EN BANC [ G.R. No.

180046, April 02, 2009 ]

REVIEW CENTER ASSOCIATION OF THE PHILIPPINES, PETITIONER, VS. EXECUTIVE SECRETARY EDUARDO ERMITA AND COMMISSION ON HIGHER EDUCATION REPRESENTED BY ITS CHAIRMAN ROMULO L. NERI, RESPONDENTS. CPA REVIEW SCHOOL OF THE PHILIPPINES, INC. (CPAR), PROFESSIONAL REVIEW AND TRAINING CENTER, INC. (PRTC), RESA REVIEW SCHOOL, INC. (RESA), CRC-ACE REVIEW SCHOOL, INC. (CRC-ACE), PETITIONERSINTERVENORS. PIMSAT COLLEGES, RESPONDENT-INTERVENOR. DECISION
CARPIO, J.: The Case Before the Court is a petition for prohibition and mandamus assailing Executive Order No. 566 (EO 566)[1] and Commission on Higher Education (CHED) Memorandum Order No. 30, series of 2007 (RIRR).[2] The Antecedent Facts On 11 and 12 June 2006, the Professional Regulation Commission (PRC) conducted the Nursing Board Examinations nationwide. In June 2006, licensure applicants wrote the PRC to report that handwritten copies of two sets of examinations were circulated during the examination period among the examinees reviewing at the R.A. Gapuz Review Center and Inress Review Center. George Cordero, Inress Review Center's President, was then the incumbent President of the Philippine Nurses Association. The examinees were provided with a list of 500 questions and answers in two of the examinations' five subjects, particularly Tests III (Psychiatric Nursing) and V (Medical-Surgical Nursing). The PRC later admitted the leakage and traced it to two Board of Nursing members.[3] On 19 June 2006, the PRC released the results of the Nursing Board Examinations. On 18 August 2006, the Court of Appeals restrained the PRC from proceeding with the oathtaking of the successful examinees set on 22 August 2006.

Consequently, President Gloria Macapagal-Arroyo (President Arroyo) replaced all the members of the PRC's Board of Nursing. President Arroyo also ordered the examinees to re-take the Nursing Board Examinations. On 8 September 2006, President Arroyo issued EO 566 which authorized the CHED to supervise the establishment and operation of all review centers and similar entities in the Philippines. On 3 November 2006, the CHED, through its then Chairman Carlito S. Puno (Chairman Puno), approved CHED Memorandum Order No. 49, series of 2006 (IRR).[4] In a letter dated 24 November 2006,[5] the Review Center Association of the Philippines (petitioner), an organization of independent review centers, asked the CHED to "amend, if not withdraw" the IRR arguing, among other things, that giving permits to operate a review center to Higher Education Institutions (HEIs) or consortia of HEIs and professional organizations will effectively abolish independent review centers. In a letter dated 3 January 2007,[6] Chairman Puno wrote petitioner, through its President Jose Antonio Fudolig (Fudolig), that to suspend the implementation of the IRR would be inconsistent with the mandate of EO 566. Chairman Puno wrote that the IRR was presented to the stakeholders during a consultation process prior to its finalization and publication on 13 November 2006. Chairman Puno also wrote that petitioner's comments and suggestions would be considered in the event of revisions to the IRR. In view of petitioner's continuing request to suspend and re-evaluate the IRR, Chairman Puno, in a letter dated 9 February 2007,[7] invited petitioner's representatives to a dialogue on 14 March 2007. In accordance with what was agreed upon during the dialogue, petitioner submitted to the CHED its position paper on the IRR. Petitioner also requested the CHED to confirm in writing Chairman Puno's statements during the dialogue, particularly on lowering of the registration fee from P400,000 to P20,000 and the requirement for reviewers to have five years' teaching experience instead of five years' administrative experience. Petitioner likewise requested for a categorical answer to their request for the suspension of the IRR. The CHED did not reply to the letter. On 7 May 2007, the CHED approved the RIRR. On 22 August 2007, petitioner filed before the CHED a Petition to Clarify/Amend Revised Implementing Rules and Regulations[8] praying for a ruling: 1. Amending the RIRR by excluding independent review centers from the coverage of the CHED; 2. Clarifying the meaning of the requirement for existing review centers to tie-up or be integrated with HEIs, consortium or HEIs and PRC-recognized professional associations with recognized programs, or in the alternative, to convert into schools; and

3. Revising the rules to make it conform with Republic Act No. 7722 (RA 7722)[9] limiting the CHED's coverage to public and private institutions of higher education as well as degree-granting programs in post-secondary educational institutions. On 8 October 2007, the CHED issued Resolution No. 718-2007[10] referring petitioner's request to exclude independent review centers from CHED's supervision and regulation to the Office of the President as the matter requires the amendment of EO 566. In a letter dated 17 October 2007,[11] then CHED Chairman Romulo L. Neri (Chairman Neri) wrote petitioner regarding its petition to be excluded from the coverage of the CHED in the RIRR. Chairman Neri stated: While it may be true that regulation of review centers is not one of the mandates of CHED under Republic Act 7722, however, on September 8, 2006, Her Excellency, President Gloria Macapagal-Arroyo, issued Executive Order No. 566 directing the Commission on Higher Education to regulate the establishment and operation of review centers and similar entities in the entire country. With the issuance of the aforesaid Executive Order, the CHED now is the agency that is mandated to regulate the establishment and operation of all review centers as provided for under Section 4 of the Executive Order which provides that "No review center or similar entities shall be established and/or operate review classes without the favorable expressed indorsement of the CHED and without the issuance of the necessary permits or authorizations to conduct review classes. x x x" To exclude the operation of independent review centers from the coverage of CHED would clearly contradict the intention of the said Executive Order No. 566. Considering that the requests requires the amendment of Executive Order No. 566, the Commission, during its 305th Commission Meeting, resolved that the said request be directly referred to the Office of the President for appropriate action. As to the request to clarify what is meant by tie-up/be integrated with an HEI, as required under the Revised Implementing Rules and Regulations, tie-up/be integrated simply means, to be in partner with an HEI.[12] (Boldfacing and underscoring in the original) On 26 October 2007, petitioner filed a petition for Prohibition and Mandamus before this Court praying for the annulment of the RIRR, the declaration of EO 566 as invalid and unconstitutional, and the prohibition against CHED from implementing the RIRR. Dr. Freddie T. Bernal, Director III, Officer-In-Charge, Office of the Director IV of CHED, sent a letter[13] to the President of Northcap Review Center, Inc., a member of petitioner, that it had until 27 November 2007 to comply with the RIRR. On 15 February 2008,[14] PIMSAT Colleges (respondent-intervenor) filed a Motion For Leave to Intervene and To Admit Comment-in-Intervention and a Comment-inIntervention praying for the dismissal of the petition. Respondent-intervenor alleges that the Office of the President and the CHED did not commit any act of grave abuse of

discretion in issuing EO 566 and the RIRR. Respondent-intervenor alleges that the requirements of the RIRR are reasonable, doable, and are not designed to deprive existing review centers of their review business. The Court granted the Motion for Leave to Intervene and to Admit Comment-in-Intervention in its 11 March 2008 Resolution.[15] On 23 April 2008, a Motion for Leave of Court for Intervention In Support of the Petition and a Petition In Intervention were filed by CPA Review School of the Philippines, Inc. (CPAR), Professional Review and Training Center, Inc. (PRTC), ReSA Review School, Inc. (ReSA), CRC-ACE Review School, Inc. (CRC-ACE), all independent CPA review centers operating in Manila (collectively, petitioners-intervenors). Petitioners-intervenors pray for the declaration of EO 566 and the RIRR as invalid on the ground that both constitute an unconstitutional exercise of legislative power. The Court granted the intervention in its 29 April 2008 Resolution.[16] On 21 May 2008, the CHED issued CHED Memorandum Order No. 21, Series of 2008 (CMO 21, s. 2008)[17] extending the deadline for six months from 27 May 2008 for all existing independent review centers to tie-up or be integrated with HEIs in accordance with the RIRR. In its 25 November 2008 Resolution, this Court resolved to require the parties to observe the status quo prevailing before the issuance of EO 566, the RIRR, and CMO 21, s. 2008. The Assailed Executive Order and the RIRR Executive Order No. 566 states in full: EXECUTIVE ORDER NO. 566 DIRECTING THE COMMISSION ON HIGHER EDUCATION TO REGULATE THE ESTABLISHMENT AND OPERATION OF REVIEW CENTERS AND SIMILAR ENTITIES WHEREAS, the State is mandated to protect the right of all citizens to quality education at all levels and shall take appropriate steps to make education accessible to all, pursuant to Section 1, Article XIV of the 1987 Constitution; WHEREAS, the State has the obligation to ensure and promote quality education through the proper supervision and regulation of the licensure examinations given through the various Boards of Examiners under the Professional Regulation Commission; WHEREAS, the lack of regulatory framework for the establishment and operation of review centers and similar entities, as shown in recent events, have adverse consequences and affect public interest and welfare; WHEREAS, the overriding necessity to protect the public against substandard review centers and unethical practices committed by some review centers demand that a regulatory framework for the establishment and operation of review centers and similar entities be immediately instituted;

WHEREAS, Republic Act No. 7722, otherwise known as the Higher Education Act of 1994, created the Commission on Higher Education, which is best equipped to carry out the provisions pertaining to the regulation of the establishment and operation of review centers and similar entities. NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, the President of the Republic of the Philippines, by virtue of the powers vested in me by law, do hereby order: SECTION 1. Establishment of a System of Regulation for Review Centers and Similar Entities. The Commission on Higher Education (CHED), in consultation with other concerned government agencies, is hereby directed to formulate a framework for the regulation of review centers and similar entities, including but not limited to the development and institutionalization of policies, standards, guidelines for the establishment, operation and accreditation of review centers and similar entities; maintenance of a mechanism to monitor the adequacy, transparency and propriety of their operations; and reporting mechanisms to review performance and ethical practice. SEC. 2. Coordination and Support. The Professional Regulation Commission (PRC), Technical Skills Development Authority (TESDA), Securities and Exchange Commission (SEC), the various Boards of Examiners under the PRC, as well as other concerned non-government organizations life professional societies, and various government agencies, such as the Department of Justice (DOJ), National Bureau of Investigation (NBI), Office of the Solicitor General (OSG), and others that may be tapped later, shall provide the necessary assistance and technical support to the CHED in the successful operationalization of the System of Regulation envisioned by this Executive Order. SEC. 3. Permanent Office and Staff. To ensure the effective implementation of the System of Regulation, the CHED shall organize a permanent office under its supervision to be headed by an official with the rank of Director and to be composed of highly competent individuals with expertise in educational assessment, evaluation and testing; policies and standards development, monitoring, legal and enforcement; and statistics as well as curriculum and instructional materials development. The CHED shall submit the staffing pattern and budgetary requirements to the Department of Budget and Management (DBM) for approval. SEC. 4. Indorsement Requirement. No review center or similar entities shall be established and/or operate review classes without the favorable expressed indorsement of the CHED and without the issuance of the necessary permits or authorizations to conduct review classes. After due consultation with the stakeholders, the concerned review centers and similar entities shall be given a reasonable period, at the discretion of the CHED, to comply with the policies and standards, within a period not exceeding three (3) years, after due publication of this Executive Order. The CHED shall see to it that the System of Regulation including the implementing mechanisms, policies, guidelines and

other necessary procedures and documentation for the effective implementation of the System, are completed within sixty days (60) upon effectivity of this Executive Order. SEC. 5. Funding. The initial amount necessary for the development and implementation of the System of Regulation shall be sourced from the CHED Higher Education Development Fund (HEDF), subject to the usual government accounting and auditing practices, or from any applicable funding source identified by the DBM. For the succeeding fiscal year, such amounts as may be necessary for the budgetary requirement of implementing the System of Regulation and the provisions of this Executive Order shall be provided for in the annual General Appropriations Act in the budget of the CHED. Whenever necessary, the CHED may tap its Development Funds as supplemental source of funding for the effective implementation of the regulatory system. In this connection, the CHED is hereby authorized to create special accounts in the HEDF exclusively for the purpose of implementing the provisions of this Executive Order. SEC. 6. Review and Reporting. The CHED shall provide for the periodic review performance of review centers and similar entities and shall make a report to the Office of the President of the results of such review, evaluation and monitoring. SEC. 7. Separability. Any portion or provision of this Executive Order that may be declared unconstitutional shall not have the effect of nullifying other provisions hereof, as long as such remaining provisions can still subsist and be given effect in their entirely. SEC. 8. Repeal. All rules and regulations, other issuances or parts thereof, which are inconsistent with this Executive Order, are hereby repealed or modified accordingly. SEC. 9. Effectivity. This Executive Order shall take effect immediately upon its publication in a national newspaper of general circulation. DONE in the City of Manila, this 8th day of September, in the year of Our Lord, Two Thousand and Six. (Sgd.) Gloria Macapagal-Arroyo By the President: (Sgd.) Eduardo R. Ermita Executive Secretary The pertinent provisions of the RIRR affecting independent review centers are as follows: Rule VII IMPLEMENTING GUIDELINES AND PROCEDURES Section 1. Authority to Establish and Operate - Only CHED recognized, accredited and reputable HEIs may be authorized to establish and operate review center/course by the CHED upon full compliance with the conditions and requirements provided herein and in other pertinent laws, rules and regulations. In addition, a consortium or consortia of

qualified schools and/or entities may establish and operate review centers or conduct review classes upon compliance with the provisions of these Rules. Rule XIV TRANSITORY PROVISIONS Section 1. Review centers that are existing upon the approval of Executive Order No. 566 shall be given a grace period of up to one (1) year, to tie-up/be integrated with existing HEIs[,] consortium of HEIs and PRC recognized Professional Associations with recognized programs under the conditions set forth in this Order and upon mutually acceptable covenants by the contracting parties. In the alternative, they may convert as a school and apply for the course covered by the review subject to rules and regulations of the CHED and the SEC with respect to the establishment of schools. In the meantime, no permit shall be issued if there is non-compliance with these conditions or non-compliance with the requirements set forth in these rules. Section 2. Only after full compliance with the requirements shall a Permit be given by the CHED to review centers contemplated under this Rule. Section 3. Failure of existing review centers to fully comply with the above shall bar them from existing as review centers and they shall be deemed as operating illegally as such. In addition, appropriate administrative and legal proceedings shall be commence[d] against the erring entities that continue to operate and appropriate sanctions shall be imposed after due process. The Issues The issues raised in this case are the following: 1. Whether EO 566 is an unconstitutional exercise by the Executive of legislative power as it expands the CHED's jurisdiction; and 2. Whether the RIRR is an invalid exercise of the Executive's rule-making power. The Ruling of this Court The petition has merit. Violation of Judicial Hierarchy The Office of the Solicitor General (OSG) prays for the dismissal of the petition. Among other grounds, the OSG alleges that petitioner violated the rule on judicial hierarchy in filing the petition directly with this Court. This Court's original jurisdiction to issue a writ of certiorari, prohibition, mandamus, quo warranto, habeas corpus, and injunction is not exclusive but is concurrent with the Regional Trial Courts and the Court of Appeals in certain cases.[18] The Court has explained:

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 also serves as a general determinant of the appropriate forum for petitions for the extraordinary writs. A becoming regard of 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 [an] established policy. It is a policy necessary to prevent inordinate demands upon the Court's time and attention which are better devoted to those matters within its exclusive jurisdiction, and to prevent further overcrowding of the Court's docket.[19] The Court has further explained: The propensity of litigants and lawyers to disregard the hierarchy of courts in our judicial system by seeking relief directly from this Court must be put to a halt for two reasons: (1) it would be an imposition upon the precious time of this Court; and (2) it would cause an inevitable and resultant delay, intended or otherwise, in the adjudication of cases, which in some instances had to be remanded or referred to the lower court as the proper forum under the rules of procedure, or as better equipped to resolve the issues because this Court is not a trier of facts.[20] The rule, however, is not absolute, as when exceptional and compelling circumstances justify the exercise of this Court of its primary jurisdiction. In this case, petitioner alleges that EO 566 expands the coverage of RA 7722 and in doing so, the Executive Department usurps the legislative powers of Congress. The issue in this case is not only the validity of the RIRR. Otherwise, the proper remedy of petitioner and petitioners-intervenors would have been an ordinary action for the nullification of the RIRR before the Regional Trial Court.[21] The alleged violation of the Constitution by the Executive Department when it issued EO 566 justifies the exercise by the Court of its primary jurisdiction over the case. The Court is not precluded from brushing aside technicalities and taking cognizance of an action due to its importance to the public and in keeping with its duty to determine whether the other branches of the Government have kept themselves within the limits of the Constitution.[22] OSG's Technical Objections The OSG alleges that the petition should be dismissed because the verification and certification of non-forum shopping were signed only by Fudolig without the express authority of any board resolution or power of attorney. However, the records show that Fudolig was authorized under Board Resolution No. 3, series of 2007[23] to file a petition before this Court on behalf of petitioner and to execute any and all documents necessary to implement the resolution. The OSG also alleges that the petition should be dismissed for violation of the 2004 Rules on Notarial Practice because Fudolig only presented his community tax certificate as competent proof of identity before the notary public. The Court would have required

Fudolig to comply with the 2004 Rules on Notarial Practice except that Fudolig already presented his Philippine passport before the notary public when petitioner submitted its reply to the OSG's comment. EO 566 Expands the Coverage of RA 7722 The OSG alleges that Section 3 of RA 7722 should be read in conjunction with Section 8, enumerating the CHED's powers and functions. In particular, the OSG alleges that the CHED has the power under paragraphs (e) and (n) of Section 8 to: (e) monitor and evaluate the performance of programs and institutions of higher learning for appropriate incentives as well as the imposition of sanctions such as, but not limited to, diminution or withdrawal of subsidy, recommendation on the downgrading or withdrawal of accreditation, program termination or school closure; (n) promulgate such rules and regulations and exercise such other powers and functions as may be necessary to carry out effectively the purpose and objectives of this Act[.] The OSG justifies its stand by claiming that the term "programs x x x of higher learning" is broad enough to include programs offered by review centers. We do not agree. Section 3 of RA 7722 provides: Sec. 3. Creation of Commission on Higher Education. - In pursuance of the abovementioned policies, the Commission on Higher Education is hereby created, hereinafter referred to as the Commission. The Commission shall be independent and separate from the Department of Education, Culture and Sports (DECS), and attached to the Office of the President for administrative purposes only. Its coverage shall be both public and private institutions of higher education as well as degree-granting programs in all post-secondary educational institutions, public and private. (Emphasis supplied) Neither RA 7722 nor CHED Order No. 3, series of 1994 (Implementing Rules of RA 7722)[24] defines an institution of higher learning or a program of higher learning. "Higher education," however, is defined as "education beyond the secondary level"[25] or "education provided by a college or university."[26] Under the "plain meaning" or verba legis rule in statutory construction, if the statute is clear, plain, and free from ambiguity, it must be given its literal meaning and applied without interpretation.[27] The legislature is presumed to know the meaning of the words, to have used words advisedly, and to have expressed its intent by use of such words as are found in the statute.[28] Hence, the term "higher education" should be taken in its ordinary sense and should be read and interpreted together with the phrase "degree-granting programs in all post-secondary educational institutions, public and private." Higher education should be taken to mean tertiary education or that which grants a degree after its completion. Further, Articles 6 and 7 of the Implementing Rules provide:

Article 6. Scope of Application. - The coverage of the Commission shall be both public and private institutions of higher education as well as degree granting programs in all post-secondary educational institutions, public and private. These Rules shall apply to all public and private educational institutions offering tertiary degree programs. The establishment, conversion, or elevation of degree-granting institutions shall be within the responsibility of the Commission. Article 7. Jurisdiction. - Jurisdiction over institutions of higher learning primarily offering tertiary degree programs shall belong to the Commission. (Emphasis supplied) Clearly, HEIs refer to degree-granting institutions, or those offering tertiary degree or post-secondary programs. In fact, Republic Act No. 8292 or the Higher Education Modernization Act of 1997 covers chartered state universities and colleges. State universities and colleges primarily offer degree courses and programs. Sections 1 and 8, Rule IV of the RIRR define a review center and similar entities as follows: Section 1. REVIEW CENTER. - refers to a center operated and owned by a duly authorized entity pursuant to these Rules intending to offer to the public and/or to specialized groups whether for a fee or for free a program or course of study that is intended to refresh and enhance the knowledge and competencies and skills of reviewees obtained in the formal school setting in preparation for the licensure examinations given by the Professional Regulations Commission (PRC). The term review center as understood in these rules shall also embrace the operation or conduct of review classes or courses provided by individuals whether for a fee or not in preparation for the licensure examinations given by the Professional Regulations Commission. xxx Section 8. SIMILAR ENTITIES - the term refer to other review centers providing review or tutorial services in areas not covered by licensure examinations given by the Professional Regulations Commission including but not limited to college entrance examinations, Civil Service examinations, tutorial services in specific fields like English, Mathematics and the like. The same Rule defines a review course as follows: Section 3. REVIEW COURSE - refers to the set of non-degree instructional program of study and/or instructional materials/module, offered by a school with a recognized course/program requiring licensure examination, that are intended merely to refresh and enhance the knowledge or competencies and skills of reviewees. The scopes of EO 566 and the RIRR clearly expand the CHED's coverage under RA 7722. The CHED's coverage under RA 7722 is limited to public and private institutions of higher education and degree-granting programs in all public and private post-secondary educational institutions. EO 566 directed the CHED to formulate a framework for the regulation of review centers and similar entities.

The definition of a review center under EO 566 shows that it refers to one which offers "a program or course of study that is intended to refresh and enhance the knowledge or competencies and skills of reviewees obtained in the formal school setting in preparation for the licensure examinations" given by the PRC. It also covers the operation or conduct of review classes or courses provided by individuals whether for a fee or not in preparation for the licensure examinations given by the PRC. A review center is not an institution of higher learning as contemplated by RA 7722. It does not offer a degree-granting program that would put it under the jurisdiction of the CHED. A review course is only intended to "refresh and enhance the knowledge or competencies and skills of reviewees." A reviewee is not even required to enroll in a review center or to take a review course prior to taking an examination given by the PRC. Even if a reviewee enrolls in a review center, attendance in a review course is not mandatory. The reviewee is not required to attend each review class. He is not required to take or pass an examination, and neither is he given a grade. He is also not required to submit any thesis or dissertation. Thus, programs given by review centers could not be considered "programs x x x of higher learning" that would put them under the jurisdiction of the CHED. Further, the "similar entities" in EO 566 cover centers providing "review or tutorial services" in areas not covered by licensure examinations given by the PRC, which include, although not limited to, college entrance examinations, Civil Services examinations, and tutorial services. These review and tutorial services hardly qualify as programs of higher learning. Usurpation of Legislative Power The OSG argues that President Arroyo was merely exercising her executive power to ensure that the laws are faithfully executed. The OSG further argues that President Arroyo was exercising her residual powers under Executive Order No. 292 (EO 292),[29] particularly Section 20, Title I of Book III, thus: Section 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 supplied) Section 20, Title I of Book III of EO 292 speaks of other powers vested in the President under the law.[30] The exercise of the President's residual powers under this provision requires legislation,[31] as the provision clearly states that the exercise of the President's other powers and functions has to be "provided for under the law." There is no law granting the President the power to amend the functions of the CHED. The President may not amend RA 7722 through an Executive Order without a prior legislation granting her such power. The President has no inherent or delegated legislative power to amend the functions of the CHED under RA 7722. Legislative power is the authority to make laws and to alter or

repeal them,[32] and this power is vested with the Congress under Section 1, Article VI of the 1987 Constitution which states: Section 1. The legislative power shall be vested in the Congress of the Philippines which shall consist of a Senate and a House of Representatives, except to the extent reserved to the people by the provision on initiative and referendum. In Ople v. Torres,[33] the Court declared void, as a usurpation of legislative power, Administrative Order No. 308 (AO 308) issued by the President to create a national identification system. AO 308 mandates the adoption of a national identification system even in the absence of an enabling legislation. The Court distinguished between Legislative and Executive powers, as follows: The line that delineates Legislative and Executive power is not indistinct. Legislative power is "the authority, under the Constitution, to make laws, and to alter and repeal them." The Constitution, as the will of the people in their original, sovereign and unlimited capacity, has vested this power in the Congress of the Philippines. The grant of legislative power to Congress is broad, general and comprehensive. The legislative body possesses plenary power for all purposes of civil government. Any power, deemed to be legislative by usage and tradition, is necessarily possessed by Congress, unless the Constitution has lodged it elsewhere. In fine, except as limited by the Constitution, either expressly or impliedly, legislative power embraces all subjects and extends to matters of general concern or common interest. While Congress is vested with the power to enact laws, the President executes the laws. The executive power is vested in the President. It is generally defined as the power to enforce and administer laws. It is the power of carrying the laws into practical operation and enforcing their due observance. As head of the Executive Department, the President is the Chief Executive. He represents the government as a whole and sees to it that all laws are enforced by the officials and employees of his department. He has control over the executive department, bureaus and offices. This means that he has the authority to assume directly the functions of the executive department, bureau and office, or interfere with the discretion of its officials. Corollary to the power of control, the President also has the duty of supervising the enforcement of laws for the maintenance of general peace and public order. Thus, he is granted administrative power over bureaus and offices under his control to enable him to discharge his duties effectively. Administrative power is concerned with the work of applying policies and enforcing orders as determined by proper governmental organs. It enables the President to fix a uniform standard of administrative efficiency and check the official conduct of his agents. To this end, he can issue administrative orders, rules and regulations. x x x. An administrative order is: "Sec. 3. Administrative Orders. - Acts of the President which relate to particular aspects of governmental operation in pursuance of his duties as administrative head shall be promulgated in administrative orders."

An administrative order is an ordinance issued by the President which relates to specific aspects in the administrative operation of government. It must be in harmony with the law and should be for the sole purpose of implementing the law and carrying out the legislative policy. x x x.[34] Just like AO 308 in Ople v. Torres, EO 566 in this case is not supported by any enabling law. The Court further stated in Ople: x x x. As well stated by Fisher: "x x x Many regulations however, bear directly on the public. It is here that administrative legislation must be restricted in its scope and application. Regulations are not supposed to be a substitute for the general policymaking that Congress enacts in the form of a public law. Although administrative regulations are entitled to respect, the authority to prescribe rules and regulations is not an independent source of power to make laws."[35] Since EO 566 is an invalid exercise of legislative power, the RIRR is also an invalid exercise of the CHED's quasi-legislative power. Administrative agencies exercise their quasi-legislative or rule-making power through the promulgation of rules and regulations.[36] The CHED may only exercise its rule-making power within the confines of its jurisdiction under RA 7722. The RIRR covers review centers and similar entities which are neither institutions of higher education nor institutions offering degree-granting programs. Exercise of Police Power Police power to prescribe regulations to promote the health, morals, education, good order or safety, and the general welfare of the people flows from the recognition that salus populi est suprema lex - the welfare of the people is the supreme law.[37] Police power primarily rests with the legislature although it may be exercised by the President and administrative boards by virtue of a valid delegation.[38] Here, no delegation of police power exists under RA 7722 authorizing the President to regulate the operations of nondegree granting review centers. Republic Act No. 8981 is Not the Appropriate Law It is argued that the President of the Philippines has adequate powers under the law to regulate review centers and this could have been done under an existing validly delegated authority, and that the appropriate law is Republic Act No. 8981[39] (RA 8981). Under Section 5 of RA 8981, the PRC is mandated to "establish and maintain a high standard of admission to the practice of all professions and at all times ensure and safeguard the integrity of all licensure examinations." Section 7 of RA 8981 further states that the PRC shall adopt "measures to preserve the integrity and inviolability of licensure examinations." There is no doubt that a principal mandate of the PRC is to preserve the integrity of licensure examinations. The PRC has the power to adopt measures to preserve the integrity and inviolability of licensure examinations. However, this power should properly be interpreted to refer to the conduct of the examinations. The enumeration of

PRC's powers under Section 7(e) includes among others, the fixing of dates and places of the examinations and the appointment of supervisors and watchers. The power to preserve the integrity and inviolability of licensure examinations should be read together with these functions. These powers of the PRC have nothing to do at all with the regulation of review centers. The PRC has the power to investigate any of the members of the Professional Regulatory Boards (PRB) for "commission of any irregularities in the licensure examinations which taint or impugn the integrity and authenticity of the results of the said examinations."[40] This is an administrative power which the PRC exercises over members of the PRB. However, this power has nothing to do with the regulation of review centers. The PRC has the power to bar PRB members from conducting review classes in review centers. However, to interpret this power to extend to the power to regulate review centers is clearly an unwarranted interpretation of RA 8981. The PRC may prohibit the members of the PRB from conducting review classes at review centers because the PRC has administrative supervision over the members of the PRB. However, such power does not extend to the regulation of review centers. Section 7(y) of RA 8981 giving the PRC the power to perform "such other functions and duties as may be necessary to carry out the provisions" of RA 8981 does not extend to the regulation of review centers. There is absolutely nothing in RA 8981 that mentions regulation by the PRC of review centers. The Court cannot likewise interpret the fact that RA 8981 penalizes "any person who manipulates or rigs licensure examination results, secretly informs or makes known licensure examination questions prior to the conduct of the examination or tampers with the grades in the professional licensure examinations"[41] as a grant of power to regulate review centers. The provision simply provides for the penalties for manipulation and other corrupt practices in the conduct of the professional examinations. The assailed EO 566 seeks to regulate not only review centers but also "similar entities." The questioned CHED RIRR defines "similar entities" as referring to "other review centers providing review or tutorial services in areas not covered by licensure examinations given by the PRC including but not limited to college entrance examinations, Civil Service examinations, tutorial services in specific fields like English, Mathematics and the like."[42] The PRC has no mandate to supervise review centers that give courses or lectures intended to prepare examinees for licensure examinations given by the PRC. It is like the Court regulating bar review centers just because the Court conducts the bar examinations. Similarly, the PRC has no mandate to regulate similar entities whose reviewees will not even take any licensure examination given by the PRC. WHEREFORE, we GRANT the petition and the petition-in-intervention. We DECLARE Executive Order No. 566 and Commission on Higher Education Memorandum Order No. 30, series of 2007 VOID for being unconstitutional.

SO ORDERED. Puno, C.J., Quisumbing, Ynares-Santiago, Carpio Morales, Tinga, Chico-Nazario, and Peralta, JJ., concur. Austria-Martinez, J., concur with J. Carpio. Corna, Velasco, Jr., Nachura, and Leonardo-De Castro, JJ., join the concurring opinion of J. Brion. Brion, J., with seperate opinion.
[1]

Rollo, pp. 35-37. Directing the Commission on Higher Education to Regulate the Establishment and Operation of Review Centers and Similar Entities. Signed on 8 September 2006.
[2]

Id. at 38-55. Revised Implementing Rules and Regulations Governing The Establishment and Operation of Review Centers And Similar Entities In The Philippines Pursuant To Executive Order No. 566. Approved on 7 May 2007.
[3]

Virginia Madeja and Anesia Dionisio were eventually charged with violation of Republic Act No. 8981 (An Act Modernizing the Professional Regulation Commission) and Republic Act No. 3019 (The Anti-Graft and Corrupt Practices Act).
[4]

Rollo, pp. 105-121. CMO 49, s. 2006 is otherwise known as the Implementing Rules and Regulations Governing the Establishment and Operation of Review Centers and Similar Entities in the Philippines.
[5]

Id. at 75-77. Id. at 79. Id. at 80. Id. at 58-69.

[6]

[7]

[8]

[9]

An Act Creating the Commission on Higher Education, Appropriating Funds Therefor and For Other Purposes.
[10]

Rollo, p. 180. Id. at 181-182. Id. at 181-182. Id. at 92. Not 14 February 2008 as stated in the 11 March 2008 Resolution.

[11]

[12]

[13]

[14]

[15]

Rollo, p. 184. Id. at 230. Id. at 257.

[16]

[17]

[18]

LPBS Commercial, Inc. v. Amila, G.R. No. 147443, 11 February 2008, 544 SCRA 199.
[19]

Liga ng mga Barangay National v. City Mayor of Manila, 465 Phil. 529, 542-543 (2004), citing People v. Cuaresma, G.R. No. 67787, 18 April 1989, 172 SCRA 415.
[20]

LPBS Commercial, Inc. v. Amila, supra note 18 at 205, citing Santiago v. Vasquez, G.R. Nos. 99289-90, 27 January 1993, 217 SCRA 633.
[21]

Holy Spirit Homeowners Association, Inc. v. Defensor, G.R. No. 163980, 3 August 2006, 497 SCRA 581.
[22]

Executive Secretary v. Southwing Heavy Industries, Inc., G.R. No. 164171, 20 February 2006, 482 SCRA 673.
[23]

Rollo, p. 104. Rules and Regulations Implementing RA 7722, as amended. WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY, 1986 ed., p. 1068. Id. Republic v. Lacap, G.R. No. 158253, 2 March 2007, 517 SCRA 255. Id. The Administrative Code of 1987. See Larin v. Executive Secretary, 345 Phil. 962 (1997).

[24]

[25]

[26]

[27]

[28]

[29]

[30]

[31]

See Kilusang Mayo Uno v. Director-General, National Economic Development Authority, G.R. No. 167798, 19 April 2006, 487 SCRA 623.
[32]

Id. 354 Phil. 948 (1998). Id. at 966-968.

[33]

[34]

[35]

Id. at 970.

[36]

Metropolitan Bank and Trust Company, Inc. v. National Wages and Productivity Commission, G.R. No. 144322, 6 February 2007, 514 SCRA 346.
[37]

Metropolitan Manila Development Authority v. Viron Transportation Co., Inc., G.R. No. 170656, 15 August 2007, 530 SCRA 341.
[38]

Id.

[39]

Otherwise known as the Philippine Regulation Commission Modernization Act of 2000.

[40]

Section 7(s). Section 15. Section 8, RIRR.

[41]

[42]

SEPARATE CONCURRING OPINION BRION, J.: I concur with the ponencia that EO 566 and the instruments derived from this EO should be declared invalid. At the same time, I maintain that the President of the Philippines has adequate powers under the law to regulate review centers. EO 566 is invalid as a regulatory measure over review centers because an executive order of this tenor cannot be issued under R.A. 7722 (The Higher Education Act of 1994). The appropriate existing law to regulate review centers is R.A. 8981, otherwise known as The PRC Modernization Act of 2000. A holistic reading of R.A. 8981 shows that it attempts to provide the blue print for a credible and effective Philippine licensure examination system and process. Under this law, the Professional Regulation Commission (an entity under the Executive Department together with the Commission on Higher Education) was given - among other powers related with its primary mandate to establish and maintain a high standard of admission to the practice of all professions and at all times ensure and safeguard the integrity of all licensure examinations - the full authority to promulgate rules and regulation to implement its mandate. To be sure, R.A.8981 does not narrowly or restrictively concern itself with the conduct of actual examinations alone as the ponencia discussed; it covers and relates as well to the various integral and/or institutional components of the licensure examination process or system.

I find it unfortunate that R.A. 7722 was made the basis for the regulation of review centers, when R.A. 8981 could have provided opportunities, appropriate to the PRC, to achieve the same end. This is unfortunate under the circumstances since the invalidity of using R.A. 7722 as the legal basis, without saying more on what can be a viable alternative, can leave a major player in the Philippine licensure examination process immune, even for a time, from regulation. It is for this compelling reason that I have tackled in this Separate Concurring Opinion the alternative and (while not fully determinative of the issue of the validity of EO 566) the related issues of: (1) whether the business of review centers can be the subject of regulation; (2) if so, on what legal basis; and (3) again, if so, which governmental authority has been vested with jurisdiction by law. The Background Facts The Office of the Solicitor General (OSG) objects to the filing of the present petition directly with this Court, based on the principle of hierarchy of courts. The principle, as a rule, can be invoked where no compelling reason exists for a direct resort to this Court.[1] However, a compelling reason does exist as the ponencia properly noted. Likewise, there are no major issues of fact that are essentially for the trial or lower courts to handle as triers of facts;[2] hence, direct resort to this Court is justified. In this regard, at the petitioners' urging and based on the implicit stance of all other parties to take judicial notice of the background facts,[3] I am providing a fuller account of the background of the case based on parallel official developments, all of them related to the root of the present issue - the nursing exam scandal of 2006. This background - albeit footnoted because they do not all directly affect the present case - may lead to a fuller appreciation of the case and the view I am putting forward, and is offered in the spirit of George Santayana's advice to remember the past to avoid being condemned to its repetition.[4] The President Has Legal Basis to Regulate, but under R.A. 8981, not R.A. 7722 I hold the view that the President has sufficient legal basis to regulate review centers and could have done so under an existing validly delegated authority. This authority, however, is not based on the charter of the CHED, R.A. 7722; hence, the issuance of EO 566 on the basis of R.A. 7722 was an illegal act of subordinate legislation undertaken without statutory basis. The law dealing with leakage and manipulation of licensure examinations is Republic Act No. 8981 (the PRC Law).[5] Section 5 of this law defines the PRC's primary mandate, which is to establish and maintain a high standard of admission to the practice of all professions and at all times ensure and safeguard the integrity of all licensure examinations. Some of the PRC's powers, functions and responsibilities under Section 7 of the law include: Section 7. Powers, Functions and Responsibilities of the Commission. - The powers, functions, and responsibilities of the Commission are as follows:

xxxx (d) To administer and conduct the licensure examinations of the various regulatory boards in accordance with the rules and regulations promulgated by the Commission; determine and fix the places and dates of examinations; use publicly or privately-owned buildings and facilities for examination purposes; conduct more than one (1) licensure examination: Provided, That, when there are two (2) or more examinations given in a year, at least one (1) examination shall be held on weekdays (Monday to Friday): Provided, further, That, if only one (1) examination is given in a year, this shall be held only on weekdays: Provided, finally, That, the Commission is also authorized to require the completion of a refresher course where the examinee has failed to pass three (3) times, except as otherwise provided by law; approve the results of examinations and the release of the same; adopt measures to preserve the integrity and inviolability of licensure examinations; appoint supervisors and room watchers from among the employees of the government and/or private individuals with baccalaureate degrees, who have been trained by the Commission for the purpose and who shall be entitled to a reasonable daily allowance for every examination day actually attended, to be determined and fixed by the Commission; publish the list of successful examinees; provide schools, colleges and universities, public and private, offering courses for licensure examinations, with copies of sample test questions on examinations recently conducted by the Commission and copies of the syllabi or terms of specifications of subjects for licensure examinations; and impose the penalty of suspension or prohibition from taking licensure examinations to any examinee charged and found guilty of violating the rules and regulations governing the conduct of licensure examinations promulgated by the Commission; xxxx (s) To investigate motu proprio or upon the filing of a verified complaint, any member of the Professional Regulatory Boards for neglect of duty, incompetence, unprofessional, unethical, immoral or dishonorable conduct, commission of irregularities in the licensure examinations which taint or impugn the integrity and authenticity of the results of the said examinations and, if found guilty, to revoke or suspend their certificates of registration and professional licenses/identification cards and to recommend to the President of the Philippines their suspension or removal from office as the case may be; xxxx (y) To perform such other functions and duties as may be necessary to carry out the provisions of this Act, the various professional regulatory laws, decrees, executive orders and other administrative issuance Complementing these mandates are the penal provisions giving teeth to the PRC's regulatory powers. Section 15 of the PRC Law provides:

Section 15. Penalties for Manipulation and Other Corrupt Practices in the Conduct of Professional Examinations. (a) Any person who manipulates or rigs licensure examination results, secretly informs or makes known licensure examination questions prior to the conduct of the examination or tampers with the grades in professional licensure examinations shall, upon conviction, be punished by imprisonment of not less than six (6) years and one (1) day to not more than twelve (12) years or a fine of not less than Fifty thousand pesos (P50,000.00) to not more than One hundred thousand pesos (P100,000.00) or both such imprisonment and fine at the discretion of the court. Another critical power under Section 17 of the law is the authority to promulgate the necessary rules and regulations needed to implement its provisions. Section 17. Implementing rules and Regulations. Within ninety (90) days after the approval of this Act, the Professional Regulation Commission, together with the representatives of the various Professional Regulatory Boards and accredited professional organizations, the DBM, and the CHED shall prepare and promulgate the necessary rules and regulations needed to implement the provisions of this Act. To be valid, this authority must be exercised on the basis of a policy that the law wishes to enforce and of sufficient standards that mark the limits of the legislature's delegation of authority. The completeness of this delegation is evidenced by the PRC Law's policy statement which provides: Section 2. Statement of Policy. The State recognizes the important role of professionals in nation-building and, towards this end, promotes the sustained development of a sustained reservoir of professionals whose competence has been determined by honest and credible licensure examinations and whose standards of professional service and practice are internationally recognized and considered world-class brought by the regulatory measures, programs and activities that foster professional growth and advancement. Read together with the grant of powers and functions under Section 5 (particularly the statement that - "the Commission shall establish and maintain a high standard of admission to the practice of all professions and at all times ensure and safeguard the integrity of all licensure examinations"), both policy and standards are therefore present as required by law and jurisprudence.[6] Whether review centers can be the legitimate subjects of PRC regulation, given the above-described experience with the nursing board examination leakage and the terms of the PRC Law, is not a hard question to answer. Review centers, because of the role they have assumed and the reliance on them by examinees, have become active participants in the licensure examination process, and their involvement can neither be downplayed nor ignored. Board examinees now undergo review preparatory to licensure examinations as a matter of accepted practice, and pay considerable sums to avail themselves of the services review centers offer. These services include the provision of review materials; lectures on examination methods; practice examinations to simulate the actual exam environment; and final coaching just before the actual examination date. To some exam candidates, these services have become security blankets that, whether true or not, boost their confidence come examination time. Not the least of the considerations, of course, is

that the review center industry has now become a billion-peso industry with sufficient means and resources for the corrupt elements of the industry to subvert the integrity and reputation of the licensure examinations. PRC experiences in the last few years attest to this reality.[7] Thus, the integrity and effectiveness of review centers are now basic considerations in ensuring an honest and credible licensure examination system. In these lights, the regulation of review centers is a must for the PRC, given its duty to adopt measures that will preserve the integrity and inviolability of licensure examinations. Thus, unlike the CHED, the PRC has the requisite authority or mandate under the PRC Modernization Law to regulate the establishment and operation of review centers. Can the President transfer the power of regulation granted the PRC to CHED? This question essentially arises under the premise that review centers fall under the PRC's mandate so that there is no gap in the law, and the President, in the exercise of her power of control, can regulate review centers. Can this presidential authority be now cited as basis to argue for the validity of EO 566? The short and quick answer is no, because the disputed EO does not even invoke the PRC Law as its legal basis. Nor can the EO be revived by simply re-issuing it, citing the PRC Law and the authority of the President of the Philippines to issue regulations. To regulate review centers under the PRC law, another EO - appropriate to the PRC and its structure under the PRC law - will have to be prepared and issued. The President, as Chief Executive, has the power of control over all the executive departments, bureaus, and offices.[8] The power of control refers to the power of an officer to alter, modify, nullify, or set aside what a subordinate officer has done in the performance of his duties, and to substitute the judgment of the former for that of the latter.[9] Under this power, the President may directly exercise a power statutorily given to any of his subordinates, as what happened in the old case of Araneta v. Gatmaitan,[10] where President Ramon Magsaysay himself directly exercised the authority granted by Congress to the Secretary of Agriculture and Natural Resources to promulgate rules and regulations concerning trawl fishing. We similarly ruled in Bermudez v. Torres when we said that the President, being the head of the Executive Department, can very well disregard or do away with the action of the departments, bureaus or offices even in the exercise of discretionary authority; in so opting, he cannot be said to be acting beyond the scope of his authority.[11] The statutory support for this authority is provided under Section 31 (2), Chapter 10, Title III, Book III of Executive Order No. 292, otherwise known as the Administrative Code of 1987 (EO 292), which states: 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 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; (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. The President's direct exercise of the power of subordinate legislation is done via the issuance of an executive or administrative order, defined under Section 2, Chapter 2, Book III of EO 292, as an ordinance issued by the President providing for rules of a general or permanent character in the implementation or execution of constitutional or statutory powers. The valid grant of the authority to issue subordinate legislation to the PRC and the exercise of this power by the President as the head of the executive department of government, however, do not extend to the authority of the President to take control of the PRC's powers under the PRC Law, and to assign these to another agency within the executive branch. Effectively, this was what happened in the present case; the President, through EO 566, took control of the PRC's authority to issue subordinate legislation to regulate review centers, and transferred this power to the CHED. This is an illegal sub-delegation of delegated power. What has once been delegated by Congress can no longer be further delegated by the original delegate to another, expressed in the Latin maxim - potestas delegata non delegare potest.[12] When the PRC Law granted the power of subordinate legislation to the PRC, the mandate was given to this agency (and under the control powers of the President, to the President by necessary implication) as the original delegate; the faithful fulfillment of this mandate is a duty that the PRC itself, as the delegate, must perform using its own judgment and not the intervening mind of another.
[13]

Additionally, EO 566 placed entities subject to the jurisdiction of a particular agency (in this case, the PRC) under the jurisdiction of another (the CHED). As the cited reorganization powers of the President show, the statutorily-allowed transfer of functions refers to those from the Office of the President to the departments and agencies, or from the departments and agencies to the Office of the President. This proceeds from the power of control the Constitution grants to the President. No general statutory nor constitutional authority exists, however, allowing the President to transfer the functions of one department or agency to another. The reason for this is obvious - the jurisdiction

of a particular department or agency is provided for by law and this jurisdiction may not be modified, reduced or increased, via a mere executive order except to the extent that the law allows. Thus, only the President, based on her constitutionally-provided control powers, can assume the functions of any of the departments or agencies under the Executive Department. Even then, the President cannot transfer these functions to another agency without transgressing the legislative prerogatives of Congress. This conclusion necessarily impacts on the validity of the CHED's issuance of the RIRR and other instruments which must similarly be invalid since they sprang from an invalid and impermissible sub-delegation of power. I therefore vote to invalidate EO 566 and the issuances arising from this EO.
[1]

See: Rubenito, et al. v. Lagata, et al., G.R. No. 140959, December 21, 2004, 447 SCRA 417.
[2]

Far East Bank & Trust Company v. Court of Appeals, G.R. No. 123569, April 1, 1996, 256 SCRA 15; Antiporda, Jr. v. Sandiganbayan, G.R. No. 116941, May 31, 2001, 358 SCRA 335.
[3]

Rollo, p. 4.

