for its part, filed on October 2, 1992 a motion to
dismiss on the ground, among others, that under Republic Act
No. 3931, as amended by Presidential Decree No. 984,
otherwise known as the Pollution Control Law, the cease and
desist order issued by it which is the subject matter of the
complaint is reviewable both upon the law and the facts of the
case by the Court of Appeals and not by the Regional Trial
Court. 10
On October 12, 1992 Judge Manuel Jn. Serapio issued an order
consolidating Civil Case No. C-15598 with Civil Case No. C15580, an earlier case filed by the Task Force Camarin
Dumpsite entitled "Fr. John Moran, et al. vs. Hon. Macario
Asistio." The LLDA, however, maintained during the trial that
the foregoing cases, being independent of each other, should
have been treated separately.
On October 16, 1992, Judge Manuel Jn. Serapio, after hearing
the motion to dismiss, issued in the consolidated cases an
order 11 denying LLDA's motion to dismiss and granting the
issuance of a writ of preliminary injunction enjoining the LLDA,
its agent and all persons acting for and on its behalf, from
enforcing or implementing its cease and desist order which
prevents plaintiff City of Caloocan from dumping garbage at
the Camarin dumpsite during the pendency of this case
and/or until further orders of the court.
On November 5, 1992, the LLDA filed a petition for certiorari,
prohibition and injunction with prayer for restraining order
with the Supreme Court, docketed as G.R. No. 107542,
seeking to nullify the aforesaid order dated October 16, 1992
issued by the Regional Trial Court, Branch 127 of Caloocan
City denying its motion to dismiss.
The Court, acting on the petition, issued a Resolution 12 on
November 10, 1992 referring the case to the Court of Appeals
for proper disposition and at the same time, without giving
due course to the petition, required the respondents to
comment on the petition and file the same with the Court of
Appeals within ten (10) days from notice. In the meantime,
the Court issued a temporary restraining order, effective
immediately and continuing until further orders from it,
ordering the respondents: (1) Judge Manuel Jn. Serapio,
Presiding Judge, Regional Trial Court, Branch 127, Caloocan
City to cease and desist from exercising jurisdiction over the
case for declaration of nullity of the cease and desist order
issued by the Laguna Lake Development Authority (LLDA);
and (2) City Mayor of Caloocan and/or the City Government of
Caloocan to cease and desist from dumping its garbage at the
Tala Estate, Barangay Camarin, Caloocan City.
Respondents City Government of Caloocan and Mayor Macario
A. Asistio, Jr. filed on November 12, 1992 a motion for
reconsideration and/or to quash/recall the temporary
restraining order and an urgent motion for reconsideration
alleging that ". . . in view of the calamitous situation that
would arise if the respondent city government fails to collect
350 tons of garbage daily for lack of dumpsite (i)t is therefore,

imperative that the issue be resolved with dispatch or with

sufficient leeway to allow the respondents to find alternative
solutions to this garbage problem."
On November 17, 1992, the Court issued a
Resolution 13 directing the Court of Appeals to immediately set
the case for hearing for the purpose of determining whether
or not the temporary restraining order issued by the Court
should be lifted and what conditions, if any, may be required if
it is to be so lifted or whether the restraining order should be
maintained or converted into a preliminary injunction.
The Court of Appeals set the case for hearing on November
27, 1992, at 10:00 in the morning at the Hearing Room, 3rd
Floor, New Building, Court of Appeals. 14 After the oral
argument, a conference was set on December 8, 1992 at
10:00 o'clock in the morning where the Mayor of Caloocan
City, the General Manager of LLDA, the Secretary of DENR or
his duly authorized representative and the Secretary of DILG
or his duly authorized representative were required to appear.
It was agreed at the conference that the LLDA had until
December 15, 1992 to finish its study and review of
respondent's technical plan with respect to the dumping of its
garbage and in the event of a rejection of respondent's
technical plan or a failure of settlement, the parties will
submit within 10 days from notice their respective
memoranda on the merits of the case, after which the petition
shall be deemed submitted for resolution. 15 Notwithstanding
such efforts, the parties failed to settle the dispute.
On April 30, 1993, the Court of Appeals promulgated its
decision holding that: (1) the Regional Trial Court has no
jurisdiction on appeal to try, hear and decide the action for
annulment of LLDA's cease and desist order, including the
issuance of a temporary restraining order and preliminary
injunction in relation thereto, since appeal therefrom is within
the exclusive and appellate jurisdiction of the Court of Appeals
under Section 9, par. (3), of Batas Pambansa Blg. 129; and (2)
the Laguna Lake Development Authority has no power and
authority to issue a cease and desist order under its enabling
law, Republic Act No. 4850, as amended by P.D. No. 813 and
Executive Order
No. 927, series of 1983.
The Court of Appeals thus dismissed Civil Case No. 15598 and
the preliminary injunction issued in the said case was set
aside; the cease and desist order of LLDA was likewise set
aside and the temporary restraining order enjoining the City
Mayor of Caloocan and/or the City Government of Caloocan to
cease and desist from dumping its garbage at the Tala Estate,
Barangay Camarin, Caloocan City was lifted, subject, however,
to the condition that any future dumping of garbage in said
area, shall be in conformity with the procedure and protective
works contained in the proposal attached to the records of
this case and found on pages 152-160 of the Rollo, which was
thereby adopted by reference and made an integral part of
the decision, until the corresponding restraining and/or
injunctive relief is granted by the proper Court upon LLDA's
institution of the necessary legal proceedings.
Hence, the Laguna Lake Development Authority filed the
instant petition for review on certiorari, now docketed as G.R.
No. 110120, with prayer that the temporary restraining order
lifted by the Court of Appeals be re-issued until after final
determination by this Court of the issue on the proper
interpretation of the powers and authority of the LLDA under
its enabling law.

The City Government of Caloocan claims that it is within its

power, as a local government unit, pursuant to the general
welfare provision of the Local Government Code, 17 to
determine the effects of the operation of the dumpsite on the
ecological balance and to see that such balance is
maintained. On the basis of said contention, it questioned,
from the inception of the dispute before the Regional Trial
Court of Caloocan City, the power and authority of the LLDA to
issue a cease and desist order enjoining the dumping of
garbage in the Barangay Camarin over which the City
Government of Caloocan has territorial jurisdiction.
The Court of Appeals sustained the position of the City of
Caloocan on the theory that Section 7 of Presidential Decree
No. 984, otherwise known as the Pollution Control law,
authorizing the defunct National Pollution Control Commission
to issue an ex-parte cease and desist order was not
incorporated in Presidential Decree No. 813 nor in Executive
Order No. 927, series of
1983. The Court of Appeals ruled that under Section 4, par.
(d), of Republic Act No. 4850, as amended, the LLDA is instead
required "to institute the necessary legal proceeding against
any person who shall commence to implement or continue
implementation of any project, plan or program within the
Laguna de Bay region without previous clearance from the
Authority."
The LLDA now assails, in this partition for review, the
abovementioned ruling of the Court of Appeals, contending
that, as an administrative agency which was granted
regulatory and adjudicatory powers and functions by Republic
Act No. 4850 and its amendatory laws, Presidential Decree No.
813 and Executive Order No. 927, series of 1983, it is invested
with the power and authority to issue a cease and desist order
pursuant to Section 4 par. (c), (d), (e), (f) and (g) of Executive
Order No. 927 series of 1983 which provides, thus:
Sec. 4. Additional Powers and Functions. The authority shall
have the following powers and functions:
xxx xxx xxx
(c) Issue orders or decisions to compel compliance with the
provisions of this Executive Order and its implementing
rules and regulations only after proper notice and hearing.
(d) Make, alter or modify orders requiring the
discontinuance of pollution specifying the conditions and
the time within which such discontinuance must be
accomplished.
(e) Issue, renew, or deny permits, under such conditions as
it may determine to be reasonable, for the prevention and
abatement of pollution, for the discharge of sewage,
industrial waste, or for the installation or operation of
sewage works and industrial disposal system or parts
thereof.
(f) After due notice and hearing, the Authority may also
revoke, suspend or modify any permit issued under this
Order whenever the same is necessary to prevent or abate
pollution.
(g) Deputize in writing or request assistance of appropriate
government agencies or instrumentalities for the purpose of
enforcing this Executive Order and its implementing rules
and regulations and the orders and decisions of the
Authority.

On July, 19, 1993, the Court issued a temporary restraining

order 16 enjoining the City Mayor of Caloocan and/or the City
Government of Caloocan to cease and desist from dumping its
garbage at the Tala Estate, Barangay Camarin, Caloocan City,
effective as of this date and containing until otherwise
ordered by the Court.

The LLDA claims that the appellate court deliberately

suppressed and totally disregarded the above provisions of
Executive Order No. 927, series of 1983, which granted
administrative quasi-judicial functions to LLDA on pollution
abatement cases.

It is significant to note that while both parties in this case

agree on the need to protect the environment and to maintain
the ecological balance of the surrounding areas of the
Camarin open dumpsite, the question as to which agency can
lawfully exercise jurisdiction over the matter remains highly
open to question.

In light of the relevant environmental protection laws cited

which are applicable in this case, and the corresponding
overlapping jurisdiction of government agencies implementing
these laws, the resolution of the issue of whether or not the
LLDA has the authority and power to issue an order which, in
its nature and effect was injunctive, necessarily requires a

determination of the threshold question: Does the Laguna

Lake Development Authority, under its Charter and its
amendatory laws, have the authority to entertain the
complaint against the dumping of garbage in the open
dumpsite in Barangay Camarin authorized by the City
Government of Caloocan which is allegedly endangering the
health, safety, and welfare of the residents therein and the
sanitation and quality of the water in the area brought about
by exposure to pollution caused by such open garbage
dumpsite?

the Camarin open dumpsite found by the LLDA to have been

done in violation of Republic Act No. 4850, as amended, and
other relevant environment laws, 23 cannot be stamped as an
unauthorized exercise by the LLDA of injunctive powers. By its
express terms, Republic Act No. 4850, as amended by P.D. No.
813 and Executive Order No. 927, series of 1983, authorizes
the LLDA to "make, alter or modify order requiring the
discontinuance or pollution." 24(Emphasis supplied) Section 4,
par. (d) explicitly authorizes the LLDA to make whatever order
may be necessary in the exercise of its jurisdiction.

The matter of determining whether there is such pollution of

the environment that requires control, if not prohibition, of the
operation of a business establishment is essentially addressed
to the Environmental Management Bureau (EMB) of the DENR
which, by virtue of Section 16 of Executive Order No. 192,
series of 1987, 18 has assumed the powers and functions of
the defunct National Pollution Control Commission created
under Republic Act No. 3931. Under said Executive Order, a
Pollution Adjudication Board (PAB) under the Office of the
DENR Secretary now assumes the powers and functions of the
National Pollution Control Commission with respect to
adjudication of pollution cases. 19

To be sure, the LLDA was not expressly conferred the power

"to issue and ex-parte cease and desist order" in a language,
as suggested by the City Government of Caloocan, similar to
the express grant to the defunct National Pollution Control
Commission under Section 7 of P.D. No. 984 which, admittedly
was not reproduced in P.D. No. 813 and E.O. No. 927, series of
1983. However, it would be a mistake to draw therefrom the
conclusion that there is a denial of the power to issue the
order in question when the power "to make, alter or modify
orders requiring the discontinuance of pollution" is expressly
and clearly bestowed upon the LLDA by Executive Order No.
927, series of 1983.

As a general rule, the adjudication of pollution cases generally

pertains to the Pollution Adjudication Board (PAB), except in
cases where the special law provides for another forum. It
must be recognized in this regard that the LLDA, as a
specialized administrative agency, is specifically mandated
under Republic Act No. 4850 and its amendatory laws to carry
out and make effective the declared national policy 20 of
promoting and accelerating the development and balanced
growth of the Laguna Lake area and the surrounding
provinces of Rizal and Laguna and the cities of San Pablo,
Manila, Pasay, Quezon and Caloocan 21 with due regard and
adequate provisions for environmental management and
control, preservation of the quality of human life and
ecological systems, and the prevention of undue ecological
disturbances, deterioration and pollution. Under such a broad
grant and power and authority, the LLDA, by virtue of its
special charter, obviously has the responsibility to protect the
inhabitants of the Laguna Lake region from the deleterious
effects of pollutants emanating from the discharge of wastes
from the surrounding areas. In carrying out the
aforementioned declared policy, the LLDA is mandated,
among others, to pass upon and approve or disapprove all
plans, programs, and projects proposed by local government
offices/agencies within the region, public corporations, and
private persons or enterprises where such plans, programs
and/or projects are related to those of the LLDA for the
development of the region. 22

Assuming arguendo that the authority to issue a "cease and

desist order" were not expressly conferred by law, there is
jurisprudence enough to the effect that the rule granting such
authority need not necessarily be express.25 While it is a
fundamental rule that an administrative agency has only such
powers as are expressly granted to it by law, it is likewise a
settled rule that an administrative agency has also such
powers as are necessarily implied in the exercise of its
express powers. 26 In the exercise, therefore, of its express
powers under its charter as a regulatory and quasi-judicial
body with respect to pollution cases in the Laguna Lake
region, the authority of the LLDA to issue a "cease and desist
order" is, perforce, implied. Otherwise, it may well be reduced
to a "toothless" paper agency.

