Administrative Law

Cases
Atty. Victoriano D. Alabastro

Jessiel R. Diamante

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November 18, 1959

G.R. No. L-12859

CEBU UNITED ENTERPRISES, plaintiff-appellee,

vs.
JOSE GALLOFIN, Collector of Customs, Cebu Port, defendant-appellant.
REYES, J.B.L., J.:
This suit for mandatory injunction was instituted in the Court of First Instance of Cebu
United Enterprise to compel Jose Gallofin, as collector of Customs, Cebu Port, to
release and deliver to the plaintiff two imported shipments of 7,834 bales of over issue
newspapers purchased by the latter from the United States. As ancillary relief during the
pendency of the action, the plaintiff prayed for the issuance of a writ of preliminary
mandatory injunction, which was granted by the court after the plaintiff posted a bond in
the amount of P60,000.00 in favor of the defendant. Thereafter, the goods were
released to the plaintiff, it appearing further that the advance sales tax due on the same
had been duly paid upon arrival of the merchandise at port.
The importation of the aforesaid shipments was made under and by virtue of an Import
Control Commission License No. 1225, issued by the defunct Import Control
Commission. Under the terms of the license, the plaintiff could import, on a no-dollar
remittance basis, over issue newspapers up to the amount or value of $118,000.00.
The refusal of the defendant to deliver the imported items is premised on his contention
that while the five bills of lading covering the two shipments of the over issue
newspapers were all dated at Los Angeles, U.S.A. December 17, 1953, or one day
before the expiration of the import license in question, the vessels M/S VENTURA and
M/S BATAAN, carrying on board the said merchandise, actually left the ports of
embarkation, Los Angeles, and San Francisco, on January 12 and January 16, 1954
respectively. Hence, according to the defendant, the importation must be considered as
having been made without a valid import license, because under the regulations issued
by the Central Bank and the Monetary Board, "all shipments that left the port of origin
after June 30, 1953, and are covered by ICC licenses, may be released by the Bureau
of Customs without the need of a Central Bank release certificate; provided they left the
port of origin within the period of validity of the licenses". No Central Bank certificate for
the release of the goods having been shown or presented to the defendant, the latter
refused to make the delivery.
The lower court was thus conformed with the issue of determining whether the valid
period of the license in question should be counted up to the time when the vessels
carrying the imported items left the ports of origin on January 12 and January 16, 1954,

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or when the corresponding bills of lading were dated, or December 17, 1953. The court
chose the latter date, and held:
In view therefore, this Court pronounces judgment making writ of preliminary mandatory
injunction issued against defendant permanent, with orders for the cancellation of
plaintiff's bond, this after whatever advance sales tax or any taxes, surcharges and so
forth might be due on the goods shall have been paid, without costs.
The defendant appealed to the Court of Appeals. The question raised, however, being
purely one of law, the appeal was certified to us pursuant to a resolution of said court
dated July 19, 1957. The appeal has no merit.
The authority of the appellee to import was contained in the Import Control Commission
License No. 17225, validated on June 18, 1953, and under Resolution 70 of the
Commission (adopted March 27, 1952), the same had a six-month period of validity
counted from the said date June 18, 1953. This license states, among other conditions,
that
Commodities covered by this license must be shipped from the country of origin before
the expiry date of the license, and are subject to sec. 13 of Republic Act. No. 650.
Although Republic Act No. 650, creating the Import Control Commission, expired on
July 31, 1953, it is to be conceded that its duly executed acts can have valid effects
even beyond the life span of said governmental agency.
What is important to consider only is the legal connotation of the word "shipped" as the
term was used in the license. Defendant maintains that it is when the vessel leaves the
port of embarkation, while plaintiff holds that it is the dates of the bills of lading, which
are usually issued after the cargo is placed on board the vessel. The date of the
shipment is the date when the goods for dispatch are loaded on board the vessel, and
not necessarily when the ship puts to sea, is clearly implied from our ruling in the case
of U.S Tobacco Corporation vs. Rufino Luna, et al., (87 Phil., 4), wherein we said:
By section 6 of Act No. 426, all goods including leaf tobacco have been placed under
control. Petitioner's merchandise left the port of departure before the passage of that
Act but arrived in Manila after its approval. For the purpose of enforcing or applying said
section 6, there can only be one date of importation. Which was the date? The date the
goods were ordered, the date they were put on board vessel, or the date they reached
the port of destination? We are of the opinion that the date of importation is the date of
shipment and not the date of Arrival in Manila. (Emphasis supplied)