[4]

On June 11-12, 2006, the Professional Regulations Commission (PRC), in coordination with the Board of Nursing (BON), administered the Philippine Nurse Licensure Examination covering five (5) nursing subjects. After computing the grades of the examinees pursuant to the established rule under the Philippine Nursing Act of 2002 (R.A. 9173, specifically, Sections 14 & 15 thereof) giving equal weight to all the examinable subjects, 41.24% of the total number of examinees passed, including 1,186 examinees who were purportedly "borderline cases." Allegations of leakage in two (2) tests - Tests III and IV - however plagued the licensure examination. This prompted the PRC to constitute a committee to investigate the reported leakage. The PRC investigating body found that leakages occurred in Tests III and V; 20 of the 100 questions in Test III and 90 of the 100 questions in Test V were found to have been leaked to the examinees by certain nursing review centers days prior to the scheduled exam. The investigating body recommended, among others, the filing of criminal charges against the examiners - BON members Madeja (for Test III) and Dionisio (for Test V). The National Bureau of Investigation (NBI) conducted a parallel investigation; the Senate, on the other hand, conducted a legislative inquiry on the leakage controversy. The PRC approved the report of the investigating body. To address the leakage problem, the PRC approved Resolution No. 31 (Resolution 31) of the BON that: (1) invalidated 20 of the 100 questions in Test III, while ruling that the remaining 80 questions are sufficient to measure the examinees' competency for the subject covered by Test III; and (2) ordered the re-computation of the grades in Test V under a statistical treatment to tone down the upward pull of the leakage. As a result of the re-computation, the original

passing rate of 41.24% rose to 42.42%; the 1,186 previously "borderline cases" became flunkers; while 1,687 examinees who flunked under the original computation became passers as "borderline cases." Various groups, concerned about the integrity and reputation of the professional nursing examination, expressed their opposition against the manner the PRC addressed the leakage and asked the PRC to reconsider Resolution 31. The PRC nevertheless scheduled and started administering the oaths for the 17,821 purportedly successful examinees; some were even issued licenses. To prevent the PRC from further administering the oaths and issuing professional licenses to the purported successful examinees, Rene Luis M. Tadle, Earl Francis R. Sumile, and Michael Angelo S. Brant (all from the University of Santo Tomas; hereinafter "Tadle, et al.") filed on August 16, 2006 with the Court of Appeals (CA) a petition for prohibition (docketed CA-G.R. SP NO. 95709) asking the appellate court to enjoin the implementation of Resolution 31 and the oath-taking of the declared passers. Tadle, et al. anchored their petition on the ground that the PRC and the BON reneged on their ministerial duty under the law to compute the grades of examinees based on the actual results from each of the five test subjects; that based on the combined application of Sections 14 and 15 of the Philippine Nursing ACT of 2002, the PRC and the BON has the duty to compute the scores of the examinees based on the actual results of the tests for the five areas; the PRC and the BON however based the ratings of examinees for Test V not on the result of an actual, true, and honest examination in Test V. To the petitioners, "the PRC - BON changed the rules of computing the ratings for passing examinees, in a manner of speaking, after the game has been played." The importance also of the subject area covered by Test V was allegedly disregarded when it was given a weight lesser than the others. As additional ground, the petitioners drew a distinction between the 2003 bar examination controversy and the nursing leakage issue. Tadle, et al. asked the appellate court to issue a temporary restraining order (TRO) and a preliminary injunction. The appellate court issued on August 18, 2006 a TRO directing the PRC and the BON to CEASE and DESIST from enforcing Resolution 31 and from proceeding with the oath-taking scheduled on August 22, 2006 of those who purportedly passed the June x x x examinations for nursing licensure. The case drew several interventions - both for and against the petition for prohibition. The Presidential Task Force on National Licensure Examination (NCLEX) for Nurses in the Philippines (the Task Force) joined the petition and additionally asked for a writ of certiorari to: annul Resolution 31; invalidate Tests III and V and conduct a new examination for these subjects; nullify the declaration of the passing examinees for lack of basis; and nullify and set aside the oath administered or caused to be administered by the PRC on supposed passing examinees. Various groups of examinees who alleged to have honestly passed the exam, on the other hand, filed their respective motions for intervention to oppose the petition for prohibition. The case followed its usual course - the filing of comments, hearings on the merits, and

the filing of the parties' memoranda. During the pendency of the case, the President promulgated Executive Order No. 565 (EO 565) which transferred the oversight functions of the Office of the President over the PRC to the Department of Labor and Employment (DOLE) by attaching the PRC to the DOLE for general direction and coordination (This was later superseded by Executive Order No. 565-A defining the extent of the DOLE's authority over the PRC). At almost the same time, the President promulgated Executive Order No. 566 (EO 566) - whose constitutionality is now assailed in the present petition - directing the Commission on Higher Education (CHED) to regulate the establishment and operation of review centers and similar entities. Under Section 1 of EO 566, the CHED, in consultation with other concerned government agencies, was directed to formulate a framework for the regulation of review centers and similar entities, including but not limited to the development and institutionalization of policies, standards, and guidelines for the establishment, operation, and accreditation of review centers and similar entities; maintenance of a mechanism to monitor the adequacy, transparency, and propriety of their operations; and reporting mechanisms to review performance and ethical practice. Under the EO 566, too, no review center or similar entity shall be established and/or operate review classes without the favorable expressed indorsement of the CHED and without the issuance of the necessary permits or authorizations to conduct review classes. The President at almost the same time undertook a total overhaul of the BON's membership. In the meantime, the NBI concluded its investigation and found, among others, that the leakage occurred only in Manila and Baguio and that the leakage of the test questions was perpetrated by the Gapuz, Inress, and Royal Pentagon Review Centers through the final coaching sessions these centers conducted two days prior to the scheduled exam. The CA rendered its decision in CA-G.R. SP NO. 95709 on October 13, 2006. Its dispositive portion reads: WHEREFORE, the petition is GRANTED. Declaring Resolution No. 31, Series of 2006 as null and void, a Writ of Prohibition is hereby issued permanently enjoining the respondents from implementing said resolution. Granting further the incidental reliefs required under the premises, the respondents are hereby directed: 1) To conduct a selective retaking in Tests III and V among the 1,687 examinees whose names were merely added to the unaltered list of 41.24% of successful examinees; 2) To restore the names of the 1,186 successful examinees and include them again in the list of 41.24% who actually passed the June 11 and 12, 2006 Nursing Licensure Examination; and 3) To cause the oath taking and issuance of licenses to all of the 41.24% successful examinees as herein reconstituted. This disquisition is without prejudice to respondents' and the executive branch's

revoking the licenses issued to examinees who may eventually be identified as among those who attended the final coaching sessions at Gapuz, Inress and Pentagon review centers. SO ORDERED. The CA thus annulled Resolution 31 for having been issued with grave abuse of discretion; to the appellate court, the effect of the leakage was insignificant so that the resolution should not have been in the first place issued. The CA at the same time prohibited the implementation of Resolution 31. It added that the applicable rule on computation should be the pre-Resolution 31 formulae, and on this basis and as incidental relief, ordered the PRC to cause the oath-taking and issuance of licenses to all of the 41.24% successful examinees. It likewise found no basis for a wholesale retake of Tests III and V of the licensure examination. Finally, the appellate court, taking into account the findings of the NBI, ruled that the licenses of those who attended the final coaching sessions at Gapuz, Inress, and Pentagon review centers may be revoked by the PRC, BON or the executive branch. On October 16 2006, the petitioners filed a motion for reconsideration of the appellate court's October 13 Decision. A DOLE-initiated attempt at conciliation failed. At the conciliation hearing, however, CA Justice Vicente Veloso verbally indicated that execution of the CA decision can take place and that the PRC may be held in contempt of court for not administering the oaths to the successful examinees. Thus, the next day October 27, 2006 - the PRC started administering the oaths and issuing the license to those who passed as defined by the CA decision. Tadle, et al. filed a petition for certiorari with the Supreme Court assailing: (1) the act of the CA in allegedly "improperly allowing its ponente to compel the PRC and the BON into letting the supposedly successful examinees take their oaths and their licenses although the decision in their favor has not yet become final"; and (2) the CA's October 13, 2006 decision. The petition for certiorari, however, was dismissed by the Court on a technicality. The Court thereafter denied with finality the Tadle, et al.'s motion for reconsideration of the dismissal of their SC petition. On November 3, 2006, the CHED issued MEMORANDUM ORDER No. 49, Series of 2006 (CMO 49). Under Rule 7.2 of CMO 49, an applicant for authority to establish and operate a review center must either be: (a) schools, colleges or universities established/created by the State, or by operation of law, or private HEIs granted recognition by the CHED; or (b) Consortium/consortia of qualified HEIs and PRCrecognized Professional Association. Under Rule 15 of CMO 49, existing review centers are given a grace period of one (1) year to tie-up/be integrated with existing HEIs, consortium of HEIs and PRC-recognized Professional Association or convert as a school and apply for the course covered by the review. Otherwise, no permit - as required by CMO 49 - for operation and establishment will ever be given them and this will bar them from existing as review centers, and be deemed as operating illegally as such. The CHED revised CMO 49 when it issued CMO 30, Series of 2007, on May 7, 2007 (the RIRR).

It was at this point that the petitioner association of independent review centers came to us, via the present petition, to assail the constitutionality of the EO 566 and the RIRR. Meanwhile, the conclusion of the legal battle did not write finis to the hurdles the June 2006 nursing board examinees had to surpass. On February 14, 2007, the Commission on Graduate of Foreign Nursing Schools (CGFNS) of the United States of America issued a press release/statement essentially saying that the Philippine nurses sworn in as licensed nurses in the Philippines following their passing the compromised licensure exam of June 2006 shall not be eligible for VisaScreen Certificate (a requirement in order that a Philippine nurse may engage in her profession in the United States of America). The CGFNS noted in its statement though that the June 2006 passers may overcome this bar and qualify for a Visa Screen Certificate by taking the equivalent of Tests 3 and 5 on a future licensing examination administered by Philippine regulatory authorities and obtaining a passing score; and, in this connection, it urged the Philippine authorities to provide an opportunity for re-take of tests without surrender of license. The President reacted by promulgating Executive Order No. 609 (EO 609) on March 12, 2007. Under EO 609, the June 2006 nursing board passers were given - to enhance their employability - the option of voluntarily retaking the equivalent of Tests III and V of the nurse licensure examination, without the risk of revocation of their professional licenses. The government assistance given to those who shall opt to voluntarily retake Tests III and V are as follows: (1) the PRC was directed to waive the collection of the usual examination fees; and (2) the designation throughout the country of special review centers to be conducted by centers of excellence in nursing or nursing schools with high passing rates where the voluntary retakers may avail themselves of free nursing board review. The CHED extended the 1-year grace period provided under the RIRR for the existing review centers' compliance for six (6) months under CMO 55, Series of 2007, issued on November 19, 2007. Subsequently, the CHED - under CMO 21, Series of 2008 extended the deadline for another six (6) months. We issued a Resolution requiring the parties to observe the status quo prevailing before the issuance of EO 566, the RIRR and CMO 21, s. 2008.
[5]

An Act Modernizing the Professional Regulation Commission, Repealing for the Purpose Presidential Decree Number Two Hundred and Twenty-Three, entitled "Creating the Professional Regulation Commission, and Prescribing its Powers and Functions," and for Other Purposes.
[6]

See: Tatad v. Secretary of the Department of Energy, G.R. No. 124360, November 5, 1997, 281 SCRA 330, on the tests for a valid delegation of legislative powers.
[7]

The PRC acted on the anomalies that allegedly marred the following licensure examinations for: Physicians (February 1993), Marine Deck Officers (June 2002), Teachers (August 2004), and Civil Engineers (November 2007).

[8]

CONSTITUTION, Article VII, Section 17.

[9]

See Ang-Angco v. Castillo, G.R. No. L-17169, November 30, 1963, 9 SCRA 619, citing Hebron v. Reyes, 104 Phil. 175 (1958).
[10]

101 Phil. 328 (1957). G.R. No. 131429. August 4, 1999, 311 SCRA 733. United States v. Barrias, 11 Phil 327 (1908). See Cruz, Philippine Political Law (2002), p. 91.

[11]

[12]

[13]

Source: Supreme Court E-Library | Date created: 2009-06-23 13:15:07 This page was dynamically generated by the E-Library Content Management System

EN BANC [ G.R. No. 166910, October 19, 2010 ]

ERNESTO B. FRANCISCO, JR. AND JOSE MA. O. HIZON, PETITIONERS, VS. TOLL REGULATORY BOARD, PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, MANILA NORTH TOLLWAYS CORPORATION, BENPRES HOLDINGS CORPORATION, FIRST PHILIPPINE INFRASTRUCTURE DEVELOPMENT CORPORATION, TOLLWAY MANAGEMENT CORPORATION, PNCC SKYWAY CORPORATION, CITRA METRO MANILA TOLLWAYS CORPORATION AND HOPEWELL CROWN INFRASTRUCTURE, INC., RESPONDENTS. [G.R. NO. 169917] HON. IMEE R. MARCOS, RONALDO B. ZAMORA, CONSUMERS UNION OF THE PHILIPPINES, INC., QUIRINO A. MARQUINEZ, HON. LUIS A. ASISTIO, HON. ERICO BASILIO A. FABIAN, HON. RENATO "KA RENE" B. MAGTUBO, HON. RODOLFO G. PLAZA, HON. ANTONIO M.

SERAPIO, HON. EMMANUEL JOEL J. VILLANUEVA, HON. ANIBAN NG MGA MANGGAGAWA SA AGRIKULTURA (AMA), INC., ANIBAN NG MGA MAGSASAKA, MANGINGISDA AT MANGGAGAWA SA AGRIKULTURA-KATIPUNAN, INC., KAISAHAN NG MGA MAGSASAKA SA AGRIKULTURA, INC., KILUSAN NG MANGAGAWANG MAKABAYAN, PETITIONERS, VS. THE REPUBLIC OF THE PHILIPPINES, ACTING BY AND THROUGH THE TOLL REGULATORY BOARD, MANILA NORTH TOLLWAYS CORPORATION, PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, AND FIRST PHILIPPINE INFRASTRUCTURE DEVELOPMENT CORP., RESPONDENTS. [G.R. NO. 173630] GISING KABATAAN MOVEMENT, INC., BARANGAY COUNCIL OF SAN ANTONIO, MUNICIPALITY OF SAN PEDRO, LAGUNA [AS REPRESENTED BY COUNCILOR CARLON G. AMBAYEC], AND YOUNG PROFESSIONALS AND ENTREPRENEURS OF SAN PEDRO, LAGUNA PETITIONERS, VS. THE REPUBLIC OF THE PHILIPPINES, ACTING THROUGH THE TOLL REGULATORY BOARD (TRB), PHILIPPINE NATIONAL CONSTRUCTION CORPORATION (PNCC), RESPONDENTS. [G.R. NO. 183599] THE REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE TOLL REGULATORY BOARD, PETITIONER, VS. YOUNG PROFESSIONALS AND ENTREPRENEURS OF SAN PEDRO, LAGUNA, RESPONDENT. DECISION
VELASCO JR., J.: Before us are four petitions; the first three are special civil actions under Rule 65, assailing and seeking to nullify certain statutory provisions, presidential actions and implementing orders, toll operation-related contracts and issuances on the construction, maintenance and operation of the major tollway systems in Luzon. The petitions likewise seek to restrain and permanently prohibit the implementation of the allegedly illegal toll

fee rate hikes for the use of the North Luzon Expressway ("NLEX"), South Luzon Expressway ("SLEX") and the South Metro Manila Skyway ("SMMS"). The fourth, a petition for review under Rule 45, seeks to annul and set aside the decision dated June 23, 2008 of the Regional Trial Court ("RTC") of Pasig, in SCA No. 3138-PSG, enjoining the original toll operating franchisee from collecting toll fees in the SLEX. By Resolution of March 20, 2007, the Court ordered the consolidation of the first three petitions, docketed as G.R. Nos. 166910, 169917 and 173630, respectively. The fourth petition, G.R. No. 183599, would later be ordered consolidated with the earlier three petitions. The Facts The antecedent facts are as follows-On March 31, 1977, then President Ferdinand E. Marcos issued Presidential Decree No. ("P.D.") 1112, authorizing the establishment of toll facilities on public improvements.[1] This issuance, in its preamble, explicitly acknowledged "the huge financial requirements" and the necessity of tapping "the resources of the private sector" to implement the government's infrastructure programs. In order to attract private sector involvement, P.D. 1112 allowed "the collection of toll fees for the use of certain public improvements that would allow a reasonable rate of return on investments." The same decree created the Toll Regulatory Board ("TRB") and invested it under Section 3 (a) (d) and (e) with the power to enter, for the Republic, into contracts for the construction, maintenance and operation of tollways, grant authority to operate a toll facility, issue therefor the necessary Toll Operation Certificate ("TOC") and fix initial toll rates, and, from time to time, adjust the same after due notice and hearing. On the same date, P.D. 1113 was issued, granting to the Philippine National Construction Corporation ("PNCC"), then known as the Construction and Development Corporation of the Philippines ("CDCP"), for a period of thirty years from May 1977 - or up to May 2007 - a franchise to construct, maintain and operate toll facilities in the North Luzon and South Luzon Expressways, with the right to collect toll fees at such rates as the TRB may fix and/or authorize. Particularly, Section 1 of P.D. 1113 delineates the coverage of the expressways from Balintawak, Caloocan City to Carmen, Rosales, Pangasinan and from Nichols, Pasay City to Lucena, Quezon. And because the franchise is not self-executing, as it was in fact made subject, under Section 3 of P.D. 1113, to "such conditions as may be imposed by the Board in an appropriate contract to be executed for such purpose," TRB and PNCC signed in October 1977, a Toll Operation Agreement ("TOA") on the North Luzon and South Luzon Tollways, providing for the detailed terms and conditions for the construction, maintenance and operation of the expressway.[2] On December 22, 1983, P.D. 1894 was issued therein further granting PNCC a franchise over the Metro Manila Expressway ("MMEX"), and the expanded and delineated NLEX and SLEX. Particularly, PNCC was granted the "right, privilege and authority to construct, maintain and operate any and all such extensions, linkages or stretches, together with the toll facilities appurtenant thereto, from any part of the North Luzon

Expressway, South Luzon Expressway and/or Metro Manila Expressway and/or to divert the original route and change the original end-points of the North Luzon Expressway and/or South Luzon Expressway as may be approved by the [TRB]."[3] Under Section 2 of P.D. 1894, "the franchise granted the [MMEX] and all extensions, linkages, stretches and diversions after the approval of the decree that may be constructed after the approval of this decree [on December 22, 1983] shall likewise have a term of thirty (30) years, commencing from the date of completion of the project." As expressly set out in P.D. 1113 and reiterated in P.D. 1894, PNCC may sell or assign its franchise thereunder granted or cede the usufruct[4] thereof upon the President's approval.[5] This same provision on franchise transfer and cession of usufruct is likewise found in P.D. 1112.[6] Then came the 1987 Constitution with its franchise provision.[7] In 1993, the Government Corporate Counsel ("GCC"), acting on PNCC's request, issued Opinion No. 224, s. 1993,[8] later affirmed by the Secretary of Justice,[9] holding that PNCC may, subject to certain clearance and approval requirements, enter into a joint venture ("JV") agreement ("JVA") with private entities without going into public bidding in the selection of its JV partners. PNCC's query was evidently prompted by the need to seek out alternative sources of financing for expanding and improving existing expressways, and to link them to economic zones in the north and to the CALABARZON area in the south. MOU FOR THE CONSTRUCTION, REHABILITATION AND EXPANSION OF EXPRESSWAYS On February 8, 1994, the Department of Public Works and Highways ("DPWH"), TRB, PNCC, Benpres Holdings Corporation ("Benpres") and First Philippine Holdings Corporation ("FPHC"), among other private and government entities/agencies, executed a Memorandum of Understanding ("MOU") envisaged to open the door for the entry of private capital in the rehabilitation, expansion (to Subic and Clark) and extension, as flagship projects, of the expressways north of Manila, over which PNCC has a franchise. To carry out their undertakings under the MOU, Benpres and FPHC formed, as their infrastructure holding arm, the First Philippine Infrastructure and Development Corporation ("FPIDC"). Consequent to the MOU execution, PNCC entered into financial and/or technical JVAs with private entities/investors for the toll operation of its franchised areas following what may be considered as a standard pattern, viz.: (a) after a JVA is concluded and the usual government approval of the assignment by PNCC of the usufruct in the franchise under P.D. 1113, as amended, secured, a new JV company is specifically formed to undertake a defined toll road project; (b) the Republic of the Philippines, through the TRB, as grantor, PNCC, as operator, and the new corporation, as investor/concessionaire, with its lender, as the case may be, then execute a Supplemental Toll Operation Agreement ("STOA") to implement the TOA previously issued; and (c) once the requisite STOA approval is

given, project prosecution starts and upon the completion of the toll road project or of a divisible phase thereof, the TRB fixes or approves the initial toll rate after which, it passes a board resolution prescribing the periodic toll rate adjustment. The STOA defines the scope of the road project coverage, the terminal date of the concession, and includes provisions on initial toll rate and a built-in formula for adjustment of toll rates, investment recovery clauses and contract termination in the event of the concessionaire's, PNCC's or TRB's default, as the case may be. The following events or transactions, involving the personalities as indicated, transpired with respect to the following projects: THE SOUTH METRO MANILA SKYWAY (SMMS) (BUENDIA - BICUTAN ELEVATED STRETCH) PROJECT PNCC entered into a JV partnership arrangement with P.T. Citra, an Indonesian company, and created, for the SMMS project, the Citra Metro Manila Tollways Corporation ("CMMTC"). On November 27, 1995, TRB, PNCC and CMMTC executed a STOA for the SMMS project ("CITRA STOA"). And on April 7, 1996, then President Fidel V. Ramos approved the CITRA STOA. Phase I of the SMMS project - the Bicutan to Buendia elevated expressway stretch - was completed in December 1998, and the consequent initial toll rates for its use implemented a month after. On November 26, 2004, the TRB passed Resolution No. 2004-53, approving the periodic toll rate adjustment for the SMMS. THE NLEX EXPANSION PROJECT (REHABILITATED AND WIDENED NLEX, SUBIC EXPRESSWAY, CIRCUMFERENTIAL ROAD C-5) In reply to the query of the then TRB Chairman, the Department of Justice ("DOJ") issued DOJ Opinion No. 79, s. of 1994, echoing an earlier opinion of the GCC, that the TRB can implement the NLEX expansion project through a JV scheme with private investors possessing the requisite technical and financial capabilities. On May 16, 1995, then President Ramos approved the assignment of PNCC's usufructuary rights as franchise holder to a JV company to be formed by PNCC and FPIDC. PNCC and FPIDC would later ink a JVA for the rehabilitation and modernization of the NLEX - referred in certain pleadings as the North Luzon Tollway project.[10] The Manila North Tollways Corporation ("MNTC") was formed for the purpose. On April 30, 1998, the Republic, through the TRB, PNCC and MNTC, executed a STOA for the North Luzon Tollway project ("MNTC STOA") in which MNTC was authorized, inter alia, to subcontract the operation and maintenance of the project, provided that the

majority of the outstanding shares of the contractor shall be owned by MNTC. The MNTC STOA covers three phases comprising of ten segments, including the rehabilitated and widened NLEX, the Subic Expressway and the circumferential Road C5.[11] The STOA is to be effective for thirty years, reckoned from the issuance of the toll operation permit for the last completed phase or until December 31, 2030, whichever is earlier. The Office of the President ("OP") approved the STOA on June 15, 1998. On August 2, 2000, pursuant to the MNTC STOA, the Tollways Management Corporation ("TMC")--formerly known as the Manila North Tollways Operation and Maintenance Corporation--was created to undertake the operation and maintenance of the NLEX tollway facilities, interchanges and related works. On January 27, 2005, the TRB issued Resolution No. 2005-04 approving the initial authorized toll rates for the closed and flat toll systems applicable to the new NLEX. THE SOUTH LUZON EXPRESSWAY PROJECT (NICHOLS TO LUCENA CITY) For the SLEX expansion project, PNCC and Hopewell Holdings Limited ("HHL"), as JV partners, executed a Memorandum of Agreement ("MOA"),[12] which eventually led to the formation of a JV company - Hopewell Crown Infrastructure, Inc. ("HCII"), now MTD Manila Expressways, Inc., ("MTDME"). And pursuant to the PNCC-MTDME JVA, the South Luzon Tollway Corporation ("SLTC") and the Manila Toll Expressway Systems, Inc. ("MATES") were incorporated to undertake the financing, construction, operation and maintenance of the resulting Project Toll Roads forming part of the SLEX. The toll road projects are divisible toll sections or segments, each segment defined as to its starting and end points and each with the corresponding distance coverage. The proposed JVA, as later amended, between PNCC and MTDME was approved by the OP on June 30, 2000. Eventually, or on February 1, 2006, a STOA[13] for the financing, design, construction, lane expansion and maintenance of the Project Toll Roads (PTR) of the rehabilitated and improved SLEX was executed by and among the Republic, PNCC, SLTC, as investor, and MATES, as operator. To be precise, the PTRs, under the STOA, comprise and contemplated the full rehabilitation and/or roadway widening of the following existing toll roads or facilities: PTR 1 - that portion of the tollway commencing at the end of South MM Skyway to the Filinvest exit at Alabang (1-242 km); PTR 2 - the tollway from Alabang to Calamba, Laguna (27.28 km); PTR 3 - the tollway from Calamba to Sto. Tomas, Batangas (7.6 km) and PTR 4 - the tollway from Sto. Tomas to Lucena City (54.27 km).[14] Under Clause 6.03 of the STOA, the Operator, after substantially completing a TPR, shall file an application for a Toll Operation Permit over the relevant completed TPR or segment, which shall include a request for a review and approval by the TRB of the calculation of the new current authorized toll rate.

G.R. No. 166910 Petitioners Francisco and Hizon, as taxpayers and expressway users, seek to nullify the various STOAs adverted to above and the corresponding TRB resolutions, i.e. Res. Nos. 2004-53 and 2005-04, fixing initial rates and/or approving periodic toll rate adjustments therefor. To the petitioners, the STOAs and the toll rate-fixing resolutions violate the Constitution in that they veritably impose on the public the burden of financing tollways by way of exorbitant fees and thus depriving the public of property without due process. These STOAs are also alleged to be infirm as they effectively awarded purported "buildoperate-transfer" ("BOT") projects without public bidding in violation of the BOT Law (R.A. 6957, as amended by R.A. 7718). Petitioners likewise assail the constitutionality of Sections 3 (a) and (d) of P.D. 1112 in relation to Section 8 (b) of P.D. 1894 insofar as they vested the TRB, on one hand, toll operation awarding power while, on the other hand, granting it also the power to issue, modify and promulgate toll rate charges. The TRB, so petitioners bemoan, cannot be an awarding party of a TOA and, at the same time, be the regulator of the tollway industry and an adjudicator of rate exactions disputes. Additionally, petitioners also seek to nullify certain provisions of P.D. 1113 and P.D. 1894, which uniformly grant the President the power to approve the transfer or assignment of usufruct or the rights and privileges thereunder by the tollway operator to third parties, particularly the transfer effected by PNCC to MNTC. As argued, the authority to approve partakes of an exercise of legislative power under Article VI, Section 1 of the Constitution.[15] In the meantime, or on April 8, 2010, the TRB issued a Certificate of Substantial Completion[16] with respect to PTR 1 (Alabang-Filinvest stretch) and PTR 2 (AlabangCalamba segments) of SLEX, signifying the completion of the full rehabilitation/expansion of both segments and the linkages/interchanges in between pursuant to the requirements of the corresponding STOA. TRB on even date issued a Toll Operation Permit in favor of MATES over said PTRs 1 and 2.[17] Accordingly, upon due application, the TRB approved the publication of the toll rate matrix for PTRs 1 and 2, the rate to take effect on June 30, 2010.[18] The implementation of the published rate would, however, be postponed to August 2010. On July 5, 2010, petitioner Francisco filed a Supplemental Petition with prayer for the issuance of a temporary restraining order ("TRO") and/or status quo order focused on the impending collection of what was perceived to be toll rate increases in the SLEX. The assailed adjustments were made public in a TRB notice of toll rate increases for the SLEX from Alabang to Calamba on June 6, 2010, and were supposed to have been implemented on June 30, 2010. On August 13, 2010, the Court granted the desired TRO, enjoining the respondents in the consolidated cases from implementing the toll rate increases in the SLEX. In their Consolidated Comment/Opposition to the Supplemental Petition, respondents

SLTC et al., aver that the disputed rates are actually initial and opening rates, not an increase or adjustment of the prevailing rate, for the new expanded and rehabilitated SLEX. In fine, the new toll rates are, per SLTC, for a new and upgraded facility, i.e. the aforementioned Project Toll Roads 1 and 2 put up pursuant to the 2006 Republic-PNCCSLTC-MATES STOA adverted to. G.R. No. 169917 While they raise, for the most part, the same issues articulated in G.R. No. 166910, such as the public bidding requirement, the power of the President to approve the assignment of PNCC's usufructuary rights to cover (as petitioners Imee R. Marcos, et al., would stress) even the assignment of the expressway from Balintawak to Tabang, the virtual amendment and extension of a statutory franchise by way of administrative action (e.g., the execution of a STOA or issuance of a TOC), petitioners in G.R. No. 169917 - some of them then and still are members of the House of Representatives - have, as their main focus, the North Luzon Tollway project and the agreements and devices entered in relation therewith. Petitioners also assail the MNTC STOA on the ground that it granted the lenders (Asian Development Bank/World Bank) of MNTC, as project concessionaire, the unrestricted rights to appoint a substitute entity to replace MNTC in case of an MNTC Default before prepayment of the loans, while also granting said lenders, in appropriate cases, the option to extend the "concession or franchise" for a period not exceeding fifty years coinciding with the full payment of the loans. G.R. No. 173630 Apart from those taken up in the other petitions for certiorari and prohibition, petitioners, in G.R. No. 173630, whose members and constituents allegedly traverse SLEX daily, aver that TRB ought to have applied the provisions of R.A. 6957 [BOT Law] and R.A. 9184 [Government Procurement Reform Act], which require public bidding for the prosecution of the SLEX project. G.R. No. 183599 Civil Case - SCA No. 3138-PSG before the RTC On September 14, 2007, the Young Professionals and Entrepreneurs of San Pedro, Laguna ("YPES"), one of the petitioners in G.R. No. 173630, filed before the RTC, Branch 155, in Pasig City, a special civil action for certiorari, etc., against the TRB, docketed as SCA No. 3138-PSG, containing practically identical issues raised in G.R. No. 173630. Like its petition in G.R. No. 173630, YPES, before the RTC, assailed and sought to nullify the April 27, 2007 TOC, which TRB issued to PNCC inasmuch as the TOC worked to extend PNCC's tollway operation franchise for the SLEX. As YPES argued, only the Congress can extend the term of PNCC's franchise which expired on May 1, 2007.

Ruling of the RTC in SCA No. 3138-PSG By Decision[19] dated June 23, 2008, the RTC, for the main stated reason that the authority to grant or renew franchises belongs only to Congress, granted YPES' petition, disposing as follows: ACCORDINGLY, the instant Petition for Certiorari, Prohibition and Mandamus is hereby GRANTED and the questioned Toll Operation Certificate (TOC) covering the [SLEX] issued by respondent TRB in April, 2007, is hereby ordered ANNULLED and SET ASIDE. FURTHER, respondent PNCC is hereby immediately PROHIBITED from collecting toll fess along the SLEX facilities as it no longer has the power and authority to do so. FINALLY, as mandated under Section 9 of PD No. 1113, respondent PNCC is hereby COMMANDED to turn over without further delay the physical assets and facilities of the SLEX including improvements thereon, together with the equipment and appurtenances directly related to their operations, without any cost, to the Government through the Toll Regulatory Board x x x.[20] Thus, the instant petition for review on certiorari under Rule 45, filed by the TRB on pure questions of law, docketed as G.R. No. 183599. In their separate comments, public and private respondents uniformly seek the dismissal of the three special civil actions on the threshold issue of the absence of a justiciable case and lack of locus standi on the part of the petitioners therein. Other grounds raised range from the impropriety of certiorari to nullify toll operation agreements; the inapplicability of the public bidding rules in the selection by PNCC of its JV partners and the authority of the President to approve TOAs and the transfer of usufructuary rights. PNCC argues, in esse, that its continuous toll operations did not constitute an extension of its franchise, its authority to operate after the expiry date thereof in May 2007 being based on the valid authority of TRB to issue TOC. The Issues The principal consolidated but interrelated issues tendered before the Court, most of which with constitutional undertones, may be reduced into six (6) and formulated in the following wise: first, whether or not an actual case or controversy exists and, relevantly, whether petitioners in the first three petitions have locus standi; second, whether the TRB is vested with the power and authority to grant what amounts to a franchise over tollway facilities; third, corollary to the second, whether the TRB can enter into TOAs and, at the same time, promulgate toll rates and rule on petitions for toll rate adjustments; fourth, whether the President is duly authorized to approve contracts, inclusive of assignment of contracts, entered into by the TRB relative to tollway operations; fifth, whether the subject STOAs covering the NLEX, SLEX and SMMS and their respective extensions, linkages, etc. are valid; sixth, whether a public bidding is required or mandatory for these tollway projects.

Expressly prayed, if not subsumed, in the first three petitions, is to prohibit TRB and its concessionaires from collecting toll fees along the Skyway and Luzon Tollways. Preliminary Issues Existence of an Actual Controversy, its Ripeness and the Locus Standi to Sue The power of judicial review can only be exercised in connection with a bona fide controversy involving a statute, its implementation or a government action.[21] Withal, courts will decline to pass upon constitutional issues through advisory opinions, bereft as they are of authority to resolve hypothetical or moot questions.[22] The limitation on the power of judicial review to actual cases and controversies defines the role assigned to the judiciary in a tripartite allocation of power, to assure that the courts will not intrude into areas committed to the other branches of government.[23] In The Province of North Cotabato v. The Government of the Republic of the Philippines Peace Panel on Ancestral Domain (GRP), the Court has expounded anew on the concept of actual case or controversy and the requirement of ripeness for judicial review, thus: An actual case or controversy involves a conflict of legal rights, an assertion of opposite legal claims, susceptible of judicial resolution as distinguished from a hypothetical or abstract difference or dispute. There must be a contrariety of legal rights x x x. The Court can decide the constitutionality of an act x x x only when a proper case between opposing parties is submitted for judicial determination. Related to the requirement of an actual case or controversy is the requirement of ripeness. A question is ripe for adjudication when the act being challenged has had a direct adverse effect on the individual challenging it. x x x [I]t is a prerequisite that something had then been accomplished or performed by either branch before a court may come into the picture, and the petitioner must allege the existence of an immediate or threatened injury to itself as a result of the challenged action. He must show that he has sustained or is immediately in danger of sustaining some direct injury as a result of the act complained of.[24] But even with the presence of an actual case or controversy, the Court may refuse judicial review unless the constitutional question or the assailed illegal government act is brought before it by a party who possesses what in Latin is technically called locus standi or the standing to challenge it.[25] To have standing, one must establish that he has a "personal and substantial interest in the case such that he has sustained, or will sustain, direct injury as a result of its enforcement."[26] Particularly, he must show that (1) he has suffered some actual or threatened injury as a result of the allegedly illegal conduct of the government; (2) the injury is fairly traceable to the challenged action; and (3) the injury is likely to be redressed by a favorable action.[27] Petitions for certiorari and prohibition are, as here, appropriate remedies to raise constitutional issues and to review and/or prohibit or nullify, when proper, acts of

legislative and executive officials.[28] The present petitions allege that then President Ramos had exercised vis--vis an assignment of franchise, a function legislative in character. As alleged, too, the TRB, in the guise of entering into contracts or agreements with PNCC and other juridical entities, virtually enlarged, modified to the core and/or extended the statutory franchise of PNCC, thereby usurping a legislative prerogative. The usurpation came in the form of executing the assailed STOAs and the issuance of TOCs. Grave abuse of discretion is also laid on the doorstep of the TRB for its act of entering into these same contracts or agreements without the required public bidding mandated by law, specifically the BOT Law (R.A. 6957, as amended) and the Government Procurement Reform Act (R.A. 9184). In fine, the certiorari petitions impute on then President Ramos and the TRB, the commission of acts that translate inter alia into usurpation of the congressional authority to grant franchises and violation of extant statutes. The petitions make a prima facie case for certiorari and prohibition; an actual case or controversy ripe for judicial review exists. Verily, when an act of a branch of government is seriously alleged to have infringed the Constitution, it becomes not only the right but in fact the duty of the judiciary to settle the dispute. In doing so, the judiciary merely defends the sanctity of its duties and powers under the Constitution.[29] In any case, the rule on standing is a matter of procedural technicality, which may be relaxed when the subject in issue or the legal question to be resolved is of transcendental importance to the public.[30] Hence, even absent any direct injury to the suitor, the Court can relax the application of legal standing or altogether set it aside for non-traditional plaintiffs, like ordinary citizens, when the public interest so requires.[31] There is no doubt that individual petitioners, Marcos, et al., in G.R. No. 169917, as then members of the House of Representatives, possess the requisite legal standing since they assail acts of the executive they perceive to injure the institution of Congress. On the other hand, petitioners Francisco, Hizon, and the other petitioning associations, as taxpayers and/or mere users of the tollways or representatives of such users, would ordinarily not be clothed with the requisite standing. While this is so, the Court is wont to presently relax the rule on locus standi owing primarily to the transcendental importance and the paramount public interest involved in the implementation of the laws on the Luzon tollways, a roadway complex used daily by hundreds of thousands of motorists. What we said a century ago in Severino v. Governor General is just as apropos today: When the relief is sought merely for the protection of private rights, x x x [the relator's] right must clearly appear. On the other hand, when the question is one of public right and the object of the mandamus is to procure the enforcement of a public duty, the people are regarded as the real party in interest, and the relator at whose instigation the proceedings are instituted need not show that he has any legal or special interest in the result, it being sufficient to show that he is a citizen and as such interested in the execution of the laws.[32] (Words in bracket and emphasis added.) Accordingly, We take cognizance of the present case on account of its transcendental importance to the public.

Second Issue: TRB Empowered to Grant Authority to Operate Toll Facility /System It is abundantly clear that Sections 3 (a) and (e) of P.D. 1112 in relation to Section 4 of P.D. 1894 have invested the TRB with sufficient power to grant a qualified person or entity with authority to construct, maintain, and operate a toll facility and to issue the corresponding toll operating permit or TOC. Sections 3 (a) and (e) of P.D. 1112 and Section 4 of P.D. 1894 amply provide the power to grant authority to operate toll facilities: Section 3. Powers and Duties of the Board. The Board shall have in addition to its general powers of administration the following powers and duties: (a) Subject to the approval of the President of the Philippines, to enter into contracts in behalf of the Republic of the Philippines with persons, natural or juridical, for the construction, operation and maintenance of toll facilities such as but not limited to national highways, roads, bridges, and public thoroughfares. Said contract shall be open to citizens of the Philippines and/or to corporations or associations qualified under the Constitution and authorized by law to engage in toll operations; xxxx (e) To grant authority to operate a toll facility and to issue therefore the necessary "Toll Operation Certificate" subject to such conditions as shall be imposed by the Board including inter alia the following: (1) That the Operator shall desist from collecting toll upon the expiration of the Toll Operation Certificate. (2) That the entire facility operated as a toll system including all operation and maintenance equipment directly related thereto shall be turned over to the government immediately upon the expiration of the Toll Operation Certificate. (3) That the toll operator shall not lease, transfer, grant the usufruct of, sell or assign the rights or privileges acquired under the Toll Operation Certificate to any person, firm, company, corporation or other commercial or legal entity, nor merge with any other company or corporation organized for the same purpose, without the prior approval of the President of the Philippines. In the event of any valid transfer of the Toll Operation Certificate, the Transferee shall be subject to all the conditions, terms, restrictions and limitations of this Decree as fully and completely and to the same extent as if the Toll Operation Certificate has been granted to the same person, firm, company, corporation or other commercial or legal entity. (4) That in time of war, rebellion, public peril, emergency, calamity, disaster or disturbance of peace and order, the President of the Philippines may cause the total or

partial closing of the toll facility or order to take over thereof by the Government without prejudice to the payment of just compensation. (5) That no guarantee, Certificate of Indebtedness, collateral, securities, or bonds shall be issued by any government agency or government-owned or controlled corporation on any financing program of the toll operator in connection with his undertaking under the Toll Operation Certificate. (6) The Toll Operation Certificate may be amended, modified or revoked whenever the public interest so requires. (a) The Board shall promulgate rules and regulations governing the procedures for the grant of Toll Certificates. The rights and privileges of a grantee under a Toll Operation Certificate shall be defined by the Board. (b) To issue rules and regulations to carry out the purposes of this Decree. SECTION 4. The Toll Regulatory Board is hereby given jurisdiction and supervision over the GRANTEE with respect to the Expressways, the toll facilities necessarily appurtenant thereto and, subject to the provisions of Section 8 and 9 hereof, the toll that the GRANTEE will charge the users thereof. By explicit provision of law, the TRB was given the power to grant administrative franchise for toll facility projects. The concerned petitioners would argue, however, that PNCC's [then CDCP's] franchise, as toll operator, was granted via P.D. 1113, on the same day P.D. 1112, creating the TRB, was issued. It is thus pointed out that P.D. 1112 could not have plausibly granted the TRB with the power and jurisdiction to issue a similar franchise. Pushing the point, they maintain that only Congress has, under the 1987 Constitution, the exclusive prerogative to grant franchise to operate public utilities. We are unable to agree with petitioners' stance and their undue reliance on Article XII, Section 11 of the Constitution, which states that: SEC. 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum of whose capital is owned by such citizens, nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires x x x. The limiting thrust of the foregoing constitutional provision on the grant of franchise or other forms of authorization to operate public utilities may, in context, be stated as follows: (a) the grant shall be made only in favor of qualified Filipino citizens or

corporations; (b) Congress can impair the obligation of franchises, as contracts; and (c) no such authorization shall be exclusive or exceed fifty years. A franchise is basically a legislative grant of a special privilege to a person.[33] Particularly, the term, franchise, "includes not only authorizations issuing directly from Congress in the form of statute, but also those granted by administrative agencies to which the power to grant franchise has been delegated by Congress."[34] The power to authorize and control a public utility is admittedly a prerogative that stems from the Legislature. Any suggestion, however, that only Congress has the authority to grant a public utility franchise is less than accurate. As stressed in Albano v. Reyes--a case decided under the aegis of the 1987 Constitution--there is nothing in the Constitution remotely indicating the necessity of a congressional franchise before "each and every public utility may operate," thus: That the Constitution provides x x x that the issuance of a franchise, certificate or other form of authorization for the operation of a public utility shall be subject to amendment, alteration or repeal by Congress does not necessarily imply x x x that only Congress has the power to grant such authorization. Our statute books are replete with laws granting specified agencies in the Executive Branch the power to issue such authorization for certain classes of public utilities.[35] (Emphasis ours.) In such a case, therefore, a special franchise directly emanating from Congress is not necessary if the law already specifically authorizes an administrative body to grant a franchise or to award a contract.[36] This is the same view espoused by the Secretary of Justice in his opinion dated January 9, 2006, when he stated: That the administrative agencies may be vested with the authority to grant administrative franchises or concessions over the operation of public utilities under their respective jurisdiction and regulation, without need of the grant of a separate legislative franchise, has been upheld by the Supreme Court x x x.[37] Under the 1987 Constitution, Congress has an explicit authority to grant a public utility franchise. However, it may validly delegate its legislative authority, under the power of subordinate legislation,[38] to issue franchises of certain public utilities to some administrative agencies. In Kilusang Mayo Uno Labor Center v. Garcia, Jr., We explained the reason for the validity of subordinate legislation, thus: Such delegation of legislative power to an administrative agency is permitted in order to adapt to the increasing complexity of modern life. As subjects for governmental regulation multiply, so does the difficulty of administering the laws. Hence, specialization even in legislation has become necessary.[39] (Emphasis ours.) As aptly pointed out by the TRB and other private respondents, the Land Transportation Franchising and Regulatory Board ("LTFRB"), the Civil Aeronautics Board ("CAB"), the National Telecommunications Commission ("NTC"), and the Philippine Ports Authority ("PPA"), to name a few, have been such delegates. The TRB may very well be added to the growing list, having been statutorily endowed, as earlier indicated, the power to grant

to qualified persons, authority to construct road projects and operate thereon toll facilities. Such grant, as evidenced by the corresponding TOC or set out in a TOA, "may be amended, modified, or revoked [by the TRB] whenever the public interest so requires."[40] In Philippine Airlines, Inc. v. Civil Aeronautics Board,[41] the Court reiterated its holding in Albano that the CAB, like the PPA, has sufficient statutory powers under R.A. 776 to issue a Certificate of Public Convenience and Necessity, or Temporary Operating Permit to a domestic air transport operator who, although not possessing a legislative franchise, meets all the other requirements prescribed by law. We held therein that "there is nothing in the law nor in the Constitution which indicates that a legislative franchise is an indispensable requirement for an entity to operate as a domestic air transport operator."[42] We further explicated: Congress has granted certain administrative agencies the power to grant licenses for, or to authorize the operation of certain public utilities. With the growing complexity of modern life, the multiplication of the subjects of governmental regulation, and the increased difficulty of administering the laws, there is a constantly growing tendency towards the delegation of greater powers by the legislature, and towards the approval of the practice by the courts. It is generally recognized that a franchise may be derived indirectly from the state through a duly designated agency, and to this extent, even the power to grant franchises has frequently been delegated, even to agencies other than those of a legislative nature. In pursuance of this, it has been held that privileges conferred by grant by local authorities as agents for the state constitute as much a legislative franchise as though the grant had been made by an act of the Legislature.[43] (Emphasis ours.) The validity of the delegation by Congress of its franchising prerogative is beyond cavil. So it was that in Tatad v. Secretary of the Department of Energy,[44] We again ruled that the delegation of legislative power to administrative agencies is valid. In the instant case, the certiorari petitioners assume and harp on the lack of authority of PNCC to continue with its NLEX, SLEX, MMEX operations, in joint venture with private investors, after the lapse of its P.D. 1113 franchise. None of these petitioners seemed to have taken due stock of and appreciated the valid delegation of the appropriate power to TRB under P.D. 1112, as enlarged in P.D. 1894. To be sure, a franchise may be derived indirectly from the state through a duly designated agency, and to this extent, the power to grant franchises has frequently been delegated, even to agencies other than those of a legislative nature.[45] Consequently, it has been held that privileges conferred by grant by administrative agencies as agents for the state constitute as much a legislative franchise as though the grant had been made by an act of the Legislature.[46] While it may be, as held in Strategic Alliance Development Corporation v. Radstock Securities Limited,[47] that PNCC's P.D. 1113 franchise had already expired effective May 1, 2007, this fact of expiration did not, however, carry with it the cancellation of PNCC's authority and that of its JV partners granted under P.D. 1112 in relation to Section 1 of P.D. 1894 to construct, operate and maintain "any and all such extensions, linkages or stretches, together with the toll facilities appurtenant thereto, from any part of the North