In the instant case, when the complainant Task Force Camarin

Dumpsite of Our Lady of Lourdes Parish, Barangay Camarin,
Caloocan City, filed its letter-complaint before the LLDA, the
latter's jurisdiction under its charter was validly invoked by
complainant on the basis of its allegation that the open
dumpsite project of the City Government of Caloocan in
Barangay Camarin was undertaken without a clearance from
the LLDA, as required under Section 4, par. (d), of Republic
Act. No. 4850, as amended by P.D. No. 813 and Executive
Order No. 927. While there is also an allegation that the said
project was without an Environmental Compliance Certificate
from the Environmental Management Bureau (EMB) of the
DENR, the primary jurisdiction of the LLDA over this case was
recognized by the Environmental Management Bureau of the
DENR when the latter acted as intermediary at the meeting
among the representatives of the City Government of
Caloocan, Task Force Camarin Dumpsite and LLDA sometime
in July 1992 to discuss the possibility of
re-opening the open dumpsite.
Having thus resolved the threshold question, the inquiry then
narrows down to the following issue: Does the LLDA have the
power and authority to issue a "cease and desist" order under
Republic Act No. 4850 and its amendatory laws, on the basis
of the facts presented in this case, enjoining the dumping of
garbage in Tala Estate, Barangay Camarin, Caloocan City.
The irresistible answer is in the affirmative.
The cease and desist order issued by the LLDA requiring the
City Government of Caloocan to stop dumping its garbage in

In this connection, it must be noted that in Pollution

Adjudication Board v. Court of Appeals, et al., 27 the Court
ruled that the Pollution Adjudication Board (PAB) has the
power to issue an ex-parte cease and desist order when there
is prima facie evidence of an establishment exceeding the
allowable standards set by the anti-pollution laws of the
country. Theponente, Associate Justice Florentino P. Feliciano,
declared:
Ex parte cease and desist orders are permitted by law and
regulations in situations like that here presented precisely
because stopping the continuous discharge of pollutive and
untreated effluents into the rivers and other inland waters
of the Philippines cannot be made to wait until protracted
litigation over the ultimate correctness or propriety of such
orders has run its full course, including multiple and
sequential appeals such as those which Solar has taken,
which of course may take several years. The relevant
pollution control statute and implementing regulations were
enacted and promulgated in the exercise of that pervasive,
sovereign power to protect the safety, health, and general
welfare and comfort of the public, as well as the protection
of plant and animal life, commonly designated as the police
power. It is a constitutional commonplace that the ordinary
requirements of procedural due process yield to the
necessities of protecting vital public interests like those
here involved, through the exercise of police power. . . .
The immediate response to the demands of "the necessities of
protecting vital public interests" gives vitality to the statement
on ecology embodied in the Declaration of Principles and
State Policies or the 1987 Constitution. Article II, Section 16
which provides:
The State shall protect and advance the right of the people
to a balanced and healthful ecology in accord with the
rhythm and harmony of nature.
As a constitutionally guaranteed right of every person, it
carries the correlative duty of non-impairment. This is but in
consonance with the declared policy of the state "to protect
and promote the right to health of the people and instill health
consciousness among them." 28 It is to be borne in mind that
the Philippines is party to the Universal Declaration of Human

Rights and the Alma Conference Declaration of 1978 which

recognize health as a fundamental human right. 29
The issuance, therefore, of the cease and desist order by the
LLDA, as a practical matter of procedure under the
circumstances of the case, is a proper exercise of its power
and authority under its charter and its amendatory laws. Had
the cease and desist order issued by the LLDA been complied
with by the City Government of Caloocan as it did in the first
instance, no further legal steps would have been necessary.
The charter of LLDA, Republic Act No. 4850, as amended,
instead of conferring upon the LLDA the means of directly
enforcing such orders, has provided under its Section 4 (d) the
power to institute "necessary legal proceeding against any
person who shall commence to implement or continue
implementation of any project, plan or program within the
Laguna de Bay region without previous clearance from the
LLDA."
Clearly, said provision was designed to invest the LLDA with
sufficiently broad powers in the regulation of all projects
initiated in the Laguna Lake region, whether by the
government or the private sector, insofar as the
implementation of these projects is concerned. It was meant
to deal with cases which might possibly arise where decisions
or orders issued pursuant to the exercise of such broad
powers may not be obeyed, resulting in the thwarting of its
laudabe objective. To meet such contingencies, then the writs
of mandamus and injunction which are beyond the power of
the LLDA to issue, may be sought from the proper courts.
Insofar as the implementation of relevant anti-pollution laws
in the Laguna Lake region and its surrounding provinces, cities
and towns are concerned, the Court will not dwell further on
the related issues raised which are more appropriately
addressed to an administrative agency with the special
knowledge and expertise of the LLDA.
WHEREFORE, the petition is GRANTED. The temporary
restraining order issued by the Court on July 19, 1993
enjoining the City Mayor of Caloocan and/or the City
Government of Caloocan from dumping their garbage at the
Tala Estate, Barangay Camarin, Caloocan City is hereby made
permanent.

Technical Assistant to the Chief of Hospital; Cora C. Solis,

Accountant III; and Enya N. Lopez, Supply Officer III, all of the
National Center for Mental Health. The petition also asks for
an order directing the Ombudsman to disqualify Director Raul
Arnaw and Investigator Amy de Villa-Rosero, of the Office of
the Ombudsman, from participation in the preliminary
investigation of the charges against petitioner (Rollo, pp. 2-17;
Annexes to Petition, Rollo, pp. 19-21).
The questioned order was issued in connection with the
administrative complaint filed with the Ombudsman (OBMADM-0-91-0151) by the private respondents against the
petitioners for violation of the Anti-Graft and Corrupt Practices
Act.
According to the petition, the said order was issued upon the
recommendation of Director Raul Arnaw and Investigator Amy
de Villa-Rosero, without affording petitioners the opportunity
to controvert the charges filed against them. Petitioners had
sought to disqualify Director Arnaw and Investigator VillaRosero for manifest partiality and bias (Rollo, pp. 4-15).
On September 10, 1992, this Court required respondents'
Comment on the petition.
On September 14 and September 22, 1992, petitioners filed a
"Supplemental Petition (Rollo, pp. 124-130); Annexes to
Supplemental Petition; Rollo pp. 140-163) and an "Urgent
Supplemental Manifestation" (Rollo,
pp. 164-172; Annexes to Urgent Supplemental
Manifestation; Rollo, pp. 173-176), respectively, averring
developments that transpired after the filing of the petition
and stressing the urgency for the issuance of the writ of
preliminary injunction or temporary restraining order.
On September 22, 1992, this Court ". . . Resolved to REQUIRE
the respondents to MAINTAIN in the meantime, the STATUS
QUO pending filing of comments by said respondents on the
original supplemental manifestation" (Rollo, p. 177).
On September 29, 1992, petitioners filed a motion to direct
respondent Secretary of Health to comply with the Resolution
dated September 22, 1992 (Rollo, pp. 182-192, Annexes, pp.
192-203). In a Resolution dated October 1, 1992, this Court
required respondent Secretary of Health to comment on the
said motion.

SO ORDERED.
G.R. No. 106719 September 21, 1993
DRA. BRIGIDA S. BUENASEDA, Lt. Col. ISABELO BANEZ,
JR., ENGR. CONRADO REY MATIAS, Ms. CORA S. SOLIS
and Ms. ENYA N. LOPEZ, petitioners,
vs.
SECRETARY JUAN FLAVIER, Ombudsman CONRADO M.
VASQUEZ, and NCMH NURSES ASSOCIATION,
represented by RAOULITO GAYUTIN, respondents.
Renato J. Dilag and Benjamin C. Santos for petitioners.
Danilo C. Cunanan for respondent Ombudsman.
Crispin T. Reyes and Florencio T. Domingo for private
respondent.

QUIASON, J.:
This is a Petition for Certiorari, Prohibition and Mandamus,
with Prayer for Preliminary Injunction or Temporary
Restraining Order, under Rule 65 of the Revised Rules of
Court.
Principally, the petition seeks to nullify the Order of the
Ombudsman dated January 7, 1992, directing the preventive
suspension of petitioners,
Dr. Brigida S. Buenaseda, Chief of Hospital III; Isabelo C.
Banez, Jr., Administrative Officer III; Conrado Rey Matias,

On September 29, 1992, in a pleading entitled "Omnibus

Submission," respondent NCMH Nurses Association submitted
its Comment to the Petition, Supplemental Petition and Urgent
Supplemental Manifestation. Included in said pleadings were
the motions to hold the lawyers of petitioners in contempt and
to disbar them (Rollo, pp. 210-267). Attached to the "Omnibus
Submission" as annexes were the orders and pleadings filed in
Administrative Case No. OBM-ADM-0-91-1051 against
petitioners (Rollo, pp. 268-480).
The Motion for Disbarment charges the lawyers of petitioners
with:
(1) unlawfully advising or otherwise causing or inducing their
clients petitioners Buenaseda, et al., to openly defy, ignore,
disregard, disobey or otherwise violate, maliciously evade
their preventive suspension by Order of July 7, 1992 of the
Ombudsman . . ."; (2) "unlawfully interfering with and
obstructing the implementation of the said order (Omnibus
Submission, pp. 50-52; Rollo, pp. 259-260); and (3) violation
of the Canons of the Code of Professional Responsibility and of
unprofessional and unethical conduct "by foisting blatant lies,
malicious falsehood and outrageous deception" and by
committing subornation of perjury, falsification and fabrication
in their pleadings (Omnibus Submission, pp. 52-54; Rollo, pp.
261-263).
On November 11, 1992, petitioners filed a "Manifestation and
Supplement to 'Motion to Direct Respondent Secretary of
Health to Comply with 22 September 1992 Resolution'"
(Manifestation attached to Rollo without pagination between
pp. 613 and 614 thereof).
On November 13, 1992, the Solicitor General submitted its
Comment dated November 10, 1992, alleging that: (a)
"despite the issuance of the September 22, 1992 Resolution

directing respondents to maintain the status quo, respondent

Secretary refuses to hold in abeyance the implementation of
petitioners' preventive suspension; (b) the clear intent and
spirit of the Resolution dated September 22, 1992 is to hold in
abeyance the implementation of petitioners' preventive
suspension, the status quo obtaining the time of the filing of
the instant petition; (c) respondent Secretary's acts in refusing
to hold in abeyance implementation of petitioners' preventive
suspension and in tolerating and approving the acts of Dr.
Abueva, the OIC appointed to replace petitioner Buenaseda,
are in violation of the Resolution dated September 22, 1992;
and
(d) therefore, respondent Secretary should be directed to
comply with the Resolution dated September 22, 1992
immediately, by restoring the status quo ante contemplated
by the aforesaid resolution" (Comment attached
to Rollo without paginations between pp. 613-614 thereof).
In the Resolution dated November 25, 1992, this Court
required respondent Secretary to comply with the
aforestated status quo order, stating inter alia, that:
It appearing that the status quo ante litem motam, or the
last peaceable uncontested status which preceded the
present controversy was the situation obtaining at the time
of the filing of the petition at bar on September 7, 1992
wherein petitioners were then actually occupying their
respective positions, the Court hereby ORDERS that
petitioners be allowed to perform the duties of their
respective positions and to receive such salaries and
benefits as they may be lawfully entitled to, and that
respondents and/or any and all persons acting under their
authority desist and refrain from performing any act in
violation of the aforementioned Resolution of September
22, 1992 until further orders from the Court (Attached
to Rollo after p. 615 thereof).
On December 9, 1992, the Solicitor General, commenting on
the Petition, Supplemental Petition and Supplemental
Manifestation, stated that (a) "The authority of the
Ombudsman is only to recommend suspension and he has no
direct power to suspend;" and (b) "Assuming the Ombudsman
has the power to directly suspend a government official or
employee, there are conditions required by law for the
exercise of such powers; [and] said conditions have not been
met in the instant case" (Attached to Rollo without
pagination).
In the pleading filed on January 25, 1993, petitioners adopted
the position of the Solicitor General that the Ombudsman can
only suspend government officials or employees connected
with his office. Petitioners also refuted private respondents'
motion to disbar petitioners' counsel and to cite them for
contempt (Attached to Rollowithout pagination).
The crucial issue to resolve is whether the Ombudsman has
the power to suspend government officials and employees
working in offices other than the Office of the Ombudsman,
pending the investigation of the administrative complaints
filed against said officials and employees.
In upholding the power of the Ombudsman to preventively
suspend petitioners, respondents (Urgent Motion to Lift Status
Quo, etc, dated January 11, 1993, pp. 10-11), invoke Section
24 of R.A. No. 6770, which provides:
Sec. 24. Preventive Suspension. The Ombudsman or his
Deputy may preventively suspend any officer or employee
under his authority pending an investigation, if in his
judgment the evidence of guilt is strong, and (a) the charge
against such officer or employee involves dishonesty,
oppression or grave misconduct or neglect in the
performance of duty; (b) the charge would warrant removal
from the service; or (c) the respondent's continued stay in
office may prejudice the case filed against him.
The preventive suspension shall continue until the case is
terminated by the Office of Ombudsman but not more than
six months, without pay, except when the delay in the
disposition of the case by the Office of the Ombudsman is
due to the fault, negligence or petition of the respondent, in

which case the period of such delay shall not be counted in

computing the period of suspension herein provided.
Respondents argue that the power of preventive suspension
given the Ombudsman under Section 24 of R.A. No. 6770 was
contemplated by Section 13 (8) of Article XI of the 1987
Constitution, which provides that the Ombudsman shall
exercise such other power or perform such functions or duties
as may be provided by law."
On the other hand, the Solicitor General and the petitioners
claim that under the 1987 Constitution, the Ombudsman can
only recommend to the heads of the departments and other
agencies the preventive suspension of officials and employees
facing administrative investigation conducted by his office.
Hence, he cannot order the preventive suspension himself.
They invoke Section 13(3) of the 1987 Constitution which
provides that the Office of the Ombudsman shall have inter
alia the power, function, and duty to:
Direct the officer concerned to take appropriate action
against a public official or employee at fault, and
recommend his removal, suspension, demotion, fine,
censure or prosecution, and ensure compliance therewith.
The Solicitor General argues that under said provision of the
Constitutions, the Ombudsman has three distinct powers,
namely: (1) direct the officer concerned to take appropriate
action against public officials or employees at fault; (2)
recommend their removal, suspension, demotion fine,
censure, or prosecution; and (3) compel compliance with the
recommendation (Comment dated December 3, 1992, pp. 910).
The line of argument of the Solicitor General is a siren call
that can easily mislead, unless one bears in mind that what
the Ombudsman imposed on petitioners was not a punitive
but only a preventive suspension.
When the constitution vested on the Ombudsman the power
"to recommend the suspension" of a public official or
employees (Sec. 13 [3]), it referred to "suspension," as a
punitive measure. All the words associated with the word
"suspension" in said provision referred to penalties in
administrative cases, e.g. removal, demotion, fine, censure.
Under the rule of Noscitor a sociis, the word "suspension"
should be given the same sense as the other words with
which it is associated. Where a particular word is equally
susceptible of various meanings, its correct construction may
be made specific by considering the company of terms in
which it is found or with which it is associated (Co Kim Chan v.
Valdez Tan Keh, 75 Phil. 371 [1945]; Caltex (Phils.) Inc. v.
Palomar, 18 SCRA 247 [1966]).
Section 24 of R.A. No. 6770, which grants the Ombudsman the
power to preventively suspend public officials and employees
facing administrative charges before him, is a procedural, not
a penal statute. The preventive suspension is imposed after
compliance with the requisites therein set forth, as an aid in
the investigation of the administrative charges.
Under the Constitution, the Ombudsman is expressly
authorized to recommend to the appropriate official the
discipline or prosecution of erring public officials or
employees. In order to make an intelligent determination
whether to recommend such actions, the Ombudsman has to
conduct an investigation. In turn, in order for him to conduct
such investigation in an expeditious and efficient manner, he
may need to suspend the respondent.
The need for the preventive suspension may arise from
several causes, among them, the danger of tampering or
destruction of evidence in the possession of respondent; the
intimidation of witnesses, etc. The Ombudsman should be
given the discretion to decide when the persons facing
administrative charges should be preventively suspended.
Penal statutes are strictly construed while procedural statutes
are liberally construed (Crawford, Statutory Construction,
Interpretation of Laws, pp. 460-461; Lacson v. Romero, 92