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The issuance of the bill of lading, furthermore, presupposes or carries the presumption
that the goods were delivered to the carrier for immediate shipment (13 C.J.S. sec. 123
(2), p. 235, and cases cited therein). It does not appear here that the bill of lading
specified any designated day on which the vessel were to lift anchor, nor was it shown
that plaintiff had any knowledge that the vessel M/S VENTURA and M/S BATAAN were
not to depart soon after he placed his cargo on board and the corresponding bills of
lading issued to him. From this latter time, the goods in contemplation of law, are
deemed already in transit (New Civil Code, Arts. 1531 and 1736).
It should also be considered that it is entirely outside the shipper's hands to fix the dates
of departure, route or arrival of a vessel (unless he charters the whole ship [see Art.
656, Code of Commerce]).
Defendant's reliance upon Central Bank regulations that the shipment licensed must
have "left the port of origin within the period of validity of the "license" is not
maintainable in the present case, because the regulations came onto effect only on July
1, 1953 already after issuance of the appellee' license and cannot be read into the
same.
The Solicitor General's contention that, assuming the six months are counted up to the
date the imports goods were placed on board the vessels for shipment the period of
validity had likewise already elapsed because, legally six months mean 180 days, which
in this case expired on December 15, cannot now be entertained because the
defendant-appellant, under paragraph 3 of his answer to the Complaint, expressly
admitted that the date appearing on the bills of lading (December 17, 1953) as the date
of loading on board the vessels "is one day before the expiration of the validity of the
import license". What he only questioned in the court below is the legal connotation of
the word "shipped" under the import license.
In the light of the resolution we have taken on the main issue, it becomes unnecessary
for us to dwell further upon the other questions raised by the parties.
Wherefore, the appeal should be dismissed and the judgment of the lower court
affirmed. So rendered.

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July 5, 1996

G.R. No. 106296.

ISABELO T. CRISOSTOMO, petitioner,

vs.
THE COURT OF APPEALS and the PEOPLE OF THE PHILIPPINES, respondents.*

MENDOZA, J.:
This is a petition to review the decision of the Court of Appeals dated July 15, 1992, the
dispositive portion of which reads:
WHEREFORE, the present petition is partially granted. The questioned Orders and
writs directing (1) reinstatement of respondent Isabelo T. Crisostomo to the position of
President of the Polytechnic University of the Philippines, and (2) payment of salaries
and benefits which said respondent failed to receive during his suspension insofar as
such payment includes those accruing after the abolition of the PCC and its transfer to
the PUP, are hereby set aside. Accordingly, further proceedings consistent with this
decision may be taken by the court a quo to determine the correct amounts due and
payable to said respondent by the said university.
The background of this case is as follows:
Petitioner Isabelo Crisostomo was President of the Philippine College of Commerce
(PCC), having been appointed to that position by the President of the Philippines on
July 17, 1974.
During his incumbency as president of the PCC, two administrative cases were filed
against petitioner for illegal use of government vehicles, misappropriation of
construction materials belonging to the college, oppression and harassment, grave
misconduct, nepotism and dishonesty. The administrative cases, which were filed with
the Office of the President, were subsequently referred to the Office of the Solicitor
General for investigation.
Charges of violations of R.A. No. 3019, 3 (e) and R.A. No. 992, 20-21 and R.A. No. 733,
14 were likewise filed against him with the Office of Tanodbayan.
On June 14, 1976, three (3) informations for violation of Sec. 3 (e) of the Anti-Graft and
Corrupt Practices Act (R.A. No. 3019, as amended) were filed against him. The
informations alleged that he appropriated for himself a bahay kubo, which was intended
for the College, and construction materials worth P250,000.00, more or less. Petitioner
was also accused of using a driver of the College as his personal and family driver.[1]

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On October 22, 1976, petitioner was preventively suspended from office pursuant to
R.A. No. 3019, 13, as amended. In his place Dr. Pablo T. Mateo, Jr. was designated as
officer-in-charge on November 10, 1976, and then as Acting President on May 13, 1977.
On April 1, 1978, P.D. No. 1341 was issued by then President Ferdinand E. Marcos,
CONVERTING THE PHILIPPINE COLLEGE OF COMMERCE INTO A POLYTECHNIC
UNIVERSITY, DEFINING ITS OBJECTIVES, ORGANIZATIONAL STRUCTURE AND
FUNCTIONS, AND EXPANDING ITS CURRICULAR OFFERINGS.
Mateo continued as the head of the new University. On April 3, 1979, he was appointed
Acting President and on March 28, 1980, as President for a term of six (6) years.
On July 11, 1980, the Circuit Criminal Court of Manila rendered judgment acquitting
petitioner of the charges against him. The dispositive portion of the decision reads:
WHEREFORE, the Court finds the accused, Isabelo T. Crisostomo, not guilty of the
violations charged in all these three cases and hereby acquits him therefrom, with
costs de oficio. The bail bonds filed by said accused for his provisional liberty are
hereby cancelled and released.
Pursuant to the provisions of Section 13, R.A. No. 3019, as amended, otherwise known
as The Anti-Graft and Corrupt Practices Act, and under which the accused has been
suspended by this Court in an Order dated October 22, 1976, said accused is hereby
ordered reinstated to the position of President of the Philippine College of Commerce,
now known as the Polytechnic University of the Philippines, from which he has been
suspended. By virtue of said reinstatement, he is entitled to receive the salaries and
other benefits which he failed to receive during suspension, unless in the meantime
administrative proceedings have been filed against him.
The bail bonds filed by the accused for his provisional liberty in these cases are hereby
cancelled and released.
SO ORDERED.
The cases filed before the Tanodbayan (now the Ombudsman) were likewise dismissed
on August 8, 1991 on the ground that they had become moot and academic. On the
other hand, the administrative cases were dismissed for failure of the complainants to
prosecute them.
On February 12, 1992, petitioner filed with the Regional Trial Court a motion for
execution of the judgment, particularly the part ordering his reinstatement to the position
of president of the PUP and the payment of his salaries and other benefits during the
period of suspension.