Luzon Expressway, South Luzon Expressway and/or Metro Manila Expressway and/or to divert the original route and change the original end-points of the [NLEX]and/or [SLEX] as may be approved by the [TRB]. And to highlight the point, the succeeding Section 2 of P.D. 1894 specifically provides that the franchise for the extension and toll road projects constructed after the approval of P.D. 1894 shall be thirty years, counted from project completion. Indeed, prior to the expiration of PNCC's original franchise in May 2007, the TRB, in the exercise of its special powers under P.D. 1112, signed supplemental TOAs with PNCC and its JV partners. These STOAs covered the expansion and rehabilitation of NLEX and SLEX, as the case may be, and/or the construction, operation and maintenance of toll road projects contemplated in P.D.1894. And there can be no denying that the corresponding toll operation permits have been issued. In fine, the STOAs[48] TRB entered with PNCC and its JV partners had the effect of granting authorities to construct, operate and maintain toll facilities, but with the injection of additional private sector investments consistent with the intent of P.D. Nos. 1112, 1113 and 1894.[49] The execution of these STOAs came in 1995, 1998 and 2006, or before the expiration of PNCC's original franchise on May 1, 2007. In accordance with applicable laws, these transactions have actually been authorized and approved by the President of the Philippines.[50] And as a measure to ensure the legality of the said transactions and in line with due diligence requirements, a review thereof was secured from the GCC and the DOJ, prior to their execution. Inasmuch as its charter empowered the TRB to authorize the PNCC and like entities to maintain and operate toll facilities, it may be stated as a corollary that the TRB, subject to certain qualifications, infra, can alter the conditions of such authorization. Well settled is the rule that a legislative franchise cannot be modified or amended by an administrative body with general delegated powers to grant authorities or franchises. However, in the instant case, the law granting a direct franchise to PNCC[51] evidently and specifically conferred upon the TRB the power to impose conditions in an appropriate contract.[52] And to reiterate, Section 3 of P.D. 1113 provides that "[t]his [PNCC] franchise is granted subject to such conditions as may be imposed by the [TRB] in an appropriate contract to be executed for this purpose, and with the understanding and upon the condition that it shall be subject to amendment, alteration or repeal when public interest so requires."[53] A similarly worded proviso is found in Section 6 of P.D. 1894. It is in this light that the TRB entered into the subject STOAs in order to allow the infusion of additional investments in the subject infrastructure projects. Prior to the expiration of PNCC's franchise on May 1, 2007, the STOAs merely imposed additional conditionalities, or as aptly pointed out by SLTC et al., obviously having in mind par. 16.06 of its STOA with TRB,[54] served as supplement, to the existing TOA of PNCC with TRB. We have carefully gone over the different STOAs and discovered that the tollway projects covered thereby were all undertaken under the P.D. 1113 franchise of PNCC. And it cannot be over-emphasized that the respective STOAs of MNTC and SLTC each contain provisions addressing the eventual expiration of PNCC's P.D. 1113 franchise and authorizing, thru the issuance by the TRB of a TOC, the implementation of a given toll project even after May 1, 2007. Thus:

MNTC STOA 2.6 CONCESSION PERIOD. In order to sustain the financial viability and integrity of the Project, GRANTOR [TRB] hereby grants MNTC the CONCESSION for the PROJECT ROADS for a period commencing upon the date that this [STOA] comes into effect under Clause 4.1 until 31 December 2030 or thirty years after the issuance of the corresponding TOLL OPERATION PERMIT for the last completed phase.... Accordingly, unless the PNCC FRANCHISE is further extended beyond its expiry on 01 May 2007, GRANTOR undertakes to issue the necessary [TOC] for the rehabilitated and refurbished [NLEX] six months prior to the expiry of the PNCC FRANCHISE on 01 May 2007.... SLTC STOA 2.03 Authority of Investor and Operator to Undertake the Project (1) The GRANTOR [TRB] has determined that the Project Toll Roads are within the existing SLEX and are thus covered by the PNCC Franchise that is due to expire on May 1, 2007. PNCC has committed to exert its best efforts to obtain an extension x x x It is understood and agreed that in the event the PNCC Franchise is not renewed beyond the said expiry date, this [STOA] and the Concession granted x x x will stand in place of the PNCC Franchise and serve as a new concession, or authority, pursuant to Section 3 (a) of the TRB Charter, for the Investor to undertake the Project and for the Operator to Operate and Maintain the Project Toll Roads immediately upon the expiration of the PNCC Franchise, without need of the execution x x x of any other document to effect the same. (2) x x x in the event it is subsequently decreed by competent authority that the issuance by the Grantor of a [TOC] is necessary x x x the Grantor shall x x x cause the TRB x x x to issue such [TOC] in favor of the Operator, embodying the terms and conditions of this Agreement. The foregoing notwithstanding, there are to be sure certain aspects in PNCC's legislative franchise beyond the altering reach of TRB. We refer to the coverage area of the tollways and the expiry date of PNCC's original franchise, which is May 1, 2007, as expressly stated under Sections 1 and 2 of P.D. 1894, respectively. The fact that these two items were specifically and expressly defined by law, i.e. P.D. 1113, indicates an intention that any alteration, modification or repeal thereof should only be done through the same medium. We said as much in Radstock, thus: "[T]he term of the x x x franchise, `which is 30 years from 1 May 1977, shall remain the same,' as expressly provided in the first sentence of x x x Section 2 of P.D. 1894."[55] It is likewise worth noting what We further held in that case: The TRB does not have the power to give back to PNCC the toll assets and facilities which were automatically turned over to the Government, by operation of law, upon the expiration of the franchise of the PNCC on 1 May 2007. Whatever power the TRB may have to grant authority to operate a toll facility or to issue a "[TOC]," such power does not obviously include the authority to transfer back to PNCC ownership of

National Government assets, like the toll assets and facilities, which have become National Government property upon the expiry of PNCC's franchise x x x.[56] (Emphasis in the original.) Verily, upon the expiration of PNCC's legislative franchise on May 1, 2007, the new authorities to construct, maintain and operate the subject tollways and toll facilities granted by the TRB pursuant to the validly executed STOAs and TOCs, shall begin to operate and be treated as administrative franchises or authorities. Pursuant to Section 3 (e) P.D. 1112, TRB possesses the power and duty, inter alia to: x x x grant authority to operate a toll facility and to issue therefore the necessary "Toll Operation Certificate" subject to such conditions as shall be imposed by the [TRB] including inter alia x x x. This is likewise consistent with the position of the Secretary of Justice in Opinion No. 122 on November 24, 1995,[57] thus: TRB has no authority to extend the legislative franchise of PNCC over the existing NSLE (North and South Luzon Expressways). However, TRB is not precluded under Section 3 (e) of P.D. No. 1112 (TRB Charter) to grant PNCC and its joint venture partner the authority to operate the existing toll facility of the NSLE and to issue therefore the necessary "Toll Operation Certificate x x x. It should be noted that the existing franchise of PNCC over the NSLE, which will expire on May 1, 2007, gives it the "right, privilege and authority to construct, maintain and operate" the NSLE. The Toll Operation Certificate which TRB may issue to the PNCC and its joint venture partner after the expiration of its franchise on May 1, 2007 is an entirely new authorization, this time for the operation and maintenance of the NSLE x x x. In other words, the right of PNCC and its joint venture partner, after May 7, 2007 [sic] to operate and maintain the existing NSLE will no longer be founded on its legislative franchise which is not thereby extended, but on the new authorization to be granted by the TRB pursuant to Section 3 (e), above quoted, of P.D. No. 1112. (Emphasis ours.) The same opinion was thereafter made by the Secretary of Justice on January 9, 2006, in Opinion No. 1,[58] stating that: The existing franchise of PNCC over the NSLE, which will expire on May 1, 2007, gives it the "right, privilege and authority to construct, maintain and operate the NSLE." The Toll Operation Certificate which the TRB may issue to the PNCC and its joint venture partner after the expiration of its franchise on May 1, 2007 is an entirely new authorization, this time for the operation and maintenance of the NSLE.... [T]he right of PNCC and its joint venture partner, after May 1, 2007, to operate and maintain the existing NSLE will no longer be founded on its legislative franchise which is not thereby extended, but on the new authorization to be granted by the TRB pursuant to Section 3 (e) of PD No. 1112.

It appears therefore, that the effect of the STOA is not to extend the Franchise of PNCC, but rather, to grant a new Concession over the SLEX Project and the OMCo., entities which are separate and distinct from PNCC. While initially, the authority of SLTC and OMCo. to enter into the STOA with the TRB and thereby become grantees of the Concession, will stem from and be based on the JVA and the assignment by PNCC to the OMCo. of the Usufruct in the Franchise, we submit that upon the execution by SLTC and the TRB of the STOA, the right to the Concession will emanate from the STOA itself and from the authority of the TRB under Section 3 (a) of the TRB Charter. Such being the case, the expiration of the Franchise on 1 May 2007, since such Concession is an entirely new and distinct concession from the Franchise and is, as stated, granted to entities other than PNCC. Finally, with regards (sic) the authority of the TRB this Office in Secretary of Justice Opinion No. 92, s. 2000, stated that: "Suffice it to say that official acts of the President enjoy full faith and confidence of the Government of the Republic of the Philippines which he represents. Furthermore, considering that the queries raised herein relates to the exercise by the TRB of its regulatory powers over toll road project, the same falls squarely within the exclusive jurisdiction of TRB pursuant to P.D. No. 1112. Consequently, it is, therefore, solely within TRB's prerogative and determination as to what rule shall govern and is made applicable to a specific toll road project proposal." The STOA is an explicit grant of the Concession by the Republic of the Philippines, through the TRB pursuant to P.D. (No.) 1112 and as approved by the President xxx. The foregoing grant is in full accord with the provisions of P.D. (No.) 1112 which authorizes TRB to enter into contracts on behalf of the Republic of the Philippines for the construction, operation and maintenance of toll facilities. Such being the case, we opine that no other legal requirement is necessary to make the STOA effective of to confirm MNTC's (In this case, SLTC and the OMCO) rights and privileges granted therein." (Emphasis in the original.) Considering, however, that all toll assets and facilities pertaining to PNCC pursuant to its P.D. 1113 franchise are deemed to have already been turned over to the National Government on May 1, 2007,[59] whatever participation that PNCC may have in the new authorities to construct, maintain and operate the subject tollways, shall be limited to doing the same in trust for the National Government. In Radstock, the Court held that "[w]ith the expiration of PNCC's franchise, [its] assets and facilities ... were automatically turned over, by operation of law, to the government at no cost."[60] The Court went on further to state that the Government's ownership of PNCC's toll assets inevitably resulted in its owning too of the toll fees and the net income derived, after May 1, 2007, from the toll assets and facilities.[61] But as We have earlier discussed, the tollways and toll facilities should remain functioning in accordance with the validly executed STOAs and TOCs. However, PNCC's assets and facilities, or, in short, its very share/participation in the JVAs and the STOAs, inclusive of its percentage share in the toll fees collected by the JV companies currently operating the tollways shall likewise automatically accrue to the Government.

In fine, petitioners' claim about PNCC's franchise being amenable to an amendment only by an act of Congress, or, what practically amounts to the same thing, that the TRB is without authority at all to modify the terms and conditions of PNCC's franchise, i.e. by amending its TOA/TOC, has to be rejected. Their lament then that the TRB, through the instrumentality of mere contracts and an administrative operating certificate, or STOAs and TOC, to be precise, effectively, but invalidly amended PNCC legislative franchise, are untenable. For, the bottom line is, the TRB has, through the interplay of the pertinent provisions of P.D. Nos. 1112, 1113 and 1894, the power to grant the authority to construct and operate toll road projects and toll facilities by way of a TOA and the corresponding TOC. What is otherwise a legislative power to grant or renew a franchise is not usurped by the issuance by the TRB of a TOC. But to emphasize, the case of the TRB is quite peculiarly unique as the special law conferring the legislative franchise likewise vested the TRB with the power to impose conditions on the franchise, albeit in a limited sense, by excluding from the investiture the power to amend or modify the stated lifetime of the franchise, its coverage and the ownership arrangement of the toll assets following the expiration of the legislative franchise.[62] At this juncture, the Court wishes to express the observation that P.D. Nos. 1112, 1113 and 1894, as couched and considered as a package, very well endowed the TRB with extraordinary powers. For, subject to well-defined limitations and approval requirements, the TRB can, by way of STOAs, allow and authorize, as it has allowed and authorized, a legislative franchisee, PNCC, to share its concession with another entity or JV partners, the authorization effectively covering periods beyond May 2007. However, this unpalatable reality, a leftover of the martial law regime, presents issues on the merits and the wisdom of the economic programs, which properly belong to the legislature or the executive to address. The TRB is not precluded from granting PNCC and its joint venture partners authority, through a TOC for a period following the term of the proposed SMMS, with the said TOC serving as an entirely new authorization upon the expiration of PNCC's franchise on May 1, 2007. In short, after May 1, 2007, the operation and maintenance of the NLEX and the other subject tollways will no longer be founded on P.D. 1113 or portions of P.D. 1894 (PNCC's original franchise) but on an entirely new authorization, i.e. a TOC, granted by the TRB pursuant to its statutory authority under Sections 3 (a) and (e) of P.D. 1112. Likewise needing no extended belaboring, in the light of the foregoing dispositions, is the untenable holding of the RTC in SCA No. 3138-PSG that the TRB is without power to issue a TOC to PNCC, amend or renew its authority over the SLEX tollways without separate legislative enactment. And lest it be overlooked, the TRB may validly issue an entirely new authorization to a JV company after the lapse of PNCC's franchise under P.D. 1113. Its thirty-year concession under P.D. 1894, however, does not have the quality of definiteness as to its start, as by the terms of the issuance, it commences and is to be counted "from the date of approval of the project," the term project obviously referring to "Metro Manila Expressways and all extensions, linkages, stretches and diversions refurbishing and rehabilitation of the existing NLEX and SLEX constructed after the approval of the decree in December 1983." The suggestion, therefore, of the

petitioners in G.R. No. 169917, citing a 1989 Court of Appeals ("CA") decision in CAG.R. 13235 (Republic v. Guerrero, et al.), that the Balintawak to Tabang portion of the expressway no longer forms part of PNCC's franchise and, therefore, PNCC is without any right to assign the same to MNTC via a JVA, is specious. Firstly, in its Decision[63] in G.R. No. 89557, a certiorari proceeding commenced by PNCC to nullify the CA decision adverted to, the Court approved a compromise agreement, which referred to (1) the PNCC's authority to collect toll and maintenance fees; and (2) the supervision, approval and control by the DPWH[64] of the construction of additional facilities, on the questioned portion of the NLEX.[65] And still in another Decision,[66] the Court ruled that the Balintawak to Tabang stretch was recognized as "part of the franchise of, or otherwise restored as toll facilities to be operated by x x x PNCC."[67] Once stamped with judicial imprimatur, and unless amended, modified or revoked by the parties, a compromise agreement becomes more than a mere binding contract; as thus sanctioned, the agreement constitutes the court's determination of the controversy, enjoining the parties to faithfully comply thereto.[68] Verily, like any other judgment, it has the effect and authority of res judicata.[69] At any rate, the PNCC was likewise granted temporary or interim authority by the TRB to operate the SLEX,[70] to ensure the continued development, operations and progress of the projects. We have ruled in Oroport Cargohandling Services, Inc. v. Phividec Industrial Authority that an administrative agency vested by law with the power to grant franchises or authority to operate can validly grant the same in the interim when it is necessary, temporary and beneficial to the public.[71] The grant by the TRB to PNCC as interim operator of the SLEX was certainly intended to guarantee the continued operation of the said tollway facility, and to ensure the want of any delay and inconvenience to the motoring public. All given, the cited CA holding is not a binding precedent. The time limitation on PNCC's franchise under either P.D. 1113 or P.D. 1894 does not detract from or diminish the TRB's delegated authority under P.D. 1112 to enter into separate toll concessions apart and distinct from PNCC's original legislative franchise. THIRD ISSUE: TRB'S POWER TO ENTER INTO CONTRACTS; ISSUE, MODIFY AND PROMULGATE TOLL RATES; AND TO RULE ON PETITIONS RELATIVE TO TOLL RATES LEVEL AND INCREASES VALID The petitioners in the special civil actions cases would have the Court declare as invalid (a) Section 3 (a) and (d) of P.D. 1112 (which accord the TRB, on one hand, the power to enter into contracts for the construction, and operation of toll facilities, while, on the other hand, granting it the power to issue and promulgate toll rates) and (b) Section 8 (b) of P.D. 1894 (granting TRB adjudicatory jurisdiction over matters involving toll rate movements). As submitted, granting the TRB the power to award toll contracts is inconsistent with its quasi-judicial function of adjudicating petitions for initial toll and periodic toll rate adjustments. There cannot, so petitioners would postulate, be impartiality in such a situation. The assailed provisions of P.D. 1112 and P.D. 1894 read:

P.D. 1112 Section 3. Powers and Duties of the Board. The Board shall have in addition to its general powers of administration the following powers and duties: (a) Subject to the approval of the President of the Philippines, to enter into contracts in behalf of the Republic of the Philippines with persons, natural or juridical, for the construction, operation and maintenance of toll facilities such as but not limited to national highways, roads, bridges, and public thoroughfares. Said contract shall be open to citizens of the Philippines and/or to corporations or associations qualified under the Constitution and authorized by law to engage in toll operations; (d) 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. Decisions of the Board 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. Such appeal shall not suspend the imposition of the new rates, provided however, that pending the resolution of the appeal, the petitioner for increased rates in such case shall deposit in a trust fund such amounts as may be necessary to reimburse toll payers affected in case a reversal of the decision. (Emphasis ours.) P.D. 1894 SECTION 8. x x x (b) For the Metro Manila Expressway and such extensions, linkages, stretches and diversions of the Expressways which may henceforth be constructed, maintained and operated by the GRANTEE, the GRANTEE shall collect toll at such rates as shall initially be approved by the Toll Regulatory Board. The Toll Regulatory Board shall have the authority to approve such initial toll rates without the necessity of any notice and hearing, except as provided in the immediately succeeding paragraph of this Section. For such purpose, the GRANTEE shall submit for the approval of the Toll Regulatory Board the toll proposed to be charged the users. After approval of the toll rate(s) by the Toll Regulatory Board and publication thereof by the GRANTEE once in a newspaper of general circulation, the toll shall immediately be enforceable and collectible upon opening of the expressway to traffic use. Any interested Expressways users shall have the right to file, within a period of ninety (90) days after the date of publication of the initial toll rate, a petition with the Toll Regulatory Board for a review of the initial toll rate; provided, however, that the filing of such petition and the pendency of the resolution thereof shall not suspend the enforceability and collection of the toll in question. The Toll Regulatory Board, at a public hearing called for the purpose after due notice, shall then conduct a review of the initial toll shall be appealable (sic) to the Office of the President within ten (10) days from the promulgation thereof. The GRANTEE may be required to post a bond in such amount and from such surety or sureties and under such terms and conditions as the Toll Regulatory Board shall fix in case of any petition for review of, or appeal from, decisions

of the Toll Regulatory Board. In case it is finally determined, after a review by the Toll Regulatory Board or appeal therefrom, that the GRANTEE is not entitled, in whole or in part, to the initial toll, the GRANTEE shall deposit in the escrow account the amount collected under the approved initial toll fee and such amount shall be refunded to Expressways users who had paid said toll in accordance with the procedure as may be prescribed or promulgated by the Toll Regulatory Board. (Emphasis ours.) The petitioners are indulging in gratuitous, if not unfair, conclusion as to the capacity of the TRB to act as a fair and objective tribunal on matters of toll fee fixing. Administrative bodies have expertise in specific matters within the purview of their respective jurisdictions. Accordingly, the law concedes to them the power to promulgate implementing rules and regulations ("IRR") to carry out declared statutory policies provided that the IRR conforms to the terms and standards prescribed by that statute.[72] The Court does not perceive an irreconcilable clash in the enumerated TRB's statutory powers, such that the exercise of one negates another. The ascription of impartiality on the part of the TRB cannot, under the premises, be accorded cogency. Petitioners have not shown that the TRB lacks the expertise, competence and capacity to implement its mandate of balancing the interests of the toll-paying motoring public and the imperative of allowing the concessionaires to recoup their investment with reasonable profits. As it were, Section 9 of P.D. 1894 provides a parametric formula for adjustment of toll rates that takes into account the Peso-US Dollar exchange rate, interest rate and construction materials price index, among other verifiable and quantifiable variables. While not determinative of the issue immediately at hand, the grant to and the exercise by an administrative agency of regulating and allowing the operation of public utilities and, at the same time, fixing the fees that they may charge their customers is now commonplace. It must be presumed that the Congress, in creating said agencies and clothing them with both adjudicative powers and contract-making prerogatives, must have carefully studied such dual authority and found the same not breaching any constitutional principle or concept.[73] So must it be for P.D. Nos. 1112 and 1894. The Court can take judicial cognizance of the exercise by the LTFRB and NTC - both spin-off agencies of the now defunct Public Service Commission - of similar concurrent powers. The LTFRB, under Executive Order No. ("E.O.") 202,[74] series of 1987, is empowered,[75] among others, to regulate the operation of public utilities or "for hire" vehicles and to grant franchises or certificates of public convenience ("CPC"); and to fix rates or fares, to approve petitions for fare rate increases and to resolve oppositions to such petitions. The NTC, on the other hand, has been granted similar powers of granting franchises, allocating areas of operations, rate-fixing and to rule on petitions for rate increases under E.O. 546,[76] s. of 1979.

The Energy Regulatory Commission ("ERC") likewise enjoys on the one hand, the power (a) to grant, modify or revoke an authority to operate facilities used in the generation of electricity, and on the other, (b) to determine, fix and approve rates and tariffs of transmission, and distribution retail wheeling charges and tariffs of franchise electric utilities and all electric power rates including that which is charged to end-users.[77] In Chamber of Real Estate and Builders' Association, Inc. v. ERC, We even categorically stated that the ERC is a "quasi-judicial and quasi-legislative regulatory body created under Section 38 of the EPIRA, [and] x x x an administrative agency vested with broad regulatory and monitoring functions over the Philippine electric industry to ensure its successful restructuring and modernization x x x."[78] To summarize, the fact that an administrative agency is exercising its administrative or executive functions (such as the granting of franchises or awarding of contracts) and at the same time exercising its quasi-legislative (e.g. rule-making) and/or quasi-judicial functions (e.g. rate-fixing), does not support a finding of a violation of due process or the Constitution. In C.T. Torres Enterprises, Inc. v. Hibionada,[79] We explained the rationale, thus: It is by now commonplace learning that many administrative agencies exercise and perform adjudicatory powers and functions, though to a limited extent only. Limited delegation of judicial or quasi-judicial authority to administrative agencies (e.g. the Securities and Exchange Commission and the National Labor Relations Commission) is well recognized in our jurisdiction, basically because the need for special competence and experience has been recognized as essential in the resolution of questions of complex or specialized character and because of a companion recognition that the dockets of our regular courts have remained crowded and clogged. xxxx 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 unquestionably called the fourth department of the government. xxxx 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. (Emphasis ours.) FOURTH ISSUE: PRESIDENT AMPLY VESTED WITH STATUTORY POWER TO APPROVE TRB CONTRACTS Just like their parallel stance on the grant to TRB of the power to enter into toll agreements, e.g., TOAs or STOAs, the petitioners in the first three petitions would assert that the grant to the President of the power to peremptorily authorize the assignment by PNCC, as franchise holder, of its franchise or the usufruct in its franchise is unconstitutional. It is unconstitutional, so petitioners would claim, for being an encroachment of legislative power. As earlier indicated, Section 3 (a) of P.D. 1112 requires approval by the President of any contract TRB may have entered into or effected for the construction and operation of toll facilities. Complementing Section 3 (a) is 3 (e) (3) of P.D. 1112 enjoining the transfer of the usufruct of PNCC's franchise without the President's prior approval. For perspective, Section 3 (e) (3) of P.D. 1112 provides: That the toll operator shall not lease, transfer, grant the usufruct of, sell or assign the rights or privileges acquired under the [TOC] to any person x x x or legal entity nor merge with any other company or corporation organized for the same purpose without the prior approval of the President of the Philippines. In the event of any valid transfer of the TOC, the Transferee shall be subject to all the conditions, terms, restrictions and limitations of this Decree x x x.[80] The President's approving authority is of statutory origin. To us, there is nothing illegal, let alone unconstitutional, with the delegation to the President of the authority to approve the assignment by PNCC of its rights and interest in its franchise, the assignment and delegation being circumscribed by restrictions in the delegating law itself. As the Court stressed in Kilosbayan v. Guingona, Jr.,[81] the rights and privileges conferred under a franchise may be assigned if authorized by a statute, subject to such restrictions as may be provided by law, such as the prior approval of the grantor or a government agency.[82] There can, therefore, be no serious challenge to this presidential- approving prerogative. Should grave abuse of discretion in some way infect the exercise of the prerogative, then the approval action may be nullified for that reason, but not on the ground that the underlying authority is constitutionally doubtful. If the TRB may validly be empowered to grant private entities the authority to operate toll facilities, would a delegation of a lesser authority to approve the grant to the head of the administrative machinery of the government be objectionable? The fact that P.D. 1112 partakes of a martial law issuance does not per se provide an objectionable feature to the decree, albeit it may be argued with some plausibility that then President Marcos intended to have the final say as to who shall act as the toll operators of the Luzon expressways. Be that as it may, "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."[83] To emphasize, Padua v. Ranada cited Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform, quoting that: 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 ... 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.[84] FIFTH ISSUE: ASSAILED STOAS VALIDLY ENTERED This brings us to the issue of the validity of certain provisions of the STOAs and related agreements entered into by the TRB, as duly approved by the President. Relying on Clause 17.4.1[85] of the MNTC STOA that the lenders have the unrestricted right to appoint a substitute entity in case of default of MNTC or of the occurrence of an event of default in respect of the loans, petitioners argue that since MNTC is the assignee or transferee of PNCC's franchise, then it steps into the shoes of PNCC. They contend that the act of replacing MNTC as grantee is tantamount to an amendment or alteration of the PNCC's original franchise and hence unconstitutional, considering that the constitutional power to appoint a new franchise holder is reserved to Congress.[86] This contention is bereft of merit. Petitioners' presupposition that only Congress has the power to directly grant franchises is misplaced. Time and again, We have held that administrative agencies may be empowered by the Legislature by means of a law to grant franchises or similar authorizations.[87] And this, We have sufficiently addressed in the present case.[88] To reiterate, We discussed in Albano that our statute books are replete with laws granting administrative agencies the power to issue authorizations.[89] This delegation of legislative power to administrative agencies is allowed "in order to adapt to the increasing complexity of modern life."[90] Consequently, We have held that the "privileges conferred by grant by local authorities as agents for the state constitute as much a legislative franchise as though the grant had been made by an act of the Legislature."[91] In this case, the TRB's charter itself, or Section 3 (e) of P.D. 1112, specifically empowers it to "grant authority to operate a toll facility and to issue therefore the necessary `Toll Operation Certificate' subject to such conditions as shall be imposed by the [TRB]x x x."[92] Section 3 (a) of the same law permits the TRB to enter into contracts for the construction, operation and maintenance of toll facilities. Clearly, there is no question that the TRB is vested by the Legislature, through P.D. 1112, with the power not only to grant an authority to operate a toll facility, but also to enter into contracts for the

construction, operation and maintenance thereof. Petitioners also contend that substituting MNTC as the grantee in case of its default with respect to its loans is tantamount to an amendment of PNCC's original franchise and is hence, unconstitutional. We also find this assertion to be without merit. Besides holding that the Legislature may properly empower administrative agencies to grant franchises pursuant to a law, We have also earlier explained in this case that P.D. 1113 and the amendatory P.D. 1894 both vested the TRB with the power to impose conditions on PNCC's franchise in an appropriate contract and may therefore amend or alter the same when public interest so requires;[93] save for the conditions stated in Sections 1 and 2 of P.D. 1894, which relates to the coverage area of the tollways and the expiration of PNCC's original franchise.[94] P.D. 1112 provided further that the TRB has the power to amend or modify a Toll Operation Certificate that it issued when public interest so requires.[95] Accordingly, to Our mind, there is nothing infirm much less questionable about the provision in the STOA, allowing the substitution of MNTC in case it defaults in its loans. Furthermore, in the subject provision (Clause 17.4.1[96]), the "unrestricted right" of the lender to appoint a substituted entity is never intended to afford such lender a plenary power to do so. The subject clause states: 17.4.1 The PARTIES acknowledge that following a Notice of Substitution under clauses 17.2 or 17.3 the LENDERS have, subject to the provisions of Clause 17.4.3, the unrestricted right to appoint a SUBSTITUTED ENTITY in place of MNTC following the declaration of the occurrence of a MNTC DEFAULT prior to full repayment of the LOANS or of an event of default in respect of the LOANS. GRANTOR shall extend all reasonable assistance to the AGENT to put in place a SUBSTITUTED ENTITY. MNTC shall make available all necessary information to potential SUBSTITUTED ENTITY to enable such entity to evaluate the Project. (Emphasis ours.) It is clear from the above-quoted provision that Clause 17.4.1 should always be construed and read in conjunction with Clauses 17.2, 17.3, 17.4.2, 17.4.3 and 20.12. Clauses 17.2 and 17.3 discuss the procedures that must be followed and undertaken in case of MNTC's default prior to the full repayment of the loans, and before the substitution under Clause 17.4.1 could take place. These clauses provide the following process: Prior to Full Repayment of the LOANS: 17.2 Upon occurrence of an MNTC DEFAULT under Clause 17.1(a) and (e) prior to full repayment of the LOANS, GRANTOR shall serve a written Notice of Default to MNTC with copy to the AGENT giving a reasonable period of time to cure the MNTC DEFAULT, such period being three (3) months from receipt of the notice or such longer period as may be approved by GRANTOR, taking due consideration of the nature of the default and of the repair works required. If MNTC fails to remedy such default during such three (3) month or [sic] curing period, GRANTOR may issue a Notice of Substitution on MNTC, copy furnished to the AGENT, which shall take effect upon the assumption and take over by the SUBSTITUTED ENTITY pursuant to

the provisions of Clause 17.4 hereof; Provided, However, that prior to such assumption and take over by the SUBSTITUTED ENTITY, MNTC shall continue to operate and maintain the project roads and shall place in an escrow account the toll revenues, save such amounts as may be needed to primarily cover the operating costs and as may be owing and due to the lenders under the loans and, secondarily, to cover the PNCC Gross Toll Revenue Share, Provided, Further, that upon the assumption and take over by the SUBSTITUTED ENTITY, such assumption and take over shall have the effect of revoking the rights, privileges and obligations of MNTC under this AGREEMENT in favor of the SUBSTITUTED ENTITY and MNTC shall cease to be a PARTY to this AGREEMENT. 17.3 If prior to full repayment of the LOANS MNTC fails to remedy MNTC DEFAULT under Clause 17.1 (b) or an MNTC DEFAULT occurs under Clause 17.1 (c), (d) or (f) prior to full repayment of the LOANS, GRANTOR shall serve a Notice of Substitution on MNTC, copy furnished to the AGENT, as provided under Clause 17.4.[97] (Emphasis ours) It is apparent from the above-quoted provision that it is the TRB - representing the Republic of the Philippines as Grantor - which has control over the situation before Clause 17.4.1 could come into place. To stress, following the condition under Clause 17.4.1, it is only when Clauses 17.2 and 17.3 have been complied with that the entire Clause 17.4 could begin to materialize. Clauses 17.4.2 and 17.4.3 also provide for certain parameters as to when a substituted entity could be considered acceptable, and enumerate the conditions that should be undertaken and complied with.[98] Particularly, the subject provisions state: 17.4.2 The SUBSTITUTED ENTITY shall be required to provide evidence to GRANTOR that at the time of substitution: (i) it is legally and validly nominated by the AGENT as MNTC's substitute to continue the implementation of the PROJECT. (ii) it is legally and validly constituted and has the capability to enter into such agreement as may be required to give effect to the substitution; 17.4.3 The AGENT shall have one (1) year to effect a substitution under Clause 17.4; Provided, However, that during this time the AGENT shall not take any action which may jeopardize the continuity of the service and shall take the necessary action to ensure its continuation. To effect such substitution, the AGENT shall notify its intention to GRANTOR and shall, at the same time, give all necessary information to GRANTOR. GRANTOR shall, within one (1) month following such notification, inform the AGENT of its acceptance of the substitution, if the conditions set forth in Clause 17.4.2 have been satisfied. The SUBSTITUTED ENTITY shall be permitted a reasonable period to cure any MNTC DEFAULT under Clause 17.1 (a), (b) or (e). From the foregoing, it is clear that the lenders do not actually have an absolute or

"unrestricted" right to appoint the SUBSTITUTED ENTITY in view of TRB's right to accept or reject the substitution within one (1) month from notice and such right to appoint comes into force only if and when the TRB decides to effectuate the substitution of MNTC as allowed in Clause 17.2 of the MNTC STOA. At the same time, Clause 17.4.4 particularizes the conditions upon which the substitution shall become effective, to wit: 17.4.4 The Substitution shall be effective upon: (a) the appointment of a SUBSTITUTED ENTITY in accordance with the provisions of this Clause 17.4; and, (b) assumption by the SUBSTITUTED ENTITY of all of the rights and obligations of MNTC under this AGREEMENT, including the payment of PNCC's Gross Toll Revenue Share under the JOINT VENTURE AGREEMENT dated 29 August 1995 and all other agreements in connection with this agreement signed and executed by and between PNCC and MNTC. The afore-quoted Section (a) of Clause 17.4.4 reiterates the necessity of compliance by the substituted entity with all the conditions provided under Clause 17.4. Furthermore, following the above-quoted conditions veritably protects the interests of the Government. As previously discussed supra, PNCC's assets with respect to its legislative franchise under P.D. 1113, as amended, has already been automatically turned over to the Government. And whatever share PNCC has in relation to the currently implemented administrative authority granted by the TRB is merely being held in trust by it in favor of the Government. Accordingly, the fact that Section "b" of Clause 17.4.4 ensures that the obligation to pay PNCC's Gross Toll Revenue Share is assumed by the substituted entity, necessarily means that the Government's Gross Toll Revenue Share is safeguarded and kept intact. The MNTC STOA also states that only in case no substituted entity is established in accordance with Clause 17.4 that Clause 17.5 shall be applied. Clause 17.5 grants the lenders the power to extend the concession in case the Grantor (Republic of the Philippines) takes over the same, for a period not exceeding fifty years, until full payment of the loans.[99] Petitioners contend that the option to extend the concession for that stated period is, however, unconstitutional. This assertion is impressed with merit. At the outset, Clause 17.5 does not actually grant the lenders of the defaulting concessionaire, the power to unilaterally extend the concession for a period not exceeding fifty years. For reference, the pertinent provision states: 17.5 Only if no SUBSTITUTE ENTITY is established ... shall the GRANTOR [TRB] be entitled to take-over the CONCESSION with no commitment on the LOANS in which case the OPERATION AND MAINTENANCE CONTRACT shall be assigned to any entity that the AGENT[100] may designate provided such entity has a sufficient legal and

technical capacity to perform and assume the obligations of the OPERATION AND MAINTENANCE CONTRACT under this AGREEMENT. The LENDERS shall receive all TOLL, excepting PNCC's revenue share provided for under the JOINT INVESTMENT PROPOSAL (vide: Annex "C" hereof), for as long as required until full repayment of the LOANS including if necessary an extension of the CONCESSION PERIOD which in no case shall exceed fifty (50) years; Provided that the LENDERS support all amounts payable under the OPERATION AND MAINTENANCE CONTRACT. For avoidance of doubt, the GRANTOR will have no obligation in relation to liabilities incurred by MNTC prior to such take-over.[101] (Emphasis supplied) The afore-quoted provision should be read in conjunction with Clause 20.12, which expressly provides that the MNTC STOA is "made under and shall be governed by and construed in accordance with" the laws of the Philippines, and particularly, by the provisions of P.D. Nos. 1112, 1113 and 1894. Under the applicable laws, the TRB may very well amend, modify, alter or revoke the authority/franchise "whenever the public interest so requires."[102] In a word, the power to determine whether or not to continue or extend the authority granted to a concessionaire to operate and maintain a tollway is vested to the TRB by the applicable laws. The necessity of whether or not to extend the concession or the authority to construct, operate and maintain a tollway rests, by operation of law, with the TRB. As such, the lenders cannot unilaterally extend the concession period, or, with like effect, impose upon or demand that the TRB agree to extend such concession. Be that as it may, it must be noted, however, that while the TRB is vested by law with the power to extend the administrative franchise or authority that it granted, nevertheless, it cannot do so for an accumulated period exceeding fifty years. Otherwise, it would violate the proscription under Article XII, Section 11 of the 1987 Constitution, which states that:
[103]

Sec. 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum of whose capital is owned by such citizens, nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration or repeal by the Congress when the common good so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation or associations must be citizens of the Philippines. (Emphasis Ours) In this case, the MNTC STOA already has an original stipulated period of thirty years. [104] Clause 17.5 allows the extension of this period if necessary to fully repay the loans made by MNTC to the lenders, thus:

x x x The LENDERS shall receive all TOLL, excepting PNCC's revenue share provided for under the JOINT INVESTMENT PROPOSAL (vide: Annex "C" hereof), for as long as required until full repayment of the LOANS including if necessary an extension of the CONCESSION PERIOD which in no case shall exceed a maximum period of fifty (50) years; x x x (Emphasis ours.) If the maximum extension as provided for in Clause 17.5, i.e. fifty years, shall be utilized, the accumulated concession period that would be granted in this case would effectively be eighty years. To Us, this is a clear violation of the fifty-year franchise threshold set by the Constitution. It is in this regard that we strike down the above-quoted clause, "including if necessary an extension of the CONCESSION PERIOD which in no case shall exceed a maximum period of fifty (50) years" in Clause 17.5 as void for being violative of the Constitution.[105] It must be made abundantly clear, however, that the nullity shall be limited to such extension beyond the 50-year constitutional limit. All told, petitioners' allegations that the TRB acted with grave abuse of discretion and with gross disadvantage to the Government with respect to Clauses 17.4.1 and 17.5 of the MNTC STOA are unfounded and speculative. Petitioners also allege that the MNTC STOA is grossly disadvantageous to the Government since under Clause 11.7 thereof, the Government, through the TRB, guarantees the viability of the financing program of a toll operator. Under Clause 11.7 of the MNTC STOA, the TRB agreed to pay monthly, the difference in the toll fees actually collected by MNTC and that which it could have realized under the STOA. The pertinent provisions states: 11.7 To insure the viability and integrity of the Project, the Parties recognize the necessity for adjustments of the AUTHORIZED TOLL RATE .... In the event that said adjustment are not effected as provided under this Agreement for reasons not attributable to MNTC, the GRANTOR [TRB] warrants and so undertakes to compensate, on a monthly basis, the resulting loss of revenue due to the difference between the AUTHORIZED TOLL RATE actually collected and the AUTHORIZED TOLL RATE which MNTC would have been able to collect had the ... adjustments been implemented. (Emphasis ours) As set out in the preamble of P.D. 1112, the need to encourage the infusion of private capital in tollway projects is the underlying rationale behind the enactment of said decree. Owing to the scarce capital available to bankroll a huge capital-intensive project, such as the North Luzon Tollway project, it is well-nigh inevitable that the financing of these types of projects is sourced from private investors. Quite naturally, the investors expect the regularity of the cash flow. It is perhaps in this broad context that the obligation of the Grantor under Clause 11.7 of the MNTC STOA was included in the STOA. To Us, Clause 11.7 is not only grossly disadvantageous to the Government but a manifest violation of the Constitution. Section 3 (e) (5) of P.D. 1112 explicitly states:

[t]hat no guarantee, Certificate of Indebtedness, collateral securities, or bonds shall be issued by any government agency or government-owned or controlled corporation on any financing program of the toll operator in connection with his undertaking under the Toll Operation Certificate. What the law seeks to prevent in this situation is the eventuality that the Government, through any of its agencies, could be obligated to pay or secure, whether directly or indirectly, the financing by the private investor of the project. In this case, under Clause 11.7 of the MNTC STOA, the Republic of the Philippines (through the TRB) guaranteed the security of the project against revenue losses that could result, in case the TRB, based on its determination of a just and reasonable toll fee, decides not to effect a toll fee adjustment under the STOA's periodic/interim adjustment formula. The OSG, in its Comment, admitted that "the amounts the government undertook to pay in case of Clause 11.7 violation ... is ... an undertaking to pay compensatory damage for something akin to a breach of contract."[106] As P.D. 1112 itself expressly prohibits the guarantee of a security in the financing of the toll operator pursuant to its tollway project, Clause 11.7 cannot be a valid stipulation in the STOA. This is more so for being in violation of the Constitution. Article VI, Section 29 (1) of the Constitution mandates that "[n]o money shall be paid out of the Treasury except in pursuance of an appropriation made by law."[107] We have held in Radstock that "government funds or property shall be spent or used solely for public purposes, as expressly mandated by Section 4 (2) of PD 1445 or the Government Auditing Code."[108] Particularly, We held in Radstock case that: [t]he power to appropriate money from the General Funds of the Government belongs exclusively to the Legislature. Any act in violation of this iron-clad rule is unconstitutional. Reinforcing this Constitutional mandate, Sections 84 and 85 of PD 1445 require that before a government agency can enter into a contract involving the expenditure of government funds, there must be an appropriation law for such expenditure, thus: Section 84. Disbursement of government funds. 1. Revenue funds shall not be paid out of any public treasury or depository except in pursuance of an appropriation law or other specific statutory authority. xxxx Section 85. Appropriation before entering into contract. No contract involving the expenditure of public funds shall be entered into unless there is an appropriation therefor, the unexpended balance of which, free of other obligations, is sufficient to cover the proposed expenditure. xxxx