Phil. 456 [1953]). The test in determining if a statute is penal

is whether a penalty is imposed for the punishment of a wrong
to the public or for the redress of an injury to an individual (59
Corpuz Juris, Sec. 658; Crawford, Statutory Construction, pp.
496-497). A Code prescribing the procedure in criminal cases
is not a penal statute and is to be interpreted liberally (People
v. Adler, 140 N.Y. 331; 35 N.E. 644).
The purpose of R.A. No. 6770 is to give the Ombudsman such
powers as he may need to perform efficiently the task
committed to him by the Constitution. Such being the case,
said statute, particularly its provisions dealing with procedure,
should be given such interpretation that will effectuate the
purposes and objectives of the Constitution. Any
interpretation that will hamper the work of the Ombudsman
should be avoided.
A statute granting powers to an agency created by the
Constitution should be liberally construed for the
advancement of the purposes and objectives for which it was
created (Cf. Department of Public Utilities v. Arkansas
Louisiana Gas. Co., 200 Ark. 983, 142 S.W. (2d) 213 [1940];
Wallace v. Feehan, 206 Ind. 522, 190 N.E., 438 [1934]).
In Nera v. Garcia, 106 Phil. 1031 [1960], this Court, holding
that a preventive suspension is not a penalty, said:
Suspension is a preliminary step in an administrative
investigation. If after such investigation, the charges are
established and the person investigated is found guilty of
acts warranting his removal, then he is removed or
dismissed. This is the penalty.
To support his theory that the Ombudsman can only
preventively suspend respondents in administrative cases
who are employed in his office, the Solicitor General leans
heavily on the phrase "suspend any officer or employee under
his authority" in Section 24 of R.A. No. 6770.
The origin of the phrase can be traced to Section 694 of the
Revised Administrative Code, which dealt with preventive
suspension and which authorized the chief of a bureau or
office to "suspend any subordinate or employee in his bureau
or under his authority pending an investigation . . . ."
Section 34 of the Civil Service Act of 1959 (R.A. No. 2266),
which superseded Section 694 of the Revised Administrative
Code also authorized the chief of a bureau or office to
"suspend any subordinate officer or employees, in his bureau
or under his authority."
However, when the power to discipline government officials
and employees was extended to the Civil Service Commission
by the Civil Service Law of 1975 (P.D. No. 805), concurrently
with the President, the Department Secretaries and the heads
of bureaus and offices, the phrase "subordinate officer and
employee in his bureau" was deleted, appropriately leaving
the phrase "under his authority." Therefore, Section 41 of said
law only mentions that the proper disciplining authority may
preventively suspend "any subordinate officer or employee
under his authority pending an investigation . . ." (Sec. 41).
The Administrative Code of 1987 also empowered the proper
disciplining authority to "preventively suspend any
subordinate officer or employee under his authority pending
an investigation" (Sec. 51).
The Ombudsman Law advisedly deleted the words
"subordinate" and "in his bureau," leaving the phrase to read
"suspend any officer or employee under his authority pending
an investigation . . . ." The conclusion that can be deduced
from the deletion of the word "subordinate" before and the
words "in his bureau" after "officer or employee" is that the
Congress intended to empower the Ombudsman to
preventively suspend all officials and employees under
investigation by his office, irrespective of whether they are
employed "in his office" or in other offices of the government.
The moment a criminal or administrative complaint is filed
with the Ombudsman, the respondent therein is deemed to be
"in his authority" and he can proceed to determine whether
said respondent should be placed under preventive
suspension.

In their petition, petitioners also claim that the Ombudsman

committed grave abuse of discretion amounting to lack of
jurisdiction when he issued the suspension order without
affording petitioners the opportunity to confront the charges
against them during the preliminary conference and even
after petitioners had asked for the disqualification of Director
Arnaw and Atty. Villa-Rosero (Rollo, pp. 6-13). Joining
petitioners, the Solicitor General contends that
assuming arguendo that the Ombudsman has the power to
preventively suspend erring public officials and employees
who are working in other departments and offices, the
questioned order remains null and void for his failure to
comply with the requisites in Section 24 of the Ombudsman
Law (Comment dated December 3, 1992, pp. 11-19).
Being a mere order for preventive suspension, the questioned
order of the Ombudsman was validly issued even without a
full-blown hearing and the formal presentation of evidence by
the parties. In Nera, supra, petitioner therein also claimed that
the Secretary of Health could not preventively suspend him
before he could file his answer to the administrative
complaint. The contention of petitioners herein can be
dismissed perfunctorily by holding that the suspension meted
out was merely preventive and therefore, as held in Nera,
there was "nothing improper in suspending an officer pending
his investigation and before tho charges against him are
heard . . . (Nera v. Garcia., supra).
There is no question that under Section 24 of R.A. No. 6770,
the Ombudsman cannot order the preventive suspension of a
respondent unless the evidence of guilt is strong and (1) the
charts against such officer or employee involves dishonesty,
oppression or grave misconduct or neglect in the performance
of duty; (2) the charge would warrant removal from the
service; or (3) the respondent's continued stay in office may
prejudice the case filed against him.
The same conditions for the exercise of the power to
preventively suspend officials or employees under
investigation were found in Section 34 of R.A. No. 2260.
The import of the Nera decision is that the disciplining
authority is given the discretion to decide when the evidence
of guilt is strong. This fact is bolstered by Section 24 of R.A.
No. 6770, which expressly left such determination of guilt to
the "judgment" of the Ombudsman on the basis of the
administrative complaint. In the case at bench, the
Ombudsman issued the order of preventive suspension only
after: (a) petitioners had filed their answer to the
administrative complaint and the "Motion for the Preventive
Suspension" of petitioners, which incorporated the charges in
the criminal complaint against them (Annex 3, Omnibus
Submission, Rollo, pp. 288-289; Annex 4, Rollo,
pp. 290-296); (b) private respondent had filed a reply to the
answer of petitioners, specifying 23 cases of harassment by
petitioners of the members of the private respondent (Annex
6, Omnibus Submission, Rollo, pp. 309-333); and (c) a
preliminary conference wherein the complainant and the
respondents in the administrative case agreed to submit their
list of witnesses and documentary evidence.
Petitioners herein submitted on November 7, 1991 their list of
exhibits (Annex 8 of Omnibus Submission, Rollo, pp. 336-337)
while private respondents submitted their list of exhibits
(Annex 9 of Omnibus Submission, Rollo, pp. 338-348).
Under these circumstances, it can not be said that Director
Raul Arnaw and Investigator Amy de Villa-Rosero acted with
manifest partiality and bias in recommending the suspension
of petitioners. Neither can it be said that the Ombudsman had
acted with grave abuse of discretion in acting favorably on
their recommendation.
The Motion for Contempt, which charges the lawyers of
petitioners with unlawfully causing or otherwise inducing their
clients to openly defy and disobey the preventive suspension
as ordered by the Ombudsman and the Secretary of Health
can not prosper (Rollo, pp. 259-261). The Motion should be
filed, as in fact such a motion was filed, with the Ombudsman.
At any rate, we find that the acts alleged to constitute indirect
contempt were legitimate measures taken by said lawyers to
question the validity and propriety of the preventive
suspension of their clients.

On the other hand, we take cognizance of the intemperate

language used by counsel for private respondents hurled
against petitioners and their counsel (Consolidated: (1)
Comment on Private Respondent" "Urgent Motions, etc.;
(2) Adoption of OSG's Comment; and (3) Reply to Private
Respondent's Comment and Supplemental Comment, pp. 4-5).

Garnishment was issued to accused Alfredo

Azarcon ordering him to transfer, surrender,
transmit and/or remit to BIR the property in
his possession owned by taxpayer Ancla.
The Warrant of Garnishment was received
by accused Azarcon on June 17, 1985. 5

A lawyer should not be carried away in espousing his client's

cause. The language of a lawyer, both oral or written, must be
respectful and restrained in keeping with the dignity of the
legal profession and with his behavioral attitude toward his
brethren in the profession (Lubiano v. Gordolla, 115 SCRA 459
[1982]). The use of abusive language by counsel against the
opposing counsel constitutes at the same time a disrespect to
the dignity of the court of justice. Besides, the use of
impassioned language in pleadings, more often than not,
creates more heat than light.

Petitioner Azarcon, in signing the "Receipt for Goods, Articles,

and Things Seized Under Authority of the National Internal
Revenue," assumed the undertakings specified in the receipt
the contents of which are reproduced as follows:

The Motion for Disbarment (Rollo, p. 261) has no place in the

instant special civil action, which is confined to questions of
jurisdiction or abuse of discretion for the purpose of relieving
persons from the arbitrary acts of judges and quasi-judicial
officers. There is a set of procedure for the discipline of
members of the bar separate and apart from the present
special civil action.
WHEREFORE, the petition is DISMISSED and the Status
quo ordered to be maintained in the Resolution dated
September 22, 1992 is LIFTED and SET ASIDE.
SO ORDERED.
G.R. No. 116033 February 26, 1997
ALFREDO L. AZARCON, petitioner,
vs.
SANDIGANBAYAN, PEOPLE OF THE PHILIPPINES and
JOSE C. BATAUSA, respondents.

PANGANIBAN, J.:
Does the Sandiganbayan have jurisdiction over a private
individual who is charged with malversation of public funds as
a principal after the said individual had been designated by
the Bureau of Internal Revenue as a custodian of distrained
property? Did such accused become a public officer and
therefore subject to the graft court's jurisdiction as a
consequence of such designation by the BIR?
These are the main questions in the instant petition for review
of Respondent Sandiganbayan's Decision 1 in Criminal Case
No. 14260 promulgated on March 8, 1994, convicting
petitioner of malversation of public funds and property, and
Resolution 2 dated June 20, 1994, denying his motion for new
trial or reconsideration thereof.
The Facts
Petitioner Alfredo Azarcon owned and operated an earthmoving business, hauling "dirt and ore." 3 His services were
contracted by the Paper Industries Corporation of the
Philippines (PICOP) at its concession in Mangagoy, Surigao del
Sur. Occasionally, he engaged the services of sub-contractors
like Jaime Ancla whose trucks were left at the former's
premises. 4 From this set of circumstances arose the present
controversy.
. . . It appears that on May 25, 1983, a
Warrant of Distraint of Personal Property
was issued by the Main Office of the Bureau
of Internal Revenue (BIR) addressed to the
Regional Director (Jose Batausa) or his
authorized representative of Revenue
Region 10, Butuan City commanding the
latter to distraint the goods, chattels or
effects and other personal property of Jaime
Ancla, a sub-contractor of accused Azarcon
and, a delinquent taxpayer. The Warrant of

(I), the undersigned, hereby acknowledge to

have received from Amadeo V. San Diego,
an Internal Revenue Officer, Bureau of
Internal Revenue of the Philippines, the
following described goods, articles, and
things:
Kind of property Isuzu dump truck
Motor number E120-229598
Chassis No. SPZU50-1772440
Number of CXL 6
Color Blue
Owned By Mr. Jaime Ancla
the same having been this day seized and left in (my)
possession pending investigation by the Commissioner of
Internal Revenue or his duly authorized representative. (I)
further promise that (I) will faithfully keep, preserve, and,
to the best of (my) ability, protect said goods, articles,
and things seized from defacement, demarcation,
leakage, loss, or destruction in any manner; that (I) will
neither alter nor remove, nor permit others to alter or
remove or dispose of the same in any manner without the
express authority of the Commissioner of Internal
Revenue; and that (I) will produce and deliver all of said
goods, articles, and things upon the order of any court of
the Philippines, or upon demand of the Commissioner of
Internal Revenue or any authorized officer or agent of the
Bureau of Internal Revenue. 6
Subsequently, Alfredo Azarcon wrote a letter dated November
21, 1985 to the BIR's Regional Director for Revenue Region 10
B, Butuan City stating that
. . . while I have made representations to retain possession
of the property and signed a receipt of the same, it appears
now that Mr. Jaime Ancla intends to cease his operations
with us. This is evidenced by the fact that sometime in
August, 1985 he surreptitiously withdrew his equipment
from my custody. . . . In this connection, may I therefore
formally inform you that it is my desire to immediately
relinquish whatever responsibilities I have over the abovementioned property by virtue of the receipt I have signed.
This cancellation shall take effect immediately. . . . 7
Incidentally, the petitioner reported the taking of the truck
to the security manager of PICOP, Mr. Delfin Panelo, and
requested him to prevent this truck from being taken out of
the PICOP concession. By the time the order to bar the
truck's exit was given, however, it was too late. 8
Regional Director Batausa responded in a letter dated May 27,
1986, to wit:
An analysis of the documents executed by you reveals that
while you are (sic) in possession of the dump truck owned
by JAIME ANCLA, you voluntarily assumed the liabilities of
safekeeping and preserving the unit in behalf of the Bureau
of Internal Revenue. This is clearly indicated in the
provisions of the Warrant of Garnishment which you have
signed, obliged and committed to surrender and transfer to
this office. Your failure therefore, to observe said provisions
does not relieve you of your responsibility. 9
Thereafter, the Sandiganbayan found that
On 11 June 1986, Mrs. Marilyn T. Calo,
Revenue Document Processor of Revenue
Region 10 B, Butuan City, sent a progress

report to the Chief of the Collection Branch

of the surreptitious taking of the dump truck
and that Ancla was renting out the truck to
a certain contractor by the name of Oscar
Cueva at PICOP (Paper Industries
Corporation of the Philippines, the same
company which engaged petitioner's earth
moving services), Mangagoy, Surigao del
Sur. She also suggested that if the report
were true, a warrant of garnishment be
reissued against Mr. Cueva for whatever
amount of rental is due from Ancla until
such time as the latter's tax liabilities shall
be deemed satisfied. . . However, instead of
doing so, Director Batausa filed a lettercomplaint against the (herein Petitioner) and
Ancla on 22 January 1988, or after more
than one year had elapsed from the time of
Mrs. Calo's report. 10
Provincial Fiscal Pretextato Montenegro "forwarded the
records of the complaint . . . to the Office of the Tanodbayan"
on May 18, 1988. He was deputized Tanodbayan prosecutor
and granted authority to conduct preliminary investigation on
August 22, 1988, in a letter by Special Prosecutor Raul
Gonzales approved by Ombudsman (Tanodbayan) Conrado
Vasquez. 11
Along with his co-accused Jaime Ancla, Petitioner Azarcon was
charged before the Sandiganbayan with the crime of
malversation of public funds or property under Article 217 in
relation to Article 222 of the Revised Penal Code (RPC) in the
following Information 12 filed on January 12, 1990, by Special
Prosecution Officer Victor Pascual:

When the prosecution finished presenting its evidence, the

petitioner then filed a motion for leave to file demurrer to
evidence which was denied on November 16, 1992, "for being
without merit." 19 The petitioner then commenced and
finished presenting his evidence on February 15, 1993.
The Respondent Court's Decision
On March 8, 1994, Respondent Sandiganbayan 20 rendered a
Decision, 21 the dispositive portion of which reads:
WHEREFORE, the Court finds accused Alfredo Azarcon y
Leva GUILTY beyond reasonable doubt as principal of
Malversation of Public Funds defined and penalized under
Article 217 in relation to Article 222 of the Revised Penal
Code and, applying the Indeterminate Sentence Law, and in
view of the mitigating circumstance of voluntary surrender,
the Court hereby sentences the accused to suffer the
penalty of imprisonment ranging from TEN (10) YEARS and
ONE (1) DAY of prision mayor in its maximum period to
SEVENTEEN (17) YEARS, FOUR (4) MONTHS and ONE (1)
DAY of Reclusion Temporal. To indemnify the Bureau of
Internal Revenue the amount of P80,831.59; to pay a fine in
the same amount without subsidiary imprisonment in case
of insolvency; to suffer special perpetual disqualification;
and, to pay the costs.
Considering that accused Jaime Ancla has not yet been
brought within the jurisdiction of this Court up to this date,
let this case be archived as against him without prejudice to
its revival in the event of his arrest or voluntary submission
to the jurisdiction of this Court.
SO ORDERED.