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The motion was granted and a partial writ of execution was issued by the trial court on
March 6, 1992. On March 26, 1992, however, President Corazon C. Aquino appointed
Dr. Jaime Gellor as acting president of the PUP, following the expiration of the term of
office of Dr. Nemesio Prudente, who had succeeded Dr. Mateo. Petitioner was one of
the five nominees considered by the President of the Philippines for the position.
On April 24, 1992, the Regional Trial Court, through respondent Judge Teresita DyLiaco Flores, issued another order, reiterating her earlier order for the reinstatement of
petitioner to the position of PUP president. A writ of execution, ordering the sheriff to
implement the order of reinstatement, was issued.
In his return dated April 28, 1992, the sheriff stated that he had executed the writ by
installing petitioner as President of the PUP, although Dr. Gellor did not vacate the office
as he wanted to consult with the President of the Philippines first. This led to a contempt
citation against Dr. Gellor. A hearing was set on May 7, 1992. On May 5, 1992,
petitioner also moved to cite Department of Education, Culture and Sports Secretary
Isidro Cario in contempt of court. Petitioner assumed the office of president of the PUP.
On May 18, 1992, therefore, the People of the Philippines filed a petition
for certiorari and prohibition (CA G.R. No. 27931), assailing the two orders and the writs
of execution issued by the trial court. It also asked for a temporary restraining order.
On June 25, 1992, the Court of Appeals issued a temporary restraining order, enjoining
petitioner to cease and desist from acting as president of the PUP pursuant to the
reinstatement orders of the trial court, and enjoining further proceedings in Criminal
Cases Nos. VI-2329-2331.
On July 15, 1992, the Seventh Division of the Court of Appeals rendered a decision,
[2]
the dispositive portion of which is set forth at the beginning of this opinion. Said
decision set aside the orders and writ of reinstatement issued by the trial court. The
payment of salaries and benefits to petitioner accruing after the conversion of the PCC
to the PUP was disallowed. Recovery of salaries and benefits was limited to those
accruing from the time of petitioners suspension until the conversion of the PCC to the
PUP.The case was remanded to the trial court for a determination of the amounts due
and payable to petitioner.
Hence this petition. Petitioner argues that P.D. No. 1341, which converted the PCC into
the PUP, did not abolish the PCC. He contends that if the law had intended the PCC to
lose its existence, it would have specified that the PCC was being abolished rather than
converted and that if the PUP was intended to be a new institution, the law would have
said it was being created. Petitioner claims that the PUP is merely a continuation of the

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existence of the PCC, and, hence, he could be reinstated to his former position as
president.
In part the contention is well taken, but, as will presently be explained, reinstatement is
no longer possible because of the promulgation of P.D. No. 1437 by the President of the
Philippines on June 10, 1978.
P.D. No. 1341 did not abolish, but only changed, the former Philippine College of
Commerce into what is now the Polytechnic University of the Philippines, in the same
way that earlier in 1952, R.A. No. 778 had converted what was then the Philippine
School of Commerce into the Philippine College of Commerce. What took place was a
change in academic status of the educational institution, not in its corporate life. Hence
the change in its name, the expansion of its curricular offerings, and the changes in its
structure and organization.
As petitioner correctly points out, when the purpose is to abolish a department or an
office or an organization and to replace it with another one, the lawmaking authority
says so. He cites the following examples:
E.O. No. 709:
1. There is hereby created a Ministry of Trade and Industry, hereinafter referred to as
the Ministry. The existing Ministry of Trade established pursuant to Presidential Decree
No. 721 as amended, and the existing Ministry established pursuant to Presidential
Decree No. 488 as amended, are abolished together with their services, bureaus and
similar agencies, regional offices, and all other entities under their supervision and
control. . . .
E.O. No. 710:
1. There is hereby created a Ministry of Public Works and Highways, hereinafter
referred to as the Ministry. The existing Ministry of Public Works established pursuant to
Executive Order No. 546 as amended, and the existing Ministry of Public Highways
established pursuant to Presidential Decree No. 458 as amended, are abolished
together with their services, bureaus and similar agencies, regional offices, and all other
entities within their supervision and control. . . .