Section 86 of PD 1445, on the other hand, requires that the proper accounting official must certify that funds have been appropriated for the purpose. Section 87 of PD 1445 provides that any contract entered into contrary to the requirements of Sections 85 and 86 shall be void....[109] (Emphasis ours.) In the instant case, the TRB, by warranting to compensate MNTC with the loss of revenue resulting from the non-implementation of the periodic and interim toll fee adjustments, violates the very constitutionally guaranteed power of the Legislature, to exclusively appropriate money for public purpose from the General Funds of the Government. The TRB veritably accorded unto itself the exclusive authority granted to Congress to appropriate money that comes from the General Funds, by making a warranty to compensate a revenue loss under Clause 11.7 of the MNTC STOA. There is not even a badge of indication that the aforementioned requisites under the Constitution and P.D. 1445 in respect of appropriation of money from the General Funds of the Government have been properly complied with. Worse, P.D. 1112 expressly prohibits the guarantee of security of the financing of a toll operator in connection with his undertaking under the Toll Operation Certificate. Accordingly, Clause 11.7 of the MNTC STOA, under which the TRB warrants and undertakes to compensate MNTC's loss of revenue resulting from the non-implementation of the periodic and interim toll fee adjustments, is illegal, unconstitutional and hence void. Parenthetically, We also find a similar provision in the SLTC STOA under Clause 8.08 thereof, which states that:[110] (2) In the event the Authorized Toll Rate and adjustments thereto are not implemented or made effective in accordance with the provisions of this Agreement, for reasons not attributable to the fault of the Investor and/or the Operator, including the reversal by the TRB or by any competent court or authority of any such adjustment in the Authorized Toll Rate previously approved by the TRB, except where such reversal is by reason of a determination of the misapplication of the Authorized Toll Rates, the Grantor shall compensate the Operator, on a monthly basis and within thirty (30) days of submission by the Operator of a notice thereof, without interest, for the resulting loss of revenue computed as the difference between: (a) the actual traffic volume for the month in question multiplied by the Current Authorized Toll Rate as escalated and/or adjusted, that should be in effect; and (b) the Gross Toll Revenue for the month in question. (3) The obligation of the Grantor to compensate the Operator shall continue until the applicable Current Authorized Toll Rate is implemented. Akin to what is contemplated in Clause 11.7 of the MNTC STOA, Clauses 8.08 (2) and (3) of the SLTC STOA, under which the TRB warrants or is obligated to compensate the Operator for its loss of revenue resulting from the non-implementation of the calculation/formula of authorized toll price and toll rate adjustments found in Clause 8

thereof, are illegal, unconstitutional and, hence, void. This ruling is consistent with the TRB's power to determine, without any influence or compulsion - direct or indirect - as to whether a change in the toll fee rates is warranted. We will discuss the same below. Petitioners argue that the CITRA, SLTC and MNTC STOAs tie the hands of the TRB as it is bound by the stipulated periodic and interim toll rate adjustments provided therein. Petitioners contend that the SMMS (CITRA STOA), the SLTC and the MNTC STOA's provisions on initial toll rates and periodic/interim toll rate adjustments, by using a builtin automatic toll rate adjustment formula,[111] allegedly guaranteed fixed returns for the investors and negated the public hearing requirement. This contention is erroneous. The requisite public hearings under Section 3 (d) of P.D. 1112 and Section 8 (b) of P.D. 1894 are not negated by the fixing of the initial toll rates and the periodic adjustments under the STOA. Prefatorily, a clear distinction must be made between the statutory prescription on the fixing of initial toll rates, on the one hand, and of periodic/interim or subsequent toll rates, on the other. First, the hearing required under the said provisos refers to notice and hearing for the approval or denial of petitions for toll rate adjustments - or the subsequent toll rates, not to the fixing of initial toll rates. By express legal provision, the TRB is authorized to approve the initial toll rates without the necessity of a hearing. It is only when a challenge on the initial toll rates fixed ensues that public hearings are required. Section 8 of P.D. 1894 says so: x x x the GRANTEE shall collect toll at such rates as shall initially be approved by the [TRB]. The [TRB] shall have the authority to approve such initial toll rates without the necessity of any notice and hearing, except as provided in the immediately succeeding paragraph of this Section. For such purpose, the GRANTEE shall submit for the approval of the [TRB] the toll proposed to be charged the users. After approval of the toll rate(s) by the [TRB] and publication thereof by the GRANTEE once in a newspaper of general circulation, the toll shall immediately be enforceable and collectible upon opening of the expressway to traffic use. Any interested Expressways users shall have the right to file, within x x x (90) days after the date of publication of the initial toll rate, a petition with the [TRB] for a review of the initial toll rate; provided, however, that the filing of such petition and the pendency of the resolution thereof shall not suspend the enforceability and collection of the toll in question. The [TRB], at a public hearing called for the purpose ... shall then conduct a review of the initial toll (sic) shall be appealable to the [OP] within ten (10) days from the promulgation thereof. (Emphasis ours.) Of the same tenor is Section 3 (d) of P.D. 1112 stating that the TRB has the power and duty to: [i]ssue, 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. Decisions of the [TRB] on petitions for the increase

of toll rate shall be appealable to the [OP] within ten (10) days from the promulgation thereof. Such appeal shall not suspend the imposition of the new rates, provided however, that pending the resolution of the appeal, the petitioner for increased rates in such case shall deposit in a trust fund such amounts as may be necessary to reimburse toll payers affected in case a (sic) reversal of the decision.[112] (Emphasis Ours.) Similarly in Padua v. Ranada, the fixing of provisional toll rates by the TRB without a public hearing was held to be valid, such procedure being expressly provided by law.[113] To be very clear, it is only the fixing of the initial and the provisional toll rates where a public hearing is not a vitiating requirement. Accordingly, subsequent toll rate adjustments are mandated by law to undergo both the requirements of public hearing and publication. In Manila International Airport Authority ("MIAA") v. Blancaflor, the Court expounded on the necessity of a public hearing in rate fixing/increases scenario. There, the Court ruled that the MIAA, being an agency attached to the Department of Transportation and Communications ("DOTC"), is governed by Administrative Code of 1987,[114] Book VII, Section 9 of which specifically mandates the conduct of a public hearing.[115] Accordingly, the MIAA's resolutions, which increased the rates and charges for the use of its facilities without the required hearing, were struck down as void.[116] Similarly, as We do concede, the TRB, being likewise an agency attached to the DOTC,[117] is governed by the same Code and consequently requires public hearing in appropriate cases. It is, therefore, imperative that in implementing and imposing new, i.e. subsequent toll rates arrived at using the toll rate adjustment formula, the subject tollway operators and the TRB must necessarily comply not only with the requirement of publication but also with the equally important public hearing. Accordingly, any fixing of the toll rate, which did not or does not comply with the twin requirements of public hearing and publication, must therefore be struck down as void. In such case, the previously valid toll rate shall consequently apply, pending compliance with the twin requirements for the new toll rate. In the instant consolidated cases, the fixing of the initial toll rates may have indeed come to pass without any public hearing.[118] Unfortunately for petitioners, and notwithstanding its presumptive validity, they did not assail the initial toll rates within the timeframe provided in P.D. 1112 and P.D. 1894.[119] Besides, as earlier explicated, the STOA provisions on periodic rate adjustments are not a bar to a public hearing as the formula set forth therein remains constant, serving only as a guide in the determination of the level of toll rates that may be allowed. It is apropos to state at this juncture that, in determining the reasonableness of the subsequent toll rate increases, it behooves the TRB to seek out the Commission on Audit ("COA") for assistance in examining and auditing the financial books of the public utilities concerned. Section 22, Chapter 4, Subtitle B, Title 1, Book V of the Administrative Code of 1987 expressly authorizes the COA to examine the aforementioned documents in connection with the fixing of rates of every nature, including as in this case, the fixing of toll fees.[120] We have on certain occasions applied this provision. Manila Electric Company, Inc. v. Lualhati easily comes to mind where

this Court tasked the Energy Regulatory Commission to seek the assistance of the COA in determining the reasonableness of the rate increases that MERALCO intended to implement.[121] We have consistently held that "the law is deemed written into every contract."[122] Being a provision of law, this authority of the COA under the Administrative Code should therefore be deemed written in the subject contracts i.e. the STOAs. In this regard, during the examination and audit, the public utilities concerned are mandated to "produce all the reports, records, books of accounts and such other papers as may be required," and the COA is empowered to "examine under oath any official or employee of the said public utilit[ies]."[123] Any public utility unreasonably denying COA access to the aforementioned documents, unnecessarily obstructs the examination and audit and may be adjudged liable "of concealing any material information concerning its financial status, shall be subject to the penalties provided by law."[124] Finally, the TRB is further obliged to take the appropriate action on the COA Report with respect to its finding of reasonableness of the proposed rate increases.[125] Furthermore, while the periodic, interim and other toll rate adjustment formulas are indicated in the STOAs,[126] it does not necessarily mean that the TRB should accept a rate adjustment predicated on the economic data, references or assumptions adopted by the toll operator. At the end of the day, the final figures should be those of the TRB based on its appreciation of the relevant rate-influencing data. In fine, the TRB should exercise its rate-fixing powers vested to it by law within the context of the agreed formula, but always having in mind that the rates should be just and reasonable. Conversely, it is very well within the power of the TRB under the law to approve the change in the current toll fees.[127] Section 3 (d) of P.D. 1112 grants the TRB the power to "[i]ssue, modify and promulgate from time to time the rates of toll that will be charged the direct users of toll facilities." But the reasonableness of a possible increase in the fees must first be clearly and convincingly established by the petitioning entities, i.e. the toll operators. Otherwise, the same should not be granted by the approving authority concerned. In Philippine Communications Satellite Corporation v. Alcuaz,[128] the Court had the opportunity to explain what is meant by a just and reasonable fixing of rates, thus: Hence, the inherent power and authority of the State, or its authorized agent, to regulate the rates charged by public utilities should be subject always to the requirement that the rates so fixed shall be reasonable and just. A commission has no power to fix rates which are unreasonable or to regulate them arbitrarily. This basic requirement of reasonableness comprehends such rates which must not be so low as to be confiscatory, or too high as to be oppressive. What is a just and reasonable rate is not a question of formula but of sound business judgment based upon the evidence it is a question of fact calling for the exercise of discretion, good sense, and a fair, enlightened and independent judgment. In determining whether a rate is confiscatory, it is essential also to consider the given situation, requirements and opportunities of the utility. A method often employed in

determining reasonableness is the fair return upon the value of the property to the public utility x x x. (Emphasis ours.) If in case the TRB finds the change in the rates to be reasonable and therefore merited, the increase shall then be implemented after the formalities of public hearing and publication are complied with. In this case, it is clear that the change in the toll fees is immediately effective and implementable. This is notwithstanding that, in case of an increase in the toll fees, an appeal thereon is filed. The law is clear. Thus: x x x 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. Such appeal shall not suspend the imposition of the new rates, provided however, that pending the resolution of the appeal, the petitioner for increased rates in such case shall deposit in a trust fund such amounts as may be necessary to reimburse toll payers affected in case a reversal of the decision.[129] (Emphasis ours.) Besides the settled rule under Section 3 (d) of P.D. 1112 that the power to issue, modify and promulgate toll fees rests with the TRB, it must also be underscored that the periodic and the interim adjustments found in Clauses 11.4 to 11.6 of the MNTC STOA do not necessarily guarantee an increase in the toll fees. To stress, the formula is based on many variable factors that could mean either an increase or a decrease in the toll fees, depending, inter alia, on how well certain economies are doing; and on the projections and figures published by the Bangko Sentral ng Pilipinas ("BSP").[130] It is therefore arduous to contemplate a grossness in a disadvantage that could only possibly arise in case of a non-implementation of a change - particularly, an increase - in the toll rates. Petitioners have not incidentally shown that it is the traveling public, the users of the expressways, who shouldered or will shoulder the completion of the projects by way of exorbitant fees payment, with the investors ending up with a "killing" therefrom. This conclusion, for all its factual dimension, is too simplistic for acceptance. And it does not consider the reality that the Court is not a trier of facts. Neither does it take stock of the nature and function of toll roads and toll fees paid by motorists, as aptly elucidated in North Negros Sugar Co., Inc. v. Hidalgo,[131] thus: "Toll" is the price of the privilege to travel over that particular highway, and it is a quid pro quo. It rests on the principle that he who, receives the toll does or has done something as an equivalent to him who pays it. Every traveler has the right to use the turnpike as any other highway, but he must pay the toll.[132] A toll road is a public highway, differing from the ordinary public highways chiefly in this: that the cost of its construction in the first instance is borne by individuals, or by a corporation, having authority from the state to build it, and, further, in the right of the public to use the road after completion, subject only to the payment of toll.[133] Toll roads are in a limited sense public roads, and are highways for travel, but we do not

regard them as public roads in a just sense, since there is in them a private proprietary right x x x.[134] (Emphasis ours.) Parenthetically, our review of Section 7 of the SMMS STOA readily yields the information that the level of the initial toll rates hinges on a mix of factors. Tax holidays that may be granted and the tax treatment of dividends may be mentioned. On the other hand, the subsequent periodic adjustments are provided to address factors that usually weigh on the financial condition of any business endeavor, such as currency devaluation, inflation and the usual increases in maintenance and operational costs incorporated into the formula provided therefor. Even with the existence of an automatic toll rate adjustment formula, compliance by the TRB and the other respondents with the twin requirements of public hearing and publication is still mandatory. To reiterate, laws always occupy a plane higher than mere contract provisions. In case the minimum statutory requirements are stiffer than that of a contract, or when the contract does not expressly stipulate the minimum requirements of the law, then We rule that compliance with such minimum legal requirements should be done. To summarize, any toll fee increase should comply with the legal twin requirements of publication and public hearing, the absence of which will nullify the imposition and collection of the new toll fees. In all, the initial toll rates and periodic adjustments appear to Us as simply predicated on the basic rationale for investing in a toll project, which to repeat is: a reasonable rate of return for the investment. Section 2 (o) of the BOT Law, as amended, provides for a definition for a reasonable rate of return on investments and operating and maintenance cost.[135] Running through the gamut of our statutes providing for and encouraging partnership of the public and private sector is the paramount common good for infrastructure projects and the equally important factor of giving a reasonable rate of return to private sector's investments. The viability of any infrastructure project depends on the returns - which should be reasonable - of the investment coming from the private sector. While the interests of the public are ideally to be accorded primacy in considering government contracts, the reality on the ground is that the tollway projects may not at all be possible or would be difficult to realize without the involvement of the investing private sector, which expects its usual share of profit. Thus, the Court is at a loss to understand how the level of the initial toll rates, which depended on several factors indicated above, and the subsequent adjustments resulted in the charging of exorbitant toll fees that, to petitioners, enabled the investors to shift the burden of financing the completion of the projects on the motoring public. Neither does the alleged drastic--if we may characterize it as such--steep increase in the level of toll rates for NLEX constitute a "killing" for PNCC and its partner MNTC. Petitioners make much of the amount of the toll fees vis--vis the then prevailing minimum wage. These plays of figures detract from the essential concern on the propriety of the level of the toll rates vis--vis the investments sunk in the NLEX project with a view, on the part of private investors, to a reasonable return on their investment.

Where no substantial figures were provided on the investments, the projected operating and maintenance costs vis--vis the projected revenue from the toll fees, no substantial conclusions may reasonably be deduced therefrom. Besides, to be taken into account in relation to the costs of the construction and rehabilitation of the NLEX is the length of the tollway and for which motorists have to pay the corresponding toll. Certainly, the allegations and conclusions of petitioners as to the unreasonable increase of the toll rates are without adequate factual mooring. The use of a tollway is a privilege that comes at a cost. The toll is a price paid for the use of a privilege. There are to be sure alternative roads and routes, which motorists may fall back on if they are unwilling to pay the toll. The toll, as might be expected, is pegged at a level that makes the developmental projects and their maintenance viable; otherwise, no investment can be expected for the furtherance of the projects. Petitioners Francisco and Hizon alleged that, per the minutes of the TRB meetings, the Board deliberately refrained, particularly with respect to the Skyway project, from conducting public hearings for the grant of the initial toll rates and on the rate adjustment formula to be used in order to accelerate the implementation of the projects. The allegation is far from correct. A perusal of the pertinent minutes of the TRB meetings, particularly that held on August 17, 1995,[136] in fact would disclose a picture different from that depicted by said petitioners. Nothing in the minutes of said meeting tends to indicate that the TRB resolved to dispense with public hearings. We, therefore, find petitioners Francisco and Hizon's attempt to mislead the Court by falsely citing supposed portions[137] of the August 17, 1995 TRB meeting very unfortunate. They quoted a correction on the minutes of the Special Board Meeting No. 95-05 held on July 26, 1995, which was taken up in the August 17, 1995 meeting for the approval of the minutes of the previous meeting. In said special meeting of July 26, 1995,[138] the Board deliberated on the recommendation of ADG Santos for the conduct of a public hearing or soliciting the endorsement of the Metro Manila Development Authority ("MMDA").[139] But the TRB did not resolve to omit a public hearing with respect to the toll rates. In fact, the deliberations used the words "in the event the Board decides" and "if the Board conducts," clearly conveying the notion that the TRB had not decided or resolved the issue of public hearings. Be that as it may, We rule that the TRB is mandated to comply with the twin requirements of public hearing and publication. Petitioners Francisco and Hizon's lament about the TRB merely relying on, if not yielding to, the recommendation and findings of the Technical Working Group ("TWG") of the DPWH on matters relative to STOA stipulations and toll-rate fixing cannot be accorded cogency. In the area involving big finance and complex project planning, banking on the data supplied by technicians and experts is at once practical as it is inevitable. The Court cannot see its way clear to understand why petitioners would begrudge the TRB for tapping the technical know-how of others. And it cannot be overemphasized that a recommendation is no more than an exhortation or an urging as to what is advisable or expedient, not binding on the person to which it is being made.[140] To recommend involves the idea that another has the final decision.[141] The ultimate decision still rests with the TRB whether or not to accept the findings of the TWG. The

minutes of the TRB meetings show that its members went through the tedious process of deliberating on the formula to be used in computing the toll rates. The fact that the TRB might have adopted the TWG's recommendation would not, on that ground alone, vitiate the bona fides of the former's decision nor stain the proceedings leading to such decision. In any case, as earlier held, the toll rate adjustment formula does not and cannot contravene the legal twin requirements of public hearing and publication. In another bid to nullify the STOAs in question, petitioners would foist on the Court the arguments that, firstly, President Ramos twisted the arms of the TRB towards entering into the agreements in question and, secondly, that the CITRA STOA contained restrictive confidentiality provisions barring the public from knowing their contents and the details of the negotiations related thereto. We are not persuaded by the first ground, not necessarily because the pressure brought to bear on TRB rendered the STOAs infirm, but because the allegations on pressure-tactics allegedly employed by President Ramos are too speculative for acceptance. On the second ground, We fail to see how the insertion of the alleged confidentiality clause in the CITRA STOA translates into grave abuse of discretion or a violation of the Constitution, particularly Article III, Section 7[142] thereof. First off, the Court can take judicial notice that most commercial contracts, including finance-related project agreements carry the standard confidentiality clause to protect proprietary data and/or intellectual property rights. This protection angle appears to be the intent of Clause 14.04(l)[143] of the CITRA STOA. And as may be noted, the succeeding Clause 14.04 (2) [144] removes from the ambit of the confidentiality restriction the following: disclosure of any information: (a) not otherwise done by the parties; (b) which is required by law to be disclosed to any person who is authorized by law to receive the same; (c) to a tribunal hearing pertinent proceedings relative to the contract or agreement; and (d) to confidential entities and persons relative to the disclosing party like its banks, consultants, financiers and advisors. The second (item b) exception provides a reasonable dimension to the assailed confidentiality clause. Needless to stress, the obligation of the government to make information available cannot be exaggerated.[145] The constitutional right to information does not mean that every day and every hour is open house in government offices having custody of the desired documents.[146] Petitioners have not sufficiently shown, thus cannot really be heard to complain, that they had been unreasonably denied access to information with regard to the MNTC or SMMS STOA. Besides, the remedy for unreasonable denial of information that is a matter of public concern is by way of mandamus.[147] Finally, as to petitioners' catch-all claim that the STOAs are disadvantageous to the government, as therein represented by the TRB, suffice it to state for the nonce that behind these agreements are the Board's expertise and policy determination on technical, financial and operational matters involving expressways and tollways. It is not for courts to look into the wisdom and practicalities behind the exercise by the TRB of its contractmaking prerogatives under P.D. Nos. 1112, 1113 and 1894, absent proof of grave abuse

of discretion which would justify judicial review. In this regard, the Court recalls what it wrote in G & S Transport Corporation v. Court of Appeals,[148] to wit: x x x courts, as a rule, refuse to interfere with proceedings undertaken by administrative bodies or officials in the exercise of administrative functions. This is because such bodies are generally better equipped technically to decide administrative questions and that nonlegal factors, such as government policy on the matter are usually involved in the decision. SIXTH ISSUE: PUBLIC BIDDING NOT REQUIRED Private petitioners would finally maintain that public bidding is required for the SMMS and the North Luzon/South Luzon Tollways, partaking as these projects allegedly do of the nature of a BOT infrastructure undertaking under the BOT Law. Prescinding from this premise, they would conclude that the STOAs in question and related preliminary and post-STOA agreements are null and void for want of the necessary public bidding required for government infrastructure projects. The contention is patently flawed. The BOT Law does not squarely apply to the peculiar case of PNCC, which exercised its prerogatives and obligations under its franchise to pursue the construction, rehabilitation and expansion of the tollways with chosen partners. The tollway projects may very well qualify as a build-operate-transfer undertaking. However, given that the projects in the instant case have been undertaken by PNCC in the exercise of its franchise under P.D. Nos. 1113 and 1894, in joint partnership with its chosen partners at the time when it was held valid to do so by the OGCC and the DOJ, the public bidding provisions under the BOT Law do not strictly apply. For, as aptly noted by the OSG, the subject STOAs are not ordinary contracts for the construction of government infrastructure projects, which requires under the Government Procurement Reform Act or the now-repealed P.D. 1594, [149] public bidding as the preferred mode of contract award. Neither are they contracts where financing or financial guarantees for the project are obtained from the government. Rather, the STOAs actually constitute a statutorily-authorized transfer or assignment of usufruct of PNCC's existing franchise to construct, maintain and operate expressways.[150] The conclusion would perhaps be different if the tollway projects were to be prosecuted by an outfit completely different from, and not related to, PNCC. In such a scenario, the entity awarded the winning bid in a BOT-scheme infrastructure project will have to construct, operate and maintain the tollways through an automatic grant of a franchise or TOC, in which case, public bidding is required under the law. Where, in the instant case, a franchisee undertakes the tollway projects of construction, rehabilitation and expansion of the tollways under its franchise, there is no need for a public bidding. In pursuing the projects with the vast resource requirements, the franchisee can partner with other investors, which it may choose in the exercise of its management prerogatives. In this case, no public bidding is required upon the franchisee in choosing its partners as such process was done in the exercise of management

prerogatives and in pursuit of its right of delectus personae.[151] Thus, the subject tollway projects were undertaken by companies, which are the product of the joint ventures between PNCC and its chosen partners. Petitioners Francisco and Hizon's assertions about the TRB awarding the tollway projects to favored companies, unsubstantiated as they are, need no belaboring. Suffice it to state that the discretion to choose who shall stand as critical JV partners remained all along with PNCC, at least theoretically. Needless to say, the records do not show that the TRB committed an oversight as an administrative body over any aspect of tollway operations with regard to PNCC's selection of partners. The foregoing disquisitions considered, there is no more point in passing upon the propriety of prohibiting or enjoining, on the ground of unconstitutionality or grave abuse of discretion, the implementation of the initial toll rates and/or the adjusted toll rates for the SMSS, expanded NLEX and SLEX, as authorized by the separate TRB resolutions, subject of and originally challenged in these proceedings. These TRB resolutions and the STOAs upon which they are predicated have long been in effect. The parties have acted on these issuances and contracts whose existence, as an operative fact, cannot be ignored, let alone erased, even if the charge of unconstitutionality is given currency. While not exactly of governing applicability in this case, what the Court wrote in De Agbayani v. Philippine National Bank,[152] on the operative fact doctrine is apropos: x x x When the courts declare a law to be inconsistent with the Constitution, the former shall be void and the latter shall govern. Administrative or executive acts, orders and regulations shall be valid only when they are not contrary to the laws of the Constitution." .... Such a view has support in logic and possesses the merit of simplicity. It may not however be sufficiently realistic. It does not admit of doubt that prior to the declaration of nullity such challenged legislative or executive act must have been in force and had to be complied with. This is so as until after the judiciary, in an appropriate case, declares its invalidity, it is entitled to obedience and respect. Parties may have acted under it and may have changed their positions. What could be more fitting than that in a subsequent litigation regard be had to what has been done while such legislative or executive act was in operation and presumed to be valid in all respects. It is now accepted as a doctrine that prior to its being nullified, its existence as a fact must be reckoned with. This is merely to reflect awareness that precisely because the judiciary is the governmental organ which has the final say on whether or not a legislative or executive measure is valid, a period of time may have elapsed before it can exercise the power of judicial review that may lead to a declaration of nullity. It would be to deprive the law of its quality of fairness and justice then, if there be no recognition of what had transpired prior to such adjudication. In the language of an American Supreme Court decision: "The actual existence of a

statute, prior to such a determination [of constitutionality], is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration x x x." (Emphasis in the original.) The petitioners in the first three (3) petitions and the respondent in the fourth have not so said explicitly, but their brief is against the issuance of P.D. Nos. 1112, 1113 and 1894, which conferred a package of express and implied powers and discretion to the TRB and the President resulting in the execution of what is perceived to be offending STOAs and the runaway collection of illegal toll fees. And they have come to the Court to strike down all these issuances, agreements and exactions. While the Court is not insensitive to their concerns, the rule is that all reasonable doubts should be resolved in favor of the constitutionality of a statute,[153] and the validity of the acts taken in pursuant thereof. It follows, therefore, that the Court will not set aside a law as violative of the Constitution except in a clear case of breach[154] and only as a last resort.[155] And as the theory of separation of powers prescribes, the Court does not pass upon questions of wisdom, expediency and justice of legislation. To Us, petitioners and respondent YPES in the fourth petition have not discharged the heavy burden of demonstrating in a clear and convincing manner the unconstitutionality of the decrees challenged or the invalidity of assailed acts of the President and the TRB. Because they failed to do so, the Court must uphold the presumptive constitutionality and validity of the provisions of the three decrees in question, and the subject contracts and TOCs. Regarding petitioner Francisco's Supplemental Petition, the toll rates, the collection of which in the amount based on the formula and assumptions set forth in the law, and the adverted STOA dated February 1, 2006 and subject of the TRO issued on August 13, 2010, has been duly published[156] and approved by the TRB, as required by Section 5 of P.D. 1112.[157] And the party-concessionaires have adequately demonstrated, and the TRB has virtually acknowledged[158] that the said rates subject of the TRO partake of the nature of opening or initial toll rates, which have not yet been implemented since the time the SLTC STOA took effect.[159] To note, the toll rates subject of the TRO were approved and are to be implemented in connection with the new facility, such as Project Toll Roads 1 and 2 pursuant to the new SLTC STOA and the expanded and rehabilitated SLEX.[160] As earlier discussed, public hearing is not required in the fixing and implementation of initial toll rates. But an interested party aggrieved by the initial rates imposed is not without any resource as he may, within the time frame provided by Section 8 (b) of P.D. 1894, repair to the TRB for review and thereafter to the OP.[161] As expressly provided in the same section, however, the pendency of the petition for review, if there be any, shall not suspend the enforceability and collection of the toll in question. In net effect, the challenge before the Court of the SLEX toll rate imposition is premature. However, the Court treats this Supplemental Petition assailing the toll rates covered by the TRB Notice of Toll Rates published on June 6, 2010 as a petition for review filed under P.D. 1894, and hereby remands the same to the TRB for a review of the questioned rates to determine the propriety thereof. WHEREFORE, the petitions in G.R. Nos. 166910 and 173630 are hereby DENIED for

lack of merit. Accordingly, We declare as VALID AND CONSTITUTIONAL the following: 1. the Supplemental Toll Operation Agreement dated April 30, 1998 covering the North Luzon Tollway Project and the TRB Board Resolution No. 2005-4 issued pursuant thereto; 2. the Supplemental Toll Operation Agreement dated November 27, 1995 covering the South Metro Manila Skyway and the TRB Board Resolution No. 2004-53 and previous TRB resolutions issued pursuant thereto; 3. the Supplemental Toll Operation Agreement covering the South Luzon Tollway Project or South Luzon Expressway and the TRB Board resolutions issued pursuant to the said agreement, particularly the TRB Board resolutions allowing the toll rate increases that are supposed to have been implemented on June 30, 2010; 4. Section 3, paragraph (a) of Presidential Decree No. 1112, otherwise known as the "Toll Operation Decree," in relation to Section 3, paragraph (d) thereof and Section 8, paragraph (b) of Presidential Decree No. 1894; and 5. Section 3, paragraph (e) 3 of P.D. No. 1112 and Section 13 of P.D. No. 1894. We however declare Clause 11.7 of the Supplemental Toll Operation Agreement between the Republic of the Philippines, represented by respondent TRB, as grantor, the Philippine National Construction Corporation, as franchisee, and the Manila North Tollways Corporation ("MNTC") dated April 30, 1998; and the clause "including if necessary an extension of the CONCESSION PERIOD which in no case shall exceed a maximum period of fifty (50) years" in Clause 17.5 of the same STOA, as VOID and UNCONSTITUTIONAL for being contrary to Section 2, Article XII of the 1987 Constitution. We likewise declare Clauses 8.08 (2) & (3) of the Supplemental Toll Operation Agreement between the Republic of the Philippines, represented by respondent TRB, as grantor, the Philippine National Construction Corporation as franchisee, the South Luzon Tollway Corporation as investor, and the Manila Toll Expressway Systems, Inc. as operator, dated February 1, 2006, as VOID and UNCONSTITUTIONAL. The petition in G.R. No. 169917 is likewise hereby DENIED for lack of merit. We declare as VALID and CONSTITUTIONAL the following: 1. Notice of Approval dated May 16, 1995 by former President Fidel V. Ramos on the assignment of PNCC's usufructuary rights; 2. the Joint Venture Agreement dated August 29, 1995; 3. the Joint Investment Proposal, etc. dated June 16, 1996; 4. the Supplemental Toll Operation Agreement ("STOA") dated April 30, 1998 and the Notice of Approval of said STOA dated June 15, 1998 by former President Fidel V. Ramos; and

5. the provisional toll rate increases published February 9, 2005, granted by the TRB. The petition in G.R. No. 183599 is GRANTED. Accordingly, the Decision dated June 23, 2008 of the Regional Trial Court, Branch 155 in Pasig City, docketed as SCA No. 3138-PSG, annulling the TOC covering the SLEX, enjoining the original toll operating franchisee from collecting toll fees in the SLEX, and ordering the turnover of related assets to the Government, is hereby REVERSED and SET ASIDE, and the petition filed therein by the Young Professionals and Entrepreneurs of San Pedro, Laguna with the RTC of Pasig is DISMISSED for lack of merit. In view of the foregoing dispositions in the petitions at bar, the TRO issued by the Court on August 13, 2010 is hereby ordered lifted, with respect to the petitions in G.R. Nos. 166910, 169917, 173630 and 183599. The challenge contained in the Supplemental Petition in G.R. No. 166910 against the toll rates subject of the TRB Notice of Toll Rates published on June 6, 2010, for the SLEX projects, Toll Road Projects 1 and 2 of the new SLTC STOA, and the expanded and rehabilitated SLEX, is remanded to the TRB for a review of the assailed toll rates to determine whether SLTC and MATES are entitled to the toll fees. No Cost. SO ORDERED. Corona, C.J., Carpio, Leonardo-De Castro, Brion, Peralta, Bersamin, Del Castillo, Villarama, Jr., Perez, Mendoza, and Sereno, JJ., concur. Carpio-Morales and Abad, JJ., on leave. Nachura, J., no part. Sol. Gen.
[1]

Authorizing the Establishment of Toll Facilities on Public Improvements, Creating a Board for the Regulation thereof and for other Purposes, P.D. 1112 [Toll Operation Decree], whereas clause (March 31, 1977).
[2]

See P.D. 1113, 3.

[3]

Amending the Franchise of the [PNCC] to Construct, Maintain and Operate Toll Facilities in the North Luzon and South Luzon Expressways to Include the Metro Manila Expressway to Serve as an Additional Artery in the Transportation of Trade and Commerce in the Metro Manila Area, P.D. 1894, 1.
[4]

What is involved when the usufruct is ceded are, inter alia, the right to collect and keep toll; operate, repair or replace the toll collection system for the project toll roads; and provide continuing operation and maintenance during the concession period.

[5]

P.D. 1113, 8; P.D. 1894, 13. P.D. 1112, 3 (e) (3). PHILIPPINE CONSTITUTION, ART. XII, 11.

[6]

[7]

Sec. 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum of whose capital is owned by such citizens, nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration or repeal by the Congress when the common good so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall belimited to their proportionate share in its capital, and all the executive and managing officers of such corporation or association must be citizens of the Philippines.
[8]

Rollo (G.R. No. 166910), pp. 152-160. Id. at 166-171; DOJ Opinion No. 79, s. 1994.

[9]

[10]

In the same way that the improvement of the SLEX would also be referred to as the South Luzon Tollway project.
[11]

Rollo (G.R. No. 169917), pp. 194-196; MNTC STOA, clause 3.1.

[12]

Initial focus of the MOA are the full rehabilitation and construction of the Alabang viaduct and full rehabilitation and expansion of the Alabang-Calamba Santo Tomas stretch.
[13]

Annex 14, SLTC's and MATES' Consolidated Comment/Opposition to the Supplemental Petition of petitioner Francisco.
[14]

Sections 2.01 of the STOA.

[15]

Article VI, Section 1 of the Constitution provides that legislative power shall be vested in the Congress of the Philippines x x x.
[16]

Annex 16, Consolidated Comment/Opposition to petitioner Francisco's Supplemental Petition.

[17]

Annex 17, Consolidated Comment/Opposition to petitioner Francisco's Supplemental Petition.

[18]

Id.

[19]

Rollo (G.R. No. 183599), pp. 58-70. Rollo (G.R. No. 183599), p. 70. Dumlao v. COMELEC, G.R. No. L-52245, January 22, 1980, 95 SCRA 392, 401. Muskrat v. U.S., 219 U.S. 346 (1913). See Flast v. Cohen, 392 U.S. 83, 20 E Ed 2d 947, 88 S. Ct. 1942, 1950 (1968).

[20]

[21]

[22]

[23]

[24]

G.R. Nos. 183591, 183752, 183893 & 183591, October 14, 2008, 568 SCRA 402, 405 [citations omitted]; see also PACU v. Secretary of Education, 97 Phil. 806, 810 (1955).
[25]

Joaquin G. Bernas, S.J., The 1987 Constitution of the Republic of the Philippines: A Commentary 939 (2003).
[26]

Id. at 939-40; citing People v. Vera, 65 Phil. 56, 89 (1937); Macasiano v. National Housing Authority, G.R. No. 107921, July 1, 1993, 224 SCRA 236.
[27]

Gonzales v. Narvasa, G.R. No. 140835, August 14, 2000, 337 SCRA 733, 740. See Taada v. Angara, G.R. No. 118295, May 2, 1997, 272 SCRA 18. Angara v. Electoral Commission, 63 Phil. 139, 158 (1936).

[28]

[29]

[30]

Chavez v. Public Estates Authority, G.R. No. 133250, July 9, 2002, 384 SCRA 152; Lim v. Executive Secretary, G.R. No. 151445, April 11, 2002, 380 SCRA 739; IBP v. Zamora, G.R. No. 141284, August 15, 2000; Tatad v. Secretary of the Department of Energy [DOE], G.R. Nos. 124360 & 127867, November 5, 1997, 281 SCRA 330; Kilosbayan v. Guingona, Jr., G.R. No. 113375, May 5, 1994, 232 SCRA 110, 137-38.
[31]

Tatad v. DOE, id. at 349; De Guia v. COMELEC, G.R. No. 104712, May 6, 1992, 208 SCRA 420, 422.
[32]

Severino v. Governor General,16 Phil. 366, 371 (1910). Del Mar v. PAGCOR, G.R. No. 138298, November 29, 2000, 346 SCRA 485, 503.

[33]

[34]

Metropolitan Cebu Water District v. Adala, G.R. No. 168914, July 4, 2007, 526 SCRA 465, 466.
[35]

Albano v. Reyes, G.R. No. 83561, July 11, 1989, 175 SCRA 264. Id. at 264.

[36]

[37]

DOJ Opinion No. 1, s. 2006; Annex 15, Consolidated Comment/Opposition to supplemental petition.
[38]

Kilusang Mayo Uno Labor Center v. Garcia, Jr., G.R. No. 115381, Dec. 23, 1994, 239 SCRA 386, 405.
[39]

Id. P.D. 1112, 3, e.

[40]

[41]

Philippine Airlines, Inc. v. Civil Aeronautics Board, G.R. No. 119528, March 26, 1997, 270 SCRA 538.
[42]

Philippine Airlines, Inc., id. at 551. Philippine Airlines, Inc., id. at 549-50. See Tatad v. DOE, supra note 30, 349; De Guia v. COMELEC, supra note 31, at 422.

[43]

[44]

[45]

Philippine Airlines, Inc., supra note 41, at 550; citing Dyer v. Tuskaloosa Bridge Co., 2 Port. 296, 27 Am. D. 655; Christian Toda Tel. Co. v. Commonwealth, 161 S.W. 543, 156 Ky. 557, 37 C.J.S. 158.
[46]

Philippine Airlines, Inc., id.; citing Ynchausti Steamship Co. v. Public Utility Commissioner, 42 Phil. 642 (1923).
[47]

G.R. No. 178158, December 4, 2009, 607 SCRA 413, 492-94.

[48]

See STOA (Covering the South Metro Manila Skyway) among the Republic, PNCC and Citra Metro Manila Tollways Corporation, November 27, 1995, Rollo (G.R. No. 166910), pp. 329-397; STOA (Covering the Manila-North Expressway) among the Republic, PNCC and Manila North Tollways Corporation, April 1998, Rollo (G.R. No. 169917), pp. 177-242.
[49]

See P.D. 1112, whereas clauses; P.D. 1113, whereas clauses; P.D. 1894, whereas clauses.
[50]

See e.g. Rollo (G.R. No. 169917), p. 243; see also Rollo (G.R. No. 169917), p. 106. P.D. 1894, amending P.D. 1113. P.D. 1113, 3; P.D. 1894, 6. P.D. 1894, 6. (Emphasis ours.) 16.06 Supplemental Effect - "This Agreement [STOA] is intended as a supplement to

[51]

[52]

[53]

[54]

the [TRB-PNCC] TOA. Accordingly, to the extent possible, both agreements should be regarded as one integrated instrument whose provisions are fully consistent with each other; provided however, that in respect of the Project or any of the Project Toll Roads, the provisions of this Agreement shall have primacy of application and shall be deemed to have modified or replaced provisions of the TOA that is contrary or inconsistent with any provision of this Agreement."
[55]

Strategic Alliance Development Corporation v. Radstock Securities Limited, supra note 47, at 494. (Emphasis in the original.)
[56]

Id. at 495. DOJ Opinion No. 122, s. 1995; Rollo (G.R. No. 169917), p. 363. DOJ Opinion No. 1, s. 2006.

[57]

[58]

[59]

Strategic Alliance Development Corporation v. Radstock Securities Limited, supra note 47, at 495.
[60]

Id. at 494. Id. See supra. Dated Aug. 20, 1990; reported in 188 SCRA 775. The DPWH had jurisdiction over the TRB pursuant to E.O. No. 644 (July 30, 2007). PNCC v. Republic, G.R. No. 89557, August 20, 1990, 188 SCRA 775, 790-91. PNCC v. Court of Appeals, G.R. No. 104437, December 17, 1993, 228 SCRA 565. Id. at 572. Id. at 567 & 570.

[61]

[62]

[63]

[64]

[65]

[66]

[67]

[68]

[69]

Martir v. Verano, 497 SCRA 120, 126-27 (2006); citing Armed Forces of the Philippines Mutual Benefit Association, Inc. v. Court of Appeals, G.R. No. 126745, July 26, 1999, 311 SCRA 143, 154-55.
[70]

In relation to G.R. No. 183599. G.R. No. 166785, July 28, 2008, 560 SCRA 197, 198, 208-209. Eastern Assurance & Surety Corporation (EASCO) v. Land Transportation and

[71]

[72]

Franchising Regulatory Board (LTFRB), G.R. No. 149717, October 7, 2003, 413 SCRA 75, 90.
[73]

Drilon v. Lim, 235 SCRA 135 (1994). Entitled "Creating The Land Transportation Franchising And Regulatory Board."

[74]

[75]

Sec. 5. Powers and Functions of the [LTFRB].--The Board shall have the following powers and functions: a. To prescribe and regulate routes of service, economically viable capacities and zones or areas of operation of public land transportation services provided by motorized vehicles xxxx; b. To issue x x x or cancel x x x or permits authorizing the operation of public land transportation services x x x and to prescribe the appropriate terms and conditions therefor; c. To determine, prescribe and approve xxx reasonable fares, rates and other related charges, relative to the operation of public land transportation services provided by motorized vehicles; .... g. To conduct investigations and hearings of complaints for violation of the public service laws on land transportation and of the Board's rules and regulations, orders, decisions and/or rulings and to impose fines and/or penalties for such violations;
[76]

Entitled "Creating A Ministry Of Public Works And A Ministry Of Transportation And Communications." xxxx Sec. 15. Functions of the Commission.--The Commission shall exercise the following functions: a. Issue [CPC] for the operation of communications utilities and services, radio communications systems, wire or wireless telephone or telegraph systems, radio and television broadcasting system and other similar public utilities; b. Establish, prescribe and regulate areas of operation of particular operators of public service communications; and determine and prescribe charges or rates pertinent to the operation of such public utility facilities and services except in cases x x x; c. Grant permits for the use of radio frequencies for wireless telephone and telegraph systems and radio communication systems including amateur radio stations and radio and television broadcasting systems;

xxxx g. Promulgate such rules and regulations, as public safety and interest may require, to encourage a larger and more effective use of communications, radio and television broadcasting facilities, and to maintain effective competition among private entities in these activities whenever the Commission finds it reasonably feasible; xxxx
[77]

An Act Ordaining Reforms in the Electric Power Industry, Amending for the Purpose Certain Laws and for Other Purposes, R.A. 9136 [Electric Power Industry Reform Act of 2001], 4 (w), 6, 8, 34, 38 & 43 (f).
[78]

Chamber of Real Estate and Builders' Association, Inc. v. ERC and MERALCO, G.R. No. 174697, July 8, 2010.
[79]

C.T. Torres Enterprises, Inc. v. Hibionada, et al., G.R. No. 80916, November 9, 1990.

[80]

Sec. 8 of P.D. 1113 and Sec. 13 of P.D. 1894 each contains a similar provision but use the word "grantee" instead of "toll operator" found in Sec. 3 of P.D. 1112, thus: The grantee shall not lease, transfer, grant the usufruct of, sell or assign the franchise nor the rights or privileges acquired thereby, x x x nor merge with any other company or corporation without the prior approval of the President of the Philippines. x x x
[81]

G.R. No. 113375, May 5, 1994, 232 SCRA 110; citing 36 Am. Jur. 2D, Franchises, 63.
[82]

National Federation of Labor v. National Labor Relations Commission, G.R. No 127718, March 2, 2000, 327 SCRA 158, 165.
[83]

Padua v. Ranada, G.R. No. 141949, 390 SCRA 663, 679.

[84]

Padua v. Ranada, id. at 679; citing Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform, 175 SCRA 343 (1989).
[85]

Rollo (G.R. No. 169917), p. 217. Id. at 46-47.

[86]

[87]

See supra; see e.g. Albano v. Reyes, supra note 35, at 264; Philippine Airlines, Inc., supra note 41, at 538, 549-551.
[88]

See supra. Albano v. Reyes, supra note 35, at 264.

[89]

[90]

Kilusang Mayo Uno, supra note 38, at 405. Philippine Airlines, Inc., supra note 41, at 549-550. P.D. 1112, 3 (e). P.D. 1113, 3; P.D. 1894, 6. See supra; see also P.D. 1894, 1 & 2.

[91]

[92]

[93]

[94]

SECTION 1. Any provision of law to the contrary notwithstanding, there is hereby granted to the Philippine National Construction Corporation, a corporation duly organized and existing under by the virtue of Philippine laws (hereinafter called the "GRANTEE"), the right, privilege and authority to construct, maintain and operate the following expressways (hereinafter collectively called "the Expressways"), together with the toll facilities appurtenant thereto: (a) the North Luzon Expressway from Balintawak (Station 9 + 563) to Carmen, Rosales, Pangasinan; (b) the South Luzon Expressway from Nichols, Pasay City (Station 10 + 540) to Lucena, Quezon; (c) the Metro Manila Expressway, from Bicutan, Paraaque, Metro Manila (Station 18 +720) to Meycauayan, Bulacan (approximate Station 63 + 290) with an approximate length of 44.570 km., to serve as an artery in the transportation of trade and commerce in the Metropolitan Manila area. The GRANTEE is hereby further granted the right, privilege and authority to construct, maintain and operate any and all such extensions, linkages or stretches, together with the toll facilities appurtenant thereto, from any part of the North Luzon Expressway, South Luzon Expressway and/or Metro Manila Expressway and/or to divert the original route and change the original end-points of the North Luzon Expressway and/or South Luzon Expressway as may be approved by the Toll Regulatory Board (any and all such extensions, linkages, stretches and diversions hereinafter deemed included in the term "Expressways"). SECTION 2. The term of the franchise provided under Presidential Decree No. 1113 for the North Luzon Expressway and the South Luzon Expressway which is thirty (30) years from 1 May 1977 shall remain the same; provided that, the franchise granted for the Metro Manila Expressway and all extensions linkages, stretches and diversions that may be constructed after the date of approval of this decree shall likewise have a term of thirty (30) years commencing from the date of completion of the project.
[95]

P.D. 1112, 3 (e) (6). 17.4.1 The PARTIES acknowledge that following a Notice of Substitution under

[96]

clauses 17.2 or 17.3 the LENDERS have, subject to the provisions of Clause 17.4.3, the unrestricted right to appoint a SUBSTITUTED ENTITY in place of MNTC following the declaration of the occurrence of a MNTC DEFAULT prior to full repayment of the LOANS or of an event of default in respect of the LOANS. GRANTOR shall extend all reasonable assistance to the AGENT to put in place a SUBSTITUTED ENTITY. MNTC shall make available all necessary information to potential SUBSTITUTED ENTITY to enable such entity to evaluate the Project.
[97]

Rollo (G.R. No. 169917), pp. 227-228. Id. at 228. MNTC STOA, Clause 17.5, id. Rollo, G.R. No. 166917, at 228.

[98]

[99]

[100]

Id. at 184. Clause 1.1.1 "AGENT" - shall mean the authorized representative/s appointed by the LENDERS to act and negotiate on their behalf with respect to the LOANS and to this AGREEMENT and notified to GRANTOR by MNTC. Id. at 184.
[101]

Supra note 99. P.D. 1112, 3, e, P.D. 1113, 3; P.D. 1894, 6. Phil. Const., Art. XII, 11. Rollo (G.R. No. 166917), p. 192. Phil. Const., Art. XII, 11. Rollo (G.R. No. 169971), p. 507. Phil. Const., Art. VI, 29 (1).

[102]

[103]

[104]

[105]

[106]

[107]

[108]

Strategic Alliance Development Corporation v. Radstock Securities Limited, supra note 47, at 498.
[109]

Id. at 498-500. SLTC STOA, 8.08 (2) & (3). See e.g. MNTC STOA, 11.4 & 11.5; SLTC STOA, 8.06 & 8.08.

[110]

[111]

11.4 Periodic Adjustment. 11.4.1 The AUTHORIZED TOLL RATE shall be adjusted as provided in this Clause every two calendar years, the first such adjustment to occur on the OPERATION DATE; Provided, However, that in the event that a delay in completion of any relevant PHASE is

attributable to MNTC, MNTC shall not be entitled to an additional adjustment of the Initial AUTHORIZED TOLL RATE at the actual OPERATION DATE of the delayed phase. 11.4.2 The adjustment formula will be as follows: 1. Until the time the LOANS have been fully repaid but not later than 31 December 2013, the projected final repayment date as per the PROJECT IMPLEMENTATION SCHEDULE and the FINANCIAL PROJECTIONS: ATRp = ATR0 x Ip where: ATRp = AUTHORIZED TOLL RATE for year p TR0 = Initial Reference AUTHORIZED TOLL RATE as defined in Clause 11.3. Ip = Toll adjustment index for year p = PCPIp Ep/E0____________________ PCPI0 x (1 + Fc)p x [Ap + Bp x ( Dp/D0 )] PCPIp = Philippine Consumer Price Index for the month prior to filing the request for adjustment in year p (or the last index available at that time) USCPIp = USA Consumer Price Index for the month prior to filing the request for adjustment in year p (or the last index available at that time) PCPI0 = Base Philippine Consumer Price Index as defined in the FINANCIAL PROJECTIONS as published by the Bangko Sentral ng Pilipinas as of 30 June 1995 USCPI0 = Base USA Consumer Price Index as defined in the FINANCIAL PROJECTIONS as of 30 June 1995 Ap = Percentage of total debt service (or debt outstanding if there is no debt service in that period) in PESO during the period of six (6) months prior to filing the request for adjustment in year p Bp = Percentage of total debt service (or debt outstanding if there is no debt service in that period) in US$ during the period of six (6) months prior to filing the request for adjustment in year p. Bp shall not exceet Fifty percent (50%) after the first adjustment of the AUTHORIZED TOLL RATE made on OPERATION DATE.