That on or about June 17, 1985, in the Municipality of Bislig,

Province of Surigao del Sur, Philippines, and within the
jurisdiction of this Honorable Court, accused Alfredo L.
Azarcon, a private individual but who, in his capacity as
depository/administrator of property seized or deposited by
the Bureau of Internal Revenue, having voluntarily offered
himself to act as custodian of one Isuzu Dumptruck (sic)
with Motor No. E120-22958, Chasis No. SPZU 50-1772440,
and number CXL-6 and was authorized to be such under the
authority of the Bureau of Internal Revenue, has become a
responsible and accountable officer and said motor vehicle
having been seized from Jaime C. Ancla in satisfaction of his
tax liability in the total sum of EIGHTY THOUSAND EIGHT
HUNDRED THIRTY ONE PESOS and 59/100 (P80,831.59)
became a public property and the value thereof as public
fund, with grave abuse of confidence and conspiring and
confederating with said Jaime C. Ancla, likewise, a private
individual, did then and there wilfully, (sic) unlawfully and
feloniously misappropriate, misapply and convert to his
personal use and benefit the aforementioned motor vehicle
or the value thereof in the aforestated amount, by then and
there allowing accused Jaime C. Ancla to remove, retrieve,
withdraw and tow away the said Isuzu Dumptruck (sic) with
the authority, consent and knowledge of the Bureau of
Internal Revenue, Butuan City, to the damage and prejudice
of the government in the amount of P80,831.59 in a form of
unsatisfied tax liability.
CONTRARY TO LAW.
The petitioner filed a motion for reinvestigation before the
Sandiganbayan on May 14, 1991, alleging that: (1) the
petitioner never appeared in the preliminary investigation;
and (2) the petitioner was not a public officer, hence a doubt
exists as to why he was being charged with malversation
under Article 217 of the Revised Penal Code. 13The
Sandiganbayan granted the motion for reinvestigation on May
22, 1991. 14 After the reinvestigation, Special Prosecution
Officer Roger Berbano, Sr., recommended the "withdrawal of
the information" 15 but was "overruled by the Ombudsman." 16
A motion to dismiss was filed by petitioner on March 25, 1992
on the ground that the Sandiganbayan did not have
jurisdiction over the person of the petitioner since he was not
a public officer. 17 On May 18, 1992; the Sandiganbayan
denied the motion. 18

Petitioner, through new counsel, 22 filed a motion for new trial

or reconsideration on March 23, 1994, which was denied by
the Sandiganbayan in its Resolution 23 dated December 2,
1994.
Hence, this petition.
The Issues
The petitioner submits the following reasons for the reversal
of the Sandiganbayan's assailed Decision and Resolution:
I. The Sandiganbayan does not have jurisdiction over crimes
committed solely by private individuals.
II. In any event, even assuming arguendo that the
appointment of a private individual as a custodian or a
depositary of distrained property is sufficient to convert
such individual into a public officer, the petitioner cannot
still be considered a public officer because:
[A]
There is no provision in the National Internal Revenue Code
which authorizes the Bureau of Internal Revenue to
constitute private individuals as depositaries of distrained
properties.
[B]
His appointment as a depositary was not by virtue of a
direct provision of law, or by election or by appointment by
a competent authority.
III. No proof was presented during trial to prove that the
distrained vehicle was actually owned by the accused Jaime
Ancla; consequently, the government's right to the subject
property has not been established.
IV. The procedure provided for in the National Internal
Revenue Code concerning the disposition of distrained
property was not followed by the B.I.R., hence the distraint
of personal property belonging to Jaime C. Ancla and found

allegedly to be in the possession of the petitioner is

therefore invalid.
V. The B.I.R. has only itself to blame for not promptly selling
the distrained property of accused Jaime C. Ancla in order to
realize the amount of back taxes owed by Jaime C. Ancla to
the Bureau. 24
In fine, the fundamental issue is whether the Sandiganbayan
had jurisdiction over the subject matter of the controversy.
Corollary to this is the question of whether petitioner can be
considered a public officer by reason of his being designated
by the Bureau of Internal Revenue as a depositary of
distrained property.
The Court's Ruling
The petition is meritorious.

The Information does not charge petitioner Azarcon of being a

co-principal, accomplice or accessory to a public officer
committing an offense under the Sandiganbayan's jurisdiction.
Thus, unless petitioner be proven a public officer, the
Sandiganbayan will have no jurisdiction over the crime
charged. Article 203 of the RPC determines who are public
officers:
Who are public officers. For the purpose of applying the
provisions of this and the preceding titles of the book, any
person who, by direct provision of the law, popular election,
popular election or appointment by competent authority,
shall take part in the performance of public functions in the
Government of the Philippine Islands, or shall perform in
said Government or in any of its branches public duties as
an employee, agent, or subordinate official, of any rank or
classes, shall be deemed to be a public officer.
Thus,

Jurisdiction of the Sandiganbayan

It is hornbook doctrine that in order "(to) ascertain whether a
court has jurisdiction or not, the provisions of the law should
be inquired into." 25 Furthermore, "the jurisdiction of the court
must appear clearly from the statute law or it will not be held
to exist. It cannot be presumed or implied." 26 And for this
purpose in criminal cases, "the jurisdiction of a court is
determined by the law at the time of commencement of the
action." 27
In this case, the action was instituted with the filing of this
information on January 12, 1990; hence, the applicable
statutory provisions are those of P.D. No. 1606, as amended
by P.D. No. 1861 on March 23, 1983, but prior to their
amendment by R.A. No. 7975 on May 16, 1995. At that time,
Section 4 of P.D. No. 1606 provided that:
Sec. 4. Jurisdiction. The Sandiganbayan shall exercise:
(a) Exclusive original jurisdiction in all cases involving:
(1) Violations of Republic Act No. 3019, as amended,
otherwise known as the Anti-Graft and Corrupt Practices
Act, Republic Act No. 1379, and Chapter II, Section 2, Title
VII of the Revised Penal Code;
(2) Other offenses or felonies committed by public
officers and employees in relation to their office, including
those employed in government-owned or controlled
corporations, whether simple or complexed with other
crimes, where the penalty prescribed by law is higher
than prision correccional or imprisonment for six (6)
years, or a fine of P6,000.00: PROVIDED, HOWEVER, that
offenses or felonies mentioned in this paragraph where
the penalty prescribed by law does not exceed prision
correccional or imprisonment for six (6) years or a fine of
P6,000.00 shall be tried by the proper Regional Trial
Court, Metropolitan Trial Court, Municipal Trial Court and
Municipal Circuit Trial Court.
xxx xxx xxx
In case private individuals are charged as co-principals,
accomplices or accessories with the public officers or
employees, including those employed in government-owned
or controlled corporations, they shall be tried jointly with
said public officers and employees.
xxx xxx xxx
The foregoing provisions unequivocally specify the only
instances when the Sandiganbayan will have jurisdiction over
a private individual, i.e. when the complaint charges the
private individual either as a co-principal, accomplice or
accessory of a public officer or employee who has been
charged with a crime within its jurisdiction.
Azarcon: A Public Officer or A Private Individual?

(to) be a public officer, one must be

(1) Taking part in the performance of public functions in the
government, or
Performing in said Government or any of its branches public
duties as an employee, agent, or subordinate official, of any
rank or class; and
(2) That his authority to take part in the performance of
public functions or to perform public duties must be
a. by direct provision of the law, or
b. by popular election, or
c. by appointment by competent authority.

28

Granting arguendo that the petitioner, in signing the receipt

for the truck constructively distrained by the BIR, commenced
to take part in an activity constituting public functions, he
obviously may not be deemed authorized by popular election.
The next logical query is whether petitioner's designation by
the BIR as a custodian of distrained property qualifies as
appointment by direct provision of law, or by competent
authority. 29 We answer in the negative.
The Solicitor General contends that the BIR, in effecting
constructive distraint over the truck allegedly owned by Jaime
Ancla, and in requiring Petitioner Alfredo Azarcon who was in
possession thereof to sign a pro formareceipt for it, effectively
"designated" petitioner a depositary and, hence,
citing U.S. vs. Rastrollo, 30 a public officer. 31 This is based on
the theory that
(t)he power to designate a private person who has actual
possession of a distrained property as a depository of
distrained property is necessarily implied in the BIR's
power to place the property of a delinquent tax payer
(sic) in distraint as provided for under Sections 206, 207
and 208 (formerly Sections 303, 304 and 305) of the
National Internal Revenue Code, (NIRC) . . . . 32
We disagree. The case of U.S. vs. Rastrollo is not applicable to
the case before us simply because the facts therein are not
identical, similar or analogous to those obtaining here. While
the cited case involved a judicialdeposit of the proceeds of the
sale of attached property in the hands of the debtor, the case
at bench dealt with the BIR's administrative act of effecting
constructive distraint over alleged property of taxpayer Ancla
in relation to his back taxes, property which was received by
Petitioner Azarcon. In the cited case, it was clearly within the
scope of that court's jurisdiction and judicial power to
constitute the judicial deposit and give "the depositary a
character equivalent to that of a public official." 33 However, in
the instant case, while the BIR had authority to require
Petitioner Azarcon to sign a receipt for the distrained truck,
the NIRC did not grant it power to appoint Azarcon a public
officer.

It is axiomatic in our constitutional framework, which

mandates a limited government, that its branches and
administrative agencies exercise only that power delegated to
them as "defined either in the Constitution or in legislation or
in both." 34 Thus, although the "appointing power is the
exclusive prerogative of the President, . . ." 35 the quantum of
powers possessed by an administrative agency forming part
of the executive branch will still be limited to that "conferred
expressly or by necessary or fair implication" in its enabling
act. Hence, "(a)n administrative officer, it has been held, has
only such powers as are expressly granted to him and those
necessarily implied in the exercise thereof." 36Corollarily,
implied powers "are those which are necessarily included in,
and are therefore of lesser degree than the power granted. It
cannot extend to other matters not embraced therein, nor are
not incidental thereto." 37 For to so extend the statutory grant
of power "would be an encroachment on powers expressly
lodged in Congress by our Constitution." 38 It is true that Sec.
206 of the NIRC, as pointed out by the prosecution, authorizes
the BIR to effect a constructive distraint by requiring "any
person" to preserve a distrained property, thus:
xxx xxx xxx
The constructive distraint of personal
property shall be effected by requiring the
taxpayer or any person having possession
or control of such property to sign a receipt
covering the property distrained and
obligate himself to preserve the same intact
and unaltered and not to dispose of the
same in any manner whatever without the
express authority of the Commissioner.

had no jurisdiction over them. The Sandiganbayan's taking

cognizance of this case is of no moment since "(j)urisdiction
cannot be conferred by . . . erroneous belief of the court that it
had jurisdiction." 44 As aptly and correctly stated by the
petitioner in his memorandum:
From the foregoing discussion, it is evident that the
petitioner did not cease to be a private individual when
he agreed to act as depositary of the garnished dump
truck. Therefore, when the information charged him and
Jaime Ancla before the Sandiganbayan for malversation of
public funds or property, the prosecution was in fact
charging two private individuals without any public officer
being similarly charged as a co-conspirator.
Consequently, the Sandiganbayan had no jurisdiction
over the controversy and therefore all the proceedings
taken below as well as the Decision rendered by
Respondent Sandiganbayan, are null and void for lack of
jurisdiction. 45
WHEREFORE, the questioned Resolution and Decision of the
Sandiganbayan are hereby SET ASIDE and declared NULL and
VOID for lack of jurisdiction. No costs.
SO ORDERED.
G.R. No. L-13827

September 28, 1962

BENJAMIN MASANGCAY, petitioner,

vs.
THE COMMISSION ON ELECTIONS, respondent.
Godofredo A. Ramos and Ruby Salazar-Alberto for petitioner.
Office of the Solicitor General and Dominador D. Dayot for
respondent.