R.A. No. 6975:

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13. Creation and Composition. - A National Police Commission, hereinafter referred to

as the Commission, is hereby created for the purpose of effectively discharging the
functions prescribed in the Constitution and provided in this Act. The Commission shall
be a collegial body within the Department. It shall be composed of a Chairman and four
(4) regular commissioners, one (1) of whom shall be designated as Vice-Chairman by
the President. The Secretary of the Department shall be the ex-officio Chairman of the
Commission, while the Vice-Chairman shall act as the executive officer of the
Commission.
xxx xxx xxx
90. Status of Present NAPOLCOM, PC-INP. - Upon the effectivity of this Act, the
present National Police Commission, and the Philippine Constabulary-Integrated
National Police shall cease to exist. The Philippine Constabulary, which is the nucleus
of the integrated Philippine Constabulary-Integrated National Police, shall cease to be a
major service of the Armed Forces of the Philippines. The Integrated National Police,
which is the civilian component of the Philippine Constabulary-Integrated National
Police, shall cease to be the national police force and in lieu thereof, a new police force
shall be established and constituted pursuant to this Act.
In contrast, P.D. No. 1341, provides:
1. The present Philippine College of Commerce is hereby converted into a university to
be known as the Polytechnic University of the Philippines, hereinafter referred to in this
Decree as the University.
As already noted, R.A. No. 778 earlier provided:
1. The present Philippine School of Commerce, located in the City of Manila,
Philippines, is hereby granted full college status and converted into the Philippine
College of Commerce, which will offer not only its present one-year and two-year
vocational commercial curricula, the latter leading to the titles of Associate in Business
Education and/or Associate in Commerce, but also four-year courses leading to the
degrees of Bachelor of Science in Business in Education and Bachelor of Science in
Commerce, and five-year courses leading to the degrees of Master of Arts in Business
Education and Master of Arts in Commerce, respectively.
The appellate court ruled, however, that the PUP and the PCC are not one and the
same institution but two different entities and that since petitioner Crisostomos term was
coterminous with the legal existence of the PCC, petitioners term expired upon the
abolition of the PCC. In reaching this conclusion, the Court of Appeals took into account
the following:

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a) After respondent Crisostomos suspension, P.D. No. 1341 (entitled CONVERTING

THE PHILIPPINE COLLEGE OF COMMERCE INTO A POLYTECHNIC UNIVERSITY,
DEFINING ITS OBJECTIVES, ORGANIZATIONAL STRUCTURE AND FUNCTIONS,
AND EXPANDING ITS CURRICULAR OFFERINGS) was issued on April 1, 1978. This
decree explicitly provides that PUPs objectives and purposes cover not only PCCs
offering of programs in the field of commerce and business administration but also
programs in other polytechnic areas and in other fields such as agriculture, arts and
trades and fisheries . . . (section 2). Being a university, PUP was conceived as a bigger
institution absorbing, merging and integrating the entire PCC and other national schools
as may be transferred to this new state university.
b) The manner of selection and appointment of the university head is substantially
different from that provided by the PCC Charter. The PUP President shall be appointed
by the President of the Philippines upon recommendation of the Secretary of Education
and Culture after consultation with the University Board of Regents (section 4, P.D.
1341). The President of PCC, on the other hand, was appointed by the President of the
Philippines upon recommendation of the Board of Trustees (Section 4, R.A. 778).
c) The composition of the new universitys Board of Regents is likewise different from
that of the PCC Board of Trustees (which included the chairman of the Senate
Committee on Education and the chairman of the House Committee on Education, the
President of the PCC Alumni Association as well as the President of the Chamber of
Commerce of the Philippines). Whereas, among others, the NEDA Director-General, the
Secretary of Industry and the Secretary of Labor are members of the PUP Board of
Regents. (Section 6, P.D. 1341).
d) The decree moreover transferred to the new university all the properties including
equipment and facilities:
. . . owned by the Philippine College of Commerce and such other National Schools as
may be integrated . . . including their obligations and appropriations . . . (Sec. 12; Italics
supplied).[3]
But these are hardly indicia of an intent to abolish an existing institution and to create a
new one. New course offerings can be added to the curriculum of a school without
affecting its legal existence. Nor will changes in its existing structure and organization
bring about its abolition and the creation of a new one. Only an express declaration to
that effect by the lawmaking authority will.
The Court of Appeals also cites the provision of P.D. No. 1341 as allegedly implying the
abolition of the PCC and the creation of a new one the PUP in its stead:

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12. All parcels of land, buildings, equipment and facilities owned by the Philippine
College of Commerce and such other national schools as may be integrated by virtue of
this decree, including their obligations and appropriations thereof, shall stand
transferred to the Polytechnic University of the Philippines, provided, however, that said
national schools shall continue to receive their corresponding shares from the special
education fund of the municipal/provincial/city government concerned as are now
enjoyed by them in accordance with existing laws and/or decrees.
The law does not state that the lands, buildings and equipment owned by the PCC were
being transferred to the PUP but only that they stand transferred to it. Stand transferred
simply means, for example, that lands transferred to the PCC were to be understood as
transferred to the PUP as the new name of the institution.
But the reinstatement of petitioner to the position of president of the PUP could not be
ordered by the trial court because on June 10, 1978, P.D. No. 1437 had been
promulgated fixing the term of office of presidents of state universities and colleges at
six (6) years, renewable for another term of six (6) years, and authorizing the President
of the Philippines to terminate the terms of incumbents who were not reappointed. P.D.
No. 1437 provides:
6. The head of the university or college shall be known as the President of the university
or college. He shall be qualified for the position and appointed for a term of six (6) years
by the President of the Philippines upon recommendation of the Secretary of Education
and Culture after consulting with the Board which may be renewed for another term
upon recommendation of the Secretary of Education and Culture after consulting the
Board. In case of vacancy by reason of death, absence or resignation, the Secretary of
Education and Culture shall have the authority to designate an officer in charge of the
college or university pending the appointment of the President.
The powers and duties of the President of the university or college, in addition to those
specifically provided for in this Decree shall be those usually pertaining to the office of
the president of a university or college.
7. The incumbent president of a chartered state college or university whose term may
be terminated according to this Decree, shall be entitled to full retirement
benefits: provided that he has served the government for at least twenty (20) years; and
provided, further that in case the number of years served is less than 20 years, he shall
be entitled to one month pay for every year of service.
In this case, Dr. Pablo T. Mateo Jr., who had been acting president of the university
since April 3, 1979, was appointed president of PUP for a term of six (6) years on March
28, 1980, with the result that petitioners term was cut short. In accordance with 7 of the

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law, therefore, petitioner became entitled only to retirement benefits or the payment of
separation pay. Petitioner must have recognized this fact, that is why in 1992 he asked
then President Aquino to consider him for appointment to the same position after it had
become vacant in consequence of the retirement of Dr. Prudente.
WHEREFORE, the decision of the Court of Appeals is MODIFIED by SETTING ASIDE
the questioned orders of the Regional Trial Court directing the reinstatement of the
petitioner Isabelo T. Crisostomo to the position of president of the Polytechnic University
of the Philippines and the payment to him of salaries and benefits which he failed to
receive during his suspension in so far as such payment would include salaries accruing
after March 28, 1980 when petitioner Crisostomos term was terminated. Further
proceedings in accordance with this decision may be taken by the trial court to
determine the amount due and payable to petitioner by the university up to March 28,
1980.
SO ORDERED.

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October 16, 1997

G.R. No. 112745.

AQUILINO T. LARIN, petitioner,

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

TORRES, JR., J.:

Challenge in this petition is the validity of petitioners removal from service as Assistant
Commissioner of the Excise Tax Service of the Bureau of Internal Revenue. Incidentally,
he questions Memorandum order no. 164 issued by the Office of the President, which
provides for the creation of A Committee to Investigate the Administrative Complaint
Against Aquilino T. Larin, Assistant Commissioner, Bureau of Internal Revenue as well
as the investigation made in pursuance thereto and Administrative Order No. 101 dated
December 2, 1993 which found him guilty of grave misconduct in the administrative
charge and imposed upon him the penalty of dismissal from office.
Likewise, petitioner seeks to assail the legality of Executive Order No. 132, issued by
President Ramos on October 26, 1993, which provides for the Streamlining of
theBureau of Internal Revenue, and of its implementing rules issued by the Bureau of
Internal Revenue, namely: a) Administrative Order No. 4-93, which provides for
theOrganizational Structure and Statement of General Functions of Offices in the
National Office and b) Administrative Order No. 5-93, which provides for Redefining the
Areas of Jurisdiction and Renumbering of Regional And District Offices.
The antecedent facts of the instant case as succinctly related by the Solicitor General
are as follows:
On September 18, 1992, [1] a decision was rendered by the Sandiganbayan convicting
herein petitioner Aquilino T. Larin, Revenue Specific Tax Officer, then Assistant
Commisioner of the Bureau of Internal Revenue and his co-accused (except Justino E.
Galban, Jr.) of the crimes of violation of Section 268 (4) of the National Internal
Revenue Code and Section 3 (e) of R.A. 3019 in Criminal Cases Nos. 14208-14209,
entitled People of the Philippines, Plaintiff vs. Aquilino T. Larin, Teodoro T. Pareno,
Justino E. Galban, Jr. and Potenciana N. Evangelista, Accused, the dispositive portion
of the judgment reads:

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"WHEREFORE, judgment is now rendered in Criminal Cases Nos. 14208 and 14209
convicting accused Assistant Commissioner for Specific Tax Aquilino T. Larin, Chief of
the Alcohol tax Division TEODORO P. PARENO, and Chief of the Revenue accounting
Division POTENCIANA M. EVANGELISTA:
xxx
SO ORDERED.
The fact of petitioners conviction was reported to the President of the Philippines by the
then Acting Finance Secretary Leong through a memorandum dated June 4, 1993. The
memorandum states, inter alia:
This is a report in the case of Assistant Commissioner AQUILINO T. LARIN of the
Excise tax Service, Bureau of Internal Revenue, a presidential appointee, one of those
convicted in the Criminal Case Nos. 14208-14209, entitled People of the
Philippines vs. Aquilino T. Larin, et. al. Referred to the Department of Finace by the
Commissioner of Internal Revenue.
The cases against Pareno and Evangelista are being acted upon by the Bureau of
Internal revenue as they non-presidential appointees.
xxx
It is clear from the foregoing that Mr. Larin has found beyond reasonable doubt to have
committed acts constituting grave misconduct. Under the Civil Service Laws and Rules
which require only preponderance of evidence, grave misconduct is punishable by
dismissal.
Acting by authority of the President, Sr. Deputy Executive Secretary Leonardo A.
Quisumbing issued Memorandum Order No. 164 dated August 25, 1993 which provides
for the creation of an Executive Committee to investigate the administrative charge
against herein petitioner Aquilino T. Larin. It states thus:
A Committee is hereby created to investigate the administrative complaint filed against
Aquilino T. Larin, Assistant Commissioner, Bureau of Internal Revenue, to be composed
of:
Atty. Frumencio A. Lagustan Chairman
Assistant Executive Secretary for Legislation
Mr. Jose B. Alejandro Member

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Presidential Assistant
Atty. Jaime M. Maza Member
Assistant commissioner of Inspector services
Bureau of Internal Revenue
The Committee shall have the powers and prerogatives of (an) investigating committee
under the administrative Code of 1987 including the power to summon witnesses,
administer oath or take testimony or evidence relevant to the investigation by subpoena
ad testificandum and subpoena duces tecum:
xxx
The Committee shall convene immediately, conduct the investigation in the most
expeditious manner, and terminate the same as soon as practicable from its first
scheduled date of hearing.
xxx
Consequently, the Committee directed the petitioner to respond to the administrative
charge leveled against him through a letter dated September 17, 1993, thus:
Presidential Memorandum Order No. 164 dated August 25, 1993, a xerox copy of which
is hereto attached for your ready reference, created an Investigation Committee to look
into the charges against you which are also the subject of the Criminal Cases No.
14208 and 14209 entitled People of the Philippines vs. Aquilino T. Larin, et. al.
The committee has its possession a certified true copy of the Decision of the
Sandiganbayan in the above-mentioned cases.
Pursuant to Presidential Memorandum Order No. 164, you are hereby directed to file
your position paper on the aforementioned charges within seven (7) days from receipt
hereof xxx.
Failure to file the required position paper shall be considered as a waiver on your part to
submit such paper or to be heard, in which case, the Committee shall deem the case
submitted on the basis of the documents and records at hand.
In compliance, petitioner submitted a letter dated September 30, 1993 which was
addressed to Atty. Frumencio A. Lagustan , the Chairman of the Investigating
Committee.In said latter, he asserts that,

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The case being sub-judice, I may not , therefore, comment on the merits of issues
involved for fear of being cited in contempt of Court. This position paper is thus limited
to furnishing the Committee pertinent documents submitted with the Supreme Court and
other tribunal which took cognizance of the case in the past, as follows:
xxx
The foregoing documents readily show that I am not administratively liable or criminally
culpable of the charges leveled against me, and that the aforesaid cases are mere
prosecutions caused to be filed and are being orchestrated by taxpayers who were
prejudiced by multi-million peso assessments I caused to be issued against them in my
official capacity as Assistant Commissioner, Excise Tax office of Bureau of Internal
Revenue.
In the same letter, petitioner claims that the administrative complaint against him is
already barred: a) on jurisdictional ground as the Office of the Ombudsman had already
taken cognizance of the case and had caused the filing only of the criminal charges
against him, b) by res judicata, c) double jeopardy, and d) because to proceed with the
case would be redundant, oppressive and a plain persecution against him.
Meanwhile, the President issued the challenged Executive order No. 132 dated October
26, 1993 which mandates for the streamlining of the Bureau of Internal Revenue. Under
said order, some positions and functions are either abolished, renamed, decentralized
or transferred to other offices, while other offices are also created. The Excise Tax
Service or the Specific Tax Service, of which petitioner was the Assistant Commissioner,
was one of those offices that was abolished by said executive order.
The corresponding implementing rules of Executive Order No. 132, namely, revenue
Administrative Orders Nos. 4-93 and 5-93, were subsequently issued .by the Bureau of
Internal Revenue.
On October 27, 1993, or one day after the promulgation of Executive Order No.132, the
President appointed the following as BIR Assistant Commissioners:
1. Bernardo A. Frianeza

5. Rizalina S. Magalona

8. Antonio N. Pangilinan

2. Dominador L. Galura

6. Victorino
Mamalateo

9. Melchor S. Ramos

3. Jaime D. Gonzales
4. Lilia C. Guillermo

C.