Ep = Rolling average of US$ selling rate against PESO, as published by the Bangko Sentral ng Pilipinas, for the period of six (6) months prior to filing the request for adjustment in year p Dp = Consumer Price Index differential between Philippines and USA calculated as PCPIp / USCPIp E0 = Base average of US$ selling rate against PESO, as published by the Bangko Sentral ng Pilipinas as stated in the FINANCIAL PROJECTIONS as of 30 June 1995 D0 = Base Consumer Price Index differential between Philippines and USA calculated as PCPI0 / USCPI0 Fc = One percent (1%) for the period up to the OPERATION DATE of the first PHASE including the first adjustment of the TOLL RATE. = One and one fourth of a percent (1.25%) for the period following the OPERATION DATE of PHASE 1

2. 2. From the time when the LOANS have been fully repaid not later than 31 December 2013: PCPIp__ ATRp = ATRp-1 x [ 1 + ( PCPIp-1 - 1 ) x 50% ] where: ATRp-1 = AUTHORIZED TOLL RATE for year p-1 If, for any reason, the Philippine Consumer Price Index as published by the National Statistics Office ceases to be published or is not available in the month in question, the PARTIES shall use the index published by the Bangko Sentral ng Pilipinas as substitute index for the purpose of effecting the above calculation or, in case the latter index is also not published or available, another index agreed mutually by the GRANTOR and MNTC. 11.4.3 Any such notice for adjustment to the AUTHORIZED TOLL RATE which results in the increase of the existing AUTHORIZED TOLL RATE shall be published in a newspaper of general circulation no later than 30 November of the year in which it is calculated and shall become enforceable and be collected by MNTC on the first day of January of the immediately succeeding year.

11.5 Interim Adjustment. 11.5.1 In addition to the Periodic Adjustment, (a) in the circumstances contemplated in Clauses 15 and 16, MNTC shall be entitled to Interim Adjustment of the Initial Reference AUTHORIZED TOLL RATE provided under Clause 11.3 or the AUTHORIZED TOLL RATE provided under Clause 11.4, as compensation under such provisions, or (b) when the rolling average over two months of either the Bangko Sentral ng Pilipinas foreign exchange selling rate (PESO/US$) (`Ep' as defined below) has varied by ten percent (10%) as long as the Toll Rate Adjustment Formula described in Clause 11.4.2.1 applies or the Consumer Price Index for the Philippines (`PCPIp' as defined below) has varied by fifteen percent (15%) compared to the level of this rate and/or index to the level of Ep-1 and PCPIp-1, respectively, MNTC shall be entitled to an adjustment of the Initial Reference AUTHORIZED TOLL RATE or AUTHORIZED TOLL RATE after the first Periodic Adjustment. 11.5.2 Any proposal for an adjustment of the Initial Reference AUTHORIZED TOLL RATE or AUTHORIZED TOLL RATE, as the case may be, pursuant to Clauses 15, 16 or 11.5.1 (b) hereof shall be submitted to GRANTOR, with a supporting calculation. Such calculation shall be subject to verification and approval by GRANTOR. 11.5.3 Any such proposal for an interim adjustment in the Initial Reference AUTHORIZED TOLL RATE or AUTHORIZED TOLL RATE as the case may be, which results in the increase of the existing AUTHORIZED TOLL RATE shall be published in a newspaper of general circulation no later than 30 November of the year in which it is calculated and shall become enforceable and be collected by MNTC on the first day of January of the immediately succeeding year. 11.5.4 An Interim Adjustment shall, other than those made by reason of the occurrence of circumstances specified under Clause 15 and 16, be considered as an advance to MNTC to be set off against future TOLL RATE Periodic Adjustment; Provided, However, that in computing the amount to be set off against the foregoing advance, the time value thereof shall be considered as recognized in the FINANCIAL PROJECTIONS.
[112]

P.D. 1112, 3, d.

[113]

Padua v. Ranada, G.R. Nos. 141949 & 151108, October 14, 2002, 390 SCRA 663, 678-83.
[114]

Manila International Airport Authority v. Blancaflor, G.R. No. 157581, December 1, 2004, 445 SCRA 471, 479.
[115]

Manila International Airport Authority, id. at 479. Manila International Airport Authority, id. at 479-480.

[116]

[117]

Executive Order No. 686 (December 19, 2007). See P.D. 1894, 8, b. Within the period of 90 days after the date of publication of the initial toll rate.

[118]

[119]

[120]

Instituting the Administrative Code of 1987 [Administrative Code], Executive Order No. 292, book V, title 1, subtitle B, chapter 4, 22 (1) (1987). Section 22. Authority to Examine Accounts of Public Utilities. (1) The [COA] shall examine and audit the books, records and accounts of public utilities in connection with the fixing of rates of every nature, or in relation to the proceedings of the proper regulatory agencies, for purposes of determining franchise taxes;
[121]

G.R. Nos. 166769 & 166818, December 6, 2006, 510 SCRA 455.

[122]

Heirs of Severina San Miguel v. Court of Appeals, et al., G.R. No. 136054, September 5, 2001.
[123]

Administrative Code, Book V, Title 1, subtitle B, Chapter 4, 22 (3). Administrative Code, Book V, Title 1, subtitle B, Chapter 4, 22 (2). See Manila Electric Company, Inc. v. Lualhati, 510 SCRA at 478. MNTC STOA, Clause 11; CITRA STOA, Clause 7; SLTC STOA, Clauses 7-8. P.D. 1112, 3, d. G.R. No. 84818, December 18, 1989, 180 SCRA 218. P.D. 1112, 3, d. Rollo (G.R. No. 169971), pp. 214-217.

[124]

[125]

[126]

[127]

[128]

[129]

[130]

[131]

North Negros Sugar Co., Inc. v. Hidalgo, G.R. No. L-42334, October 31, 1936, 63 Phil. 664.
[132]

Ibid, citing City of St. Louis v. Creen, 7 Mo. App., 468, 476.

[133]

Id., citing Virginia Caon Toll Road Co. v. People, 45 Pac., 396, 399; 22 Colo., 429; 37 L. R. A., 711.
[134]

North Negros Sugar Co., Inc., 63 Phil. 664; citing Board of Shelby County Commissioners v. Castetter, 33 N. E., 986, 987; 7 Ind. App., 309.

[135]

Sec. 2 (o) - Reasonable rate of return on investments and operating and maintenance cost - The rate of return that reflects the prevailing cost of capital in the domestic and international markets x x x Provided further that for negotiated contracts for public utility projects which are monopolies, the rate of return on rate base shall be determined by existing laws, which in no case shall exceed twelve per centum (12%).
[136]

Rollo (G.R. No. 166910), pp. 275-285. Id. at 88. Petitioners quoted: 17 August 1995 Board Meeting

[137]

1.

The Board resolved that "(i)n the event that the Board decides on a hearing before the TOA approval, this will mean delay in the start of the construction and considering that the President has given instructions to accelerate the implementation of this project, the issue of the delay should be raised to the President. If the Board conducts the hearing after the approval of the TOA, this will allow construction to start soon and would eventually result in time savings. However, if the rates are rejected in public hearing, then government may be considered in default."
[138]

Id. at 219-226. Id. at 225. The discussion went like this:

[139]

The representative of ADG Santos brought to the attention of the Board the latter's position that if the parametric formula is adopted, there shall be no default on the part of government in case no toll rate adjustment is given. He further stated that if default is insisted by the proponent, ADG Santos is recommending for the conduct of a public hearing before approval. ADG Santos further suggested that before the contract is signed, the Board shall conduct a public hearing or solicit the indorsement of MMDA. In the event that the Board decides on a hearing before the TOA approval, this will mean delay in the start of construction and considering that the President has given instructions to accelerate the implementation of this project, the issue of the delay should be addressed to the President. If the Board conducts the hearing after the approval of the TOA, this will allow construction to start soon and would eventually result in time savings. However, if rates are rejected in the public hearing, then government may be considered in default.
[140]

Cuyegkeng v. Cruz, G.R. No. L-16263, July 26, 1960, 108 Phil. 1147.

[141]

Simon v. Civil Service Commission, G.R. No. 101251, November 5, 1992, 215 SCRA 410, 418.
[142]

Sec. 7. The right of the people to information on matters of public concern shall be recognized. Access to official records, and to documents, papers pertaining to official acts, transactions, or decisions, as well as to government research data used as basis for

policy development, shall be afforded the citizens, subject to such limitations as may be provided by law.
[143]

14.04 CONFIDENTIALITY. 1. None of the parties shall xxx without the consent of the other, divulge x x x any of the contents of this Agreement or any information relating to the negotiation concerning the operations, contracts, commercial or financial arrangements or affairs of the other parties hereto x x x.
[144]

Rollo (G.R. No. 166910), p. 392.

[145]

Joaquin G. Bernas, S.J., The Constitution of the Republic of the Philippines 337 (1996).
[146]

See Baldoza v. Judge Dimaano, A.M. No. 1120-MTJ, May 5, 1976, 17 SCRA 14.

[147]

See Taada v. Tuvera, G.R. No. 63915, April 24, 1985, 136 SCRA 27; Legaspi v. Civil Service Commission, G.R. No. 72119, May 29, 1987, 150 SCRA 530.
[148]

432 Phil. 7 (2002).

[149]

Dated June 11, 1978 entitled, "Prescribing Policies, Guidelines, Rules and Regulations for Government Infrastructure Contracts"; Expressly repealed by R.A. 9184.
[150]

Rollo (G.R. No. 166910), pp. 820-821.

[151]

Choice of persons; the selection of persons satisfactory to one's self for a position involving trust and confidence in the other's character.
[152]

De Agbayani, v. Philippine National Bank, G.R. No. L-23127, April 29, 1971, 38 SCRA 429-430.
[153]

Basco v. PAGCOR, G.R. Nos. 138298, November 29, 2000, 346 SCRA 485. Angara v. Electoral Commission, G.R. No. 45081, July 15, 1936, 63 Phil. 139. 16 Am. Jur. 2d, Constitutional Law, Sec. 115, citing cases. Annex 18-A-2, Consolidated Comment/Opposition to Supplemental Petition. P.D. 1112, 5.

[154]

[155]

[156]

[157]

[158]

See Annexes 18-A-2 & 18-C-2, supra wherein the TRB gave notice that any interested expressway user shall have the right to file, within a period of ninety (90) days from the date of publication of the toll rate matrix, a petition for review.
[159]

See Supplemental Petition of petitioner Francisco, at 18, Annex C.

[160]

Consolidated Comment/Opposition to petitioner Francisco's Supplemental Petition, at 43-50, Annex 16.

[161]

See also Annex 18-C-2, Consolidated Comment/Opposition to petitioner Francisco's Supplemental Petition.

Source: Supreme Court E-Library | Date created: 2010-11-22 15:27:46 This page was dynamically generated by the E-Library Content Management System

FIRST DIVISION [ G.R. No. 119761, August 29, 1996 ]

COMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS. HON. COURT OF APPEALS, HON. COURT OF TAX APPEALS AND FORTUNE TOBACCO CORPORATION, RESPONDENTS. DECISION
VITUG, J.: The Commissioner of Internal Revenue ("CIR") disputes the decision, dated 31 March 1995, of respondent Court of Appeals[1] affirming the 10th August 1994 decision and the 11th October 1994 resolution of the Court of Tax Appeals[2] ("CTA") in C.T.A. Case No. 5015, entitled "Fortune Tobacco Corporation vs. Liwayway Vinzons-Chato in her capacity as Commissioner of Internal Revenue." The facts, by and large, are not in dispute. Fortune Tobacco Corporation ("Fortune Tobacco") is engaged in the manufacture of different brands of cigarettes. On various dates, the Philippine Patent Office issued to the corporation separate certificates of trademark registration over "Champion," "Hope," and "More" cigarettes. In a letter, dated 06 January 1987, of then Commissioner of Internal Revenue Bienvenido A. Tan, Jr., to Deputy Minister Ramon Diaz of the Presidential Commission on Good Government, "the initial position of the Commission was to classify 'Champion,' 'Hope,' and 'More' as foreign brands since they were listed in the World Tobacco Directory as belonging to foreign companies. However, Fortune Tobacco changed the names of 'Hope'

to Hope Luxury' and 'More' to 'Premium More,' thereby removing the said brands from the foreign brand category. Proof was also submitted to the Bureau (of Internal Revenue ['BIR']) that 'Champion' was an original Fortune Tobacco Corporation register and therefore a local brand."[3] Ad Valorem taxes were imposed on these brands,[4] at the following rates: AD VALOREM "BRAND TAX RATE E.O. 22 06-23-86 07- and E.O. 273 07-25- RA 6956 06-18-90 01-86 87 01-01-88 07-05-90 Hope Luxury M. 100's 40% 45% Sec. 142, (c), (2) Hope Luxury M. King 40% 45% Sec. 142, (c), (2) More Premium M. 100's 40% 45% Sec. 142, (c), (2) More PremiumInternational Sec. 142, (c), (2) Champion Int'l. M. 100's Sec. 142, (c), (2) Champion M. 100's 40% Sec. 142, (c), (2) Champion M. King Sec. 142, (c), last par. Champion Lights 15% 20% 45%

40%

45%

40%

45%

15% 20%"[5] Sec. 142, (c), last par. A bill, which later became Republic Act ("RA") No. 7654, [6] was enacted, on 10 June 1993, by the legislature and signed into law, on 14 June 1993, by the President of the Philippines. The new law became effective on 03 July 1993. It amended Section 142(c) (1) of the National Internal Revenue Code ("NIRC") to read; as follows: "SEC. 142. Cigars and Cigarettes. "x x x xxx x x x.

"(c) Cigarettes packed by machine. - There shall be levied, assessed and collected on cigarettes packed by machine a tax at the rates prescribed below based on the constructive manufacturer's wholesale price or the actual manufacturer's wholesale price, whichever is higher: "(1) On locally manufactured cigarettes which are currently classified and taxed at fiftyfive percent (55%) or the exportation of which is not authorized by contract or otherwise, fifty-five (55%) provided that the minimum tax shall not be less than Five Pesos (P5.00) per pack. "(2).On other locally manufactured cigarettes, forty-five percent (45%) provided that the minimum tax shall not be less than Three Pesos (P3.00) per pack. "x x x x x x x x x. "When the registered manufacturer's wholesale price or the actual manufacturer's wholesale price whichever is higher of existing brands of cigarettes, including the amounts intended to cover the taxes, of cigarettes packed in twenties does not exceed Four Pesos and eighty centavos (P4.80) per pack, the rate shall be twenty percent (20%)."[7] (Italics supplied.) About a month after the enactment and two (2) days before the effectivity of RA 7654, Revenue Memorandum Circular No. 37-93 ("RMC 37-93"), was issued by the BIR the full text of which expressed: "REPUBLIKA NG PILIPINAS KAGAWARAN NG PANANALAPI KAWANIHAN NG RENTAS INTERNAS July 1, 1993 REVENUE MEMORANDUM CIRCULAR NO. 37-93 SUBJECT : Reclassification of Cigarettes Subject to Excise Tax TO : All Internal Revenue Officers and Others Concerned.

"In view of the issues raised on whether 'HOPE,' 'MORE' and 'CHAMPION' cigarettes which are locally manufactured are appropriately considered as locally manufactured cigarettes bearing a foreign brand, this Office is compelled to review the previous rulings on the matter. "Section 142(c)(1) National Internal Revenue Code, as amended by R.A. No. 6956, provides: "'On locally manufactured cigarettes bearing a foreign brand, fifty-five percent (55%) Provided, That this rate shall apply regardless of whether or not the right to use or title to the foreign brand was sold or transferred by its owner to the local manufacturer.

Whenever it has to be determined whether or not a cigarette bears a foreign brand, the listing of brands manufactured in foreign countries appearing in the current World Tobacco Directory shall govern." "Under the foregoing, the test for imposition of the 55% ad valorem tax on cigarettes is that the locally manufactured cigarettes bear a foreign brand regardless of whether or not the right to use or title to the foreign brand was sold or transferred by its owner to the local manufacturer. The brand must be originally owned by a foreign manufacturer or producer. If ownership of the cigarette brand is, however, not definitely determinable, 'x x x the listing of brands manufactured in foreign countries appearing in the current World Tobacco Directory shall govern. x x x' "'HOPE' is listed in the World Tobacco Directory as being manufactured by (a) Japan Tobacco, Japan and (b) Fortune Tobacco, Philippines. 'MORE' is listed in the said directory as being manufactured by: (a) Fills de Julia Reig, Andorra; (b) Rothmans, Australia; (c) RJR-Macdonald, Canada; (d) Rettig-Strenberg, Finland; (e) Karellas, Greece; (f) R.J. Reynolds, Malaysia; (g) Rothmans, New Zealand; (h) Fortune Tobacco, Philippines; (i) R.J. Reynolds, Puerto Rico; (j) R.J. Reynolds, Spain; (k) Tabacalera, Spain; (l) R.J. Reynolds, Switzerland; and (m) R.J. Reynolds, USA. 'Champion' is registered in the said directory as being manufactured by (a) Commonwealth Bangladesh; (b) Sudan, Brazil; (c) Japan Tobacco, Japan; (d) Fortune Tobacco, Philippines; (e) Haggar, Sudan; and (f) Tabac Reunies, Switzerland. "Since there is no showing who among the above-listed manufacturers of the cigarettes bearing the said brands are the real owner/s thereof, then it follows that the same shall be considered foreign brand for purposes of determining the ad valorem tax pursuant to Section 142 of the National Internal Revenue Code. As held in BIR Ruling No. 410-88, dated August 24, 1988, 'in cases where it cannot be established or there is dearth of evidence as to whether a brand is foreign or not, resort to the World Tobacco Directory should be made.' "In view of the foregoing, the aforesaid brands of cigarettes, viz: 'HOPE,' 'MORE' and 'CHAMPION' being manufactured by Fortune Tobacco Corporation are hereby considered locally manufactured cigarettes bearing a foreign brand subject to the 55% ad valorem tax on cigarettes. "Any ruling inconsistent herewith is revoked or modified accordingly. (SGD) LIWAYWAY VINZONS-CHATO Commissioner" On 02 July 1993, at about 17:50 hours, BIR Deputy Commissioner Victor A. Deoferio, Jr., sent via telefax a copy of RMC 37-93 to Fortune Tobacco but it was addressed to no one in particular. On 15 July 1993, Fortune Tobacco received, by ordinary mail, a certified xerox copy of RMC 37-93. In a letter, dated 19 July 1993, addressed to the appellate division of the BIR, Fortune

Tobacco, requested for a review, reconsideration and recall of RMC 37-93. The request was denied on 29 July 1993. The following day, or on 30 July 1993, the CIR assessed Fortune Tobacco for ad valorem tax deficiency amounting to P9,598,334.00. On 03 August 1993, Fortune Tobacco filed a petition for review with the CTA. [8] On 10 August 1994, the CTA upheld the position of Fortune Tobacco and adjudged: "WHEREFORE, Revenue Memorandum Circular No. 37-93 reclassifying the brands of cigarettes, viz: `HOPE,' `MORE' and `CHAMPION' being manufactured by Fortune Tobacco Corporation as locally manufactured cigarettes bearing a foreign brand subject to the 55% ad valorem tax on cigarettes is found to be defective, invalid and unenforceable, such that when R.A. No. 7654 took effect on July 3, 1993, the brands in question were not CURRENTLY CLASSIFIED AND TAXED at 55% pursuant to Section 1142(c)(1) of the Tax Code, as amended by R.A. No. 7654 and were therefore still classified as other locally manufactured cigarettes and taxed at 45% or 20% as the case may be. "Accordingly, the deficiency ad valorem tax assessment issued on petitioner Fortune Tobacco Corporation in the amount of P9,598,334.00, exclusive of surcharge and interest, is hereby canceled for lack of legal basis. "Respondent Commissioner of Internal Revenue is hereby enjoined from collecting the deficiency tax assessment made and issued on petitioner in relation to the implementation of RMC No. 37-93. "SO ORDERED." [9] In its resolution, dated 11 October 1994, the CTA dismissed for lack of merit the motion for reconsideration. The CIR forthwith filed a petition for review with the Court of Appeals, questioning the CTA's 10th August 1994 decision and 11th October 1994 resolution. On 31 March 1993, the appellate court's Special Thirteenth Division affirmed in all respects the assailed decision and resolution. In the instant petition, the Solicitor General argues: That "I. RMC 37-93 IS A RULING OR OPINION OF THE COMMISSIONER OF INTERNAL REVENUE INTERPRETING THE PROVISIONS OF THE TAX CODE. "II. BEING AN INTERPRETATIVE RULING OR OPINION, THE PUBLICATION OF RMC 37-93, FILING OF COPIES THEREOF WITH THE UP LAW CENTER AND PRIOR HEARING ARE NOT NECESSARY TO ITS VALIDITY, EFFECTIVITY AND ENFORCEABILITY. "III. PRIVATE RESPONDENT IS DEEMED TO HAVE BEEN NOTIFIED OR RMC 37-93 ON JULY 2, 1993.

"IV. RMC 37-93 IS NOT DISCRIMINATORY SINCE IT APPLIES TO ALL LOCALLY MANUFACTURED CIGARETTES SIMILARLY SITUATED AS 'HOPE,' 'MORE' AND 'CHAMPION' CIGARETTES. "V. PETITIONER WAS NOT LEGALLY PROSCRIBED FROM RECLASSIFYING HOPE, MORE AND CHAMPION CIGARETTES BEFORE THE EFFECTIVITY OF R.A. NO. 7654. "VI. SINCE RMC 37-93 IS AN INTERPRETATIVE RULE, THE INQUIRY IS NOT INTO ITS VALIDITY, EFFECTIVITY OR ENFORCEABILITY BUT INTO ITS CORRECTNESS OR PROPRIETY; RMC 37-93 IS CORRECT." [10] In fine, petitioner opines that RMC 37-93 is merely an interpretative ruling of the BIR which can thus become effective without any prior need for notice and hearing, nor publication, and that its issuance is not discriminatory since it would apply under similar circumstances to all locally manufactured cigarettes. The Court must sustain both the appellate court and the tax court. Petitioner stresses on the wide and ample authority of the BIR in the issuance of rulings for the effective implementation of the provisions of the National Internal Revenue Code. Let it be made clear that such authority of the Commissioner is not here doubted. Like any other government agency, however, the CIR may not disregard legal requirements or applicable principles in the exercise of its quasi-legislative powers. Let us first distinguish between two kinds of administrative issuances - a legislative rule and an interpretative rule. In Misamis Oriental Association of Coco Traders, Inc., vs. Department of Finance Secretary, [11] the Court expressed: "x x x a legislative rule is in the nature of subordinate legislation, designed to implement a primary legislation by providing the details thereof. In the same way that laws must have the benefit of public hearing, it is generally required that before a legislative rule is adopted there must be hearing. In this connection, the Administrative Code of 1987 provides: "Public Participation. - If not otherwise required by law, an agency shall, as far as practicable, publish or circulate notices of proposed rules and afford interested parties the opportunity to submit their views prior to the adoption of any rule. "(2) In the fixing of rates, no rule or final order shall be valid unless the proposed rates shall have been published in a newspaper of general circulation at least two (2) weeks before the first hearing thereon. "(3) In case of opposition, the rules on contested cases shall be observed.

"In addition such rule must be published. On the other hand, interpretative rules are

designed to provide guidelines to the law which the administrative agency is in charge of enforcing." [12] It should be understandable that when an administrative rule is merely interpretative in nature, its applicability needs nothing further than its bare issuance for it gives no real consequence more than what the law itself has already prescribed. When, upon the other hand, the administrative rule goes beyond merely providing for the means that can facilitate or render least cumbersome the implementation of the law but substantially adds to or increases the burden of those governed, it behooves the agency to accord at least to those directly affected a chance to be heard, and thereafter to be duly informed, before that new issuance is given the force and effect of law. A reading of RMC 37-93, particularly considering the circumstances under which it has been issued, convinces us that the circular cannot be viewed simply as a corrective measure (revoking in the process the previous holdings of past Commissioners) or merely as construing Section 142(c)(1) of the NIRC, as amended, but has, in fact and most importantly, been made in order to place "Hope Luxury," "Premium More" and "Champion" within the classification of locally manufactured cigarettes bearing foreign brands and to thereby have them covered by RA 7654. Specifically, the new law would have its amendatory provisions applied to locally manufactured cigarettes which at the time of its effectivity were not so classified as bearing foreign brands. Prior to the issuance of the questioned circular, "Hope Luxury," "Premium More," and "Champion" cigarettes were in the category of locally manufactured cigarettes not bearing foreign brand subject to 45% ad valorem tax. Hence, without RMC 37-93, the enactment of RA 7654, would have had no new tax rate consequence on private respondent's products. Evidently, in order to place "Hope Luxury," "Premium More," and "Champion" cigarettes within the scope of the amendatory law and subject them to an increased tax rate, the now disputed RMC 37-93 had to be issued. In so doing, the BIR not simply interpreted the law; verily, it legislated under its quasi-legislative authority. The due observance of the requirements of notice, of hearing, and of publication should not have been then ignored. Indeed, the BIR itself, in its RMC 10-86, has observed and provided: "RMC NO. 10-86 Effectivity of Internal Revenue Rules and Regulations "It has been observed that one of the problem areas bearing on compliance with Internal Revenue Tax rules and regulations is lack or insufficiency of due notice to the tax paying public. Unless there is due notice, due compliance therewith may not be reasonably expected. And most importantly, their strict enforcement could possibly suffer from legal infirmity in the light of the constitutional provision on `due process of law' and the essence of the Civil Code provision concerning effectivity of laws, whereby due notice is a basic requirement (Sec. 1, Art. IV, Constitution; Art. 2, New Civil Code). "In order that there shall be a just enforcement of rules and regulations, in conformity with the basic element of due process, the following procedures are hereby prescribed for the drafting, issuance and implementation of the said Revenue Tax Issuances:

"(1). This Circular shall apply only to (a) Revenue Regulations; (b) Revenue Audit Memorandum Orders; and (c) Revenue Memorandum Circulars and Revenue Memorandum Orders bearing on internal revenue tax rules and regulations. "(2). Except when the law otherwise expressly provides, the aforesaid internal revenue tax issuances shall not begin to be operative until after due notice thereof may be fairly presumed. "Due notice of the said issuances may be fairly presumed only after the following procedures have been taken: "xxx xxx xxx "(5). Strict compliance with the foregoing procedures is enjoined." [13] Nothing on record could tell us that it was either impossible or impracticable for the BIR to observe and comply with the above requirements before giving effect to its questioned circular. Not insignificantly, RMC 37-93 might have likewise infringed on uniformity of taxation. Article VI, Section 28, paragraph 1, of the 1987 Constitution mandates taxation to be uniform and equitable. Uniformity requires that all subjects or objects of taxation, similarly situated, are to be treated alike or put on equal footing both in privileges and liabilities.[14] Thus, all taxable articles or kinds of property of the same class must be taxed at the same rate[15] and the tax must operate with the same force and effect in every place where the subject may be found. Apparently, RMC 37-93 would only apply to "Hope Luxury," Premium More" and "Champion" cigarettes and, unless petitioner would be willing to concede to the submission of private respondent that the circular should, as in fact my esteemed colleague Mr. Justice Bellosillo so expresses in his separate opinion, be considered adjudicatory in nature and thus violative of due process following the Ang Tibay[16] doctrine, the measure suffers from lack of uniformity of taxation. In its decision, the CTA has keenly noted that other cigarettes bearing foreign brands have not been similarly included within the scope of the circular, such as "1. Locally manufactured by ALHAMBRA INDUSTRIES, INC. (a) `PALM TREE' is listed as manufactured by office of Monopoly, Korea (Exhibit `R') "2. Locally manufactured by LA SUERTE CIGAR and CIGARETTE COMPANY (a) `GOLDEN KEY' is listed being manufactured by United Tobacco, Pakistan (Exhibit `S') (b) `CANNON' is listed as being manufactured by Alpha Tobacco, Bangladesh (Exhibit `T') "3. Locally manufactured by LA PERLA INDUSTRIES, INC.

(a) `WHITE HORSE' is listed as being manufactured by Rothman's, Malaysia (Exhibit `U') (b) `RIGHT' is listed as being manufactured by SVENSKA, Tobaks, Sweden (Exhibit `V-1') "4. Locally manufactured by MIGHTY CORPORATION (a) 'WHITE HORSE' is listed as being manufactured by Rothman's, Malaysia (Exhibit 'U-1') "5. Locally manufactured by STERLING TOBACCO CORPORATION (a) UNION' is listed as being manufactured by Sumatra Tobacco, Indonesia and Brown and Williamson, USA (Exhibit 'U-3') (b) WINNER' is listed as being manufactured by Alpha Tobacco, Bangladesh; Nanyang, Hongkong; Joo Lan, Malaysia; Pakistan Tobacco Co., Pakistan; Premier Tobacco, Pakistan and Haggar, Sudan (Exhibit 'U-4')." [17] The court quoted at length from the transcript of the hearing conducted on 10 August 1993 by the Committee on Ways and Means of the House of Representatives; viz: "THE CHAIRMAN. So you have specific information on Fortune Tobacco alone. You don't have specific information on other tobacco manufacturers. Now, there are other brands which are similarly situated. They are locally manufactured bearing foreign brands. And may I enumerate to you all these brands, which are also listed in the World Tobacco Directory x x x. Why were these brands not reclassified at 55 if your want to give a level playing field to foreign manufacturers? "MS. CHATO. Mr. Chairman, in fact, we have already prepared a Revenue Memorandum Circular that was supposed to come after RMC No. 37-93 which have really named specifically the list of locally manufactured cigarettes bearing a foreign brand for excise tax purposes and includes all these brands that you mentioned at 55 percent except that at that time, when we had to come up with this, we were forced to study the brands of Hope, More and Champion because we were given documents that would indicate the that these brands were actually being claimed or patented in other countries because we went by Revenue Memorandum Circular 1488 and we wanted to give some rationality to how it came about but we couldn't find the rationale there. And we really found based on our own interpretation that the only test that is given by that existing law would be registration in the World Tobacco Directory. So we came out with this proposed revenue memorandum circular which we forwarded to the Secretary of Finance except that at that point in time, we went by the Republic Act 7654 in Section 1 which amended Section 142, C-1, it said, that on locally manufactured cigarettes which are currently classified and taxed at 55 percent. So we were saying that when this law took effect in July 3 and if we are going to come up with this revenue circular thereafter, then I think our action would really be subject to question but we feel that . . .

Memorandum Circular Number 37-93 would really cover even similarly situated brands. And in fact, it was really because of the study, the short time that we were given to study the matter that we could not include all the rest of the other brands that would have been really classified as foreign brand if we went by the law itself. I am sure that by the reading of the law, you would without that ruling by Commissioner Tan they would really have been included in the definition or in the classification of foregoing brands. These brands that you referred to or just read to us and in fact just for your information, we really came out with a proposed revenue memorandum circular for those brands. (Italics supplied) "Exhibit 'FF-2-C', pp. V-5 TO V-6, VI-1 to VI-3). "x x x xxx x x x.

"MS. CHATO. x x x But I do agree with you now that it cannot and in fact that is why I felt that we . . . I wanted to come up with a more extensive coverage and precisely why I asked that revenue memorandum circular that would cover all those similarly situated would be prepared but because of the lack of time and I came out with a study of RA 7654, it would not have been possible to really come up with the reclassification or the proper classification of all brands that are listed there. x x x' (italics supplied) (Exhibit 'FF-2d', page IX-1) "x x x xxx x x x.

"HON. DIAZ. But did you not consider that there are similarly situated? "MS. CHATO. That is precisely why, Sir, after we have come up with this Revenue Memorandum Circular No. 37-93, the other brands came about the would have also clarified RMC 37-93 by I was saying really because of the fact that I was just recently appointed and the lack of time, the period that was allotted to us to come up with the right actions on the matter, we were really caught by the July 3 deadline. But in fact, We have already prepared a revenue memorandum circular clarifying with the other . . . does not yet, would have been a list of locally manufactured cigarettes bearing a foreign brand for excise tax purposes which would include all the other brands that were mentioned by the Honorable Chairman. (Italics supplied) (Exhibit 'FF-2-d,' par. IX-4)."[18] All taken, the Court is convinced that the hastily promulgated RMC 37-93 has fallen short of a valid and effective administrative issuance. WHEREFORE, the decision of the Court of Appeals, sustaining that of the Court of Tax Appeals, is AFFIRMED. No costs. SO ORDERED. Kapunan, J., concurs. Padilla, J., joins Justice Hermosisima, Jr., in his dissenting opinion. Bellosillo, J., see separate opinion. Hermosisima, Jr., J., see dissenting opinion.

[1]

Through Associate Justices Justo P. Torres, Jr. (ponente), Corona Ibay-Somera and Conrado M. Vasquez, Jr. (members).
[2]

Penned by Presiding Judge Ernesto D. Acosta and concurred in by Associate Judges Ramon O. De Veyra and Manuel K. Gruba.
[3]

Underscoring supplied. Rollo, pp. 55-56. Since the institution of Executive Order No. 22 on 23 June 1986. Rollo, p. 56

[4]

[5]

[6]

An Act Revising The Excise Tax Base, Allocating a Portion Of The Incremental Revenue Collected For The Emergency Employment Program For Certain Workers Amending For The Purpose Section 142 Of The National Internal Revenue Code, As Amended, And For Other Purposes.
[7]

Official Gazette, Vol. 89., No. 32, 09 August 1993, p. 4476. The petition was subsequently amended on 12 August 1993. Rollo, pp. 115-116. Rollo, pp. 21-22. 238 SCRA 63. Italics supplied. At p. 69. Rollo, pp. 65-66. See Juan Luna Subdivision vs. Sarmiento, 91 Phil. 371. City of Baguio vs. De Leon, 25 SCRA 938. Ang Tibay vs. Court of Industrial Relations, 69 Phil. 635. Rollo, pp. 97-98.

[8]

[9]

[10]

[11]

[12]

[13]

[14]

[15]

[16]

[17]

[18]

Rollo, pp. 98-100. SEPARATE OPINION

BELLOSILLO, J.:

RA 7654 was enacted by Congress on 10 June 1993, signed into law by the President on 14 June 1993, and took effect 3 July 1993. It amended partly Sec. 142, par. (c), of the National Internal Revenue Code (NIRC) to read SEC. 142. Cigars and cigarettes. - x x x (c) Cigarettes packed by machine. - There shall be levied , assessed and collected on cigarettes packed by machine a tax at the rates prescribed below based on the constructive manufacturer's wholesale price or the actual manufacturer's wholesale price, whichever is higher: (1) On locally manufactured cigarettes which are currently classified and taxed at fiftyfive percent (55%) or the exportation of which is not authorized by contract or otherwise, fifty-five percent (55%) provided that the minimum tax shall not be less than Five Pesos (P5.00) per pack (italics supplied). (2) On other locally manufactured cigarettes, forty-five percent (45%) provided that the minimum tax shall not be less than Three Pesos (P3.00) per pack. Prior to the effectivity of RA 7654, cigarette brands Hope Luxury, Premium More and Champion were considered local brands subjected to an ad valorem tax at the rate of 2045%. However, on 1 July 1993 or two (2) days before RA 7654 took effect, petitioner Commissioner of Internal Revenue issued RMC 37-93 reclassifying "Hope, More and Champion being manufactured by Fortune Tobacco Corporation x x x (as) locally manufactured cigarettes bearing a foreign brand subject to the 55% ad valorem tax on cigarettes."[1] RMC 37-93 in effect subjected Hope Luxury, Premium More and Champion cigarettes to the provisions of Sec. 142, par. (c), subpar. (1), NIRC, as amended by RA 7654, imposing upon these cigarette brands an ad valorem tax of "fiftyfive percent (55%) provided that the minimum tax shall not be less than Five Pesos (P5.00) per pack." On 2 July 1993, Friday, at about five-fifty in the afternoon, or a few hours before the effectivity of RA 7654, a copy of RMC 37-93 with a cover letter signed by Deputy Commissioner Victor A. Deoferio of the Bureau of Internal Revenue was sent by facsimile to the factory of respondent corporation in Parang, Marikina, Metro Manila. It appears that the letter together with a copy of RMC 37-93 did not immediately come to the knowledge of private respondent as it was addressed to no one in particular. It was only when the reclassification of respondent corporation's cigarette brands was reported in the column of Fil C. Sionil in Business Bulletin on 4 July 1993 that the president of respondent corporation learned of the matter, prompting him to inquire into its veracity and to request from petitioner a copy of RMC 37-93. On 15 July 1993 respondent corporation received by ordinary mail a certified machine copy of RMC 37-93. Respondent corporation sought a review, reconsideration and recall of RMC 37-93 but was forthwith denied by the Appellate Division of the Bureau of Internal Revenue. As a consequence, on 30 July 1993 private respondent was assessed an ad valorem tax deficiency amounting to P9,598,334.00. Respondent corporation went to the Court of Tax Appeals (CTA) on a petition for review.

On 10 August 1994, after due hearing, the CTA found the petition meritorious and ruledRevenue Memorandum Circular No. 37-93 reclassifying the brands of cigarettes, viz: Hope, More, and Champion being manufactured by Fortune Tobacco Corporation as locally manufactured cigarettes bearing a foreign brand subject to the 55% ad valorem tax on cigarettes is found to be defective, invalid and unenforceable x x x Accordingly, the deficiency ad valorem tax assessment issued on petitioner Fortune Tobacco Corporation in the amount of P9,598,334.00, exclusive of surcharge and interest, is hereby cancelled for lack of legal basis."[2] The CTA held that petitioner Commissioner of Internal Revenue failed to observe due process of law in issuing RMC 37-93 as there was no prior notice and hearing, and that RMC 37-93 was in itself discriminatory. The motion to reconsider its decision was denied by the CTA for lack of merit. On 31 March 1995 respondent Court of Appeals affirmed in toto the decision of the CTA.[3] Hence, the instant petition for review. Petitioner now submits through the Solicitor General that RMC 37-93 reclassifying Hope Luxury, Premium More and Champion as locally manufactured cigarettes bearing foreign brands is merely an interpretative ruling which needs no prior notice and hearing as held in Misamis Oriental Association of Coco Traders, Inc. v. Department of Finance Secretary.[4] It maintains that neither is the assailed revenue memorandum circular discriminatory as it merely "lays down the test in determining whether or not a locally manufactured cigarette bears a foreign brand using (only) the cigarette brands Hope, More and Champion as specific examples."[5] Respondent corporation on the other hand contends that RMC 37-93 is not a mere interpretative ruling but is adjudicatory in nature where prior notice and hearing are mandatory, and that Misamis Oriental Association of Coco Traders, Inc. v. Department of Finance Secretary on which the Solicitor General relies heavily is not applicable. Respondent Fortune Tobacco Corporation also argues that RMC 37-93 discriminates against its cigarette brands since those of its competitors which are similarly situated have not been reclassified. The main issues before us are (a) whether RMC 37-93 is merely an interpretative rule the issuance of which needs no prior notice and hearing, or an adjudicatory ruling which calls for the twin requirements of prior notice and hearing, and, (b) whether RMC 37-93 is discriminatory in nature. A brief discourse on the powers and functions of administrative bodies may be instructive. Administrative agencies possess quasi-legislative or rule making powers and quasijudicial or administrative adjudicatory powers. Quasi-legislative or rule making power is the power to make rules and regulations which results in delegated legislation that is within the confines of the granting statute and the doctrine of nondelegability and separability of powers.

Interpretative rule, one of the three (3) types of quasi-legislative or rule making powers of an administrative agency (the other two being supplementary or detailed legislation, and contingent legislation), is promulgated by the administrative agency to interpret, clarify or explain statutory regulations under which the administrative body operates. The purpose or objective of an interpretative rule is merely to construe the statute being administered. It purports to do no more than interpret the statute. Simply, the rule tries to say what the statute means. Generally, it refers to no single person or party in particular but concerns all those belonging to the same class which may be covered by the said interpretative rule. It need not be published and neither is a hearing required since it is issued by the administrative body as an incident of its power to enforce the law and is intended merely to clarify statutory provisions for proper observance by the people. In Taada v. Tuvera,[6] this Court expressly said that "[i]nterpretative regulations x x x need not be published." Quasi-judicial or administrative adjudicatory power on the other hand is the power of the administrative agency to adjudicate the rights of persons before it. It is the power to hear and determine questions of fact to which the legislative policy is to apply and to decide in accordance with the standards laid down by the law itself in enforcing and administering the same law.[7] The administrative body exercises its quasi-judicial power when it performs in a judicial manner an act which is essentially of an executive or administrative nature, where the power to act in such manner is incidental to or reasonably necessary for the performance of the executive or administrative duty entrusted to it.[8] In carrying out their quasi-judicial functions the administrative officers or bodies are required to investigate facts or ascertain the existence of facts, hold hearings, weigh evidence, and draw conclusions from them as basis for their official action and exercise of discretion in a judicial nature. Since rights of specific persons are affected it is elementary that in the proper exercise of quasi-judicial power due process must be observed in the conduct of the proceedings. The importance of due process cannot be underestimated. Too basic is the rule that no person shall be deprived of life, liberty or property without due process of law. Thus when an administrative proceeding is quasi-judicial in character, notice and fair open hearing are essential to the validity of the proceeding. The right to reasonable prior notice and hearing embraces not only the right to present evidence but also the opportunity to know the claims of the opposing party and to meet them. The right to submit arguments implies that opportunity otherwise the right may as well be considered impotent. And those who are brought into contest with government in a quasi-judicial proceeding aimed at the control of their activities are entitled to be fairly advised of what the government proposes and to be heard upon its proposal before it issues its final command. There are cardinal primary rights which must be respected in administrative proceedings. The landmark case of Ang Tibay v. The Court of Industrial Relations[9] enumerated these rights (1) the right to a hearing, which includes the right to the party interested or affected to present his own case and submit evidence in support thereof; (2) the tribunal must consider the evidence presented; (3) the decision must have something to support itself; (4) the evidence must be substantial; (5) the decision must be rendered on the evidence

presented at the hearing, or at least contained in the record and disclosed to the parties affected; (6) the tribunal 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 in arriving at a decision; and, (7) the tribunal should in all controversial questions render its decision in such manner that the parties to the proceeding may know the various issues involved and the reasons for the decision rendered. In determining whether RMC 37-93 is merely an interpretative rule which requires no prior notice and hearing, or an adjudicatory rule which demands the observance of due process, a close examination of RMC 37-93 is in order. Noticeably, petitioner Commissioner of Internal Revenue at first interprets Sec. 142, par. (c), subpar. (1), of the NIRC, as amended, by citing the law and clarifying or explaining what it means Section 142 (c) (1), National Internal Revenue Code, as amended by R.A. No. 6956, provides: On locally manufactured cigarettes bearing a foreign brand, fifty-five percent (55%) Provided, That this rate shall apply regardless of whether or not the right to use or title to the foreign brand was sold or transferred by its owner to the local manufacturer. Whenever it has to be determined whether or not a cigarette bears a foreign brand, the listing of brands manufactured in foreign countries appearing in the current World Tobacco Directory shall govern. Under the foregoing, the test for imposition of the 55% ad valorem tax on cigarettes is that the locally manufactured cigarettes bear a foreign brand regardless of whether or not the right to use or title to the foreign brand was sold or transferred by its owner to the local manufacturer. The brand must be originally owned by a foreign manufacturer or producer. If ownership of the cigarette brand is, however, not definitely determinable, "x x x the listing of brands manufactured in foreign countries appearing in the current World Tobacco Directory shall govern x x x" Then petitioner makes a factual finding by declaring that Hope (Luxury), (Premium) More and Champion are manufactured by other foreign manufacturersHope is listed in the World Tobacco Directory as being manufactured by (a) Japan Tobacco, Japan and (b) Fortune Tobacco, Philippines. More is listed in the said directory as being manufactured by: (a) Fills de Julia Reig, Andorra; (b) Rothmans, Australia; (c) RJR-MacDonald, Canada; (d) Rettig-Strenberg, Finland; (e) Karellas, Greece; (f) R.J. Reynolds, Malaysia; (g) Rothmans, New Zealand; (h) Fortune Tobacco, Philippines; (i) R.J. Reynolds, Puerto Rico; (j) R.J. Reynolds, Spain; (k) Tabacalera, Spain; (l) R.J. Reynolds, Switzerland; and (m) R.J. Reynolds, USA. "Champion" is registered in the said directory as being manufactured by: (a) Commonwealth Bangladesh; (b) Sudan, Brazil; (c) Japan Tobacco, Japan; (d) Fortune Tobacco, Philippines; (e) Haggar, Sudan; and (f) Tabac Reunies, Switzerland. From this finding, petitioner thereafter formulates an inference that since it cannot be determined who among the manufacturers are the real owners of the brands in question, then these cigarette brands should be considered foreign brandsSince there is no showing who among the above-listed manufacturers of the cigarettes bearing the said brands are the real owner/s thereof, then it follows that the same shall be considered foreign brand for purposes of determining the ad valorem tax pursuant to Section 142 of the National Internal Revenue Code. As held in BIR Ruling No. 410-88,

dated August 24, 1988, "in cases where it cannot be established or there is dearth of evidence as to whether a brand is foreign or not, resort to the World Tobacco Directory should be made." Finally, petitioner caps RMC 37-93 with a disposition specifically directed at respondent corporation reclassifying its cigarette brands as locally manufactured bearing foreign brandsIn view of the foregoing, the aforesaid brands of cigarettes, viz: Hope, More and Champion being manufactured by Fortune Tobacco Corporation are hereby considered locally manufactured cigarettes bearing a foreign brand subject to the 55% ad valorem tax on cigarettes. Any ruling inconsistent herewith is revoked or modified accordingly. It is evident from the foregoing that in issuing RMC 37-93 petitioner Commissioner of Internal Revenue was exercising her quasi-judicial or administrative adjudicatory power. She cited and interpreted the law, made a factual finding, applied the law to her given set of facts, arrived at a conclusion, and issued a ruling aimed at a specific individual. Consequently prior notice and hearing are required. It must be emphasized that even the text alone of RMC 37-93 implies that reception of evidence during a hearing is appropriate if not necessary since it invokes BIR Ruling No. 410-88, dated August 24, 1988, which provides that "in cases where it cannot be established or there is dearth of evidence as to whether a brand is foreign or not x x x" Indeed, it is difficult to determine whether a brand is foreign or not if it is not established by, or there is dearth of, evidence because no hearing has been called and conducted for the reception of such evidence. In fine, by no stretch of the imagination can RMC 37-93 be considered purely as an interpretative rule - requiring no previous notice and hearing and simply interpreting, construing, clarifying or explaining statutory regulations being administered by or under which the Bureau of Internal Revenue operates. It is true that both RMC 47-91 in Misamis Oriental Association of Coco Traders v. Department of Finance Secretary, and RMC 37-93 in the instant case reclassify certain products for purposes of taxation. But the similarity between the two revenue memorandum circulars ends there. For in properly determining whether a revenue memorandum circular is merely an interpretative rule or an adjudicatory rule, its very tenor and text, and the circumstances surrounding its issuance will have to be considered. We quote RMC 47-91 promulgated 11 June 1991 Revenue Memorandum Circular No. 47-91 SUBJECT: Taxability of Copra TO : All Revenue Officials and Employees and Others Concerned.