xxx xxx xxx

However, we find no provision in the NIRC constituting such
person a public officer by reason of such requirement. The
BIR's power authorizing a private individual to act as a
depositary cannot be stretched to include the power to
appoint him as a public officer. The prosecution argues that
"Article 222 of the Revised Penal Code . . . defines the
individuals covered by the term 'officers' under Article 217 39 .
. ." of the same Code. 40 And accordingly, since Azarcon
became "a depository of the truck seized by the BIR" he also
became a public officer who can be prosecuted under Article
217 . . . ." 41
The Court is not persuaded. Article 222 of the RPC reads:
Officers included in the preceding
provisions. The provisions of this chapter
shall apply to private individuals who, in any
capacity whatever, have charge of any
insular, provincial or municipal funds,
revenues, or property and to any
administrator or depository of funds or
property attached, seized or deposited by
public authority, even if such property
belongs to a private individual.
"Legislative intent is determined principally from the language
of a statute. Where the language of a statute is clear and
unambiguous, the law is applied according to its express
terms, and interpretation would be resorted to only where a
literal interpretation would be either impossible or absurd or
would lead to an injustice." 42 This is particularly observed in
the interpretation of penal statutes which "must be construed
with such strictness as to carefully safeguard the rights of the
defendant . . . ." 43 The language of the foregoing provision is
clear. A private individual who has in his charge any of the
public funds or property enumerated therein and commits any
of the acts defined in any of the provisions of Chapter Four,
Title Seven of the RPC, should likewise be penalized with the
same penalty meted to erring public officers. Nowhere in this
provision is it expressed or implied that a private individual
falling under said Article 222 is to be deemed a public officer.
After a thorough review of the case at bench, the Court thus
finds Petitioner Alfredo Azarcon and his co-accused Jaime
Ancla to be both private individuals erroneously charged
before and convicted by Respondent Sandiganbayan which

BAUTISTA ANGELO, J.:

Benjamin Masangcay, with several others, was on October 14,
1957 charged before the Commission on Election with
contempt for having opened three boxes bearing serial
numbers l-8071, l-8072 and l-8073 containing official and
sample ballots for the municipalities of the province of Aklan,
in violation of the instructions of said Commission embodied
in its resolution promulgated September 2, 1957, and its
unnumbered resolution date March 5, 1957, inasmuch as he
opened said boxes not the presence of the division
superintendent of schools of Aklan, the provincial auditor, and
the authorized representatives of the Nacionalista Party, the
Liberal Party and the Citizens' Party, as required in the
aforesaid resolutions, which are punishable under Section 5 of
the Revised Election Code and Rule 64 of the Rules of Court.
Masangcay was then the provincial treasurer of Aklan
designated by the Commission in its resolution in Case CE-No.
270, part II 2 (b) thereof, to take charge of the receipt and
custody of the official ballots, election forms and supplies, as
well as of their distribution, among the different municipalities
of the province.
In compliance with the summons issued to Masangcay and his
co-respondents to appear and show cause why they should
not be punished for contempt on the basis of the
aforementioned charge, they all appeared before the
Commission on October 21, 1957 and entered a plea of not
guilty. Thereupon, evidence was presented by both the
prosecution and the defense, and on December 16, 1957 the
Commission rendered its decision finding Masangcay and his
co-respondent Molo guilty as charged and sentencing each of
them to suffer three months imprisonment and pay a fine of
P500, with subsidiary imprisonment of two months in case of
insolvency, to be served in the provincial jail of Aklan. The
other respondents were exonerated for lack of evidence.
Masangcay brought the present petition for review raising as
main issue the constitutionality of Section 5 of the Revised
Election Code which grants the Commission on Elections as
well as its members the power to punish acts of contempt
against said body under the same procedure and with the
same penalties provided for in Rule 64 of the Rules of Court in
that the portion of said section which grants to the
Commission and members the power to punish for contempt
is unconstitutional for it infringes the principle underlying the
separation of powers that exists among the three
departments of our constitutional form of government. In
other words, it is contended that, even if petitioner can be
held guilty of the act of contempt charged, the decision is null
and void for lack of valid power on the part of the Commission
to impose such disciplinary penalty under the principle of
separation of powers. There is merit in the contention that the

Commission on Elections lacks power to impose the

disciplinary penalty meted out to petitioner in the decision
subject of review. We had occasion to stress in the case
of Guevara v. The Commission on Elections 1 that under the
law and the constitution, the Commission on Elections has
only the duty to enforce and administer all laws to the
conduct of elections, but also the power to try, hear and
decide any controversy that may be submitted to it in
connection with the elections. In this sense, said, the
Commission, although it cannot be classified a court of justice
within the meaning of the Constitution (Section 30, Article
VIII), for it is merely an administrative body, may however
exercise quasi-judicial functions insofar as controversies that
by express provision law come under its jurisdiction. The
difficulty lies in drawing the demarcation line between the
duty which inherently is administrative in character and a
function which calls for the exercise of the quasi-judicial
function of the Commission. In the same case, we also
expressed the view that when the Commission exercises a
ministerial function it cannot exercise the power to punish
contempt because such power is inherently judicial in nature,
as can be clearly gleaned from the following doctrine we laid
down therein:
. . . In proceeding on this matter, it only discharged a
ministerial duty; it did not exercise any judicial function.
Such being the case, it could not exercise the power to
punish for contempt as postulated in the law, for such
power is inherently judicial in nature. As this Court has aptly
said: 'The power to punish for contempt is inherent in all
courts; its existence is essential to the preservation of order
in judicial proceedings, and to the enforcement of
judgments, orders and mandates courts, and, consequently,
in the administration of justice (Slade Perkins v. Director of
Prisons, 58 Phil., 271; U.S. v. Lee Hoc, 36 Phil., 867; In
Re Sotto, 46 O.G., 2570; In Re Kelly, Phil., 944). The exercise
of this power has always been regarded as a necessary
incident and attribute of courts (Slade Perkins v. Director of
Prisons, Ibid.). Its exercise by administrative bodies has
been invariably limited to making effective the power to
elicit testimony (People v. Swena, 296 P., 271). And the
exercise of that power by an administrative body in
furtherance of its administrative function has been held
invalid (Langenberg v. Lecker, 31 N.E., 190; In Re Sims, 37
P., 135; Roberts v. Hacney, 58 SW., 810).1awphl.nt
In the instant case, the resolutions which the Commission
tried to enforce and for whose violation the charge for
contempt was filed against petitioner Masangcay merely call
for the exercise of an administrative or ministerial function for
they merely concern the procedure to be followed in the
distribution of ballots and other election paraphernalia among
the different municipalities. In fact, Masangcay, who as
provincial treasurer of Aklan was the one designated to take
charge of the receipt, custody and distribution of election
supplies in that province, was charged with having opened
three boxes containing official ballots for distribution among
several municipalities in violation of the instructions of the
Commission which enjoin that the same cannot be opened
except in the presence of the division superintendent of
schools, the provincial auditor, and the authorized
representatives of the Nacionalista Party, the Liberal Party,
and the Citizens' Party, for he ordered their opening and
distribution not in accordance with the manner and procedure
laid down in said resolutions. And because of such violation he
was dealt as for contempt of the Commission and was
sentenced accordingly. In this sense, the Commission has
exceeded its jurisdiction in punishing him for contempt, and
so its decision is null and void.
Having reached the foregoing conclusion, we deem it
unnecessary to pass on the question of constitutionality raised
by petitioner with regard to the portion of Section 5 of the
Revised Election Code which confers upon the Commission on
Elections the power to punish for contempt for acts provided
for in Rule 64 of our rules of court.
WHEREFORE, the decision appealed from insofar as petitioner
Benjamin Masangcay is concerned, as well as the resolution
denying petitioner's motion for reconsideration, insofar as it
concerns him, are hereby reversed, without pronouncement
as to costs.
G.R. No. 110265 July 7, 1994
FREEMAN, INC., FREEMAN MANAGEMENT &
DEVELOPMENT CORP., CHIAO LIAN, LECHU S. LIM,
PERLITA S. DYOGI, OLIVIA S. SANTOS, CARMEN S. SAW
and RUBEN CHUA, petitioners,
vs.
THE SECURITIES AND EXCHANGE COMMISSION, SAW
MUI, RUBEN SAW, DIONISIO SAW, LINA S. CHUA, LUCILA
S. RUSTE and EVELYN SAW, respondents.

Abelardo G. Luzano for petitioner.

Benito O. Ching, Jr. for private respondents.

BELLOSILLO, J.:
This petition for certiorari filed under Rule 65 of the Rules of
Court seeks to annul and set aside the order of respondent
Securities and Exchange Commission dated 7 January 1993 in
SEC-EB No. 308 denying the action of petitioners to nullify the
7 January 1992 order of the Securities and Exchange
Commission in SEC Case No. 3577.
Sometime in 1986 and 1987, Freeman, Inc. (FREEMAN), was
granted a loan by Equitable Banking Corporation (EQUITABLE)
as evidenced by two (2) promissory notes, P.N. No. 125957
dated 8 December 1986 for P1,700,000.00 payable 8
December 1987, and P.N. No. TL-369 dated 24 April 1987 for
P6,000,000.00 payable 24 April 1988. Saw Chiao Lian,
President of Freeman, Inc., signed as co-maker in both
promissory notes.
When FREEMAN failed to pay its obligations, EQUITABLE
instituted collection suit against FREEMAN and Saw Chiao
Lian. 1 EQUITABLE also prayed for preliminary attachment.
On 27 May 1988, private respondents Saw Mui, Ruben Saw,
Dionisio Saw, Lina S. Chua, Lucila S. Ruste and Evelyn Saw
filed an answer in intervention claiming that they owned the
minority interest in FREEMAN.
On 12 October 1988, the trial court denied the intervention of
private respondents. The denial was affirmed by the Court of
Appeals and thereafter by this Court. 2
The collection case was terminated when the parties entered
into a compromise agreement duly approved by the court and
a decision rendered thereon on 5 December 1988. However,
Freeman, Inc. (FREEMAN) and Saw Chiao Lian, defendants in
the trial court, failed to comply with the judgment.
On 30 January 1989, a writ of execution was issued. Two (2)
parcels of land belonging to FREEMAN covered by TCT Nos.
34219 and 34220 were levied upon and sold at public auction
on 31 March 1989. The highest bidder was one of the
petitioners, Freeman Management and Development
Corporation (FREEMAN MANAGEMENT), which thereafter
registered its certificate of sale with the Register of Deeds.
On 23 May 1989, before FREEMAN MANAGEMENT could
consolidate its title over the properties purchased at the
auction sale, private respondents, representing the minority
shareholdings of FREEMAN, filed a petition with the Securities
and Exchange Commission (SEC) seeking the dissolution of
FREEMAN, accounting and reconveyance of the properties
covered by TCT Nos. 34219 and 34220. 3
On 5 April 1990, private respondent filed a similar complaint
against petitioners with the Regional Trial Court of Kalookan
City. 4 The complaint sought to annul the compromise
agreement between EQUITABLE on one hand and defendants
FREEMAN and Saw Chiao Lian on the other, as well as the
promissory notes executed by Saw Chiao Lian, the auction
sale, and the sheriff's certificate of sale of the lots covered by
TCT Nos. 34219 and 34220.
Petitioners moved for the dismissal of the complaint on the
ground that the same was a duplication of the case pending in
the SEC. But the motion was denied. Petitioners went up
on certiorari to the Court of Appeals which reversed the trial
court and directed the dismissal of the complaint by reason of
the pendency of the case. 5
On 7 January 1992, on motion on private respondents in SEC
Case
No. 3577, and despite the opposition thereto by petitioners,
SEC Hearing Officer Juanito B. Almosa, Jr., issued a writ of
preliminary injunction to prevent the consolidation of

ownership of petitioner FREEMAN MANAGEMENT over the

properties it acquired in the auction sale of 31 March 1989,
the redemption period having expired on 7 April 1990. 6
Petitioners assailed the order of the SEC Hearing Officer by
filing a petition for certiorari with the SEC en bancwhich on 7
January 1993 however denied the petition. 7 On 15 March
1993, petitioners' motion for reconsideration was likewise
denied. 8
On 22 April 1993, petitioners filed with this Court a petition
for certiorari questioning the 15 March 1993 order of the
SEC. 9 In a Resolution dated 10 May 1993, this Court dismissed
the petition for its failure to state the date when the
questioned SEC Order was received as well as the date when
the order denying the Motion for Reconsideration was
received. 10
On 4 June 1993, petitioners filed the present petition
containing the matters omitted in the petition earlier
dismissed. Petitioners allege that the SEC committed grave
abuse of discretion and acted in excess of jurisdiction in
sustaining the order of its Hearing Officer granting the writ of
injunction enjoining consolidation of ownership in FREEMAN
MANAGEMENT and that the SEC miscontrued the decisions of
the Court of Appeals in Equitable Banking Corp. v. Hon.
Mangay 11 and of this Court in Saw v. Court
of Appeals, 12 which in effect ruled the SEC has jurisdiction to
take cognizance of and determine the rights of petitioners and
private respondents as against each other. Petitioners also
argue that the assailed order of the SEC violated the basic
principle that the SEC, being a coordinate body with the
Regional Trial Court, could not interfere in the proceedings
held therein, and neither could it review the issues passed
upon by the said court. They likewise maintain that although
SEC Case No. 3577 could still proceed as to the dissolution of
FREEMAN, the two (2) properties of the latter which were
levied upon and sold to FREEMAN MANAGEMENT are already
excluded from the corporate assets of FREEMAN; and, that
these properties could no longer be the subject of the action
for reconveyance in the SEC because they had been the
subject of execution to enforce the decision of the trial court
in Civil Case No. 88-44404 which had already attained finality.
In their comment, private respondents contend that the
present petition was filed beyond the reglementary period of
thirty (30) days within which to appeal to this Court, citing
Sec. 1, Rule 17, of the New Rules of Procedure of the SEC.
Private respondents also allege that the jurisdiction of the SEC
has been resolved by this Court in Saw v. Court of
Appeals 13 when it held that "even with the denial of
petitioners' motion to intervene, nothing is really lost to them.
The denial did not necessarily prejudice them as their rights
are being litigated in the case (SEC Case No. 3577) now
before the Securities and Exchange Commission and may be
fully asserted and protected in that separate proceeding."
In its comment, the Office of the Solicitor General expresses
conformity with the allegations in the petition and prays that
the petition be given due course. It also avers that since the
present petition, which is one under Rule 65 of the Rules of
Court, was filed thirty-five (35) days after receipt of the
assailed resolution of the SEC, the instant petition was filed
within a reasonable time. The Solicitor General also agrees
with petitioners' contention that the SEC, as a co-equal body
with the Regional Trial Court, cannot modify, reverse or pass
upon the decision of said court. Moreover, private
respondents had the opportunity to submit a bid for the
foreclosed properties during the public auction and their
failure to exercise their right should not prejudice petitioners.
We sustain petitioners. The present petition seeks to annul
and set aside the order of the SEC for want of jurisdiction to
issue the writ of injunction, a provisional remedy to the
principal action pending in the SEC for the dissolution of
petitioner FREEMAN. Hence, the petition is not an appeal from
a final order of the SEC but a special civil action questioning
the legal competence of the latter to issue such interlocutory
order. It is covered by Sec. 1, Rule 65, of the Rules of Court
which allow a person aggrieved to file a verified petition in the
proper court praying that judgment be rendered annulling or
modifying the proceedings, as the law requires, of the
tribunal, board or officer when the latter, exercising judicial