10. Joel L. Tan-Torress

7. Jaime M. Masa

Admin. Law | 16

Consequently, the president, in the assailed Administrative Order No. 101 dated
December 2, 1993, found petitioner guilty of grave misconduct in the administrative
charge and imposed upon him the penalty of dismissal with forfeiture of his leave credits
and retirement benefits including disqualification for reappointment in the government
service.
Aggrieved, petitioner filed directly with this Court the instant petition on December 13,
1993 to question basically his alleged unlawful removal from office.
On April 17, 1996 and while the instant petition is pending, this Court set aside the
conviction of the petitioner in Criminal Case Nos. 14208 and 14209.
In his petition, petitioner challenged the authority of the President to dismiss him from
office. He argued that in so far as presidential appointees who are Career Executive
Service Officers are concerned, the President exercises only the power of control not
the power to remove. He also averred that the administrative investigation conducted
under Memorandum Order No. 164 is void as it violated his right to due process.
According to him, the letter of the Committee dated September 17, 1993 and his
position paper dated September 30, 1993 are not sufficient for purposes of complying
with the requirements of due process. He alleged that he was not informed of the
administrative charges leveled against him nor was he given official notice of his
dismissal.
Petitioner likewise claimed that he was removed as a result of the reorganization made
by the Executive Department in the BIR pursuant to Executive Order No. 132. Thus, he
assailed said Executive Order No. 132 and its implementing rules, namely, Revenue
Administrative Orders 4-93 and 5-93 for being ultra vires. He claimed that there is yet no
law enacted by Congress which authorizes the reorganization by the Executive
Department of executive agencies, particularly the Bureau of Internal revenue. He said
that the reorganization sought to be effected by the Executive Department on the basis
of E.O. No. 132 is tainted with bad faith in apparent violation of Section 2 of R.A. 6656,
otherwise known as the Act Protecting the Security of Tenure of Civil Service Officers
and Employees in the Implementation of Government Reorganization.
On the other hand, respondents contended that since petitioner is the presidential
appointee, he falls under the disciplining authority of the President. They also
contended that E.O. No. 132 and its implementing rules were validly issued pursuant to
Sections 48 and 62 of Republic Act No. 7645. Apart from this, the other legal bases of
E.O. No. 132 as stated in its preamble are Section 63 of E.O No.127 (Reorganizing the
Ministry of Finance), and Section 20, Book III of E.O. No. 292, otherwise known as the
Administrative Code of 1987. In addition, it is clear that in Section 11 of R.A No.6656
future reorganization is expressly contemplated and nothing in said law that prohibits

Admin. Law | 17

subsequent reorganization through an executive order. Significantly, respondents

clarified that petitioner was not dismissed by virtue of EO 132. Respondents claimed
that he was removed from office because he was found guilty of grave misconduct in
the administrative cases filed against him.
The ultimate issue to be resolved in the instant case falls on the determination of the
validity of petitioners dismissal from office. Incidentally, in order to resolve this matter, it
is imperative that We consider these questions : a) Who has the power to discipline the
petitioner?, b) Were the proceedings taken pursuant to Memorandum Order No. 164 in
accord with due process?, c) What is the effect of petitioners acquittal in the criminal
case to his administrative charge? d) Does the President have the power to reorganize
the BIR or to issue the questioned E.O. NO. 132?, e) Is the reorganization of BIR
pursuant to E.O. No. 132 tainted with bad faith?
At the outset, it is worthy to note that the position of the Assistant Commissioner of the
BIR is part of the Career Executive Service. [2] Under the law,[3] Career Executive Service
officers, namely Undersecretary, Assistant Secretary, Bureau director, Assistant Bureau
Director, Regional Director, Assistant Regional Director, Chief of Department Service
and other officers of equivalent rank as may be identified by the Career Executive
Service Board, are all appointed by the President. Concededly, petitioner was appointed
as Assistant Commissioner in January, 1987 by then President Aquino. Thus, petitioner
is a presidential appointee who belongs to career service of the Civil Service. Being a
presidential appointee, he comes under the direct diciplining authority of the President.
This is in line with the well settled principle that the power to remove is inherent in the
power to appoint conferred to the President by Section 16, Article VII of the Constitution.
Thus, it is ineluctably clear that Memorandum Order No. 164, which created a
committee to investigate the administrative charge against petitioner, was issued
pursuant to the power of removal of the President. This power of removal, however, is
not an absolute one which accepts no reservation. It must be pointed out that petitioner
is a career service officer. Under the Administrative Code of 1987, career service is
characterized by the existence of security of tenure, as contra-distinguished from noncareer service whose tenure is co-terminus with that of the appointing or subject to his
pleasure, or limited to a period specified by law or to the duration of a particular project
for which purpose the employment was made. As a career service officer, petitioner
enjoys the right to security of tenure. No less than the 1987 Constitution guarantees the
right of security of tenure of the employees of the civil service. Specifically, Section 36 of
P.D. No. 807, as amended, otherwise known as Civil Service Decree of the Philippines,
is emphatic that career service officers and employees who enjoy security of tenure
may be removed only for any of the causes enumerated in said law. In other words, the
fact that the petitioner is a presidential appointee does not give the appointing authority
the license to remove him at will or at his pleasure for it is an admitted fact that he is