For the information and guidance of all officials and employees and others concerned, quoted hereunder in its entirety is VAT Ruling No. 190-90 dated August 17,1990: COCOFED MARKETING RESEARCH CORPORATION

6th Floor Cocofed Building 144 Amorsolo Street Legaspi Village, Makati Metro Manila Attention: Ms. Esmyrna E. Reyes Vice President - Finance Sirs: This has reference to your letter dated January 16, 1990 wherein you represented that inspite of your VAT registration of your copra trading company, you are supposed to be exempt from VAT on the basis of BIR Ruling dated January 8,1988 which considered copra as an agricultural food product in its original state. In this connection, you request for a confirmation of your opinion as aforestated. In reply, please be informed that copra, being an agricultural non-food product, is exempt from VAT only if sale is made by the primary producer pursuant to Section 103 (a) of the Tax Code, as amended. Thus as a trading company and a subsequent seller, your sale of copra is already subject to VAT pursuant to Section 9(b)(1) of Revenue Regulations 5-27. This revokes VAT Ruling Nos. 009-88 and 279-88. Very truly yours, (Sgd.) JOSE U. ONG Commissioner of Internal Revenue As a clarification, this is the present and official stand of this Office unless sooner revoked or amended. All revenue officials and employees are enjoined to give this Circular as wide a publicity as possible. (Sgd.) JOSE U. ONG Commissioner of Internal Revenue Quite obviously, the very text of RMC 47-91 itself shows that it is merely an interpretative rule as it simply quotes a VAT Ruling and reminds those concerned that the ruling is the present and official stand of the Bureau of Internal Revenue. Unlike in RMC 37-93 where petitioner Commissioner manifestly exercised her quasi-judicial or administrative adjudicatory power, in RMC 47-91 there were no factual findings, no application of laws to a given set of facts, no conclusions of law, and no dispositive portion directed at any particular party. Another difference is that in the instant case, the issuance of the assailed revenue memorandum circular operated to subject the taxpayer to the new law which was yet to take effect, while in Misamis, the disputed revenue memorandum circular was issued simply to restate and then clarify the prevailing position and ruling of the administrative

agency, and no new law yet to take effect was involved. It merely interpreted an existing law which had already been in effect for some time and which was not. set to be amended. RMC 37-93 is thus prejudicial to private respondent alone. A third difference, and this likewise resolves the issue of discrimination, is that RMC 3793 was ostensibly issued to subject the cigarette brands of respondent corporation to a new law as it was promulgated two days before the expiration of the old law and a few hours before the effectivity of the new law. That RMC 37-93 is particularly aimed only at respondent corporation and its three (3) cigarette brands can be seen from the dispositive portion of the assailed revenue memorandum circular In view of the foregoing, the aforesaid brands of cigarettes, viz: Hope, More, and Champion being manufactured by Fortune Tobacco Corporation are hereby considered locally manufactured cigarettes bearing a foreign brand subject to the 55% ad valorem tax on cigarettes. Any ruling inconsistent herewith is revoked or modified accordingly. Thus the argument of the Solicitor General that RMC 37-93 is not discriminatory as "[i]t merely lays down the test in determining whether or not a locally manufactured cigarette bears a foreign brand using the cigarette brands Hope, More and Champion as specific examples," cannot be accepted, much less sustained. Without doubt, RMC 37-93 has a tremendous effect on respondent corporation - and solely on respondent corporation - as its deficiency ad valorem tax assessment on its removals of Hope Luxury, Premium More, and Champion cigarettes for six (6) hours alone, i.e., from six o'clock in the evening of 2 July 1993 which is presumably the time respondent corporation was supposed to have received the facsimile message sent by Deputy Commissioner Victor A. Deoferio, until twelve o'clock midnight upon the effectivity of the new law, was already P9,598,334.00. On the other hand, RMC 47-91- was issued with no purpose except to state and declare what has been the official stand of the administrative agency on the specific subject matter, and was indiscriminately directed to all copra traders with no particular individual in mind. That petitioner Commissioner of Internal Revenue is an expert in her field is not attempted to be disputed; hence, we do not question the wisdom of her act in reclassifying the cigarettes. Neither do we deny her the exercise of her quasi-judicial powers. But most certainly, by constitutional mandate, the Court must check the exercise of these powers and ascertain whether petitioner has gone beyond the legitimate bounds of her authority. In the final analysis, the issue before us is not the expertise, the authority to promulgate rules, or the wisdom of petitioner as Commissioner of Internal Revenue in reclassifying the cigarettes of private respondents. It is simply the faithful observance by government of the basic constitutional right of a taxpayer to due process of law and the equal protection of the laws. This is what distresses me no end - the manner and the circumstances under which the cigarettes of private respondent were reclassified and correspondingly taxed under RMC 37-93, an adjudicatory rule which therefore requires reasonable notice and hearing before its issuance. It should not be confused with RMC

47-91, which is a mere interpretative rule. In the earlier case of G.R. No. 119322, which practically involved the same opposing interests, I also voted to uphold the constitutional right of the taxpayer concerned to due process and equal protection of the laws. By a vote of 3-2, that view prevailed. In sequela, we in the First Division who constituted the majority found ourselves unjustly drawn into the vortex of a nightmarish episode. The strong ripples whipped up by my opinion expressed therein - and of the majority - have yet to vanish when we are again in the imbroglio of a similar dilemma. The unpleasant experience should be reason enough to simply steer clear of this controversy and surf on a pretended loss of judicial objectivity. Such would have been an easy way out, a gracious exit, so to speak, albeit lame. But to camouflage my leave with a sham excuse would be to turn away from a professional vow I keep at all times; I would not be true to myself, and to the people I am committed to serve. Thus, as I have earlier expressed, if placed under similar circumstances in some future time, I shall have to brave again the prospect of another vilification and a tarnished image if only to show proudly to the whole world that under the present dispensation judicial independence in our country is a true component of our democracy. In fine, I am greatly perturbed by the manner RMC No. 37-93 was issued as well as the effect of such issuance. For it cannot be denied that the circumstances clearly demonstrated that it was hastily issued without prior notice and hearing, and singling out private respondent alone - when two days before a new tax law was to take effect petitioner reclassified and taxed the cigarette brands of private respondent at a higher rate. Obviously, this was to make it appear that even before the anticipated date of effectivity of the statute which was undeniably priorly known to petitioner - these brands were already currently classified and taxed at fifty-five percent (55%), thus shoving them into the purview of the law that was to take effect two days after! For sure, private respondent was not properly informed before the issuance of the (questioned memorandum circular that its cigarette brands, Hope Luxury, Premium More and Champion were being reclassified and subjected to a higher tax rate. Naturally, the result would be to lose financially because private respondent was still selling its cigarettes at a price based on the old, lower tax rate. Had there been previous notice and hearing, as claimed by private respondent, it could have very well presented its side, either by opposing the reclassification, or by acquiescing thereto but increasing the price of its cigarettes to adjust to the higher tax rate. The reclassification and the ensuing imposition of a tax rate increase therefore could not be anything but confiscatory if we are also to consider the claim., of private respondent that the new tax is even higher than the cost of its cigarettes. Accordingly, I vote to deny the petition.
[1]

See penultimate paragraph of RMC 37-93. Decision penned by Presiding Judge Ernesto D. Acosta, concurred in by Associate

[2]

Judges Manuel K. Gruba and Ramon O. De Veyra.

[3]

Special Thirteenth Division; Decision penned by Associate Justice Justo P. Torres as chairman, concurred in by Associate Justices Corona Ibay-Somera and Conrado M. Vasquez, Jr.
[4]

G.R. No. 108524, 10 November 1994; 238 SCRA 63. Petition for Review, p. 28; Rollo, p. 38. No. L-63915, 29 December 1986, 146 SCRA 446.

[5]

[6]

[7]

Hormed v. Helvering, 312 U.S. 552; Reetz v. Michigan, 188 U.S. 505; Gudmindson v. Cardollo, 126 F 2d. 521.
[8]

Collins v. Selectmen of Brookline, 91 N.E. 2d, 747. 69 Phil. 635 (1940). DISSENTING OPINION

[9]

HERMOSISIMA, JR., J.: Private respondent Fortune Tobacco Corporation in the instant case disputes its liability for deficiency ad valorem excise taxes on its removals of "Hope," "More," and "Champion" cigarettes from 6:00 p.m. to 12:00 midnight of July 2, 1993, in the total amount of P9,598,334.00. It claims that the circular, upon which the assessment was based and made, is defective, invalid and unenforceable for having been issued without notice and hearing and in violation of the equal protection clause guaranteed by the Constitution. The majority upholds these claims of private respondent, convinced that the Circular in question, in the first place, did not give prior notice and hearing, and so, it could not have been valid and effective. It proceeds to affirm the factual findings of the Court of Tax Appeals, which findings were considered correct by respondent Court of Appeals, to the effect that the petitioner Commissioner of Internal Revenue had indeed blatantly failed to comply with the said twin requirements of notice and hearing, thereby rendering the issuance of the questioned Circular to be in violation of the due process clause of the Constitution. It is also its dominant opinion that the questioned Circular discriminates against private respondent Fortune Tobacco Corporation insofar as it seems to affect only its "Hope," "More," and "Champion" cigarettes, to the exclusion of other cigarettes apparently of the same kind or classification as these cigarettes manufactured by private respondent. With all due respect, I disagree with the majority in its disquisition of the issues and its resulting conclusions.

Section 245 of the National Internal Revenue Code, as amended, empowers the Commissioner of Internal Revenue to issue the questioned Circular Section 245 of the National Internal Revenue Code, as amended, provides: "Sec. 245. Authority of Secretary of Finance to promulgate rules and regulations.The Secretary of Finance, upon recommendation of the Commissioner, shall promulgate all needful rules and regulations for the effective enforcement of the provisions of this Code x x x without prejudice to the power of the Commissioner of Internal Revenue to make rulings or opinions in connection with the implententation of the provisions of internal revenue laws, including rulings on the classification of articles for sales tax and similar purposes." The subject of the questioned Circular is the reclassification of cigarettes subject to excise taxes. It was issued in connection with Section 142 (c) (1) of the National Internal Revenue Code, as amended, which imposes ad valorem excise taxes on locally manufactured cigarettes bearing a foreign brand. The same provision prescribes the ultimate criterion that determines which cigarettes are to be considered "locally manufactured cigarettes bearing a foreign brand." It provides: "x x x Whenever it has to be determined whether or not a cigarette bears a foreign brand, the listing of brands manufactured in foreign countries appearing in the current World Tobacco Directory shall govern." There is only one World Tobacco Directory for a given current year, and the same is mandated by law to be the BIR Commissioner's controlling basis for determining whether or not a particular locally manufactured cigarette is one bearing a foreign brand. In so making a determination, petitioner should inquire into the entries in the World Tobacco Directory for the given current year and shall be held bound by such entries therein. She is not required to subject the results of her inquiries to feedback from the concerned cigarette manufacturers, and it is doubtlessly not desirable nor managerially sound to court dispute thereon when the law does not, in the first place, require debate or hearing thereon. Petitioner may make such a determination because she is the Chief Executive Officer of the administrative agency that is the Bureau of Internal Revenue in which are vested quasi-legislative powers entrusted to it by the legislature in recognition of its more encompassing and unequalled expertise in the field of taxation. "The vesture, of quasi-legislative and quasi-judicial powers in administrative bodies is not unconstitutional, unreasonable and oppressive. It has been necessitated by 'the growing complexity of the modern society' (Solid Homes, Inc. vs. Payawal, 177 SCRA 72, 79). More and more administrative bodies are necessary to help in the regulation of society's ramified activities. 'Specialized in the particular field 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' x x x"[1] Statutorily empowered to issue rulings, or opinions embodying the proper determination in respect to classifying articles, including cigarettes, for purposes of tax assessment and collection, petitioner was acting well within her prerogatives when she issued the questioned Circular. And in the exercise of such prerogatives under the law, she has in her favor the presumption of regular performance of official duty which must be overcome by clearly persuasive evidence of stark error and grave abuse of discretion in

order to be overturned and disregarded. It is irrelevant that the Court of Tax Appeals makes much of the effect of the passing of Republic Act No. 7654[2] on petitioner's power to classify cigarettes. Although the decisions assailed and sought to be reviewed, as well as the pleadings of private respondent, are replete with alleged admissions of our legislators to the effect that the said Act was intended to freeze the current classification of cigarettes and make the same an integral part of the said Act, certainly the repeal, if any, of petitioner's power to classify cigarettes must be reckoned from the effectivity of the said Act and not before. Suffice it to say that indisputable is the plain fact that the questioned Circular was issued on July 1, 1993, while the said Act took effect on July 3, 1993. The contents of the questioned circular have not been proven to be erroneous or illegal as to render issuance thereof an act of grave abuse of discretion on the part of petitioner Commissioner Prior to the effectivity of R.A. No. 7654, Section 142 (c) (1) of the National Internal Revenue Code, as amended, levies the following ad valorem taxes on cigarettes in accordance with their predetermined classifications as established by the Commissioner of Internal Revenue: "x x x based on the manufacturer's registered wholesale price: (1) On locally manufactured cigarettes bearing a foreign brand, fifty-five percent (55%) Provided, That this rate shall apply regardless of whether or not the right to use or title to the foreign brand was sold or transferred by its owner to the local manufacturer. Whenever it has to be determined whether or not a cigarette bears a foreign brand, the listing of brands manufactured in foreign countries appearing in the current World Tobacco Directory shall govern. (2) Other locally manufactured cigarettes, forty five percent (45%). x x x" Prior to the issuance of the questioned Circular, assessed against and paid by private respondent as ad valorem excise taxes on their removals of "Hope," 'More," and "Champion" cigarettes were amounts based on paragraph (2) above, i.e., the tax rate made applicable on the said cigarettes was 45% at the most. The reason for this is that apparently, petitioner's predecessors have all made determinations to the effect that the said cigarettes were to be considered "other locally manufactured cigarettes" and not "locally manufactured cigarettes bearing a foreign brand." Even petitioner, until her issuance of the questioned Circular, adhered to her predecessors' determination as to the proper classification of the above-mentioned cigarettes for purposes of ad valorem excise taxes. Apparently, the past determination that the said cigarettes were to be classified as "other locally manufactured cigarettes" was based on private respondent's convenient move of changing the names of "Hope" to "Hope Luxury" and "More" to "Premium More." It also submitted proof that "Champion" was an original Fortune Tobacco Corporation register and, therefore, a local brand. Having registered these brands with the Philippine Patent Office and with corresponding evidence to that effect, private respondent paid ad valorem excise taxes computed at the rate of not more than 45%

which is the rate applicable to cigarettes considered as locally manufactured brands. How these past determinations pervaded notwithstanding their erroneous basis is only tempered by their innate quality of being merely errors in interpretative rulings, the formulation of which does not bind the government. Advantage over such errors may precipitously be withdrawn from those who have been benefiting from them once the same have been discovered and rectified. Petitioner correctly emphasizes that: "x x x the registration of said brands in the name of private respondent is proof only that it is the exclusive owner thereof in the Philippines, it does not necessarily, follow, however, that, it is the exclusive owner thereof in the whole world. Assuming arguendo that private respondent is the exclusive owner of said brands in the Philippines, it does not mean that they are local. Otherwise, they would not have been listed in the WTD as international brands manufactured by different entities in different countries. Moreover, it cannot be said that the brands registered in the names of private respondent are not the same brands listed in the WTD because private respondent is one of the manufacturers of said brands listed in the WTD."[3] Private respondent attempts to cast doubt on the determination made by petitioner in the questioned Circular that Japan is a manufacturer of "Hope" cigarettes. Private respondent's own inquiry into the World Tobacco Directory reveals that Japan is not a manufacturer of "Hope" cigarettes. In pointing this out, private respondent concludes that the entire Circular is erroneous and makes such error the principal proof of its claim that the nature of the determination embodied in the questioned Circular requires a hearing on the facts and a debate on the applicable law. Such a determination is adjudicatory in nature and, therefore, requires notice and hearing. Private respondent is, however, apparently only eager to show error on the part of petitioner for acting with grave abuse of discretion. Private respondent conveniently forgets that petitioner, equipped with the expertise in taxation, recognized in that expertise by the legislature that vested in her the power to make rules respecting classification of articles for taxation purposes, and presumed to have regularly exercised her prerogatives within the scope of her statutory power to issue determinations specifically under Section 142 (c) (1) in relation to Section 245 of the National Internal Revenue Code, as amended, simply followed the law as she understood it. Her task was to determine which cigarette brands were foreign, and she was directed by the law to look into the World Tobacco Directory. Foreign cigarette brands were legislated to be taxed at higher rates because of their more extensive public exposure and international reputation; their competitive edge against local brands may easily be checked by imposition of higher tax rates. Private respondent makes a mountain of the mole hill circumstance that "Hope" is listed, not as being "manufactured" by Japan but as being "used" by Japan. Whether manufactured or used by Japan, however, "Hope" remains a cigarette brand that can not be said to be limited to local manufacture in the Philippines. The undeniable fact is that it is a foreign brand the sales in the Philippines of which are greatly boosted by its international exposure and reputation. The petitioner was well within her prerogatives, in the exercise of her rule-making power, to classify articles for taxation purposes, to interpret the laws which she is mandated to administer. In interpreting the same, petitioner must, in general, be guided by the principles underlying

taxation, i.e., taxes are the lifeblood of Government, and revenue laws ought to be interpreted in favor of the Government, for Government can not survive without the funds to underwrite its varied operational expenses in pursuit of the welfare of the society which it serves and protects. Private respondent claims that its business will be destroyed by the imposition of additional ad valorem taxes as a result of the effectivity of the questioned Circular. It claims that under the vested rights theory, it cannot now be made to pay higher taxes, after having been assessed for less in the past. Of course private respondent will trumpet its losses, its interests, after all, being its sole concern. What private respondent fails to see is the loss of revenue by the Government which, because of erroneous determinations made by its past revenue commissioners, collected lesser taxes than what it was entitled to in the first place. It is every citizen's duty to pay the correct amount of taxes. Private respondent will not be shielded by any vested rights, for there are no vested rights to speak of respecting a wrong construction of the law by administrative officials, and such wrong interpretation does not place the Government in estoppel to correct or overrule the same.[4] The questioned Circular embodies an interpretative ruling of petitioner Commissioner which as such does not require notice and hearing. As one of the public offices of the Government, the Bureau of Internal Revenue, through its Commissioner, has grown to be a typical administrative agency vested with a fusion of different governmental powers: the power to investigate, initiate action and control the range of investigation, the power to promulgate rules and regulations to better carry out statutory policies, and the power to adjudicate controversies within the scope of their activities.[5] In the realm of administrative law, we understand that such an empowerment of administrative agencies was evolved in response to the needs of a changing society. This development arose as the need for broad social control over complex conditions and activities became more and more pressing, and such complexity could no longer be dealt with effectively and directly by the legislature or the judiciary. The theory which underlies the empowerment of administrative agencies like the Bureau of Internal Revenue, is that the issues with which such agencies deal ought to be decided by experts, and not be a judge, at least not in the first instance or until the facts have been sifted and arranged.[6] One of the powers of administrative agencies like the Bureau of Internal Revenue, is the power to make rules. The necessity for vesting administrative agencies with this power stems from the impracticability of the lawmakers providing general regulations for various and varying details pertinent to a particular legislation.[7] The rules that administrative agencies may promulgate may either be legislative or interpretative. The former is a form of subordinate legislation whereby the administrative agency is acting in a legislative capacity, supplementing the statute. Filling in the details, pursuant to a specific delegation of legislative power.[8]

Interpretative rules, on the other hand, are "those which purport to do no more than interpret the statute being administered, to say what it means."[9] "There can be no doubt that there is a distinction between an administrative rule or regulation and an administrative interpretation of a law whose enforcement is entrusted to an administrative body. When an administrative agency promulgates rules and regulations, it 'makes' a new law with the force and effect of a valid law, while when it renders an opinion or gives a statement of policy, it merely interprets a preexisting law (Parker, Administrative Law, p. 197; Davis, Administrative Law, p. 194). Rules and regulations when promulgated in pursuance of the procedure or authority conferred upon the administrative agency by law, partake of the nature of a statute, and compliance therewith may be enforced by a penal sanction provided in the law. This is so because statutes are usually couched in general terms, after expressing the policy, purposes, objectives, remedies and sanctions intended by the legislature. The details and the manner of carrying out the law are often times left to the administrative agency entrusted with its enforcement. In this sense, it has been said that rules and regulations are the product of a delegated power to create new or additional legal provisions that have the effect of law. (Davis, op. cit. p. 194.) A rule is binding on the courts as long as the procedure fixed for its promulgation is followed and its scope is within the statutory authority granted by the legislature, even if the courts are not in agreement with the policy stated therein or its innate wisdom (Davis, op. cit. pp. 195-197). On the other hand, administrative interpretation of the law is at best merely advisory, for it is the courts that finally determine what the law means."[10] "Whether a given statutory delegation authorizes legislative or interpretative regulations depends upon whether, the statute places specific 'sanctions' behind the regulations authorized, as for example, by making it a criminal offense to disobey them, or by making conformity with their provisions a condition of the exercise of legal privileges."[11] This is because interpretative regulations are by nature simply statutory interpretations, which have behind them into statutory sanction. Such regulations, whether so expressly authorized by statute or issued only as an incident of statutory administration, merely embody administrative findings of law which are always subject to judicial determination as to whether they are erroneous or not, even when their issuance is authorized by statute. The questioned Circular has undisputedly been issued by petitioner in pursuance of her rule-making powers under Section 245 of the National Internal Revenue Code, as amended. Exercising such powers, petitioner re-classified "Hope," "More" and "Champion" cigarettes as locally manufactured cigarettes bearing foreign brands. The reclassification, as previously explained, is the correct interpretation of Section 142 (c) (1) of the said Code. The said legal provision is not accompanied by any penal sanction, and no detail had to be filled in by petitioner. The basis for the classification of cigarettes has been provided for by the legislature, and all petitioner has to do, on behalf of the government agency she heads, is to proceed to make the proper determination using the criterion stipulated by the lawmaking body. In making the proper determination, petitioner gave it a liberal construction consistent with the rule that revenue laws are to be

construed in favor of the Government whose survival depends on the contributions that taxpayers give to the public coffers that finance public services and other governmental operations. The Bureau of Internal Revenue which petitioner heads, is the government agency charged with the enforcement of the laws pertinent to this case and so, the opinion of the Commissioner of Internal Revenue, in the absence of a clear showing that it is plainly wrong, is entitled to great weight. Private respondent claims that its rights under previous interpretations of Section 142 (c) (1) may not abruptly be cut by a new interpretation of the said section, but precisely the said section is subject to various and changing construction, and hence, any ruling issued by petitioner thereon is necessarily interpretative and not legislative. Private respondent insists that the questioned circular is adjudicatory in nature because it determined the rights of private respondent in a controversy involving his tax liability. It also asseverates that the questioned circular involved administrative action that is particular and immediate, thereby rendering it subject to the requirements of notice and hearing in compliance with the due process clause of the Constitution. We find private respondent's arguments to be rather strained. Petitioner made a determination as to the classification of cigarettes as mandated by the aforecited provisions in the National Internal Revenue Code, as amended. Such determination was an interpretation by petitioner of the said legal provisions. If in the course of making that interpretation and embodying the same in the questioned circular which the petitioner subsequently issued after making such a determination, private respondent's cigarette products, by their very nature of being foreign brands as evidenced by their enlistment in the World Tobacco Directory, which is the controlling basis for the proper classification of cigarettes as stipulated by the law itself, have come to be classified as locally manufactured cigarettes bearing foreign brands and as such subject to a tax rate higher than what was previously imposed thereupon based on past rulings of other revenue commissioners, such a situation is simply a consequence of the performance by petitioner of her duties under the law. No adjudication took place, much less was there any controversy ripe for adjudication. The natural consequences of making a classification in accordance with law may not be used by private respondent in arguing that the questioned circular is in fact adjudicatory in nature. Such an exercise in driving home a point is illogical as it is fallacious and misplaced. Private respondent concedes that under general rules of administrative law, "a ruling which is merely 'interpretative' in character may not require prior notice to affected parties before its issuance as well as a hearing" and "for this reason, in most instances, interpretative regulations are not given the force of law."[12] Indeed, "interpretative regulations and those merely internal in nature x x x need not be published."[13] And it is now settled that only legislative regulations and not interpretative rulings must have the benefit of public hearing.[14] Because (1) the questioned circular merely embodied an interpretation or a way of

reading and giving meaning to Section 142 (c) (1) of the National Internal Revenue Code, as amended; (2) petitioner did not fill in any details in the aforecited section but only classified cigarettes on the basis of the World Tobacco Directory in the light of the paramount principle of construing revenue laws in favor of the Government to the end that Government collects as much tax money as it is entitled to in order to fulfill its public purposes for the general good of its citizens; (3) no penal sanction is provided in the aforecited section that was construed by petitioner in the questioned circular; and (4) a similar circular declassifying copra from being an agricultural food to non-food product for purposes of the value added tax laws, resulting in the revocation of an exemption previously enjoyed by copra traders, has been ruled by us to be merely an interpretative ruling and not a legislative, much less, an adjudicatory, action on the part of the revenue commissioner,[15] this Court must not be blind to the fact that the questioned Circular is indeed an interpretative ruling not subject to notice and hearing. Neither is the questioned Circular tainted by a violation or the equal protection clause under the Constitution. Private respondent anchors its claim of violation of its equal protection rights upon the too obvious fact that only its cigarettes brands, i.e., "Hope," "More" and "Champion," are mentioned in the questioned circular. Because only the cigarettes that they manufacture are enumerated in the questioned circular, private respondent proceeded to attack the same as being discriminatory against it. On the surface, private respondent seems to have a point there. A scrutiny of the questioned Circular, however, will show that it is undisputedly one of general application for all cigarettes that are similarly situated as private respondent's brands. The new interpretation of Section 142 (1) (c) has been well illustrated in its application upon private respondent's brands, which illustration is properly a subject of the questioned Circular. Significantly, indicated as the subject of the questioned circular is the "reclassification of cigarettes subject to excise taxes." The reclassification resulted in the foregrounding of private respondent's cigarette brands, which incidentally is largely due to the controversy spawned no less by private respondent's own action of conveniently changing its brand names to avoid falling under a classification that would subject it to higher ad valorem tax rates. This caused then Commissioner Bienvenido Tan to depart from his initial determination that private respondent's cigarette brands are foreign brands. The consequent specific mention of such brands in the questioned Circular, does not change the fact that the questioned Circular has always been intended for and did cover, all cigarettes similarly situated as "Hope," "More" and "Champion." Petitioner is thus correct in stating that: "x x x RMC 37-93 is not discriminatory. It lays down the test in determining whether or not a locally manufactured cigarette bears a foreign brand using the cigarette brands 'Hope,' 'More' and 'Champion' as specific examples. Such test applies to all locally manufactured cigarette brands similarly situated as the cigarette brands aforementioned. While it is true that only 'Hope,' 'More' and 'Champion' cigarettes are actually determined as locally manufactured cigarettes bearing a foreign brand, RMC 37-93 does not state that ONLY cigarettes fall under such classification to the exclusion of other cigarettes similarly situated. Otherwise stated, RMC 37-93 does not exclude the coverage of other cigarettes similarly situated. Otherwise stated, RMC 37-

93 does not exclude the coverage of other cigarettes similarly situated as locally manufactured cigarettes bearing a foreign brand. Hence, in itself, RMC 37-93 is not discriminatory."[16] Both the respondent Court of Appeals and the Court of Tax Appeals held that the questioned Circular reclassifying "Hope," "More" and "Champion" cigarettes, is defective, invalid and unenforceable and has rendered the assessment against private respondent of deficiency ad valorem excise taxes to be without legal basis. The majority agrees with private respondent and respondent Courts. As the foregoing opinion chronicles the fatal flaws in private respondent's arguments, it becomes more apparent that the questioned Circular is in fact a valid and subsisting interpretative ruling that the petitioner had power to promulgate and enforce. WHEREFORE, I vote to grant the petition and set aside the decisions of the Court of Tax Appeals and the Court of Appeals, respectively, and to reinstate the decision of petitioner Commissioner of Internal Revenue denying private respondent's request for a review, reconsideration and recall of Revenue Memorandum Circular No. 37-93 dated July 1, 1993.
[1]

Phil. Association of Service Exporters, Inc. vs. Torres, 212 SCRA 304.

[2]

Entitled, "An Act Revising the Excise Tax Base, Allocating a Portion of the Incremental Revenue Collected for the Emergency Employment Program for Certain Workers Amending for the Purpose Section 142 of the National Internal Revenue Code, as amended, and for Other Purposes," 89 O.G. 4475-4480, August 9, 1993.
[3]

Petition for Review dated May 9, 1995, p. 38, Rollo, p. 48.

[4]

Tan Guan vs. Court of Appeals, 19 SCRA 903; Compania General de Tabacos de Filipinas vs. City of Manila, 8 SCRA 367.
[5]

1 Am, Jur 2d., p. 816. 73 C.J.S. pp. 295-296. 1 Am. Jur. 2d., p. 890. 1 Am. Jur. 2d., p. 892. de Leon, Hector, Administrative Law, 1989 ed., p. 67. Victorias Milling Co. Inc. vs. Social Security Commission, 114 Phil. 558. de Leon, supra, p. 69. Comment of Fortune Tobacco Corporation, p. 52; Rollo, p. 199.

[6]

[7]

[8]

[9]

[10]

[11]

[12]

[13]

Tanada vs. Tuvera, 146 SCRA 454.

[14]

Misamis Oriental Association of Coco Traders, Inc. vs. Department of Finance Secretary, 238 SCRA 63.
[15]

Ibid. Petition for Review dated May 9, 1995, pp. 28-29, Rollo, pp. 38-39.

[16]

Source: Supreme Court E-Library | Date created: 2011-03-10 14:43:01 This page was dynamically generated by the E-Library Content Management System

THIRD DIVISION [ G.R. NO. 144322, February 06, 2007 ]

METROPOLITAN BANK AND TRUST COMPANY, INC., PETITIONER, VS. NATIONAL WAGES AND PRODUCTIVITY COMMISSION AND REGIONAL TRIPARTITE WAGES AND PRODUCTIVITY BOARD - REGION II, RESPONDENTS. DECISION
AUSTRIA-MARTINEZ, J.: Before the Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court seeking the reversal of the Decision[1] of the Court of Appeals (CA) dated July 19, 2000 in CA-G.R. SP No. 42240 which denied the petition for certiorari and prohibition of Metropolitan Bank and Trust Company, Inc. (petitioner). The procedural antecedents and factual background of the case are as follows: On October 17, 1995, the Regional Tripartite Wages and Productivity Board, Region II, Tuguegarao, Cagayan (RTWPB), by virtue of Republic Act No. 6727 (R.A. No. 6727), otherwise known as the Wage Rationalization Act,[2] issued Wage Order No. R02-03 (Wage Order), as follows: Section 1. Upon effectivity of this Wage Order, all employees/workers in the private sector throughout Region II, regardless of the status of employment are granted an across-the-board increase of P15.00 daily.[3]

The Wage Order was published in a newspaper of general circulation on December 2, 1995[4] and took effect on January 1, 1996.[5] Its Implementing Rules[6] were approved on February 14, 1996.[7] Per Section 13 of the Wage Order, any party aggrieved by the Wage Order may file an appeal with the National Wages and Productivity Commission (NWPC) through the RTWPB within 10 calendar days from the publication of the Wage Order. In a letter-inquiry to the NWPC dated May 7, 1996, the Bankers' Council for Personnel Management (BCPM), on behalf of its member-banks, requested for a ruling on the eligibility of establishments with head offices outside Region II to seek exemption from the coverage of the Wage Order since its member-banks are already paying more than the prevailing minimum wage rate in the National Capital Region (NCR), which is their principal place of business.[8] In a letter-reply dated July 16, 1996, the NWPC stated that the member-banks of BCPM are covered by the Wage Order and do not fall under the exemptible categories listed under the Wage Order.[9] In a letter-inquiry to the NWPC dated July 23, 1996, petitioner sought for interpretation of the applicability of said Wage Order.[10] The NWPC referred petitioner's inquiry to the RTWPB. In a letter-reply dated August 12, 1996, the RTWPB clarified that the Wage Order covers all private establishments situated in Region II, regardless of the voluntary adoption by said establishments of the wage orders established in Metro Manila and irrespective of the amounts already paid by the petitioner.[11] On October 15, 1996, the petitioner filed a Petition for Certiorari and Prohibition with the CA seeking nullification of the Wage Order on grounds that the RTWPB acted without authority when it issued the questioned Wage Order; that even assuming that the RTWPB was vested with the authority to prescribe an increase, it exceeded its authority when it did so without any ceiling or qualification; that the implementation of the Wage Order will cause the petitioner, and other similarly situated employers, to incur huge financial losses and suffer labor unrest.[12] On March 24, 1997, the Office of the Solicitor General (OSG) filed a Manifestation and Motion in lieu of Comment affirming the petitioner's claim that the RTWPB acted beyond its authority in issuing the Wage Order prescribing an across-the-board increase to all workers and employees in Region II, effectively granting additional or other benefits not contemplated by R.A. No. 6727.[13] In view of the OSG's manifestation, the CA directed respondents NWPC and RTWPB to file their comment.[14] On September 22, 1997, respondents filed their Comment praying that the petition should be dismissed outright for petitioner's procedural lapses; that certiorari and prohibition are

unavailing since petitioner failed to avail of the remedy of appeal prescribed by the Wage Order; that the Wage Order has long been in effect; and that the issuance of the Wage Order was performed in the exercise of a purely administrative function.[15] On July 19, 2000, the CA rendered its Decision denying the petition. The appellate court held that a writ of prohibition can no longer be issued since implementation of the Wage Order had long become fait accompli, the Wage Order having taken effect on January 1, 1996 and its implementing rules approved on February 14, 1996; that a writ of certiorari is improper since the Wage Order was issued in the exercise of a purely administrative function, not judicial or quasi-judicial; that the letter-query did not present justiciable controversies ripe for consideration by the respondents in the exercise of their wagefixing function, since no appeal from the Wage Order was filed; that petitioner never brought before the said bodies any formal and definite challenge to the Wage Order and it cannot pass off the letter-queries as actual applications for relief; that even if petitioner's procedural lapse is disregarded, a regional wage order prescribing a wage increase across-the-board applies to banks adopting a unified wage system and a disparity in wages between employees holding similar positions in different regions is not wage distortion.[16] Hence, the present petition anchored on the following grounds: 4.1 THE COURT OF APPEALS ERRED IN REFUSING TO DECLARE WAGE ORDER NO. R02-03 NULL AND VOID AND OF NO LEGAL EFFECT. 4.1.1 THE BOARD, IN ISSUING WAGE ORDER NO. R02-03, EXCEEDED THE AUTHORITY DELEGATED TO IT BY CONGRESS. 4.1.2 WAGE ORDER NO. R02-03 IS AN UNREASONABLE INTRUSION INTO THE PROPERTY RIGHTS OF PETITIONER. 4.1.3 WAGE ORDER NO. R02-03 UNDERMINES THE VERY ESSENCE OF COLLECTIVE BARGAINING. 4.1.4 WAGE ORDER NO. R02-03 FAILS TO TAKE INTO ACCOUNT THE VERY RATIONALE FOR A UNIFIED WAGE STRUCTURE. 4.2 PETITIONER'S RECOURSE TO A WRIT OF CERTIORARI AND PROHIBITION WAS PROPER.[17] Following the submission of the Comment[18] and Reply[19] thereto, the Court gave due course to the petition and required both parties to submit their respective memoranda.[20] In compliance therewith, petitioner and respondents submitted their respective memoranda.[21] Petitioner poses two issues for resolution, to wit: (1) whether Wage Order No. R02-03 is void and of no legal effect; and (2) whether petitioner's recourse to a petition for certiorari and prohibition with the CA was proper. Anent the first issue, petitioner maintains that the RTWPB, in issuing said Wage Order, exceeded the authority delegated to it under R.A. No. 6727, which is limited to

determining and fixing the minimum wage rate within their respective territorial jurisdiction and with respect only to employees who do not earn the prescribed minimum wage rate; that the RTWPB is not authorized to grant a general across-the-board wage increase for non-minimum wage earners; that Employers Confederation of the Philippines v. National Wages and Productivity Commission[22] (hereafter referred to as "ECOP") is not authority to rule that respondents have been empowered to fix wages other than the minimum wage since said case dealt with an across-the-board increase with a salary ceiling, where the wage adjustment is applied to employees receiving a certain denominated salary ceiling; that the Wage Order is an unreasonable intrusion into its property rights; that the Wage Order undermines the essence of collective bargaining; that the Wage Order fails to take into account the rationale for a unified wage structure. As to the second issue, petitioner submits that ultra vires acts of administrative agencies are correctible by way of a writ of certiorari and prohibition; that even assuming that it did not observe the proper remedial procedure in challenging the Wage Order, the remedy of certiorari and prohibition remains available to it by way of an exception, on grounds of justice and equity; that its failure to observe procedural rules could not have validated the manner by which the disputed Wage Order was issued. Respondents counter that the present petition is fatally defective from inception since no appeal from the Wage Order was filed by petitioner; that the letter-query to the NWPC did not constitute the appeal contemplated by law; that the validity of the Wage Order was never raised before the respondents; that the implementation of the Wage Order had long become fait accompli for prohibition to prosper. Respondents insist that, even if petitioner's procedural lapses are disregarded, the Wage Order was issued pursuant to the mandate of R.A. No. 6727 and in accordance with the Court's pronouncements in the ECOP case;[23] that the Wage Order is not an intrusion on property rights since it was issued after the required public hearings; that the Wage Order does not undermine but in fact recognizes the right to collective bargaining; that the Wage Order did not result in wage distortion. The Court shall first dispose of the procedural matter relating to the propriety of petitioner's recourse to the CA before proceeding with the substantive issue involving the validity of the Wage Order. Certiorari as a special civil action is available only if the following essential requisites concur: (1) it must be directed against a tribunal, board, or officer exercising judicial or quasi-judicial functions; (2) the tribunal, board, or officer must have acted without or in excess of jurisdiction or with grave abuse of discretion amounting lack or excess of jurisdiction; and (3) there is no appeal nor any plain, speedy, and adequate remedy in the ordinary course of law.[24] On the other hand, prohibition as a special civil action is available only if the following essential requisites concur: (1) it must be directed against a tribunal, corporation, board, officer, or person exercising functions, judicial, quasi-judicial, or ministerial; (2) the tribunal, corporation, board or person has acted without or in excess of its jurisdiction, or

with grave abuse of discretion amounting lack or excess of jurisdiction; and (3) there is no appeal or any other plain, speedy, and adequate remedy in the ordinary course of law.
[25]

A respondent is said to be exercising judicial function where he has the power to determine what the law is and what the legal rights of the parties are, and then undertakes to determine these questions and adjudicate upon the rights of the parties.[26] Quasijudicial function is a term which applies to the action, discretion, etc., of public administrative officers or bodies, who are required to investigate facts or ascertain the existence of facts, hold hearings, and draw conclusions from them as a basis for their official action and to exercise discretion of a judicial nature.[27] Ministerial function is one which an officer or tribunal performs in the context of a given set of facts, in a prescribed manner and without regard to the exercise of his own judgment upon the propriety or impropriety of the act done.[28] In the issuance of the assailed Wage Order, respondent RTWPB did not act in any judicial, quasi-judicial capacity, or ministerial capacity. It was in the nature of subordinate legislation, promulgated by it in the exercise of delegated power under R.A. No. 6727. It was issued in the exercise of quasi-legislative power. Quasi-legislative or rule-making power is exercised by administrative agencies through the promulgation of rules and regulations within the confines of the granting statute and the doctrine of nondelegation of certain powers flowing from the separation of the great branches of the government.[29] Moreover, the rule on the special civil actions of certiorari and prohibition equally mandate that these extra-ordinary remedies are available only when "there is no appeal or any other plain, speedy, and adequate remedy in the ordinary course of law." A remedy is considered plain, speedy and adequate if it will promptly relieve the petitioner from the injurious effects of the judgment or rule, order or resolution of the lower court or agency.
[30]

Section 13 of the assailed Wage Order explicitly provides that any party aggrieved by the Wage Order may file an appeal with the NWPC through the RTWPB within 10 days from the publication of the wage order.[31] The Wage Order was published in a newspaper of general circulation on December 2, 1995.[32] In this case, petitioner did not avail of the remedy provided by law. No appeal to the NWPC was filed by the petitioner within 10 calendar days from publication of the Wage Order on December 2, 1995. Petitioner was silent until seven months later, when it filed a letter-inquiry on July 24, 1996 with the NWPC seeking a clarification on the application of the Wage Order. Evidently, the letter-inquiry is not an appeal. It must also be noted that the NWPC only referred petitioner's letter-inquiry to the RTWPB. Petitioner did not appeal the letter-reply dated August 12, 1996 of the RTWPB to the NWPC. No direct action was taken by the NWPC on the issuance or implementation of the Wage Order. Petitioner failed to invoke the power of the NWPC to

review regional wage levels set by the RTWPB to determine if these are in accordance with prescribed guidelines. Thus, not only was it improper to implead the NWPC as party-respondent in the petition before the CA and this Court, but also petitioner failed to avail of the primary jurisdiction of the NWPC under Article 121 of the Labor Code, to wit: ART. 121. Powers and Functions of the Commission. - The Commission shall have the following powers and functions: xxxx (d) To review regional wage levels set by the Regional Tripartite Wages and Productivity Boards to determine if these are in accordance with prescribed guidelines and national development plans; xxxx (f) To review plans and programs of the Regional Tripartite Wages and Productivity Boards to determine whether these are consistent with national development plans; (g) To exercise technical and administrative supervision over the Regional Tripartite Wages and Productivity Boards; xxxx (Emphasis supplied) Under the doctrine of primary jurisdiction, courts cannot and will not resolve a controversy involving a question which is within the jurisdiction of an administrative tribunal, especially 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.[33] Nevertheless, the Court will proceed to resolve the substantial issues in the present petition pursuant to the well-accepted principle that acceptance of a petition for certiorari or prohibition as well as the grant of due course thereto is addressed to the sound discretion of the court.[34] It is a well-entrenched principle that rules of procedure are not inflexible tools designed to hinder or delay, but to facilitate and promote the administration of justice. Their strict and rigid application, which would result in technicalities that tend to frustrate, rather than promote substantial justice, must always be eschewed.[35] As to respondents' submission that the implementation of the Wage Order can no longer be restrained since it has become fait accompli, the Wage Order having taken effect on January 1, 1996 and its implementing rules approved on February 14, 1996, suffice it to state that courts will decide a question otherwise moot if it is capable of repetition yet evading review.[36] Besides, a case becomes moot and academic only when there is no more actual controversy between the parties or no useful purpose can be served in passing upon the merits. Such circumstances do not obtain in the present case. The

implementation of the Wage Order does not in any way render the case moot and academic, since the issue of the validity of the wage order subsists even after its implementation and which has to be determined and passed upon to resolve petitioner's rights and consequent obligations therein. It is worthy to quote the Court's pronouncements in Tan v. Commission on Elections,[37] thus: For this Honorable Court to yield to the respondents' urging that, as there has been fait accompli, then this Honorable Court should passively accept and accede to the prevailing situation is an unacceptable suggestion. Dismissal of the instant petition, as respondents so propose is a proposition fraught with mischief. Respondents' submission will create a dangerous precedent. Should this Honorable Court decline now to perform its duty of interpreting and indicating what the law is and should be, this might tempt again those who strut about in the corridors of power to recklessly and with ulterior motives commit illegal acts, either brazenly or stealthily, confident that this Honorable Court will abstain from entertaining future challenges to their acts if they manage to bring about a fait accompli.[38] Having disposed of this procedural issue, the Court now comes to the substance of the petition. R.A. No. 6727 declared it a policy of the State to rationalize the fixing of minimum wages and to promote productivity-improvement and gain-sharing measures to ensure a decent standard of living for the workers and their families; to guarantee the rights of labor to its just share in the fruits of production; to enhance employment generation in the countryside through industrial dispersal; and to allow business and industry reasonable returns on investment, expansion and growth.[39] In line with its declared policy, R.A. No. 6727[40] created the NWPC,[41] vested with the power to prescribe rules and guidelines for the determination of appropriate minimum wage and productivity measures at the regional, provincial or industry levels;[42] and authorized the RTWPB to determine and fix the minimum wage rates applicable in their respective regions, provinces, or industries therein and issue the corresponding wage orders, subject to the guidelines issued by the NWPC.[43] Pursuant to its wage fixing authority, the RTWPB may issue wage orders which set the daily minimum wage rates,[44] based on the standards or criteria set by Article 124[45] of the Labor Code. In ECOP,[46] the Court declared that there are two ways of fixing the minimum wage: the "floor-wage" method and the "salary-ceiling" method. The "floor-wage" method involves the fixing of a determinate amount to be added to the prevailing statutory minimum wage rates. On the other hand, in the "salary-ceiling" method, the wage adjustment was to be applied to employees receiving a certain denominated salary ceiling. In other words, workers already being paid more than the existing minimum wage (up to a certain amount stated in the Wage Order) are also to be given a wage increase.[47] To illustrate: under the "floor wage method", it would have been sufficient if the Wage

Order simply set P15.00 as the amount to be added to the prevailing statutory minimum wage rates, while in the "salary-ceiling method", it would have been sufficient if the Wage Order states a specific salary, such as P250.00, and only those earning below it shall be entitled to the salary increase. In the present case, the RTWPB did not determine or fix the minimum wage rate by the "floor-wage method" or the "salary-ceiling method" in issuing the Wage Order. The RTWPB did not set a wage level nor a range to which a wage adjustment or increase shall be added. Instead, it granted an across-the-board wage increase of P15.00 to all employees and workers of Region 2. In doing so, the RTWPB exceeded its authority by extending the coverage of the Wage Order to wage earners receiving more than the prevailing minimum wage rate, without a denominated salary ceiling. As correctly pointed out by the OSG, the Wage Order granted additional benefits not contemplated by R.A. No. 6727. In no uncertain terms must it be stressed that the function of promulgating rules and regulations may be legitimately exercised only for the purpose of carrying out the provisions of a law. The power of administrative agencies is confined to implementing the law or putting it into effect. Corollary to this guideline is that administrative regulation cannot extend the law and amend a legislative enactment.[48] It is axiomatic that the clear letter of the law is controlling and cannot be amended by a mere administrative rule issued for its implementation.[49] Indeed, administrative or executive acts, orders, and regulations shall be valid only when they are not contrary to the laws or the Constitution.[50] Where the legislature has delegated to an executive or administrative officers and boards authority to promulgate rules to carry out an express legislative purpose, the rules of administrative officers and boards, which have the effect of extending, or which conflict with the authority-granting statute, do not represent a valid exercise of the rule-making power but constitute an attempt by an administrative body to legislate.[51] It has been said that when the application of an administrative issuance modifies existing laws or exceeds the intended scope, as in this case, the issuance becomes void, not only for being ultra vires, but also for being unreasonable.[52] Thus, the Court finds that Section 1, Wage Order No. R02-03 is void insofar as it grants a wage increase to employees earning more than the minimum wage rate; and pursuant to the separability clause[53] of the Wage Order, Section 1 is declared valid with respect to employees earning the prevailing minimum wage rate. Prior to the passage of the Wage Order, the daily minimum wage rates in Region II was set at P104.00 for the Province of Isabela, P103.00 for the Province of Cagayan, P101.00 for the Province of Nueva Vizcaya, and P100.00 for the Provinces of Quirino and Batanes.[54] Only employees earning the above-stated minimum wage rates are entitled to the P15.00 mandated increase under the Wage Order.