functions, has acted without or in excess of its or his

jurisdiction or with grave abuse of discretion and there is no
appeal, nor any plain, speedy and adequate remedy in the
ordinary course of law.
We have consistently ruled that petitions for certiorari must
be filed within a reasonable time. In the instant case, the
records show that the petition at bench was filed on 4 June
1993, or two (2) months and nineteen (19) days from 17
March 1993, which was the date when petitioners received
copy of the order of the SEC denying their motion for
reconsideration. There is no doubt that this petition was
seasonably filed.
SEC Case No. 3577 arose from the action filed by private
respondents as minority shareholders of petitioner FREEMAN
for the dissolution of the corporation and reconveyance of the
properties conveyed to another petitioner FREEMAN
MANAGEMENT in a public auction. The SEC maintained that it
had jurisdiction to issue the writ of injunction preventing the
consolidation of ownership in FREEMAN MANAGEMENT on the
basis of our ruling in Saw v. Court of Appeals. We denied the
intervention of private respondents in the trial court in Civil
Case No. 88-44404 which had already been terminated. As we
stated therein, even with the denial of herein private
respondents' motion to intervene nothing could really be lost
to them as their rights were being litigated before the SEC and
would be fully asserted and protected in that separate
proceeding.
Our ruling in Saw v. Court of Appeals should be understood in
the light of two(2) basic legal principles. First, that
administrative agencies like the SEC are tribunals of limited
jurisdiction and as such can exercise only those powers which
are specifically granted to them by their enabling
statutes. 14 Section 5 of P.D. No. 902-A, as amended, provides
the cases over which the SEC has original and exclusive
jurisdiction to hear and decide.Section 6 of the same decree
empowers the SEC to issue preliminary or permanent
injunction, whether prohibitory or mandatory, in all cases in
which it has jurisdiction.
The action for dissolution of FREEMAN filed by its minority
stockholders is well within the jurisdiction of the SEC to
resolve in accordance with P.D. No. 902-A. However, the
inclusion in the SEC case of FREEMAN MANAGEMENT of which
private respondents are not stockholders for the purpose of
compelling it to reconvey to FREEMAN the properties originally
owned by the latter but were levied upon and sold to
FREEMAN MANAGEMENT in a public auction is a matter
outside of the limited jurisdiction of the SEC. The petition for
reconveyance of properties against FREEMAN MANAGEMENT
is not an intra-corporate controversy since private
respondents have no shares or interests whatsoever in
FREEMAN MANAGEMENT, a corporation separate and distinct
from FREEMAN, which is undergoing dissolution proceedings
in the SEC.
The second basic principle is the doctrine of non-interference
which should be regarded as highly important in judicial
stability and in the administration of justice whereby the
judgment of a court of competent jurisdiction may not be
opened, modified or vacated by any court or tribunal of
concurrent jurisdiction. 15 The SEC is at the very least co-equal
with the Regional Trial Court. As such, one would have no
power to control the other. 16 Moreover, in the instant case,
judgment was rendered by the trial court in Civil Case No. 8844404 approving the compromise agreement between
EQUITABLE on one hand, and FREEMAN and Saw Chiao Lian on
the other. A writ of execution was issued against the
defendants to enforce the judgment and two (2) properties of
FREEMAN were levied upon and sold to FREEMAN
MANAGEMENT as highest bidder in the public auction.
Finally, the judgment was fully satisfied and a certificate of
sale was issued to FREEMAN MANAGEMENT. It is axiomatic
that after a judgment has been fully satisfied, the case is
deemed terminated once and for all. 17 It cannot be modified
or altered. Hence, the properties sold to FREEMAN
MANAGEMENT are now considered excluded from the
corporate assets of FREEMAN and can no longer be the
subject of the proceedings in the SEC for the dissolution of the
latter. Therefore SEC exceeded its jurisdiction when it issued a

writ of injunction enjoining FREEMAN MANAGEMENT from

consolidating its ownership over the two (2) parcels of land it
acquired as highest bidder in the execution sale.

and remove whatever improvements they may have

introduced thereto.
xxxx

WHEREFORE, the petition is GRANTED and the assailed orders

of the Securities and Exchange Commission dated 7 January
1993 and 15 March 1993 are REVERSED and SET ASIDE.
SO ORDERED.
G.R. No. 161811

April 12, 2006

THE CITY OF BAGUIO, MAURICIO DOMOGAN, and

ORLANDO GENOVE, Petitioners,
vs.
FRANCISCO NIO, JOSEFINA NIO, EMMANUEL NIO,
and EURLIE OCAMPO, Respondents.
DECISION
CARPIO MORALES, J.:
The Bureau of Lands awarded on May 13, 1966 to Narcisa A.
Placino (Narcisa) a parcel of land identified as Lot No. 10 (the
lot) located at Saint Anthony Road, Dominican-Mirador
Barangay, Baguio City.
Francisco Nio (Nio), one of the herein respondents, who has
been occupying the lot, contested the award by filing a
Petition Protest on December 23, 1975 before the Bureau of
Lands.
The Director of Lands dismissed the Petition Protest by Order
of November 11, 1976.
Nio appealed the dismissal all the way to the Supreme Court
but he did not succeed.
The decision of the Director of Lands dated November 11,
1976 having become final and executory,1 the then-Executive
Director of the Department of Environment and Natural
Resources-Cordillera Autonomous Region (DENR-CAR), on
petition of Narcisa, issued an Order of Execution dated
February 1, 1993 directing the Community Environment and
Natural Resources Office (CENRO) Officer to enforce the
decision "by ordering Petitioner Nio and those acting in his
behalf to refrain from continuously occupying the area and
remove whatever improvements they may have introduced
thereto."2
Attempts to enforce the Order of Execution failed, prompting
Narcisa to file a complaint for ejectment before the Baguio
City Municipal Trial Court in Cities (MTCC). The MTCC
dismissed Narcisas complaint, however, by Order 3of August
7, 1996.
Narcisas counsel, Atty. Edilberto Claravall (Atty. Claravall),
later petitioned the DENR-CAR for the issuance of a Special
Order authorizing the City Sheriff of Baguio, the City Police
Station, and the Demolition Team of the City Government to
demolish or remove the improvements on the lot introduced
by Nio. The DENR-CAR denied the petition, citing lack of
jurisdiction over the City Sheriff of Baguio, the City Police
Station, and the Demolition Team of the City Government. The
DENR-CAR also invoked Section 14 (now Section 10 (d)) of
Rule 39 of the Rules of Court.4
Atty. Claravall thereupon moved to have the Order of
Execution previously issued by the DENR-CAR amended,
which was granted. As amended, the Order of Execution
addressed to the CENRO Officer read:
WHEREFORE, pursuant to the provisions of Section 1844 of
the Revised Administrative Code as amended by Act No. 3077,
you are hereby enjoined to enforce the aforementioned order,
with the assistance upon request of the City Sheriff of Baguio
City, the Demolition Team of Baguio City and the Baguio City
Police Station, by Ordering Petitioner Nio and those acting in
his behalf to refrain from continuously occupying the area

SO ORDERED.5 (Emphasis and underscoring supplied)

The DENR-CENRO, together with the Demolition Team of
Baguio City and the Baguio City police, desisted, however, in
their earlier attempt to enforce the Amended Order of
Execution.6
On July 16, 1997, the Demolition Team of Baguio City headed
by Engineer Orlando Genove and the Baguio City Police, on
orders of then Baguio City Police Officer-In-Charge (OIC)
Donato Bacquian, started demolishing the houses of Nio and
his herein co-respondents.7
The demolition was, however, temporarily stopped upon the
instructions of DENR-CENR Officer Guillermo Fianza, who later
advised Nio that the DENR-CENRO would implement the
Amended Order of Execution on August 4, 1997.8
Nio and his wife Josefina Nio thereupon filed a Petition 9 for
Certiorari and Prohibition with Prayer for Temporary
Restraining Order before the Regional Trial Court (RTC) of
Baguio City against Guillermo Fianza, Teofilo Olimpo of the
DENR-CENRO, Mayor Mauricio Domogan (hereafter petitioner),
Atty. Claravall, Engr. Orlando Genove (hereafter petitioner),
Rolando Angara, and Police Officer Donato Bacquian
challenging the Amended Order of Execution issued by the
DENR-CENRO.1avvphil.net
The Nio spouses later filed an Amended Petition10 by
impleading Emmanuel Nio and Eurlie Ocampo as therein copetitioners and the City of Baguio (hereafter petitioner) and
Narcisa as therein additional respondents, and further praying
for damages.
Branch 6 of the Baguio RTC dismissed the petition of Nio et
al. (hereafter respondents) for lack of merit.11Respondents
Motion for Reconsideration12 having been denied, they filed a
Petition for Review13 under Rule 42 of the Rules before the
Court of Appeals.
By Decision14 of December 11, 2002, the Court of Appeals
granted the Petition for Review, holding that Sec. 10(d) of Rule
39 of the Rules reading:
SEC. 10. Execution of judgments for specific act.
xxxx
(d) Removal of improvements on property subject of
execution. When the property subject of the execution
contains improvements constructed or planted by the
judgment obligor or his agent, the officer shall not destroy,
demolish or remove said improvements except upon special
order of the court, issued upon motion of the judgment
obligee after due hearing and after the former has failed to
remove the same within a reasonable time fixed by the court.
(Underscoring supplied)
applies.
Thus disposed the appellate court:
WHEREFORE, the instant appeal is hereby GRANTED and the
Orders dated September 24, 1997 and November 23, 1998
are hereby SET ASIDE. Public respondent City Mayor Mauricio
Domogan thru the Demolition Team and City Engineers Office
are hereby ordered to cease and desist from enforcing the
amended order of executionissued by Oscar N. Hamada,
Regional Executive Director of the Department of
Environmental and Natural Resources, concerning the
demolition or removal of the structures made by petitioners
until private respondent applied for a special order
abovementioned with the proper court.1avvphil.net

SO ORDERED.15 (Underscoring supplied)

Respondents filed before the appellate court an Ex-Parte
Motion for Reconsideration16 on January 9, 2003, alleging that
some of the reliefs they prayed for in their petition were left
unacted upon.17 Petitioners too filed a Motion for
Reconsideration18 on January 28, 2003, raising the following
grounds:
1. THE HONORABLE COURT FAILED TO CONSIDER
THAT THE CITY MAYOR HAS THE POWER TO ORDER
THE DEMOLITION OF ILLEGALLY-BUILT STRUCTURES;
2. THE HONORABLE COURT GRAVELY ERRED IN
GIVING DUE COURSE TO THE PETITION FOR REVIEW;
3. THE HONORABLE COURT MISAPPLIED SEC. 10 (d),
RULE 39 of the RULES OF COURT.19(Underscoring
supplied)
In support of the first ground, petitioners raised before the
appellate court, in their Motion for Reconsideration, for the
first time, the power of the City Mayor to validly order the
demolition of a structure constructed without a building
permit pursuant to Sec. 455(b) 3(vi) of the Local Government
Code of 1991 in relation to the National Building Code of the
Philippines.
Alleging that respondents built their house without the
required entry and building permits, petitioners argued that
the City Mayor may order the demolition of a house without a
special court order.20
The Court of Appeals denied both parties motions for
reconsideration by Resolution21 of December 17, 2003.
Hence, the present petition of the City of Baguio, Mayor
Domogan (now a Congressman), and Orlando Genove,
faulting the appellate court:
1. . . . IN RULING THAT A SPECIAL COURT ORDER IS NEEDED
FOR THE DEMOLITION OF RESPONDENTS STRUCTURES;
2. . . . IN APPLYING SEC. 10(d) RULE 39 OF THE RULES OF
COURT IN THIS CASE;
3. . . . IN ENTERTAINING RESPONDENTS PETITION FOR
REVIEW.22
The petition fails.
While it is noted that respondents appeal to the Court of
Appeals was erroneously brought under Rule 42 of the Rules
of Court, instead of under Rule 41, the RTC having rendered
the questioned decision in the exercise of its original, not
appellate, jurisdiction, this Court overlooks the error in view of
the merits of respondents case.23
Petitioners contention that the enforcement of the Amended
Order of Execution does not need a hearing and court order
which Sec. 10(d) of Rule 39 of the Rules of Court requires does
not lie. That an administrative agency which is clothed with
quasi-judicial functions issued the Amended Order of
Execution is of no moment, since the requirement in Sec. 10
(d) of Rule 39 of the Rules of Court echoes the constitutional
provision that "no person shall be deprived of life, liberty or
property without due process of law, nor shall any person be
denied the equal protection of the laws."24
Antipolo Realty Corporation v. National Housing
Authority teaches:
In general, the quantum of judicial or quasi-judicial powers
which an administrative agency may exercise is defined in the
enabling act of such agency. In other words, the extent to
which an administrative entity may exercise such powers
depends largely, if not wholly, on the provisions of the statute
creating or empowering such agency.25 (Underscoring
supplied)

There is, however, no explicit provision granting the Bureau of

Lands (now the Land Management Bureau) or the DENR
(which exercises control over the Land Management Bureau)
the authority to issue an order of demolition26 which the
Amended Order of Execution, in substance, is.
Indeed,
[w]hile the jurisdiction of the Bureau of Lands is confined to
the determination of the respective rights of rival claimants to
public lands or to cases which involve the disposition of public
lands, the power to determine who has the actual,
physical possession or occupation or the better right of
possession over public lands remains with the courts.
The rationale is evident. The Bureau of Lands does not have
the wherewithal to police public lands. Neither does it have
the means to prevent disorders or breaches of peace among
the occupants. Its power is clearly limited to disposition and
alienation and while it may decide disputes over possession,
this is but in aid of making the proper awards. The ultimate
power to resolve conflicts of possession is recognized
to be within the legal competence of the civil courts
and its purpose is to extend protection to the actual
possessors and occupants with a view to quell social
unrest.27 (Emphasis added)
Consequently, this Court held:28
x x x the power to order the sheriff to remove
improvements and turn over the possession of the land
to the party adjudged entitled thereto, belongs only to
the courts of justice and not to the Bureau of
Lands.29 (Emphasis and underscoring supplied)
In fine, it is the court sheriff which is empowered to remove
improvements introduced by respondents on, and turn over
possession of, the lot to Narcisa.
Petitioners invocation of the City Mayors authority under Sec.
455(b) 3(vi) of the Local Government Code to order the
demolition or removal of an illegally constructed house,
building, or structure within the period prescribed by law or
ordinance and their allegation that respondents structures
were constructed without building permits30 were not raised
before the trial court. Petitioners having, for the first time,
invoked said section of the Local Government Code and
respondents lack of building entry permits in their Motion for
Reconsideration of the Court of Appeals decision, it was
correctly denied of merit,31 it being settled that matters,
theories or arguments not brought out in the proceedings
below will ordinarily not be considered by a reviewing court as
they cannot be raised for the first time on appeal.32
WHEREFORE, the petition is DISMISSED. The questioned
Decision and Resolution of the Court of Appeals
are AFFIRMED.
G.R. No. 108310 September 1, 1994
RUFINO O. ESLAO, in his capacity as President of
Pangasinan State University, petitioner,
vs.
COMMISSION ON AUDIT, respondent.
Mehol K. Sadain for petitioner.

FELICIANO, J.:
In this Petition for Certiorari, Rufino O. Eslao in his capacity as
President of the Pangasinan State University ("PSU") asks us
to set aside Commission on Audit ("COA") Decisions Nos. 1547
(1990) and 2571 (1992) which denied honoraria and per
diems claimed under National Compensation Circular No. 53
by certain PSU personnel including petitioner.

On 9 December 1988, PSU entered into a Memorandum of

Agreement ("MOA") 1 with the Department of Environment
and Natural Resources ("DENR") for the evaluation of eleven
(11) government reforestation operations in Pangasinan. 2 The
evaluation project was part of the commitment of the Asian
Development Bank ("ADB") under the ADB/OECF Forestry
Sector Program Loan to the Republic of the Philippines and
was one among identical project agreements entered into by
the DENR with sixteen (16) other state universities.
On 9 December 1988, a notice to proceed 3 with the review
and evaluation of the eleven (11) reforestation operations was
issued by the DENR to PSU. The latter complied with this
notice and did proceed.
On 16 January 1989, per advice of the PSU Auditor-in-Charge
with respect to the payment of honoraria and per diems of
PSU personnel engaged in the review and evaluation project,
PSU Vice President for Research and Extension and Assistant
Project Director Victorino P. Espero requested the Office of the
President, PSU, to have the University's Board of Regents
("BOR") confirm the appointments or designations of involved
PSU personnel including the rates of honoraria and per
diems corresponding to their specific roles and functions. 4
The BOR approved the MOA on 30 January 1989 5 and on 1
February 1989, PSU issued Voucher No.
8902007 6representing the amount of P70,375.00 for payment
of honoraria to PSU personnel engaged in the project. Later,
however, the approved honoraria rates were found to be
somewhat higher than the rates provided for in the guidelines
of National Compensation Circular ("NCC") No. 53.
Accordingly, the amounts were adjusted downwards to
conform to NCC No. 53. Adjustments were made by deducting
amounts from subsequent disbursements of honoraria. By
June 1989, NCC No. 53 was being complied with. 7
On 6 July 1989, Bonifacio Icu, COA resident auditor at PSU,
alleging that there were excess payments of honoraria, issued
a "Notice of Disallowance" 8 disallowing P64,925.00 from the
amount of P70,375.00 stated in Voucher No. 8902007,
mentioned earlier. The resident auditor based his action on
the premise that Compensation Policy Guidelines ("CPG") No.
80-4, dated 7 August 1980, issued by the Department of
Budget and Management which provided for lower rates than
NCC No. 53 dated 21 June 1988, also issued by the
Department of Budget and Management, was the schedule
for honoraria and per diems applicable to work done under
the MOA of 9 December 1988 between the PSU and the DENR.
On 18 October 1989, a letter 9 was sent by PSU Vice President
and Assistant Project Director Espero to the Chairman of the
COA requesting reconsideration of the action of its resident
auditor. In the meantime, the Department of Budget and
Management ("DBM"), upon request by PSU, issued a
letter 10 clarifying that the basis for the
project's honoraria should notbe CPG No. 80-4 which pertains
to locally funded projects but rather NCC No. 53 which
pertains to foreign-assisted projects. A copy of this
clarification was sent to the COA upon request by PSU.
On 18 September 1990, COA Decision No. 1547 11 was issued
denying reconsideration of the decision of its resident auditor.
The COA ruled that CPG. No. 80-4 is the applicable guideline
in respect of the honoraria as CPG No. 80-4 does not
distinguish between projects locally funded and projects
funded or assisted with monies of foreign-origin.
PSU President Eslao sent a letter 12 dated 20 March 1991
requesting reconsideration of COA Decision No. 1547 (1990)
alleging that (a) COA had erred in applying CPG No. 80-4 and
not NCC No. 53 as the project was foreign-assisted and (b) the
decision was discriminatory honoraria based on NCC No. 53
having been approved and granted by COA resident auditors
in two (2) other state universities engaged in the same
reforestation project. PSU then submitted to the COA (a) a
certification 13 from the DENR to the effect that the DENR
evaluation project was foreign- assisted and (b) the letter of
the DBM quoted in the margin supra.
On 16 November 1992, COA Decision No. 2571 (1992)
issued denying reconsideration.

14

was

In the meantime, in December 1990, the DENR informed

petitioner of its acceptance of the PSU final reports on the
review and evaluation of the government reforestation
projects. 15 Subsequently, honoraria for the period from
January 1989 to January 1990 were disbursed in accordance
with NCC No. 53. A Certificate of Settlement and Balances
(CSB No. 92-0005-184 [DENR]) 16 was then issued by the COA
resident auditor of PSU showing disallowance of alleged
excess payment of honoraria which petitioner was being
required to return.
The instant Petition prays that (a) COA Decision Nos. 1547
(1990) and 2571 (1992) be set aside; (b) the COA be ordered
to pass in audit the grant of honoraria for the entire duration
of the project based on the provisions and rates contained in
NCC No. 53; and (c) the COA be held liable for actual damages
as well as petitioner's legal expenses and attorney's fees.
The resolution of the dispute lies in the determination of the
circular or set of provisions applicable in respect of
the honoraria to be paid to PSU personnel who took part in the
evaluation project, i.e., NCC No. 53 or CPG No. 80-4.
In asserting that NCC No. 53 supplies the applicable guideline
and that the COA erred in applying CPG No. 80-4 as the
pertinent standard, petitioner contends that:
(a) CPG No. 80-4 applies to "special projects" the definition
and scope of which do not embrace the evaluation project
undertaken by petitioner for the DENR;
(b) NCC No. 53 applies to foreign-assisted projects ("FAPs")
while CPG No. 80-4 applies to locally-funded projects as no
reference to any foreign component characterizing the
projects under its coverage is made;
(c) the DENR evaluation project is a foreign-assisted project
per certification and clarification of the DENR and DBM
respectively as well as the implied admission of the COA in
its Comment; and
(d) the DBM's position on the matter should be respected
since the DBM is vested with authority to (i) classify
positions and determine appropriate salaries for specific
position classes, (ii) review the compensation benefits
programs of agencies and (iii) design job evaluation
programs.
The Office of the Solicitor General, in lieu of a Comment on
the Petition, filed a Manifestation 17 stating that (a) since, per
certification of the DENR and Letter/Opinion of the DBM that
the project undertaken by PSU is foreign-assisted, NCC No. 53
should apply; and (b) respondent COA's contention that CPG
No. 80-4 does not distinguish between projects which are
foreign-funded from locally-funded projects deserves no merit,
since NCC No. 53, a special guideline, must be construed as
an exception to CPG No. 80-4, a general guideline. The
Solicitor General, in other words, agreed with the position of
petitioner.
Upon the other hand, respondent COA filed its own comment,
asserting that:
(a) while the DBM is vested with the authority to issue rules
and regulations pertaining to compensation, this authority
is regulated by Sec. 2 (2) of Art. IX-D of the 1987
Constitution which vests respondent COA with the power to
"promulgate accounting and auditing rules and regulations,
including those for the prevention and disallowance of
irregular, unnecessary, excessive, extravagant or
unconscionable expenditures, or uses of government funds
and properties;
(b) the Organizational Arrangement and Obligations of the
Parties sections of the MOA clearly show that the evaluation
project is an "inter-agency activity" between the DENR and
PSU and therefore a "special project";
(c) the issue as to whether the evaluation project is in fact a
"special project" has become moot in view of the DBM's
clarification/ruling that the evaluation project is foreign-

assisted and therefore NCC No. 53, not CPG No. 80-4 which
applies only to locally-funded projects, should apply;

Obligations of DENR:
The DENR shall have the following obligations:

(d) the DBM issuance notwithstanding, respondent COA

applied CPG No. 80-4 to effectively rationalize the rates of
additional compensation assigned to or detailed in "special
projects" as its application is without distinction as to the
source of funding and any payment therefore in excess of
that provided by CPG No. 80-4 is unnecessary, excessive
and disadvantageous to the government;
(e) respondent COA's previous allowance of payment
of honoraria based on NCC No. 53 or the fact that a full five
years had already elapsed since NCC No. 53's issuance does
not preclude COA from assailing the circular's validity as "it
is the responsibility of any public official to rectify every
error he encounters in the performance of his function" and
"he is not duty- bound to pursue the same mistake for the
simple reason that such mistake had been continuously
committed in the past";
(f) the DBM ruling classifying the evaluation project as
foreign-assisted does not rest on solid ground since loan
proceeds, regardless of source, eventually become public
funds for which the government is accountable, hence, any
project under the loan agreement is to be considered
locally-funded;
(g) the DBM ruling constitutes an unreasonable
classification, highly discriminatory and violative of the
equal protection clause of the Constitution; and
(h) granting arguendo NCC No. 53 is the applicable
criterion, petitioner received honoraria in excess of what
was provided in the MOA.
We consider the Petition meritorious.
Sec. 2.1 of CPG No. 80-4 defines "special project" as
an inter-agency or inter-committee activity or
an undertaking by a composite group of officials/employees
from various agencies which [activity or undertaking] is not
among the regular and primary functions of the agencies
involved. (Emphasis and brackets supplied)
Respondent COA maintains that the sections of the MOA
detailing the "Organizational Arrangement and Obligations of
the Parties" clearly show that the evaluation project is an
"inter-agency activity." The pertinent sections of the MOA are
as follows:
ORGANIZATIONAL ARRANGEMENTS
A Coordinating Committee shall be created which shall be
responsible for the overall administration and coordination
of the evaluation, to be chaired by a senior officer of the
DENR. The Committee shall [be] composed [of] the
following:
Chairman : Undersecretary for Planning,
Policy and Project Management
[DENR]
Co-Chairman : Vice-President for Research
and Development [PSU]
Members : Director of FMB
Dean, PSU Infanta Campus
Associate Dean, PSU Infanta
Campus
Chief, Reforestation
Division
Project Director of the ADB
Program Loan for Forestry
Sector
OBLIGATIONS OF THE PARTIES

1. Provide the funds necessary for the review and

reevaluation of eleven (11) reforestation projects.
xxx xxx xxx
2. Undertake the monitoring of the study to ascertain its
progress and the proper utilization of funds in conformity
with the agreed work and financial plan.
3. Reserve the right to accept or reject the final report and
in the latter case, DENR may request PSU to make some
revisions/modifications on the same.
Obligations of the PSU:
The PSU shall have the following obligations:
1. Undertake the review and evaluation of the eleven (11)
DENR-funded reforestation projects in accordance with the
attached TOR;
2. Submit regularly to DENR financial status reports apart
from the progress report required to effect the second
release of funds;
3. Submit the final report to DENR fifteen (15) days after the
completion of the work. The report should at least contain
the information which appears in Annex D;
4. Return to DENR whatever balance is left of the funds
after the completion of work.
Simply stated, respondent COA argues that since the
Coordinating Committee is composed of personnel from the
DENR and PSU, the evaluation project is an "inter-agency
activity" within the purview of the definition of a "special
project".
We are unable to agree with respondent COA.
Examination of the definition in CPG No. 80-4 of a "special
project" reveals that definition has two (2) components: firstly,
there should be an inter-agency or inter-committee activity or
undertaking by a group of officials or employees who are
drawn from various agencies; and secondly, the activity or
undertaking involved is not part of the "regular or primary"
functions of the participating agencies. Examination of the
MOA and its annexes reveals that two (2) groups were actually
created. The first group consisted of the coordinating
committee, the membership of which was drawn from officials
of the DENR and of the PSU; and the second, the evaluation
project team itself which was, in contrast, composed
exclusively of PSU personnel. 18 We believe that the first
component of the CPU No. 80-4's definition of "special project"
is applicable in respect of the group which is charged with the
actual carrying out of the project itself, rather than to the
body or group which coordinates the task of the operating or
implementing group. To construe the administrative definition
of "special project" otherwise would create a situation, which
we deem to be impractical and possibly even absurd, under
which any undertaking entered into between the senior
officials of government agencies would have to be considered
an "inter-agency or inter-committee activity," even though the
actual undertaking or operation would be carried out not by
the coordinating body but rather by an separate group which
might not (as in the present case) be drawn from the agencies
represented in the coordinating group. In other words, an
"inter-agency or inter-committee activity or . . . undertaking"
must be one which is actually carried out by a composite
group of officials and employees from the two (2) or more
participating agencies.
As already noted, in the case at hand, the project
team actually tasked with carrying out the evaluation of the
DENR reforestation activity is composed exclusively of
personnel from PSU; the project team's responsibility and