Although the concomitant effect of the nullity of the Wage Order to those employees who have received the mandated increase was not put in issue, this Court shall make a definite pronouncement thereon to finally put this case to rest. As ruled by the Court in Latchme Motoomull v. Dela Paz,[55] "the Court will always strive to settle the entire controversy in a single proceeding leaving no root or branch to bear the seeds of future litigation."[56] Applying by analogy, the Court's recent pronouncement in Philippine Ports Authority v. Commission on Audit,[57] thus: In regard to the refund of the disallowed benefits, this Court holds that petitioners need not refund the benefits received by them based on our rulings in Blaquera v. Alcala, De Jesus v. Commission on Audit and Kapisanan ng mga Manggagawa sa Government Service Insurance System (KMG) v. Commission on Audit. In Blaquera, the petitioners, who were officials and employees of several government departments and agencies, were paid incentive benefits pursuant to EO No. 292 and the Omnibus Rules Implementing Book V of EO No. 292. On January 3, 1993, then President Fidel V. Ramos issued Administrative Order (AO) No. 29 authorizing the grant of productivity incentive benefits for the year 1992 in the maximum amount of P1,000. Section 4 of AO No. 29 directed all departments, offices and agencies which authorized payment of CY 1992 Productivity Incentive Bonus in excess of P1,000 to immediately cause the refund of the excess. Respondent heads of the departments or agencies of the government concerned caused the deduction from petitioners' salaries or allowances of the amounts needed to cover the overpayments. Petitioners therein filed a petition for certiorari and prohibition before this Court to prevent respondents therein from making further deductions from their salaries or allowances. The Court ruled against the refund, thus: Considering, however, that all the parties here acted in good faith, we cannot countenance the refund of subject incentive benefits for the year 1992, which amounts the petitioners have already received. Indeed, no indicia of bad faith can be detected under the attendant facts and circumstances. The officials and chiefs of offices concerned disbursed such incentive benefits in the honest belief that the amounts given were due to the recipients and the latter accepted the same with gratitude, confident that they richly deserve such benefits. The said ruling in Blaquera was applied in De Jesus. In De Jesus, COA disallowed the payment of allowances and bonuses consisting of representation and transportation allowance, rice allowance, productivity incentive bonus, anniversary bonus, year-end bonus and cash gifts to members of the interim Board of Directors of the Catbalogan Water District. This Court affirmed the disallowance because petitioners therein were not entitled to other compensation except for payment of per diem under PD No. 198. However, the Court ruled against the refund of the allowances and bonuses received by petitioners, thus: This ruling in Blaquera applies to the instant case. Petitioners here received the additional allowances and bonuses in good faith under the honest belief that LWUA Board Resolution No. 313 authorized such payment. At the time petitioners received the additional allowances and bonuses, the Court had not yet decided

Baybay Water District. Petitioners had no knowledge that such payment was without legal basis. Thus, being in good faith, petitioners need not refund the allowances and bonuses they received but disallowed by the COA. Further, in KMG, this Court applied the ruling in Blaquera and De Jesus in holding that the Social Insurance Group (SIG) personnel of the Government Service Insurance System need not refund the hazard pay received by them although said benefit was correctly disallowed by COA. The Court ruled: The Court however finds that the DOH and GSIS officials concerned who granted hazard pay under R.A. No. 7305 to the SIG personnel acted in good faith, in the honest belief that there was legal basis for such grant. The SIG personnel in turn accepted the hazard pay benefits likewise believing that they were entitled to such benefit. At that time, neither the concerned DOH and GSIS officials nor the SIG personnel knew that the grant of hazard pay to the latter is not sanctioned by law. Thus, following the rulings of the Court in De Jesus v. Commission on Audit, and Blaquera v. Alcala, the SIG personnel who previously received hazard pay under R.A. No. 7305 need not refund such benefits. In the same vein, the rulings in Blaquera, De Jesus and KMG apply to this case. Petitioners received the hazard duty pay and birthday cash gift in good faith since the benefits were authorized by PPA Special Order No. 407-97 issued pursuant to PPA Memorandum Circular No. 34-95 implementing DBM National Compensation Circular No. 76, series of 1995, and PPA Memorandum Circular No. 22-97, respectively. Petitioners at that time had no knowledge that the payment of said benefits lacked legal basis. Being in good faith, petitioners need not refund the benefits they received.[58] (Emphasis supplied) employees, other than minimum wage earners, who received the wage increase mandated by the Wage Order need not refund the wage increase received by them since they received the wage increase in good faith, in the honest belief that they are entitled to such wage increase and without any knowledge that there was no legal basis for the same. Considering the foregoing, the Court need not delve on the other arguments raised by the parties. WHEREFORE, the petition is PARTIALLY GRANTED. The Decision of the Court of Appeals dated July 19, 2000 in CA-G.R. SP No. 42240 is MODIFIED. Section 1 of Wage Order No. R02-03 issued on October 17, 1995 by the Regional Tripartite Wages and Productivity Board for Region II, Tuguegarao, Cagayan is declared VALID insofar as the mandated increase applies to employees earning the prevailing minimum wage rate at the time of the passage of the Wage Order and VOID with respect to its application to employees receiving more than the prevailing minimum wage rate at the time of the passage of the Wage Order. No costs. SO ORDERED.

Ynares-Santiago, (Chairperson), Callejo, Sr., and Chico-Nazario, JJ., concur.

[1]

Penned by Associate Justice Godardo A. Jacinto (now retired) and concurred in by Associate Justices Rodrigo V. Cosico and Remedios Salazar-Fernando; CA rollo, pp. 102-123.
[2]

Entitled "An Act to Rationalize Wage Policy Determination by Establishing the Mechanism and Proper Standards Therefor, Amending for the Purpose Article 99 of, and Incorporating Articles 120, 121, 122, 123, 124, 126 and 127 into Presidential Decree No. 442, as amended, Otherwise Known as the Labor Code of the Philippines, Fixing New Wage Rates, Providing Wage Incentives for Industrial Dispersal to the Countryside, and for Other Purposes." Effective July 1, 1989.
[3]

CA rollo, p. 31 (dorsal side). Id. at 8. Section 18, Wage Order No. R02-03; CA rollo, id. at 34 (dorsal side). Id. at 35. Id. at 40. Id. at 41. Id. at 42. Id. at 44. Id. at 47. Id. at 2. Id. at 68. Id. at 87. Id. at 88. Id. at 102. Rollo, pp. 20-21. Id. at 166. Id. at 211.

[4]

[5]

[6]

[7]

[8]

[9]

[10]

[11]

[12]

[13]

[14]

[15]

[16]

[17]

[18]

[19]

[20]

Id. at 220. Id. at 231 and 266. G.R. No. 96169, September 24, 1991, 201 SCRA 759. Id. REVISED RULES OF COURT, Rule 65, Sec. 1. REVISED RULES OF COURT, Rule 65, Sec. 2.

[21]

[22]

[23]

[24]

[25]

[26]

1 FLORENZ D. REGALADO, REMEDIAL LAW COMPENDIUM 706 (1999) citing Ruperto v. Torres, L-8785, February 25, 1957, and Municipal Council of Lemery v. Provincial Board of Batangas, 56 Phil. 260, 268 (1931).
[27]

Bautista v. Commission on Elections, 460 Phil. 459, 476 (2003); United Residents of Dominican Hill, Inc. v. Commission on the Settlement of Land Problems, G.R. No. 135945, March 7, 2001, 353 SCRA 782, 797; Midland Insurance Corporation v. Intermediate Appellate Court, 227 Phil. 413, 418 (1986); See also Villarosa v. Commission on Elections, 377 Phil. 497, 506-507 (1999).
[28]

De Guzman, Jr. v. Mendoza, A.M. No. P-03-1693, March 17, 2005, 453 SCRA 565, 571; Sismaet v. Sabas, A.M. No. P-03-1680, May 27, 2004, 429 SCRA 241, 247-248; Philippine Bank of Communications v. Torio, 348 Phil. 74, 84 (1998).
[29]

Abella, Jr. v. Civil Service Commission, G.R. No. 152574, November 17, 2004, 442 SCRA 507, 530; Bellosillo, J., Separate Opinion, Commissioner of Internal Revenue v. Court of Appeals, 329 Phil. 987, 1017 (1996).
[30]

Montes v. Court of Appeals, G.R. No. 143797, May 4, 2006, 489 SCRA 432, 441; Longino v. General, G.R. No. 147956, February 16, 2005, 451 SCRA 423, 437; National Irrigation Administration v. Court of Appeals, 376 Phil. 362, 372 (1999).
[31]

Section 13, Wage Order No. R02-03; CA rollo, p. 34. See also LABOR CODE, Art. 123.
[32]

Supra note 4. Villaflor v. Court of Appeals, 345 Phil. 524, 559 (1997).

[33]

[34]

Tan v. Bausch & Lomb, Inc., G.R. No. 148420, December 15, 2005, 478 SCRA 115, 120; Floren Hotel v. National Labor Relations Commission, G.R. No. 155264, May 6, 2005, 458 SCRA 128, 141.

[35]

Jaworski v. Philippine Amusement and Gaming Corp., G.R. No. 144463, January 14, 2004, 419 SCRA 317, 323-324; Serrano v. Galant Maritime Services, Inc., 455 Phil. 992, 999 (2003).
[36]

Pimentel, Jr. v. Ermita, G.R. No. 164978, October 13, 2005, 472 SCRA 587, 593; Longino v. General, supra note 30; Sanlakas v. Executive Secretary, G.R. No. 159085, February 3, 2004, 421 SCRA 656, 664; Tolentino v. Commission on Elections, G.R. No. 148334, January 21, 2004, 420 SCRA 438, 451.
[37]

226 Phil. 624 (1986).

[38]

Id. at 637-638; Reiterated in City of Pasig v. Commission on Elections, 372 Phil. 864, 871 (1999).
[39]

REPUBLIC ACT NO. 6727 (1989), Sec. 2.

[40]

REPUBLIC ACT NO. 6727 incorporated Articles 120, 121, 122, 123, 124, 126 and 127 into the Labor Code.
[41]

LABOR CODE, Art.120. LABOR CODE, Art.121. LABOR CODE, Art.122.

[42]

[43]

[44]

LABOR CODE, Art. 123. Wage Order. - Whenever conditions in the region so warrant, the Regional Board shall investigate and study all pertinent facts; and based on the standards and criteria herein prescribed, shall proceed to determine whether a Wage Order should be issued. Any such Wage Order shall take effect after fifteen (15) days from its complete publication in at least one (1) newspaper of general circulation in the region. (Emphasis supplied) In the performance of its wage determining functions, the Regional Board shall conduct public hearings/consultations, giving notices to employees' and employers' groups, provincial, city and municipal officials and other interested parties. Any party aggrieved by the Wage Order issued by the Regional Board may appeal such order to the Commission within ten (10) calendar days from the publication of such order. It shall be mandatory for the Commission to decide such appeal within sixty (60) calendar days from the filing thereof. The filing of the appeal does not stay the order unless the person appealing such order shall file with the Commission an undertaking with a surety or sureties satisfactory to the Commission for the payment to the employees affected by the order of the corresponding increase, in the event such order is affirmed. (Emphasis supplied)
[45]

LABOR CODE, Art.124. Standards/Criteria for Minimum Wage Fixing. - The

regional minimum wages to be established by the Regional Board shall be as nearly adequate as in economically feasible to maintain the minimum standards of living necessary for the health, efficiency and general well-being of the employees within the framework of the national economic and social development program. In the determination of such regional minimum wages, the Regional Board shall, among other relevant factors, consider the following: (a) The demand for living wages; (b) Wage adjustment vis--vis the consumer price index; (c) The cost of living and changes or increases therein; (d) The needs of workers and their families; (e) The need to induce industries to invest in the countryside; (f) Improvements in standards of living; (g) The prevailing wage levels; (h) Fair return of the capital invested and capacity to pay of employers; (i) Effects on employment generation and family income; and (j) The equitable distribution of income and wealth along the imperatives of economic and social development. The wages prescribed in accordance with the provisions of this Title shall be the standard prevailing minimum wages in every region. These wages shall include wages varying within industries, provinces or localities if in the judgment of the Regional Board conditions make such local differentiation proper and necessary to effectuate the purpose of this Title. (Emphasis supplied)
[46]

Supra note 22, at 763.

[47]

Norkis Free and Independent Workers Union v. Norkis Trading Company, Inc., G.R. No. 157098, June 30, 2005, 462 SCRA 485, 494.
[48]

Land Bank of the Philippines v. Court of Appeals and Department of Agrarian Reform v. Court of Appeals, 319 Phil. 246, 257 (1995).
[49]

Municipality of Paraaque v. V.M. Realty Corporation, 354 Phil. 684, 694-695 (1998).
[50]

ART. 7, CIVIL CODE OF THE PHILIPPINES.

[51]

United BF Homeowner's Association v. BF Homes, Inc., 369 Phil. 568, 580 (1999); People v. Maceren, G.R. No. L-32166, October 18, 1977, 79 SCRA 450, 462.
[52]

Executive Secretary v. Southwing Heavy Industries, Inc., G.R. Nos. 164171, 164172 and 168741, February 20, 2006, 482 SCRA 673, 699.
[53]

Section 16. All laws, orders, issuances, rules and regulations, or parts thereof inconsistent with the provisions of this Wage Order are hereby repealed, amended, or modified accordingly. If any provision or part of this Wage Order or the application thereof to any person or circumstance, is held invalid or unconstitutional, the remainder of this Wage Order or the application of such provision or part thereof to other persons or circumstances shall not be affected thereby. (Emphasis supplied).
[54]

CA rollo, p. 36. G.R. No. 45302, July 24, 1990, 187 SCRA 743. Id. at 754. G.R. No. 159200, February 16, 2006, 482 SCRA 490. Id. at 498-500.

[55]

[56]

[57]

[58]

Source: Supreme Court E-Library | Date created: 2008-06-05 10:51:05 This page was dynamically generated by the E-Library Content Management System

FIRST DIVISION [ G.R. No. 109568, August 08, 2002 ]

ROLANDO SIGRE, PETITIONER, VS. COURT OF APPEALS AND LILIA Y. GONZALES, AS CO-ADMINISTRATRIX OF THE ESTATE OF MATIAS YUSAY, RESPONDENTS. [G.R. NO. 113454. AUGUST 8, 2002] LAND BANK OF THE PHILIPPINES, PETITIONER, VS. COURT OF APPEALS AND LILIA Y. GONZALES, AS COADMINISTRATRIX OF THE ESTATE OF MATIAS YUSAY, RESPONDENTS.

DECISION
AUSTRIA-MARTINEZ, J.: In a not-so-novel attempt to challenge the long-settled constitutionality of Presidential Decree No. 27, private respondent Lilia Y. Gonzales, as co-administratrix of the Estate of Matias Yusay, filed with the Court of Appeals on September 15, 1992, a petition for prohibition and mandamus docketed as CA-G.R. SP No. 28906, seeking to prohibit the Land Bank of the Philippines (LBP) from accepting the leasehold rentals from Ernesto Sigre (predecessor of petitioner Rolando Sigre), and for LBP to turn over to private respondent the rentals previously remitted to it by Sigre. It appears that Ernesto Sigre was private respondents tenant in an irrigated rice land located in Barangay Naga, Pototan, Iloilo. He was previously paying private respondent a lease rental of sixteen (16) cavans per crop or thirty-two (32) cavans per agricultural year. In the agricultural year of 19911992, Sigre stopped paying his rentals to private respondent and instead, remitted it to the LBP pursuant to the Department of Agrarian Reforms Memorandum Circular No. 6, Series of 1978, which set the guidelines in the payment of lease rental/partial payment by farmer-beneficiaries under the land transfer program of P.D. No. 27. The pertinent provision of the DAR Memorandum Circular No. 6 reads: A. Where the value of the land has already been established. The value of the land is established on the date the Secretary or his authorized representative has finally approved the average gross production data established by the BCLP or upon the signing of the LTPA by landowners and tenant farmers concerned heretofore authorized. Payment of lease rentals to landowners covered by OLT shall terminate on the date the value of the land is established. Thereafter, the tenant-farmers shall pay their lease rentals/amortizations to the LBP or its authorized agents: provided that in case where the value of the land is established during the month the crop is to be harvested, the cut-off period shall take effect on the next harvest season. With respect to cases where lease rentals paid may exceed the value of the land, the tenant-farmers may no longer be bound to pay such rental, but it shall be his duty to notify the landowner and the DAR Team Leader concerned of such fact who shall ascertain immediately the veracity of the information and thereafter resolve the matter expeditiously as possible. If the landowner shall insist after positive ascertainment that the tenant-farmer is to pay rentals to him, the amount equivalent to the rental insisted to be paid shall de deposited by the tenant-farmer with the LBP or its authorized agent in his name and for his account to be withdrawn only upon proper written authorization of the DAR District Officer based on the result of ascertainment or investigation.[1] (Emphasis ours) According to private respondent, she had no notice that the DAR had already fixed the 3year production prior to October 1972 at an average of 119.32 cavans per hectare,[2] and

the value of the land was pegged at Thirteen Thousand Four Hundred Five Pesos and Sixty-Seven Centavos (P13,405.67).[3] Thus, the petition filed before the Court of Appeals, assailing, not only the validity of Memorandum Circular No. 6, but also the constitutionality of P.D. 27. The appellate court, in its decision dated March 22, 1993, gave due course to the petition and declared Memorandum Circular No. 6 null and void.[4] The LBP was directed to return to private respondent the lease rentals paid by Sigre, while Sigre was directed to pay the rentals directly to private respondent.[5] In declaring Memorandum Circular No. 6 as null and void, the appellate court ruled that there is nothing in P.D. 27 which sanctions the contested provision of the circular;[6] that said circular is in conflict with P.D. 816 which provides that payments of lease rentals shall be made to the landowner, and the latter, being a statute, must prevail over the circular;[7] that P.D. 27 is unconstitutional in laying down the formula for determining the cost of the land as it sets limitations on the judicial prerogative of determining just compensation;[8] and that it is no longer applicable, with the enactment of Republic Act No. 6657.[9] Hence, this present recourse, which is a consolidation of the separate petitions for review filed by Rolando Sigre (who substituted his predecessor Ernesto Sigre), docketed as G.R. No. 109568 and the LBP, docketed as G.R. No. 113454. Petitioner Sigre, in G.R. No. 109568, alleges that: "I PUBLIC RESPONDENT COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION IN RULING THAT DAR MEMORANDUM CIRCULAR NO. 6, SERIES OF 1978 RUNS COUNTER TO PRESIDENTIAL DECREE NO. 816. II PUBLIC RESPONDENT ERRED IN RULING THAT DAR MEMORANDUM CIRCULAR NO. 6, SERIES OF 1978 AMENDS OR EXPANDS PRESIDENTIAL DECREE NO. 27. III PUBLIC RESPONDENT ERRED IN RULING THAT PROVISION OF PRESIDENTIAL DECREE NO. 27 ON THE FORMULA FOR DETERMINING THE COST OF THE LAND IS UNCONSTITUTIONAL. IV PUBLIC RESPONDENT ERRED IN RULING THAT THE PROVISION OF PRESIDENTIAL DECREE NO. 27 ON FIXING THE JUST COMPENSATION OF

THE LAND HAS BEEN REPEALED BY REPUBLIC ACT NO. 6657.[10] Petitioner LBP, in G.R.No. 113454, claims that: A THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT MAR CIRCULAR NO. 6 IS A VALID PIECE OF ADMINISTRATIVE RULES AND REGULATION COVERING A SUBJECT GERMANE TO THE OBJECTS AND PURPOSES OF PRESIDENTIAL DECREE NO. 27, CONFORMING TO THE STANDARDS OF SAID LAW AND RELATING SOLELY TO CARRYING INTO EFFECT THE GENERAL PROVISIONS OF SAID LAW. B THE COURT OF APPEALS SERIOUSLY ERRED IN RULING THAT MAR CIRCULAR NO. 6 IS INVALID IN THAT IT SUFFERS IRRECONCILABLE CONFLICT WITH PRESIDENTIAL DECREE NO. 816, THUS GROSSLY DISREGARDING THE APPLICABLE DECISION OF THE SUPREME COURT THAT THERE IS NO INCONSISTENCY OR INCOMPATIBILITY BETWEEN MAR CIRCULAR NO. 6 AND P.D. 816. C THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT P.D. 27, INSOFAR AS IT SETS FORT (sic) THE FORMULA FOR DETERMINING THE VALUE OF THE RICE/CORN LAND, IS UNCONSTITUTIONAL, THUS GROSSLY DISREGARDING THE EXISTING JURISPRUDENCE THAT CONSISTENTLY RULED THAT P.D. 27 IS SUSTAINED AGAINST ALL CONSTITUTIONAL OBJECTIONS RAISED AGAINST IT. D THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT P.D. 27 HAS BEEN IMPLIEDLY REPEALED BY REPUBLIC ACT NO. 6657.[11] Presidential Decree No. 27,[12] issued on October 21, 1972 by then Pres. Ferdinand E. Marcos, proclaimed the entire country as a land reform area and decreed the emancipation of tenants from the bondage of the soil, transferring to them the ownership of the land they till. To achieve its purpose, the decree laid down a system for the purchase by tenant-farmers, long recognized as the backbone of the economy, of the lands they were tilling. Owners of rice and corn lands that exceeded the minimum retention area were bound to sell their lands to qualified farmers at liberal terms and subject to conditions.[13] It was pursuant to said decree that the DAR issued Memorandum Circular No. 6, series of 1978.

The Court of Appeals held that P.D. No. 27 does not sanction said Circular, particularly, the provision stating that payment of lease rentals to landowners shall terminate on the date the value of the land is established, after which the tenant-farmer shall pay their lease rentals/amortizations to the LBP or its authorized agents. We disagree. The power of subordinate legislation allows administrative bodies to implement the broad policies laid down in a statute by "filling in" the details. All that is required is that the regulation should be germane to the objects and purposes of the law; that the regulation be not in contradiction to but in conformity with the standards prescribed by the law.[14] One such administrative regulation is DAR Memorandum Circular No. 6. As emphasized in De Chavez v. Zobel,[15] emancipation is the goal of P.D. 27., i.e., freedom from the bondage of the soil by transferring to the tenant-farmers the ownership of the land theyre tilling. As noted, however, in the whereas clauses of the Circular, problems have been encountered in the expeditious implementation of the land reform program, thus necessitating its promulgation, viz.: 1. Continued payment of lease rentals directly to landowners by tenant-farmers may result to situations wherein payments made may even exceed the actual value of the land. xxx 2. There is difficulty in recording lease rental payments made by tenant-farmers to landowners specifically in cases where landowners concerned refuse to issue acknowledgment/official receipts for payments made; 3. Payments made by tenant-farmers to landowners after the establishment of Farmer Amortization Schedule (FAS) through the National Computer Center were found to be ineffectively captured or accounted for. x x x 4. The prolonged disagreement between parties concerned on the total payments made by the tenant-farmers has delayed program implementations. The rationale for the Circular was, in fact, explicitly recognized by the appellate court when it stated that (T)he main purpose of the circular is to make certain that the lease rental payments of the tenant-farmer are applied to his amortizations on the purchase price of the land. x x x The circular was meant to remedy the situation where the tenantfarmers lease rentals to landowner were not credited in his favor against the determined purchase price of the land, thus making him a perpetual obligor for said purchase price.[16] Since the assailed Circular essentially sought to accomplish the noble purpose of P.D. 27, it is therefore valid.[17] Such being the case, it has the force of law and is entitled to great respect.[18] The Court cannot see any irreconcilable conflict between P.D. No. 816[19] and DAR Memorandum Circular No. 6. Enacted in 1975, P.D. No. 816 provides that the tenantfarmer (agricultural lessee) shall pay lease rentals to the landowner until the value of the property has been determined or agreed upon by the landowner and the DAR. On the other hand, DAR Memorandum Circular No. 6, implemented in 1978, mandates that the

tenant-farmer shall pay to LBP the lease rental after the value of the land has been determined. In Curso v. Court of Appeals,[20] involving the same Circular and P.D. 816, it was categorically ruled that there is no incompatibility between these two. Thus: Actually, we find no inconsistency nor incompatibility between them. Of significance are the two whereas clauses of P.D. 816 quoted hereunder: xxx Clearly, under P.D. No. 816, rentals are to be paid to the landowner by the agricultural lessee until and after the valuation of the property shall have been determined. In the same vein, the MAR Circular provides: xxx In other words, the MAR Circular merely provides guidelines in the payment of lease rentals/amortizations in implementation of P.D. 816. Under both P.D. 816 and the MAR Circular, payment of lease rentals shall terminate on the date the value of the land is established. Thereafter, the tenant farmers shall pay amortizations to the Land Bank (LBP). The rentals previously paid are to be credited as partial payment of the land transferred to tenant-farmers.[21] Private respondent, however, splits hairs, so to speak, and contends that the Curso case is premised on the assumption that the Circular implements P.D. 816, whereas it is expressly stated in the Circular that it was issued in implementation of P.D. 27.[22] Both Memorandum Circular No. 6 and P.D. 816 were issued pursuant to and in implementation of P.D. 27. These must not be read in isolation, but rather, in conjunction with each other. Under P.D. 816, rental payments shall be made to the landowner. After the value of the land has been determined/established, then the tenant-farmers shall pay their amortizations to the LBP, as provided in DAR Circular No. 6.[23] Clearly, there is no inconsistency between them. Au contraire, P.D. 816 and DAR Circular No. 6 supplement each other insofar as it sets the guidelines for the payments of lease rentals on the agricultural property. Further, that P.D. 27 does not suffer any constitutional infirmity is a judicial fact that has been repeatedly emphasized by this Court in a number of cases. As early as 1974, in the aforecited case of De Chavez v. Zobel,[24] P.D. 27 was assumed to be constitutional, and upheld as part and parcel of the law of the land, viz.: There is no doubt then, as set forth expressly therein, that the goal is emancipation. What is more, the decree is now part and parcel of the law of the land according to the revised Constitution itself. Ejectment therefore of petitioners is simply out of the question. That would be to set at naught an express mandate of the Constitution. Once it

has spoken, our duty is clear; obedience is unavoidable. This is not only so because of the cardinal postulate of constitutionalism, the supremacy of the fundamental law. It is also because any other approach would run the risk of setting at naught this basic aspiration to do away with all remnants of a feudalistic order at war with the promise and the hope associated with an open society. To deprive petitioners of the small landholdings in the face of a presidential decree considered ratified by the new Constitution and precisely in accordance with its avowed objective could indeed be contributory to perpetuating the misery that tenancy had spawned in the past as well as the grave social problems thereby created. There can be no justification for any other decision then whether predicated on a juridical norm or on the traditional role assigned to the judiciary of implementing and not thwarting fundamental policy goals.[25] Thereafter, in Gonzales v. Estrella,[26] which incidentally involves private respondent and counsel in the case at bench, the Court emphatically declared that Presidential Decree No. 27 has survived the test of constitutionality.[27] Then, in 1982, P.D. 27, once again, was stamped with judicial imprimatur in Association of Rice & Corn Producers of the Philippines, Inc. v. The National Land Reform Council, [28] to wit: x x x If as pointed out in the opening paragraph, the validity of Presidential Decree No. 27 was assumed as early as 1974, on the first anniversary of the present constitution, in De Chavez v. Zobel and specifically upheld in Gonzales v. Estrella five years later, there cannot be any justification for holding that it is unconstitutional on its face without any factual foundation.[29] Further, in Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform,[30] involving the constitutionality of P.D. 27, E.O. Nos. 228[31] and 229, [32] and R.A. 6657,[33] any other assault on the validity of P.D. 27 was ultimately foreclosed when it was declared therein that R.A. No. 6657, P.D. No. 27, Proc. No. 131, and E.O. Nos. 228 and 229 are SUSTAINED against all the constitutional objections raised in the herein petition. [34] The objection that P.D. 27 is unconstitutional as it sets limitations on the judicial prerogative of determining just compensation is bereft of merit. P.D. 27 provides: For the purpose of determining the cost of the land to be transferred to the tenant-farmer pursuant to this Decree, the value of the land shall be equivalent to two and one half (2 ) times the average harvest of three normal crop years immediately preceding the promulgation of this Decree; E.O. 228 supplemented such provision, viz.: SEC. 2. Henceforth, the valuation of rice and corn lands covered by P.D. 27 shall be based on the average gross production determined by the Barangay Committee on Land Production in accordance with Department Memorandum Circular No. 26, series of 1973

and related issuances and regulation of the Department of Agrarian Reform. The average gross production per hectare shall be multiplied by two and a half (2.5), the product of which shall be multiplied by Thirty Five Pesos (P35.00), the government support price for one cavan of 50 kilos of palay on October 21, 1972, or Thirty One Pesos (P31.00), the government support price for one cavan of 50 kilos of corn on October 21, 1972, and the amount arrived at shall be the value of the rice and corn land, as the case may be, for the purpose of determining its cost to the farmer and compensation to the landowner. The determination of just compensation under P.D. No. 27, like in Section 16 (d) of R.A. 6657 or the CARP Law, is not final or conclusive.[35] This is evident from the succeeding paragraph of Section 2 of E.O. 228: x x x In the event of dispute with the landowner regarding the amount of lease rental paid by the farmer beneficiary, the Department of Agrarian Reform and the Barangay Committee on Land Production concerned shall resolve the dispute within thirty (30) days from its submission pursuant to Department of Agrarian Reform Memorandum Circular No. 26, series of 1973, and other pertinent issuances. In the event a party questions in court the resolution of the dispute, the landowners compensation shall still be processed for payment and the proceeds shall be held in trust by the Trust Department of the Land Bank in accordance with the provisions of Section 5 hereof, pending the resolution of the dispute before the court. Clearly therefrom, unless both the landowner and the tenant-farmer accept the valuation of the property by the Barrio Committee on Land Production and the DAR, the parties may bring the dispute to court in order to determine the appropriate amount of compensation, a task unmistakably within the prerogative of the court. Finally, the Court need not belabor the fact that R.A. 6657 or the CARP Law operates distinctly from P.D. 27. R.A. 6657 covers all public and private agricultural land including other lands of the public domain suitable for agriculture as provided for in Proclamation No. 131 and Executive Order No. 229;[36] while, P.D. 27 covers rice and corn lands. On this score, E.O. 229, which provides for the mechanism of the Comprehensive Agrarian Reform Program, specifically states: (P)residential Decree No. 27, as amended, shall continue to operate with respect to rice and corn lands, covered thereunder. x x x[37] It cannot be gainsaid, therefore, that R.A. 6657 did not repeal or supersede, in any way, P.D. 27. And whatever provisions of P.D. 27 that are not inconsistent with R.A. 6657 shall be suppletory to the latter,[38] and all rights acquired by the tenant-farmer under P.D. 27 are retained even with the passage of R.A. 6657.[39] WHEREFORE, the consolidated petitions filed by Rolando Sigre and the Land Bank of the Philippines are hereby GRANTED. The assailed Decision of the Court of Appeals is hereby NULLIFIED and SET ASIDE and the petition in CA-G.R. SP No. 28906 is DISMISSED for lack of merit. SO ORDERED.

Davide, Jr., C.J., (Chairman), and Vitug, JJ., concur. Kapunan, and Ynares-Santiago, JJ., no part.
[1] [2]

Rollo, CA-G.R. SP No. 28906, pp. 25-26, Annex C. Ibid., p. 23, Annex A. [3] Ibid., p. 24, Annex B. [4] Ibid., p. 80. [5] Ibid., p. 92. [6] Ibid., pp. 86-87. [7] Ibid., p. 88. [8] Ibid., pp. 89-90. [9] Ibid., p. 92. [10] Rollo, G.R. No. 109568, p. 4. [11] Rollo, G.R. 113454, pp. 9-10. [12] Entitled, Decreeing the Emancipation of Tenants from the Bondage of the Soil Transferring to Them the Ownership of the Land they Till and Providing the Instruments and Mechanism therefore. [13] Pagtalunan v. Tamayo, 183 SCRA 252, 258 1990. [14] The Conference of Maritime Manning Agencies, Inc. vs. POEA, 243 SCRA 666, 675 1995. [15] 55 SCRA 26 1974. [16] Rollo, CA-G.R. SP No. 28906, pp. 87-88. [17] Grego vs. Commission on Elections, 274 SCRA 481, 498 1997. [18] Vinzons-Magana vs. Estrella, 201 SCRA 536, 540 1991. [19] Presidential Decree No. 816 entitled, Providing that Tenant-Farmers/Agricultural Lessees Shall Pay the Leasehold Rentals When They Fall Due and Providing Penalties Therefor, issued on October 21, 1975. [20] 128 SCRA 5671984. [21] Ibid., pp. 573-574. [22] Rollo, pp. 178-179; Memorandum, pp. 4-5. [23] Supra., Curso vs. Court of Appeals; see also P.D. 816 and DAR Memorandum Circular No. 6. [24] 55 SCRA 26 1974 [25] Ibid., p. 31. [26] 91 SCRA 294 1979 [27] Ibid., p. 295. [28] 113 SCRA 798 1982 [29] Ibid., p. 801. [30] 175 SCRA 343 1989 [31] Issued on July 17, 1987, entitled Declaring Full Land Ownership to Qualified Farmer Beneficiaries Covered by Presidential Decree No. 27; Determining the Value of Remaining Unvalued Rice and Corn Lands Subject of P.D. 27; and Providing for the Manner of Payment by the Farmer Beneficiary and Mode of Compensation to the Landowner. [32] Issued on July 22, 1987, entitled Providing the Mechanisms for the Implementation of the Comprehensive Agrarian Reform Program.

[33]

Signed into law on June 10, 1988, entitled An Act Instituting a Comprehensive Agrarian Reform Program to Promote Social Justice and Industrialization; Providing the Mechanism for its Implementation, and For Other Purposes. [34] Supra., note no. 19, p. 393. [35] Vinzons case, note 18, p. 541; Association of Small Landowners in the Philippines, Inc. case, note 30, p. 382. [36] Section 2 of R.A. 6657. [37] Section 27 of E.O. 229. [38] Section 75 of R.A. 6657. [39] Association of Small Landowners in the Philippines, Inc. case, note 30, p. 391.

Source: Supreme Court E-Library | Date created: 2011-04-07 09:21:55 This page was dynamically generated by the E-Library Content Management System

THIRD DIVISION [ G.R. No. 134495, December 28, 1998 ]

PERFECTO R. YASAY, JR., PETITIONER, VS. HONORABLE OMBUDSMAN ANIANO A. DESIERTO AND THE FACTFINDING AND INVESTIGATION BUREAU, REPRESENTED BY ATTY. RIZALDE F. LAUDENCIA, RESPONDENTS. RESOLUTION
KAPUNAN, J.: This is a petition for certiorari[1] under Rule 65 of the Revised Rules of Court seeking: (1) the nullification of the Order dated July 22, 1998 of the respondent Ombudsman in OMB-ADM-0-98-0365 (Fact-Finding and Investigation Bureau v. Perfecto R. Yasay, Jr.) where petitioner Perfecto R. Yasay, Jr. was placed under preventive suspension for a period of ninety (90) days without pay; and (2) the dismissal of the administrative charges filed against him.[2] Petitioner also filed an Urgent Omnibus Motion dated October 26, 1998 praying of this Court (a) to lift or set aside the preventive suspension order and order extending the same, and (b) for resolution of the instant petition, with prayer for the issuance of temporary restraining order and/or writ of preliminary injunction to enjoin the enforcement of the respondent Ombudsmans Extension Order dated October 23, 1998, extending the period of petitioners preventive suspension for another ninety (90) days

following the expiration of the original ninety-day period. We shall consider this Urgent Omnibus Motion as an integral part of the petition and regard it in consolidation with the petition. We first consider the issues raised in the petition which are: (1) whether the respondent Ombudsman has jurisdiction over the subject matter of the administrative case against petitioner on his contention that what is involved is an intra-membership dispute in a private condominium corporation and does not involve the exercise of a governmental duty or function;[3] (2) whether the respondent Ombudsman gravely abused his discretion in giving due course to the administrative charges against petitioner;[4] and (3) whether the respondent Ombudsman gravely abused his discretion in issuing the order placing petitioner under preventive suspension.[5] The antecedents are as follows: In a Complaint-Affidavit dated June 17, 1997 filed with the respondent Ombudsman, Donato Teodoro, Sr., as President and Chairman of the Board of Donsol Development & Commercial Corporation and D.B. Teodoro Securities, Inc., charged petitioner with Estafa under the Revised Penal Code and violation of Sec. 3 (e) of R.A. No. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act, which provides thus: Sec. 3. Corrupt Practice of Public Officers. - In addition to acts or omissions of public officers already penalized by existing law, the following shall constitute corrupt practices of any public officer and are hereby declared to be unlawful; xxx xxx xxx

e. Causing any undue injury to any party, including the Government x x x x x x in the discharge of his official, administrative or judicial functions through bad faith or gross inexcusable negligence. x x x x x x The complaint reads: 3. At all times, material thereto, DONSOL and D.B. TEODORO are the registered owners of condominium units designated as G-02 and G-03 located at the ground floor of the SEC Building, EDSA, Mandaluyong City, their titles over said units are evidenced by Condominium Certificate of Title Nos. 4074 and 1706 of the Registry of Deeds of Metro Manila, District II, issued in accordance with the provisions of Republic Act No. 47261 as early as 1982 x x x; 4. The condominium units designated as G-03 and portions of G-02 was leased, and occupied by one Mrs. Emily Mendoza, the latter used the area as coffee shop; 5. Before however, the lease of Mrs. Mendoza (on the premises) expired, respondent, acting in representation of the Securities and Exchange Commission and the SEC Building Condominium Corp. which entities he is the President and Chairman, intimated to me (being the President and Board Chairman of DONSOL and DB TEODORO) SEC and SBCCs intention to lease the premises; he represented to me that the premises (G-03 and portion of G-02) will be used exclusively as SEC and SBCCs display area;

6. Although problems cropped-up to transfer Mrs. Mendoza (whose lease in the premises has not yet expired) to other units within the building in order to accommodate the respondent, we were able to finally convince Mrs. Mendoza to transfer to unit 208 located at the second floor (of the building) at our expense; 7. Among the conditions of the lease which was agreed upon, are as follows: 7a. as to the period of lease four (4) months to commence on September 1, 1996 up to December 31, 1996; 7b. as to the amounts of rentals P14,000.00 every month to be shared by SEC and SBCC at P7,000.00 each; 7c. as to the use of the premises exclusively for `display; It was further, agreed that after the expiration of the lease, the same shall be continued until terminated by the parties; 8. After the premises was vacated by Mrs. Mendoza, respondent caused to demolish the structure (coffee shop) constructed by the former, and thereupon, entered, and occupied the premises. 9. However, despite the occupancy of the premises, respondent as Chairman and President of SEC and SBCC did not only fail to execute the lease contract with DONSOL and DB SECURITIES, but he also miserably failed and refused to pay the monthly rentals of the premises without justifiable reason and despite verbal and written demands made upon him; 10. DONSOL and DB SECURITIES referred the respondents failure above-stated to their lawyer who addressed him a letter dated April 11, 1997. In the said letter, the demand for him to execute the lease contract of the premises, and to pay the rentals for the periods, October to December 1996 at P14,000.00 every month, and the rentals for the periods, January to March 1997 to P16,000.00 (20% increase) per month was reiterated x x x; 11. However, instead of complying with the demands, respondent addressed us a letter through our lawyer dated April 24, 1997. In his said letter, he stated that SEC and SBCC will not enter into such contract of lease because allegedly, the premises is a common area. He further stated that the appropriation of the premises to any unit owners is in violation of the Condominium Act x x x; 12. Amazed of the respondents stand (on our demands), our lawyer addressed him a letter dated May 13, 1997 informing him of DONSOL and DB SECURITIESs title(s) over the premises issued by the Registry of Deeds of the Province of Rizal in accordance with the provisions of the Condominium Acts as early as 1982. We informed him of the conclusiveness, and finality of our title(s), and his failure to question the same within the prescriptive period, copy of said letter is hereto attached and made part hereof, Annex, D; 13. Despite knowledge of the validity, conclusiveness, and finality of DONSOL and DB SECURITIES titles over the premises, respondent with grave abuse of confidence and in bad faith, failed and refused and continue to fail and refuse to heed and/or comply with the demand(s) to the damage and prejudice of DONSOL and DB SECURITIES.[6]

The complaint-affidavit was referred to the Evaluation and Preliminary Investigation Bureau, which required petitioner to file his counter-affidavit. Petitioner filed his counter-affidavit on October 15, 1997 where he alleged the following, inter alia: 4. The truth of the matter is that the area referred to as unit G-03 and portion of G-02 by the complainant, Mr. Teodoro, and which used to be a canteen/coffee shop, is a part of the ground floor lobby/hallway which is held in common by all the condominium unit owners of the SEC Building. The operator/owner of the said canteen at the ground floor lobby, Ms. Melisa Mendoza, was repeatedly directed by the SEC and the SBCC to vacate the premises because of the findings of the Mandaluyong City Fire Department that the structure serving as a canteen is a fire hazard and poses serious and imminent threat to the unit owners of the building and the public in general considering that the majority or a substantial portion of the building is being occupied by the Securities and Exchange Commission (SEC). When said Mrs. Mendoza persistently refused to vacate the premises and remove the illegal structure built therein, the herein affiant, acting in his capacity as Chairman and President of SEC and SBCC, respectively, wrote an official letter requiring Mrs. Mendoza to immediately vacate the premises, as the illegal structure (canteen) built therein was a serious threat to the large number of the people or the public who come and go to the SEC, not to mention the unit owners occupying their respective units. A copy of the said letter is hereto attached and marked as Annex C and made part hereof. 5. The said letter clearly indicates the stand of the SEC and SBCC that the illegal structure which is being used as a canteen dangerously impedes the egress of the public from the building and that the premises intended as a common area for the comfort and safety of the public. It would therefore be absurd and sheer illogic for herein affiant to intimate to Mr. Teodoro, as the latter would claim, the commission of the illegal act like the lease of the said premises, knowing that the area is part of the ground floor hallway which is held in common by all the units owners of the SEC Building, and such intimation is contrary to law (National Building Code), morals, good custom and public policy. 6. Emily S. Mendoza, in her letter to the SEC dated October 11, 1996, clearly acknowledged that the area she occupied and used as a canteen/coffee shop is part of the ground floor lobby/hallway, as she later on willingly complied with the order to vacate. A copy of the said letter is hereto attached and marked as Annex D and made part hereof. 7. There is no truth to the allegation that there was a contract of lease agreed upon between the corporations of Mr. Teodoro as one party and the SEC and SBCC as the other party. This claim is a bald-face lie and manifestly false in that Mr. Teodoro is evidently imagining a fact that does not exist, as he could not even make up his mind as to the terms of the alleged contract of lease. Prior to the filing of the civil complaint before the Metropolitan Trial Court, he sent to SEC and SBCC for signing an alleged contract of lease purportedly embodying the agreement of the parties. The preparation of the contract and its transmission to the SEC and SBCC was a subterfuge, a devious scheme to lend semblance to the existence of an alleged fact which does not exist and, per se, illegal. A copy of the said document is hereto attached and marked as Annex E and made part hereof. The said document stated in paragraph 1 of the alleged terms and

conditions the monthly rental of that they call unit G-03 which is P14,000.00, to be shared by the lessees as follows: SEC P9,800.00 and SBCC P4,200.00. 8. Compare this with paragraph 7 of the Complaint-Affidavit where it was alleged that monthly rental agreed upon the parties was P14,000.00 to be shared by SEC and SBCC at P7,000.00 each. This glaring discrepancy as to the rental sharing in the alleged contract of lease and the allegation in the complaint-affidavit filed before this Honorable Court is an eloquent proof that there was really no agreement to lease the premises and the alleged contract of lease is just a malicious concoction of a scheming mind. In other words, there is no contract to speak of in the first place. 9. The area where the canteen used to be situated is now being used as a passageway/lobby by the unit owners and their visitors and the public who come and transact business with the SEC. Needless to say, SEC and SBCC is under no obligation to pay any rent, as it is not occupying the area in the first place, and secondly, the area is held in common by all the unit owners of the condominium and, as aforesaid, being used by the public. 10. Mr. Teodoros claim that respondent (has) misappropriated and converted to his own personal use and benefit the amount(s) of rentals due to DONSOL and DB SECURITIES, hence the provisions of the Revised Penal Code on Estafa x x x was committed by respondent, are wild conjectures, speculations and conclusions of law without any factual basis, as the complaint never specified the necessary relevant facts supportive of such very liberal inference. Nowhere in the Complaint-Affidavit was there any narration of facts that proves or even remotely points to any misappropriation or conversion of the monthly rentals. The acts constituting misappropriation or conversion must be clearly alleged, otherwise the complaint must necessarily fall. The refusal to execute the alleged contract of lease, for the reasons aforestated, cannot even be remotely construed as misappropriation or conversion such refusal was in accord with the law and/or public policy. 11. Sec. 3(e) of RA 3019 cited by complainant does not also apply to herein affiant. Affiant, in the discharge of his official functions, never gave any unwarranted benefit, advantage or preference to any private party. His refusal to sign the alleged contract of lease cannot possibly be construed as bad faith or malice or even gross inexcusable negligence on his part. For one, affiant never misrepresented himself. His stand, as well as that of SEC and SBCC, is consistent from the very start that the illegal structure at the ground floor lobby must be removed as it is sitting on a common area and is dangerously impeding the egress of the public from the building. Such a structure is a fire hazard and poses serious threat to the unit owners and the public in general. For another, there was really no lease agreement to speak of.[7] Thereafter, the Fact-Finding and Intelligence Bureau submitted a Report dated June 10, 1998 where the investigators recommended the filing of criminal charges against petitioner for violation of Section 3 (e) of R.A. No. 3019 and administrative charges of dishonesty, gross misconduct, abuse of authority and conduct unbecoming of a public official. The investigators further recommended the preventive suspension of petitioner.[8] On July 23, 1998, the Ombudsman issued the assailed order.[9]