undertaking are quite distinct from the responsibilities of the

coordinating [DENR and PSU] committee. Thus, the project
team is not a "composite group" as required by the definition
of CPG No. 80-4 of "special projects." It follows that the
evaluation projects here involved do not fall within the ambit
of a "special project" as defined and regulated by CPG No. 804.
We do not consider it necessary to rule on whether the project
at hand involved an undertaking "which is not among the
regular and primary functions of the agencies involved" since
the reforestation activity evaluation group is not, as pointed
out above, a "special project" within the meaning of CPG No.
80-4. In any case, this particular issue was not raised by any
of the parties here involved.
It is true, as respondent COA points out, that the provisions of
CPG No. 80-4 do not distinguish between "a special project"
which is funded by monies of local or Philippine origin and "a
special project" which is funded or assisted by monies
originating from international or foreign agencies. As earlier
noted, CPG No. 80-4 was issued by the Department of Budget
and Management back in 7 August 1980. Upon the other
hand, NCC No. 53 was issued also by the Department of
Budget and Management more than eight (8) years later, i.e.,
9 December 1988. Examination of the provisions of NCC No.
53 makes it crystal clear that the circular is applicable to
foreign-assisted projects only. The explicit text of NCC No. 53
states that it was issued to
prescribe/authorize the classification and compensation
rates of positions in foreign-assisted projects(FAPs)
including honoraria rates for personnel detailed to
FAPs and guidelines in the implementation thereof
pursuant to Memorandum No. 173 dated 16 May
1988 19 (Emphasis supplied)
and which apply to all positions in foreign-assisted projects
only. Clearly, NCC No. 53 amended the earlier CPG No. 80-4 by
carving out from the subject matter originally covered by CPG
No. 80-4 all "foreign-assisted [special] projects." CPG No. 80-4
was, accordingly, modified so far as "foreign-assisted [special]
projects (FAPs)" are concerned. It is this fact or consequence
of NCC No. 53 that respondent COA apparently failed to grasp.
Thus, CPG No. 80-4 does not control, nor even relate to, the
DENR evaluation project for at least two (2) reasons: firstly,
the evaluation project was not a "special project" within the
meaning of CPG No. 80-4; secondly, that same evaluation
project was a Foreign-Assisted Project to which NCC No. 53 is
specifically applicable.
That the instant evaluation project is a Foreign-Assisted
Project is borne out by the records: (a) the MOA states that
the project is "part of the commitment with the Asian
Development Bank (ADB) under the Forestry Sector Program
Loan"; (b) the certification issued by the DENR certifies that
. . . the review and evaluation of DENR
reforestation projects undertaken by State
Universities and Colleges, one of which is
Pangasinan State University, is one of the
components of the ADB/OECF Forestry
Sector Program Loan which is funded by the
loan. It is therefore a
foreign-assisted project (Underscoring
supplied); and
(c) the clarification issued by the DBM stating that
The honoraria rates of the detailed
personnel should not be based on
Compensation Policy Guidelines No. 80-4,
which pertains to locally funded projects.
Since the funding source for this activity
come from loan proceeds, National
Compensation Circular No. 53 should apply.
Even in its Comment respondent COA submits that
. . . the issue as to whether or not the project was special
already became moot in the face of the opinion/ruling of the
DBM that since it (the project) is "foreign-assisted" NCC 53

should apply, for CPG No. 80-4 applies only to "locallyfunded projects. 20
Under the Administration Code of 1987, the Compensation
and Position Classification Bureau of the DBM "shall classify
positions and determine appropriate salaries for specific
position classes and review appropriate salaries for specific
position classes and review the compensation benefits
programs of agencies and shall design job evaluation
programs." 21 In Warren Manufacturing Workers Union
(WMWU) v. Bureau of Labor Relations, 22 the Court held that
"administrative regulations and policies enacted by
administrative bodies to interpret the law have the force of
law and are entitled to great respect." It is difficult for the
Court to understand why, despite these certifications,
respondent COA took such a rigid and uncompromising
posture that CPG No. 80-4 was the applicable criterion
for honoraria to be given members of the reforestation
evaluation project team of the PSU.
Respondent COA's contention that the DBM clarification is
unconstitutional as that ruling does not fulfill the requisites of
a valid classification 23 is, in the Court's perception,
imaginative but nonetheless an after-thought and a futile
attempt to justify its action. As correctly pointed out by
petitioner, the constitutional arguments raised by respondent
COA here were never even mentioned, much less discussed,
in COA Decisions Nos. 1547 (1990) and 2571 (1992) or in any
of the proceedings conducted before it.
Petitioner also argues that the project's duration stipulated in
the MOA was implicitly extended by the parties. The DENR's
acceptance, without any comment or objection, of PSU's (a)
letter explaining the delay in its submission of the final project
report and (b) the final project report itself brought about,
according to petitioner, an implied agreement between the
parties to extend the project duration. It is also contended
that by the very nature of an evaluation project, the project's
duration is difficult to fix and as in the case at bar, the period
fixed in the MOA is merely an initial estimate subject to
extension. Lastly, petitioner argues that whether the project
was impliedly extended is an inconsequential consideration;
the material consideration being that the project stayed within
its budget. The project having been extended, petitioner
concludes that the evaluation team should be
paid honoraria from the time it proceeded with the project and
up to the time the DENR accepted its final report.
Mindful of the detailed provisions of the MOA and Project
Proposal governing project duration and project financing as
regulated by NCC No. 53, the Court is not persuaded that
petitioner can so casually assume implicit consent on the part
of the DENR to an extension of the evaluation project's
duration.
The "Duration of Work" clause of the MOA provides that
PSU shall commence the work 10 days from
receipt of the Notice to Proceed and shall be
completed five months thereafter.
(Emphasis supplied)
On 9 December 1988, the DENR advised PSU President
Rufino Eslao that PSU "may now proceed with the review
and reevaluation as stipulated" in the MOA. The Notice to
Proceed further stated that
Your institution is required to complete the
work within five months starting ten (10)
days upon receipt of this notice. (Emphasis
supplied)
In respect of the financial aspects of the project, the MOA
provides that
The DENR shall have the following obligations:
1. Provide the funds necessary for the review and
reevaluation of the eleven (11) reforestation projects . . .
in the amount not more than FIVE HUNDRED SIX
THOUSAND TWO HUNDRED TWENTY FOUR PESOS

(P506,224.00) which shall be spent in accordance with

the work and financial plan which attached as Annex C.
Fund remittances shall be made on a staggered basis
with the following schedule:
a. FIRST RELEASE
Twenty percent (20%) of the total cost to be
remitted within fifteen (15) working days upon
submission of work plan;
b. SECOND RELEASE
Forty percent of the total cost upon submission of a
progress report of the activities that were so far
undertaken;

Research Associates (2) P8,000

Honorarium P1,000/mo. for 4 months
Special Disbursing Officer (1) 4,000
Honorarium P1,000/mo. for 4 months
Enumerators/Data Gatheres 36,000
360 mandays at P100/manday
including COLA
Coders/Encoders 30,000
300 mandays at P100/manday
including COLA
Cartographer/Illustrator 5,000
50 mandays at P100/manday
including COLA
Documentalist 4,500
45 mandays at P100/manday
including COLA
Typist 5,000
50 mandays at P100/manday
including COLA

c. THIRD RELEASE
Thirty percent (30%) of the total amount upon submission
of the draft final report;
d. FOURTH RELEASE
Ten percent of the total amount [upon submission] of the
final report. (Underscoring supplied)
Annex "C" referred to in the MOA is the Project Proposal. Per
the Proposal's "Budget Estimate," P175,000.00 and
P92,500.00 were allotted for "Expert Services" and "Support
Services" respectively itemized as follows:
PERSONAL SERVICES
EXPERT SERVICES
Duration
Expert of Service Rate/ Total
(mo.) mo.
1. Ecologist 4 P5,000 P20,000
2. Silviculturist 3 -do- 15,000
3. Forestry Economist 4 -do- 20,000
4. Soils Expert 2 -do- 10,000

T O T A L P92,500

In addition, the Proposal already provided a list of identified

experts:
EXPERTS
1. Dr. Victorino P. Espero Enviromental
Science
2. Dean Antonio Q. Repollo Silviculture
3. Prof. Artemio M. Rebugio Forestry
Economics
4. Ms. Naomenida Olermo Soils
5. Dr. Elvira R. Castillo Social Forestry
6. Dr. Alfredo F. Aquino Management
7. Dr. Lydio Calonge Horticulture
8. Engr. Manolito Bernabe Engineering
9. Dr. Elmer C. Vingua Animal Science
10. Prof. Rolando J. Andico Systems Analysts
Programming
11. Dr. Eusebio Miclat, Jr. Statistics/
Instrumentation
12. Dr. Porferio Basilio Shoreline Resources
13. Dr. Rufino O. Eslao Policy Administration
who, together with six (6) staff members namely
Henedina M. Tantoco, Alicia Angelo Yolanda Z. Sotelo,
Gregoria Q. Calela, Nora A. Caburnay and Marlene S.
Bernebe composed the evaluation project team. At
this point, it should be pointed out that the " Budget
Estimate even provides a duration for the
participation of each and every person whether
rendering expert or support services.

5. Social Forestry Expert 4 -do- 20,000

6. Management Expert 2 -do- 10,000
On the other hand, NCC No. 53 provides:
7. Horticulturist 2 -do- 10,000
8. Agricultural Engineer 2 -do- 10,000
9. Systems Analysts/Programer 2 -do- 10,000
10. Statistician 2 -do- 10,000
11. Shoreline Resources Expert 2 -do- 10,000
12. Animal Science Specialist 2 -do- 10,000
13. Policy/Administrative 4 -do- 20,000
Expert
T O T A L P175,000

Support Services

3.3.1 The approved 0rganization and staffing shall be valid

up to project completion except for modifications deemed
necessary by the Project Manager. The Project Manager
shall be given the flexibility to determine the timing of
hiring personnel provided the approved man-years for a
given position for the duration of the project is not
exceeded.
xxx xxx xxx
3.6 A regular employee who may detailed to any FAPs on a
part-time basis shall be entitled to receive honoraria in
accordance with the schedule shown in Attachment II
hereof.
xxx xxx xxx
3.7 Payment of honoraria shall be made out of project
funds and in no case shall payment thereof be made out of
regular agency fund.

xxx xxx xxx

3.10 The total amount of compensation to be paid shall not
exceed the original amount allocated for personal
services of the individual foreign-assisted projects. Any
disbursement in excess of the original amount allotted for
personal services of the individual projects shall be the
personal liability and responsibility of the officials and
employees authorizing or making such payment.
(Underscoring supplied)
Attachment II of NCC No. 53 prescribes the monthly rates
allowed for officials/employees on assignment to foreignassisted special projects:
A. Position Level Project Manager/Project
Director
Responsibility . . .
Parttime P2,000.00
B. Position Level Assistant Project
Director
Responsibility . . .
Parttime P1,500.00
C. Position Level Project Consultant
Responsibility . . .
Parttime P1,000.00
D. Position Level Supervisor/Senior Staff
Member
Responsibility . . .
Parttime P1,000.00
E. Position Level Staff Member

earlier on pages 19-20) reveals that the submission of reports

merely served to trigger the phased releases of funds. There
being no explicit agreement between PSU and the DENR to
extend the duration of the evaluation project, the MOA's
"Budget Estimate" which, among others, provides in detail the
duration of service for each member of the evaluation project
as amended by the rates provided by NCC No. 53 must be the
basis of the honoraria due to the evaluation team.
The other arguments of respondent COA appear to us to be
insubstantial and as, essentially, afterthoughts. The COA
apparently does not agree with the policy basis of NCC No.
53 in relation to CPG No. 80-4 since COA argues that loan
proceeds regardless of source eventually become public
funds for which the government is accountable. The result
would be that any provisions under any [foreign] loan
agreement should be considered locally-funded. We do not
consider that the COA is, under its constitutional mandate,
authorized to substitute its own judgment for any applicable
law or administrative regulation with the wisdom or
propriety of which, however, it does not agree, at least not
before such law or regulation is set aside by the authorized
agency of government i.e., the courts as
unconstitutional or illegal and void. The COA, like all other
government agencies, must respect the presumption of
legality and constitutionality to which statutes and
administrative regulations are entitled 26 until such statute
or regulation is repealed or amended, or until set aside in
an appropriate case by a competent court (and ultimately
this Court).
Finally, we turn to petitioner's claim for moral damages and
reimbursement of legal expenses. We consider that this
claim cannot be granted as petitioner has failed to present
evidence of bad faith or tortious intent warranting an award
thereof. The presumption of regularity in the performance of
duty must be accorded to respondent COA; its action should
be seen as its effort to exercise (albeit erroneously, in the
case at bar) its constitutional power and duty in respect of
uses of government funds and properties.
WHEREFORE, for all the foregoing, the Petition
for Certiorari is hereby GRANTED. COA Decisions Nos. 1547
and 2571, respectively dated 18 September 1990 and 16
November 1992, are hereby SET ASIDE. The instant
evaluation project being a Foreign-Assisted Project, the
following PSU personnel involved in the project shall be paid
according to the Budget Estimate schedule of the MOA as
aligned with NCC No. 53:

Responsibility . . .
A. A. For Experts
Parttime P700.00
Administrative and Clerical Support
A. Position Level Administrative Assistant
Responsibility . . .
Parttime P500.00
B. Position Level Administrative Support
Staff
Responsibility . . .
Parttime P400.00
From the clear and detailed provisions of the MOA and Project
Proposal in relation to NCC No. 53, consent to any extension of
the evaluation project, in this instance, must be more
concrete than the alleged silence or lack of protest on the part
of the DENR. Although tacit acceptance is recognized in our
jurisdiction, 24 as a rule, silence is not equivalent to consent
since its ambiguity lends itself to error. And although under
the Civil Code there are instances when silence amounts to
consent, 25 these circumstances are wanting in the case at
bar. Furthermore, as correctly pointed out by the respondent
COA, the date when the DENR accepted the final project
report is by no means conclusive as to the terminal date of
the evaluation project. Examination of the MOA (quoted

Duration Rate/
Expert of month Total
Service (NCC
(mo.) No. 53)
1. Dr. Rufino O. Eslao Policy/Admi- 4 P2,000 P8,000
nistrative
expert*2. Dr. Victorino P. Espero Ecologist** 4 1,500 6,000
3. Dean Antonio Q. Repollo Silvicul- 3 1,000 3,000
turist***
4. Prof. Artemio M. Rebugio Forestry 4 1,000 4,000
Economist
5. Ms. Naomenida Olermo Soils Expert 2 1,000 2,000
6. Dr. Elvira R. Castillo Social 4 1,000 4,000
Forestry
Expert
7. Dr. Alfredo F. Aquino Management 2 1,000 2,000
Expert
8. Dr. Lydio Calonge Horticul 2 1,000 2,000
turist
9. Engr. Manolito Bernabe Agricultural 2 1,000 2,000
Engineer
10. Prof. Rolando J. Andico Systems 2 1,000 2,000
Analysts/
Programmer
11. Dr. Eusebio Miclat, Jr. Statistician 2 1,000 2,000
12. Dr. Porferio Basilio Shoreline 2 1,000 2,000
Resources
Expert
13. Dr. Elmer C. Vingua Animal 2 1,000 2,000

Science
Specialist

4 Gregoria Q. Calela Special 4 700 2,800

Disbursing
Officer
5 Nora A. Caburnay Typist 2.27 500 1,135
6 Marlene S. Bernebe Cashier 2.27 500 1,135

41,000

* Project Manager/ Project

Director
** Assistant Project
Director
*** Project Consultants

12,098
* Per Attachment to DBM
Clarification dated 10
November 1989, Rollo, p.
59.
** Staff Member
*** Administrative
Assistants.

B. For Support Staff

Duration Rate/
Expert of month Total
Service (NCC
(mo.) No. 53)
1 Henedina M. Tantoco Research 4 700 2,800
Associate**
2 Alicia Angelo Research 4 700 2,800
3 Yolanda Z. Sotelo Documentalist 2.04 700 1,428

No pronouncement as to costs.
SO ORDERED.