As a preliminary matter, we must note that petitioner admits he did not file with the Office of the Ombudsman a motion for reconsideration of the assailed order, on the assertion that [t]here is no plain, adequate and speedy remedy in the course of law available to petitioner against the assailed order and the remedy of a motion for reconsideration of the order has been foreclosed and rendered inadequate and useless, in view of the `immediately executory nature of said order.[10] Such failure to file a motion for reconsideration is fatal. The rule is that the special civil action of certiorari will not lie unless the aggrieved party has no other plain, speedy and adequate remedy in the ordinary course of law.[11] The Rules of Procedure of the Office of the Ombudsman[12] allows a party to file a motion for reconsideration of an approved order or resolution within fifteen (15) days in criminal cases, or ten (10) days in administrative cases, from notice thereof, on specified grounds. [13] Such is the plain, speedy and adequate remedy which petitioner should have availed of.[14] Verily, the motion for reconsideration is intended to afford the Ombudsman an opportunity to re-examine his order and to correct whatever if any mistakes or errors he may have committed, without the intervention of a higher court.[15] That the assailed order was stated to be immediately executory cannot mean that the remedy of filing a motion for reconsideration is foreclosed to petitioner. An order for preventive suspension need be immediately executory considering that it is a preliminary step in an administrative investigation,[16] and considering further its purpose, which is to prevent the respondent from using the position or office to influence prospective witnesses or tamper with the records which may be vital in the prosecution of the case against him.[17] On the substantive issues, we find no merit in petitioners stance. Petitioner first argues that the Ombudsman has no jurisdiction over the subject matter of the administrative case because the subject thereof pertains to a private intra-membership dispute in a private condominium corporation and does not involve the exercise of a governmental duty or function.[18] He asserts that [h]e acted in representation of the Securities and Exchange Commission as a unit owner in the SEC building and member of SBCC, not in his capacity as Chairman of the Securities and Exchange Commission as a government agency.[19] Petitioners effort to make a distinction between his being the Chairman of the Securities and Exchange Commission and the President of the SEC Building Condominium Corporation is vacuous. The Solicitor General points out, and we agree that: [p]etitioner cannot make a distinction between his position as chairman of the SEC as a government agency and chairman of the SEC but this time as condominium unit owner in the building owned by SEC as a government agency. The distinction is simply hairsplitting, a sterile attempt to make a difference where there is none. His being the president or chairman of the SEC Building Condominium Corporation (BCC) is

inseparable and completely appendant to his title as chairman of the government agency. He cannot become the president of the SBCC unless he is the chairman, or at least an officer, of the SEC. Differently stated, his standing as SBCC president arises from or is the necessary effect of his being the chairman of the SEC, and not because of anything else. Consequently, his acts or omissions as SBCC president must also be viewed in the light of his powers and functions as SEC chairman.[20] It is worthy of note that in petitioners counter-affidavit filed with the Evaluation and Preliminary Investigation Bureau, he asserted that he was acting in his capacity as Chairman and President of SEC and SBCC, respectively, [when he] wrote an official letter [dated October 23, 1996] requiring Ms. Mendoza to immediately vacate the premises,[21] that said letter clearly indicates the stand of the SEC and SBCC,[22] and further, as a matter of defense, that affiant, in the discharge of his official functions, never gave any unwarranted benefit, advantage or preference to any private party.[23] Also, the letter dated October 23, 1996 referred to by petitioner bore the Securities and Exchange Commission letterhead and was signed by petitioner as Chairman.[24] The second argument raised by petitioner is that the respondent Ombudsman gravely abused his discretion in giving due course to the administrative charges against petitioner because he contends that the evidence on record does not support the finding of grave misconduct and gross dishonesty. Petitioner raises matters of defense, for example, that he acted as a member of a collegial body,[25] which are best ventilated in the Office of Ombudsman, the proper investigative authority.[26] Furthermore, the arguments raised are not proper in a certiorari proceeding. We cannot, as petitioner prays, go over the evidence on record and make the determination of whether such evidence supports the administrative charges against him. Under Section 14 of R.A. No. 6770, otherwise known as An Act Providing for the Functional and Structural Organization of the Office of the Ombudsman, and for Other Purposes, [n]o court shall hear any appeal or application for remedy against the decision or findings of the Ombudsman, except the Supreme Court, on pure question of law. Petitioner next assails the respondent Ombudsmans order placing him under preventive suspension. The power of the Ombudsman to place under preventive suspension a public officer or employee pending investigation is provided for in R. A. No. 6770, thus: 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 charges would warrant removal from the service; or (c) the respondents 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 the 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. The companion provision in the Rules of Procedure of the Office of the Ombudsman reads: Sec. 9. Preventive suspension.- Pending investigation, the respondent may be preventively suspended without pay for a period of not more than six (6) months if, in the judgment of the Ombudsman or his proper deputy, the evidence of guilt is strong, and (a) the charge against such officer or employee involves dishonesty, oppression or gross misconduct, or neglect in the performance of duty; or (b) the charge would warrant removal from the service; or (c) the respondents continued stay in office may prejudice the case filed against him. If the administrative investigation is not terminated within the period the respondent is suspended, the respondent shall be automatically reinstated unless the delay in the disposition of the case is due to fault, negligence, or any cause attributable to the respondent, in which case the period of such delay shall not be counted in computing the period of suspension. In the assailed order, the Ombudsman concluded that the essential elements that must concur to impose preventive suspension of [petitioner] exist. He noted that the evidence is strong showing acts of grave misconduct and gross dishonesty on the part of [petitioner] and that the offenses are serious which call for a penalty of dismissal from the service if [petitioner] is found guilty thereof, and further that the preventive suspension is urgent considering that the continued exercise of authority on the part of [petitioner] may affect an impartial investigation of the administrative charges. In support of the above conclusions, the Ombudsman made the following findings in the assailed order: Based on the evidence on record, it is clear that a deceptive scheme or subterfuge was employed by Respondent [petitioner herein] in the following manner: 1) Respondent made representations with complainant Teodoro and agreed to lease the premises being occupied by Mrs. Mendoza. This matter was discussed during the SEC Meeting and Meeting of the SEC Building Condominium Corporation (SBCC) (Minutes of the Meeting pp. 017 and 035, Record) and corroborated by the Affidavits of SEC Commissioner Edijer Martinez (p. 069) and Mr. Pacifico So (p. 071); 2) The tricky scheme is very obvious because Respondent never questioned the complainants titles of ownership over the area occupied by the canteen before the demolition and while the negotiation for the lease of the subject premises was going on. But after taking possession of the premises, Respondent assumed that the premises

constitute a common area not subject to ownership by any one unit owner. That DONSOL and D.B. TEODORO Securities, Inc., represented by complainant Donato B. Teodoro, Sr., are the registered owners of the condominium units G-02 and G-03 is evidenced by Condominium Certificates of Title Nos. 4074 and 1706 of the Register of Deeds for Metro Manila, District II issued in 1986 and 1982, respectively (pp. 012 and 014); 3) The contemplated lease agreement between Teodoro and SEC enabled Respondent Yasay to effect his occupancy and the demolition of the canteen with little resistance because of his assurance that the SEC and SBCC would lease the premises from Complainant Teodoro after termination of the lease agreement with Mrs. Mendoza. To accommodate Respondents request, Mr. Teodoro convinced Mrs. Mendoza to vacate the premises alleging that her canteen is a fire hazard. He also threatened to demolish her structure if she failed to dismantle her canteen (Letter of P. Yasay dated October 23, 1996, p. 060, Record) In other words, what constitutes the deception and dishonesty is the employment by Respondent of an apparent scheme to take possession of the premises and effect the demolition under the guise of entering into a lease contract with complainant Teodoro. In so doing, Respondent impliedly recognized ownership of the complainant but when he had acquired possession thereof, he started claiming that the premises constituted a common area and that the SEC and SBCC would not enter into a lease contract with complainant because the appropriation of a common area to any unit owner was in violation of the Condominium Act. The apparent misconduct is aggravated by the demolition of the canteen of Complainants lessee, Mrs. Mendoza, even before the expiration of the latters lease agreement with Complainant. The rule is that whether the evidence of guilt is strong, as required in Section 24 of R.A. No. 6770, is left to the determination of the Ombudsman by taking into account the evidence before him.[27] In the very words of Section 24, the Ombudsman may preventively suspend a public official pending investigation if in his judgment the evidence presented before him tends to show that the officials guilt is strong and if the further requisites enumerated in Section 24 are present. The Court cannot substitute its own judgment for that of the Ombudsman on this matter, absent clear showing of grave abuse of discretion.[28] Petitioner has failed to show such grave abuse of discretion on the part of respondent Ombudsman. Petitioner also asserts that by making the findings and conclusions in the assailed order justifying the preventive suspension, the Ombudsman was clearly laying the basis for petitioners eventual dismissal and that he had already prejudged the case.[29] We find that there is no prejudging of the merits of the case at this stage of the proceedings. As pointed out by the Solicitor General, an order of preventive suspension is not a demonstration of a public officials guilt, which can be pronounced only after trial on the merits.[30]

We now consider the Urgent Omnibus Motion dated October 26, 1988 filed by petitioner seeking to enjoin respondent Ombudsmans Extension Order dated October 23, 1998, reproduced in its entirety hereunder: Considering that the respondent [herein petitioner] opted for a formal hearing which could not be terminated within the 90-day preventive suspension period, and it appearing that the complexion of the case has not been changed, accordingly, pursuant to Section 24 of R.A. 6770 the preventive suspension of herein respondent is hereby extended for another ninety (90) days without pay from date of expiration of the July 22, 1998 Order of this Office, effective immediately upon receipt of this Order. We must set aside the extension order and direct the lifting of the second ninety-day period of preventive suspension imposed upon petitioner. On the matter of the period of preventive suspension, Section 24 of R.A. No. 6770 and Section 9, Rule III of the Rules of Procedure must be read together, the former being couched in general terms, with the latter categorically providing that the respondent must be automatically reinstated at the end of the period of preventive suspension. The rules of procedure were promulgated by the Office of the Ombudsman itself, in the form of subordinate legislation, for the effective exercise or performance of its powers, functions, and duties by virtue of delegated power in Section 18 of R.A. No. 6770. The second paragraph of Section 9, Rule III of the Rules of Procedure of the Office of the Ombudsman provides that [I]f the administrative investigation is not terminated within the period the respondent is suspended, the respondent shall automatically be reinstated unless the delay in the disposition of the case is due to the fault, negligence, or any cause attributable to the respondent, in which case the period of such delay shall not be counted in computing the period of suspension. Petitioner reported for work on October 22, 1998, the day following the last days of the period of his preventive suspension.[31] At this time, the investigation of his case was still pending before the Ombudsmans office. Respondent Ombudsman issued the extension order the following day, on October 23, 1998. The import of Section 9, Rule III of the Rules of Procedure is that the respondent must be reinstated to work at the end of the period of suspension even if the investigation of his case is still pending. The period of suspension is extended only if respondent causes a delay in the investigation, with the actual days delay tolling the period of suspension. There is in actuality, no additional or second period, but merely that the original period seems longer because the interruptions in the investigation caused by the respondents delay is not counted in computing the period of suspension.[32] The reason given by the Ombudsman for the second ninety-day period of preventive suspension, reading from the assailed extension order, was that petitioner opted for a formal investigation.

We find that this is not the delay due to the fault, negligence, or any cause attributable to the respondent contemplated by Section 9 of the Rules of Procedure. Petitioners having availed of the procedure allowed by Section 5, Rule III of the Rules of Procedure can in no way be construed as fault or negligence or even as a cause analogous to these two causes. Examples of such fault or cause are the respondents own absences from scheduled hearings, the filing of motions for postponement and the filing of requests to transfer venue.[33] It is the contention of the Solicitor General that petitioner caused the delay of the investigation, first, when he filed the instant petition for certiorari; second, when he filed criminal and administrative cases against the Ombudsman before his own office; third, when he filed a motion for inhibition dated September 8, 1998 against the panel of investigators hearing his case; and fourth, when he filed a motion to suspend proceedings dated September 15, 1998. We disagree. Petitioners filing of the instant petition cannot, as the Solicitor General says weigh down the administrative proceeding.[34] The rule is that the filing of an original action for certiorari is an independent action and does not interrupt the course of the principal action.[35] No temporary restraining order was issued by this Court to arrest the course of the proceedings below.[36] We also do not see how petitioners having filed administrative and criminal cases against the Ombudsman can delay the investigation of his (petitioners) own administrative case. Though related by virtue of the dramatis personae involved, these cases, however, are independent of each other. Anent the motion to suspend proceedings and motion for inhibition filed by petitioner, these were resolved and denied by the Fact-Finding & Intelligence Board through an Order dated October 12, 1998, within the ninety-day period of petitioners preventive suspension. We see no reason why proceedings need be halted pending resolution of these motions. Furthermore, resolution of these motions, certainly common to such a body as the Office of the Ombudsman, is a matter simple enough as not to entail much research and require extensive man-hours. Notably, the proceedings of the formal investigation is within the control of the Hearing Panel constituted by the Administrative Adjudication Bureau of the Ombudsmans office to hear petitioners case. The Hearing Panel had, under Section 5, Rule III of the Rules of Procedure, at its command, processes which are aimed at expediting proceedings before it, such as the preliminary conference to determine the nature of the charge, [arrive at a] stipulation of facts, a definition of the issues, [for the] identification and marking of exhibits, limitation of witnesses and such other matters as would expedite the proceedings, and the issuance of a preliminary conference order. Consequently, any delay from any cause whatsoever can be averted and forestalled and the course of the proceedings scheduled judiciously.

We must add that it is axiomatic that before the respondent Ombudsman made the initial determination as to the period of preventive suspension to be imposed upon a respondent, he considered all pertinent matters such as the nature of the charge, the issues involved and the evidence of the parties. Needless to say, the Ombudsman had sufficient evidence before him to make such a determination as to the period of preventive suspension, as he had sufficient evidence to establish that the evidence of guilt was strong as to warrant the issuance itself of the order for preventive suspension. CONSIDERING the foregoing, the Court RESOLVED to: (a) DISMISS the petition insofar as it assails the Order dated July 22, 1998 of the Ombudsman in OMB-ADM-0-98-0365 and prays for the dismissal of the administrative case against petitioner Perfecto R. Yasay, Jr., on the ground that no grave abuse of discretion was committed by respondent Ombudsman; and (b) SET ASIDE the Extension Order dated October 23, 1998 thereby lifting the preventive suspension imposed upon petitioner by virtue of said order. This directive is IMMEDIATELY EXECUTORY. SO ORDERED. Romero (Chairman), Purisima, and Pardo, JJ., concur.
[1]

Filed July 28, 1998. Petition, pp. 2, and 14. Id., at 7. Ibid. Ibid. Annex A-3 of the Petition. Annex A-8 of the Petition. Annex A-1 of the Petition. Annex A of the Petition. Petition, p. 3.

[2]

[3]

[4]

[5]

[6]

[7]

[8]

[9]

[10]

[11]

Tan v. The Honorable Sandiganbayan (Third Division), G.R. No. 128764, July 10, 1998 citing cases.

[12]

Administrative Order No. 07 dated April 10, 1990. Section 7, Rule II and Section 8, Rule III of the Rules of Procedure.

[13]

[14]

See Philippine National Construction Corporation (PNCC) v. National Labor Relations Commission, 245 SCRA 668 (1995).
[15]

Philippine National Construction Corporation, supra; Tan, Jr. v. The Honorable Sandiganbayan, G.R. No. 128764, July 10, 1998; Zapata v. National Labor Relations Commission, 175 SCRA 56 (1989); Labudahon v. National Labor Relations Commission, 251 SCRA 129 (1995); Darama v. National Labor Relations Commission, 236 SCRA 280 (1994)/
[16]

Alonzo v. Capulong, 244 SCRA 80 (1995).

[17]

Ibid.; Pimentel v. Gartichorena, 208 SCRA 122 (1992); Lacson v. Roque, 92 Phil. 450 (1953).
[18]

Petition, p. 7. Ibid. Comment, pp. 18-19. Paragraph 4. Paragraph 5. Id., at 11. Annex A-11 of the Petition. Petition, p. 13. Section 15 of R.A. No. 6770; See Deloso v. Domingo, 191 SCRA 545 (1990).

[19]

[20]

[21]

[22]

[23]

[24]

[25]

[26]

[27]

Buenaseda v. Flavier, 226 SCRA 645 (1993); Lastimosa v. Vasquez, 243 SCRA 497 (1995).
[28]

See Castillo-Co v. Barbers, G.R. No. 129952, June 16, 1998. Petition, p. 12. Comment, p. 2. Urgent Omnibus Motion, p. 2.

[29]

[30]

[31]

[32]

See the following similar provisions

Section 27, Rule XIV of the Omnibus Rules Implementing Rule V of Executive Order No. 292 and Other Pertinent Civil Service Laws provides thus: When the administrative case against a non-presidential officer or employee under preventive suspension is not finally decided by the disciplining authority within the period of ninety (90) days after the date of his preventive suspension, he shall be automatically reinstated in the service: Provided, That when the delay in the disposition of the case is due to the fault, negligence or petition of the respondent, the period of delay should not be included in the counting of the ninety (90) calendar day-period of preventive suspension. Section 42 of P.D. No. 807, otherwise known as the Civil Service Decree of the Philippines provides thus: Lifting of Preventive Suspension Pending Administrative Investigation. When the administrative case against the officer or employee under preventive suspension is not finally decided by the disciplining authority within the period of ninety (90) days after the date of suspension of the respondent who is not a presidential appointee, the respondent shall be automatically reinstated in the service: Provided, That when the delay in the disposition of the case is due to the fault, negligence or petition of the respondent, the period of delay shall not be counted in computing the period of suspension herein provided. See also Layug v. Quisumbing, 182 SCRA 46 (1990).
[33]

Layug, supra. Comment on the Urgent Omnibus Motion, p.6.

[34]

[35]

Reyes v. Commission on Elections, 254 SCRA 514 (1996) citing Palomares v. Jimenez, 90 Phil. 773 (1952).
[36]

Id..

Source: Supreme Court E-Library | Date created: 2010-01-15 10:39:15 This page was dynamically generated by the E-Library Content Management System

EN BANC

[ G.R. No. 104848, January 29, 1993 ]

ANTONIO GALLARDO, ANTONIO AREVALO, CRESENCIO ECHAVES, EMMANUEL ARANAS, PALERMO SIA, RONNIE RAMBUYON, PRIMO NAVARRO, AND NOEL NAVARRO, PETITIONERS, VS. HON. SINFOROSO V. TABAMO, JR., IN HIS CAPACITY AS PRESIDING JUDGE OF BRANCH 28 OF THE REGIONAL TRIAL COURT OF MAMBAJAO, CAMIGUIN, AND PEDRO P. ROMUALDO, RESPONDENTS. DECISION
DAVIDE JR., J.: This is a petition for certiorari and prohibition under Rule 65 of the Revised Rules of Court. Petitioners would have Us prohibit, restrain and enjoin public respondent Sinforoso V. Tabamo, Jr., Presiding Judge of Branch 28 of the Regional Trial Court (RTC) of Mambajao, Camiguin, from continuing with the proceedings in a petition for injunction, prohibition and mandamus with a prayer for a writ of preliminary injunction and restraining order filed as a taxpayers suit, docketed therein as Special Civil Action No. 465 and entitled "Pedro P. Romualdo, Jr. versus Gov. Antonio Gallardo, et al." Petitioners likewise seek to prohibit the enforcement of the Temporary Restraining Order (TRO), issued by the respondent Judge on 10 April 1992, on the ground that the latter acted whimsically, capriciously and without jurisdiction when he took cognizance of the case and issued the said order. It is the petitioners' thesis that the said case principally involves an alleged violation of the provisions of the Omnibus Election Code the jurisdiction over which is exclusively vested in the Commission on Elections (COMELEC). It is additionally averred that the action is completely baseless, that the private respondent is not a real party in interest and that the public respondent acted with undue haste, manifest partiality and evident bias in favor of the private respondent in issuing the TRO. In Our Resolution of 20 April 1992, We required the respondents to comment on the petition and issued a Temporary Restraining Order directing the respondent Judge to cease and desist from implementing and enforcing the challenged Order of 10 April 1992, and from continuing with the proceedings in Special Civil Action No. 465. At the time of the filing of both the special civil action and the instant petition, petitioner Antonio Gallardo was the incumbent Governor of the Province of Camiguin and was seeking re-election in the 11 May 1992 synchronized elections. Petitioners Antonio Arevalo, Cresencio Echaves, Emmanuel Aranas and Palermo Sia are the provincial treasurer, provincial auditor, provincial engineer and provincial budget officer of Camiguin, respectively. Their co-petitioners Ronnie Rambuyon, Primo Navarro and Noel Navarro are all government project laborers. On the other hand, the private respondent

was the incumbent Congressman of the lone Congressional District of Camiguin, a candidate for the same office in the said synchronized elections and the Regional Chairman of the Laban ng Demokratikong Pilipino (LDP) in Region X. The antecedents of this case are not complicated. On 10 April 1992, private respondent filed his Petition (Special Civil Action No. 465) before the court a quo against petitioners Gallardo, Arevalo, Echaves, Aranas and Sia to prohibit and restrain them from pursuing or prosecuting certain public works projects; from releasing, disbursing and/or spending any public funds for such projects; and from issuing, using or availing of treasury warrants or any device for the future delivery of money, goods and other things of value chargeable against public funds in connection with the said projects as (1) said projects were undertaken in violation of the 45-day ban on public works imposed by the Omnibus Election Code (Batas Pambansa Blg. 881) because although they were initiated a few days before 27 March 1992, the date the ban took effect, they were not covered by detailed engineering plans, specifications or a program of work which are preconditions for the commencement of any public works project; hence, they could not have been lawfully and validly undertaken; (2) the hiring of hundreds of laborers in the different projects continues unabated in flagrant violation of paragraphs (a), (b), (v) and (w), Section 261 of the Omnibus Election Code; (3) the projects were undertaken in violation of the provisions of the Local Government Code governing the use and expenditure of the twenty percent (20%) development fund of the Province of Camiguin; (4) these projects, which are "Locally-Funded", were pursued without the requisite approval of the provincial budget by the Regional Office of Budget and Management as required by Section 326 of the Local Government Code; (5) some of the projects which are "Foreign-Assisted" and funded by the Spanish Assistance for Integrated Livelihood Program (SAIL) lack the required building permits and are without any relevance to those livelihood projects envisioned by the SAIL; and (6) more importantly, as alleged in paragraph VII of his Petition:
[1] [2] [3]

"x x x the illegal prosecution of these public work projects requiring massive outlay of public funds during this election period has been and is being done maliciously and intentionally for the purpose of corrupting the voters and inducing them to support the candidacy of Respondent Gallardo and his candidates in the coming May 11, 1992 election." In support of his prayer for a restraining order to be issued upon the filing of the petition and a writ of preliminary injunction immediately thereafter, herein private respondent alleges in paragraph XV of his Petition: "That unless the illegal acts of Respondents are enjoined or restrained immediately first by the issuance of the restraining order upon the filing of this Petition and immediately after that a Writ of Preliminary Injunction, great or irreparable loss and injury shall be caused not only to Petitioner himself, as a candidate and as a taxpayer, but also to the entire LDP slate of candidates, whose supporters are being corrupted and illegally induced to vote for

Respondent Antonio A. Gallardo and his candidates in consideration of their employment in these projects, but (sic) most of all the greatest and most irreparable loss, damage, and injury, in terms of wanton, irresponsible, excessive, abusive and flagrant waste of public money, is now being caused and shall continue to be caused, primarily and principally to the sixty-thousand or more taxpayers of the Province of Camiguin, whom Petitioner represents as Congressman and whose interests Petitioner is sworn to uphold, promote and protect."
[4]

The questioned projects are classified into two (2) categories: (a) those that are LocallyFunded, consisting of twenty-nine (29) different projects for the maintenance or concreting of various roads, the rehabilitation of the Katibawasan Falls and the construction of the Capitol Building, and (b) those designated as Foreign-Assisted, consisting of fifteen (15) projects which include the construction of the Human Resource Development Center, various Day Care cum Production Centers and waterworks systems; the extension and renovation of various buildings; the acquisition of hospital and laboratory equipment; and the rehabilitation of office and equipment.
[5]

On the same day that the private respondent filed his petition, public respondent Judge issued the questioned TRO, the pertinent portion of which reads:
[6]

"It appearing from the verified petition in this case that great and irreparable damage and/or injury shall be caused to the petitioner as candidate and taxpayer, such damage and injury taking the form and shape occasioned by the alleged wanton, excessive, abusive and flagrant waste of public money, before the matter can be heard on notice, the respondents are hereby Temporarily Restrained from pursuing or prosecuting the projects itemized in Annexes "A" and "A-1" of the petition; from releasing, disbursing and/or spending any public funds for such projects; from issuing, using or availing of treasury warrants or any device undertaking future delivery of money, goods or other things of value chargeable against public funds in connection with said projects." (Emphasis supplied). In the same order, the public respondent directed the petitioners to file their Answer within ten (10) days from receipt of notice and set the hearing on the application for the issuance of the writ of preliminary injunction for 24 April 1992. Instead of filing their Answer, the petitioners filed the instant special civil action for certiorari and prohibition, with a prayer for a writ of preliminary injunction and/or temporary restraining order, alleging as grounds therefor the following: "I PUBLIC RESPONDENT HAS NO JURISDICTION OVER SPECIAL CIVIL ACTION NO. 465, BEING (sic) A SUIT INTENDED TO ENJOIN AN ALLEGED VIOLATION OF THE OMNIBUS ELECTION CODE.

II THE REGIONAL TRIAL COURT'S JURISDICTION IS LIMITED TO CRIMINAL ACTIONS FOR VIOLATION OF THE OMNIBUS ELECTION CODE. III THE REGIONAL TRIAL COURT HAS NO JURISDICTION TO TAKE COGNIZANCE OF COMPLAINTS/PETITION BASED ON ELECTION OFFENSES PRIOR TO THE CONDUCT OF PRELIMINARY INVESTIGATION BY THE COMMISSION ON ELECTIONS; FURTHER, PRIVATE RESPONDENT HAS NO RIGHT TO FILE SPECIAL CIVIL ACTION NO. 465 SINCE THE AUTHORITY TO PROSECUTE ELECTION OFFENSES BELONGS TO THE COMMISSION ON ELECTIONS. IV PRIVATE RESPONDENT FAILED TO EXHAUST ALL HIS ADMINISTRATIVE REMEDIES. V THE PETITION DATED 09 APRIL 1992 FILED WITH PUBLIC RESPONDENT IS COMPLETELY BASELESS SINCE: A. THE PUBLIC WORKS PROJECTS BEING UNDERTAKEN BY PETITIONERS ARE EXEMPTED FROM THE PUBLIC WORKS BAN ENFORCED BY THE COMELEC.

B. THE PUBLIC WORKS PROJECTS WERE COMMENCED ONLY AFTER APPROVAL OF THE DETAILED ENGINEERING PLANS AND SPECIFICATIONS AND PROGRAM OF WORK. C. THE PUBLIC WORKS PROJECTS WERE PROPERLY SUPPORTED BY A BUDGET DULY PASSED AND APPROVED BY THE SANGGUNIANG PANLALAWIGAN. D. THE DEVELOPMENT FUND MAY VALIDLY BE USED TO FINANCE THE MAINTENANCE OF PROVINCIAL ROADS. VI THE TAXPAYER'S SUIT FILED BY PRIVATE RESPONDENT IS IMPROPER SINCE HE IS NOT A REAL PARTY IN INTEREST. VII

THE PUBLIC RESPONDENT ACTED WITH UNDUE HASTE, MANIFEST PARTIALITY AND EVIDENT BIAS IN FAVOR OF PRIVATE RESPONDENT AND AGAINST PETITIONERS IN ISSUING THE TEMPORARY RESTRAINING ORDER."
[7]

As adverted to earlier, We issued a Temporary Restraining Order on 20 April 1992. After considering the allegations, issues and arguments adduced in the Petition, the Comment thereto and the Reply to the Comment, We gave due course to this Petition and required the parties to submit their respective Memoranda which they complied with.
[8]

The main issue in this case is whether or not the trial court has jurisdiction over the subject matter of Special Civil Action No. 465. The material operative facts alleged in the petition therein inexorably link the private respondent's principal grievance to alleged violations of paragraphs (a), (b), (v) and (w), Section 261 of the Omnibus Election Code (Batas Pambansa Blg. 881). There is particular emphasis on the last two (2) paragraphs which read: "SEC. 261. Prohibited Acts. -- The following shall be guilty of an election offense: (a) Vote-buying and vote-selling. -xxx (b) Conspiracy to bribe voters. -xxx xxx (v) Prohibition against release, disbursement or expenditure of public funds. Any public official or employee including barangay officials and those of government-owned or controlled corporations and their subsidiaries, who, during forty-five days before a regular election and thirty days before a special election, releases, disburses or expends any public funds for: (1) Any and all kinds of public works, except the following: xxx (w) Prohibition against construction of public works, delivery of materials for public works and issuance of treasury warrants and similar devices. -- During the period of forty-five days preceding a regular election and thirty days before a special election, any person who (a) undertakes the construction of any public works, except for projects or works exempted in the preceding paragraph; or (b) issues, uses or avails of treasury warrants or any device undertaking future delivery of money, goods or other things of value chargeable against public funds.

Private respondent likewise focuses on Resolution No. 2332 (not 2322 as erroneously stated in page 10 of his Petition) of the COMELEC, promulgated on 2 January 1992, implementing the aforesaid paragraphs (v) and (w) of Section 261 and fixing the duration of the 45-day ban for purposes of the synchronized elections from 27 March 1992 to 11 May 1992. Essentially, therefore, Civil Case No. 465 before the trial court is for the enforcement of laws involving the conduct of elections; corollarily, the issue that is logically provoked is whether or not the trial court has jurisdiction over the same. If the respondent Judge had only hearkened to this Court's teaching about a quarter of a century earlier, this case would not have reached Us and taken away from more deserving cases so much precious time. Zaldivar vs. Estenzo, decided by this Court on 3 May 1968, had squarely resolved the issue above posed. Speaking through then Associate Justice Enrique Fernando (who later became Chief Justice), this Court explicitly ruled that considering that the Commission on Elections is vested by the Constitution with exclusive charge of the enforcement and administration of all laws relative to the conduct of elections, the assumption of jurisdiction by the trial court over a case involving the enforcement of the Election Code "is at war with the plain constitutional command, the implementing statutory provisions, and the hospitable scope afforded such grant of authority so clear and unmistakable in recent decisions."
[9] [10]

Said case was decided under the aegis of the 1935 Constitution and R.A. No. 180, otherwise known as the Revised Election Code, which took effect on 21 June 1947. The present Constitution and extant election laws have further strengthened the foundation for the above doctrine; there can be no doubt that the present COMELEC has broader powers than its predecessors. While under the 1935 Constitution it had "exclusive charge of the enforcement and administration of all laws relative to the conduct of elections," exercised "all other functions x x x conferred upon it by law" and had the power to deputize all law enforcement agencies and instrumentalities of the Government for the purpose of insuring free, orderly and honest elections, and under the 1973 Constitution it had, inter alia, the power to (a) "[E]nforce and administer all laws relative to the conduct of elections" (b) "(D]eputize, with the consent or at the instance of the Prime Minister, law enforcement agencies and instrumentalities of the Government, including the Armed Forces of the Philippines, for the purpose of ensuring free, orderly, and honest elections, and (c) "[P]erform such other functions as may be provided by law," it was not expressly vested with the power to promulgate regulations relative to the conduct of an election. That power could only originate from a special law enacted by Congress; this is the necessary implication of the above constitutional provision authorizing the Commission to "[P]erform such other functions as may be provided by law."
[11] [12] [13] [14] [15]

The present Constitution, however, implicitly grants the Commission the power to promulgate such rules and regulations. The pertinent portion of Section 2 of Article IX-C thereof reads as follows:

"SEC. 2. The Commission on Elections shall exercise the following powers and functions: (1) Enforce and administer all laws and regulations relative to the conduct of an election, plebiscite, initiative, referendum, and recall." (Emphasis supplied). xxx The word regulations is not found in either the 1935 or 1973 Constitutions. It is thus clear that its incorporation into the present Constitution took into account the Commission's power under the Omnibus Election Code (Batas Pambansa Blg. 881), which was already in force when the said Constitution was drafted and ratified, to: xxx "Promulgate rules and regulations implementing the provisions of this Code or other laws which the Commission is required to enforce and administer, x x x."
[16]

Hence, the present Constitution upgraded to a constitutional status the aforesaid statutory authority to grant the Commission broader and more flexible powers to effectively perform its duties and to insulate it further from legislative intrusions. Doubtless, if its rule-making power is made to depend on statutes, Congress may withdraw the same at any time. Indeed, the present Constitution envisions a truly independent Commission on Elections committed to ensure free, orderly, honest, peaceful and credible elections, and to serve as the guardian of the people's sacred right of suffrage -- the citizenrys vital weapon in effecting a peaceful change of government and in achieving and promoting political stability.
[17]

Additionally, by statutory mandate, the present Commission on Elections possesses, inter alia, the following powers: "1) Exercise direct and immediate supervision and control over national and local officials or employees, including members of any national or local law enforcement agency and instrumentality of the government required by law to perform duties relative to the conduct of elections. In addition, it may authorize CMT cadets eighteen years of age and above to act as its deputies for the purpose of enforcing its orders. The Commission may relieve any officer or employee referred to in the preceding paragraph from the performance of his duties relating to electoral processes who violates the election law or fails to comply with its instructions, orders, decisions or rulings, and appoint his substitute. Upon recommendation of the Commission, the corresponding proper authority shall suspend or remove from office any or all of such officers or employees who may, after due process, be found guilty of such violation or failure.
[18]

2) To stop any illegal election activity, or confiscate, tear down, and stop any unlawful, libelous, misleading or false election propaganda, after due notice and hearing.
[19]

Needless to say, the acts sought to be restrained in Special Civil Action No. 465 before the court a quo are matters falling within the exclusive jurisdiction of the Commission. As a matter of fact, the specific allegations in the petition therein of violations of paragraphs (a), (b), (v) and (w), Section 261 of the Omnibus Election Code provide a stronger basis and reason for the application of the Zaldivar doctrine. At most, the facts in the latter case do not illustrate as clearly the announced doctrine as the facts in this case do. In Zaldivar, no specific provision of the Revised Election Code then in force was alleged to have been violated. What was sought to be enjoined was the alleged wielding by Zaldivar, then a municipal mayor, of the power, by virtue of his office, to appoint special policemen or agents to terrorize voters into supporting the congressional candidate of his choice. In holding that the then Court of First Instance did not have jurisdiction over the case, this Court considered the constitutional power of the Commission on Elections to have exclusive charge of the enforcement and administration of all laws relative to the conduct of elections and to exercise all other functions which may be conferred by law. We likewise relied on the provisions of the Revised Election Code vesting upon the COMELEC (a) direct and immediate supervision over municipal, city and provincial officials designated by law to perform duties relative to the conduct of elections and (b) authority to suspend them from the performance of such duties for failure to comply with its instructions, orders, decisions or rulings and recommend to the President their removal if found guilty of non-feasance, malfeasance or misfeasance in connection with the performance of their duties relative to the conduct of elections.
[20]

Under the present law, however, except in case of urgent need, the appointment or hiring of new employees or the creation or filling up of new positions in any government office, agency or instrumentality, whether national or local, including government-owned or controlled corporations, is banned during the period of forty-five (45) days before a regular election and thirty (30) days before a special election if made without the prior authority of the Commission on Elections. A violation thereof constitutes an election offense. Then too, no less than the present Constitution -- and not just the Election Law as was the case at the time of Zaldivar -- expressly provides that the Commission may "[R]ecommend to the President the removal of any officer or employee it has deputized, or the imposition of any other disciplinary action, for violation or disregard of, or disobedience to its directive, order, or decision."
[21] [22]

Moreover, the present Constitution also invests the Commission with the power to "investigate and, where appropriate, prosecute cases of violations of election laws, including acts or omissions constituting election frauds, offenses, and malpractices.

[23]

It may thus be said without fear of contradiction that this vast array of powers and functions now enjoyed by the Commission under the present Constitution provides a stronger foundation for, and adds vigor and vitality to, the Zaldivar doctrine.

The rationale of the said doctrine needs to be stressed here so that henceforth, no judge will lose his bearings when confronted with the same issue. Otherwise, he should be held to account for either the sheer ignorance of the law or the callous disregard of pronouncements by this Court to accommodate partisan political feelings. We declared in the said case: "The question may be asked: Why should not the judiciary be a co-participant in this particular instance of enforcing the Election Code as its authority was invoked? The obvious answer is the literal language of the Constitution which empowers the Commission on Elections to have exclusive charge of the enforcement and administration of all laws relative to the conduct of the elections. Moreover, as was so aptly observed by the then Justice Frankfurter, although the situation confronting the United States Supreme Court was of a different character: Nothing is clearer than that this controversy concerns matters that bring courts into immediate and active relations with party contests. From the determination of such issues this Court has traditionally held aloof. It is hostile to a democratic system to involve the judiciary in the politics of the people. And it is not less pernicious if such judicial intervention in an essentially political contest be dressed up in the abstract phrases of the law. Then, too, reference by analogy may be made to the principle that sustains Albano v. Arranz. For even without the express constitutional prescription that only this Court may review the decisions, orders and rulings of the Commission on Elections, it is easy to understand why no interference whatsoever with the performance of the Commission on Elections of its functions should be allowed unless emanating from this Court. The observation of Acting Chief Justice J.B.L. Reyes in Albano v. Arranz, while not precisely in point, indicates the proper approach. Thus: It is easy to realize the chaos that would ensue if the Court of First Instance of each and every province were to arrogate unto itself the power to disregard, suspend, or contradict any order of the Commission on Elections; that constitutional body would be speedily reduced to impotence. This conclusion finds support from a consideration of weight and influence. What happened in this case could be repeated elsewhere. It is not improbable that courts of first instance would be resorted to by leaders of candidates or political factions entertaining the belief whether rightly or wrongly that local officials would employ all the power at their command to assure the victory of their candidates. Even if greater care and circumspection, than did exist in this case, would be employed by judges thus appealed to, it is not unlikely that the shadow of suspicion as to alleged partisanship would fall on their actuations, whichever way the matter before them is decided. It is imperative that the faith in the impartiality of the judiciary be preserved unimpaired. Whenever, therefore, the fear may be plausibly entertained that an assumption of jurisdiction would lead to a lessening of the undiminished trust that should be reposed in the courts and the absence of authority discernible from the wording of applicable statutory provisions and the trend of judicial decisions, even if no constitutional mandate as that present in this case could be relied upon, there should be no hesitancy in declining to act."
[24] [25] [26]

The foregoing disquisitions should have rendered unnecessary the resolution of the remaining collateral issues raised in this petition. In view, however, of their importance, they will be dealt with in a general way. It is not true that, as contended by the petitioners, the jurisdiction of the Regional Trial Court under the election laws is limited to criminal actions for violations of the Omnibus Election Code. The Constitution itself grants to it exclusive original jurisdiction over contests involving elective municipal officials. Neither can We agree with the petitioners' assertion that the Special Civil Action filed in the court below involves the prosecution of election offenses; the said action seeks some reliefs incident to or in connection with alleged election offenses; specifically, what is sought is the prevention of the further commission of these offenses which, by their alleged nature, are continuing.
[27]

There is as well no merit in the petitioners' claim that the private respondent has no legal standing to initiate the filing of a complaint for a violation of the Omnibus Election Code. There is nothing in the law to prevent any citizen from exposing the commission of an election offense and from filing a complaint in connection therewith. On the contrary, under the COMELEC Rules of Procedure, initiation of complaints for election offenses may be done motu propio by the Commission on Elections or upon written complaint by any citizen, candidate or registered political party or organization under the party-list system or any of the accredited citizens arms of the Commission. However, such written complaints should be filed with the "Law Department of the Commission; or with the offices of the Election Registrars, Provincial Election Supervisors or Regional Election Directors, or the State Prosecutor, Provincial Fiscal or City Fiscal." As earlier intimated, the private respondent was not seriously concerned with the criminal aspect of his alleged grievances. He merely sought a stoppage of the public works projects because of their alleged adverse effect on his candidacy. Indeed, while he may have had reason to fear and may have even done the right thing, he committed a serious procedural misstep and invoked the wrong authority.
[28] [29]

We have, therefore, no alternative but to grant this petition on the basis of Our resolution of the principal issue. Nevertheless, it must be strongly emphasized that in so holding that the trial court has no jurisdiction over the subject matter of Special Civil Action No. 465, We are not to be understood as approving of the acts complained of by the private respondent. If his charges for the violation of paragraphs (a), (b), (v) and (w), Section 261 of the Omnibus Election Code are true, then no one should be spared from the full force of the law. No government official should flout laws designed to ensure the holding of free, orderly, honest, peaceful and credible elections or make a mockery of our electoral processes. The bitter lessons of the past have shown that only elections of that nature or character can guarantee a peaceful and orderly change. It is then his duty to respect, preserve and enhance an institution which is vital in any democratic society. WHEREFORE, the instant Petition is hereby GRANTED. The challenged order of respondent Judge of 10 April 1992 in Special Civil Action No. 465 is SET ASIDE and said Civil Case is hereby ordered DISMISSED, without prejudice on the part of the

private respondent to file, if he is so minded, the appropriate complaint for an election offense pursuant to the COMELEC Rules of Procedure. Costs against the private respondent. SO ORDERED. Feliciano, Padilla, Bidin, Grio-Aquino, Regalado, Romero, Nocon, Bellosillo, Melo, and Campos, Jr., JJ., concur. Narvasa, C.J., and Gutierrez, Jr., J., join J. Cruz in his separate opinion.

[1]

Annex "D" of Petition; Rollo, 45-59. R.A. No. 7160. Rollo, 49. Rollo, 54. Annexes "A" and "A-1" of Petition in Special Civil Action No. 465; Id., 60-61. Rollo, 39. Rollo, 10-12. Id., 134. 23 SCRA 533 [1968]. At page 534. Section 2, Article X. Third sentence, Id. Section 2(1), Article XII-C. Section 2(4), Id. Section 2(8), Id. Section 52(c), Article VII, Omnibus Election Code. Section 2(4), Article IX-C, 1987 Constitution.

[2]

[3]

[4]

[5]

[6]

[7]

[8]

[9]

[10]

[11]

[12]

[13]

[14]

[15]

[16]

[17]

[18]

Section 52(a), Article VII, Omnibus Election Code. Section 57(2), Id. Section 3, R.A. No. 180. Section 261(g), Omnibus Election Code. Section 2(8), Article IX-C. Section 2(6), Id. Citing Colegrove vs. Green, 328 U.S. 549, 553-550 [1946]. G.R. No. L-19260, 31 January 1962, 4 SCRA 386. At pages 540-541.

[19]

[20]

[21]

[22]

[23]

[24]

[25]

[26]

Section 2(2), Article IX-C of the 1987 Constitution and Section 251 of the Omnibus Election Code. Also under the former section, courts of limited jurisdiction (Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts) have exclusive original jurisdiction over contests involving elective barangay officials. These courts likewise have jurisdiction in inclusion and exclusion cases (Section 138, Omnibus Election Code).
[27] [28]

Section 3, Rule 34, COMELEC Rules of Procedure. Section 4, Id.

[29]

CONCURRING AND DISSENTING OPINION

CRUZ, J.:

I concur but, regretfully, not with the statement that the Commission on Elections now derives the power to promulgate resolutions directly from Article IX-C, Section 2(1) of the Constitution, to wit: SEC. 2. The Commission on Elections shall exercise the following powers and functions:
(1) Enforce and administer all laws and regulations relative to the conduct of an election, plebiscite, initiative, referendum, and

recall. (Emphasis supplied)

With all due respect, I submit that what the COMELEC is authorized to do under that provision is only to "enforce and administer" such laws and regulations, not to promulgate them. The addition of the word "regulations" in the new subsection does not empower it now to promulgate regulations any more than it can promulgate laws. As I read it, all that the change imports is that the scope of the measures the COMELEC may enforce and administer has been expressly widened, to include "regulations." Regulations are mainly intended to implement or supplement a law and may be generally issued only pursuant to a valid delegation of legislative power. That is why they are known as "subordinate legislation." In the case of the COMELEC, I see no constitutional vesture in it of the power to promulgate regulations, much less laws. There does not seem to be even an "implicit" grant of that authority, as the ponencia suggests.

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