Admin. Law | 18

likewise a career service officer who under the law is the recipient of tenurial protection,
thus, may only be removed for a cause and in accordance with procedural due process.
Was petitioner then removed from office for a legal cause under a valid proceeding?
Although the proceedings taken complied with the requirements of procedural due
process, this Court, however, considers that petitioner was not dismissed for a valid
cause.
It should be noted that what precipitated the creation of the investigative committee to
look into the administrative charge against petitioner is his conviction by the
Sandiganbayan in criminal Case Nos. 14208 and 14209. As admitted by the
respondents, the administrative case against petitioner is based on the Sandiganbayan
Decision of September 18, 1992. Thus, in the Administrative Order No. 101 issued by
Senior Deputy Executive Secretary Quisumbing which found petitioner guilty of grave
misconduct, it clearly states that:
"This pertains to the administrative charge against Assistant Commissioner Aquilino T.
Larin of the Bureau of Internal Revenue, for grave misconduct by virtue of a
Memorandum signed by Acting Secretary Leong of the Department of Finance, on the
basis of decision handed down by the Hon. Sandiganbayan convicting Larin, et. al. in
Criminal Cases No. 14208 and 14209."[4]
In a nutshell, the criminal cases against petitioner refer to his alleged violation of
Section 268 (4) of the National Internal Revenue Code and of section 3(e) of R.A.
No.3019 as a consequence of his act of favorably recommending the grant of tax credit
to Tanduay Distillery, Inc.. The pertinent portion of the judgment of the Sandiganbayan
reads:
"As above pointed out, the accused had conspired in knowingly preparing false
memoranda and certification in order to effect a fraud upon taxes due to the
government. By their separate acts which had resulted in an appropriate tax credit
of P180,701,682.00 in favor of Tanduay. The government had been defrauded of a tax
revenue - for the full amount, if one is to look at the availments or utilization thereof
(Exhibits 'AA' to 'AA-31-a'), or for a substantial portion thereof (P73,000,000.00) if we
are to rely on the letter of Deputy Commissioner Eufracio D. Santos (Exhibits '21' for all
the accused).
As pointed out above, the confluence of acts and omissions committed by accused
Larin, Pareno and Evangelista adequately prove conspiracy among them for no other
purpose than to bring about a tax credit which Tanduay did not deserve. These

Admin. Law | 19

misrepresentations as to how much Tanduay had paid in ad valorem taxes obviously

constituted a fraud of tax revenue of the government xxx.' [5]
However, it must be stressed at this juncture that the conviction of petitioner by the
Sandiganbayan was set aside by this court in our decision promulgated on April 17,
1996 in G.R. Nos. 108037-38 and 107119-20. We specifically ruled in no uncertain
terms that : a) petitioner cannot be held negligent in relying on the certification of a coequal unit in the BIR, b) it is not incumbent upon Larin to go beyond the certification
made by the Revenue Accounting Division that Tanduay Distillery, Inc. had paid the ad
valorem taxes, c) there is nothing irregular or anything false in Larin's marginal note on
the memorandum addressed to Pareno, the Chief of Alcohol Tax Division who was also
one of the accused, but eventually acquitted, in the said criminal cases, and d) there is
no proof of actual agreement between the accused, including petitioner, to commit the
illegal acts charged. We are emphatic in our resolution in said cases that there is
nothing "illegal with the acts committed by the petitioner(s)." We also declare that "there
is no showing that petitioner(s) had acted irregularly, or performed acts outside of his
(their) official functions." Significantly, these acts which We categorically declare to be
not unlawful and improper in G.R. Nos. 108037-38 and G.R. Nos. 107119-20 are the
very same acts for which petitioner is held to be administratively responsible. Any
charge of malfeasance or misfeasance on the part of the petitioner is clearly belied by
our conclusion in said cases. In the light of this decisive pronouncement, We see no
reason for the administrative charge to continue - it must, thus, be dismissed.
We are not unaware of the rule that since administrative cases are independent from
criminal actions for the same act or omission, the dismissal or acquittal of the criminal
charge does not foreclose the institution of administrative action nor carry with it the
relief from administrative liability.[6] However, the circumstantial setting of the instant
case sets it miles apart from the foregoing rule and placed it well within the exception.
Corollarily, where the very basis of the administrative case against petitioner is his
conviction in the criminal action which was later on set aside by this court upon a
categorical and clear findings that the acts for which he was administratively held liable
are not unlawful and irregular, the acquittal of the petitioner in the criminal case
necessarily entails the dismissal of the administrative action against him, because in
such a case, there is no basis nor justifiable reason to maintain the administrative suit.
On the aspect of procedural due process, suffice it to say that petitioner was given
every chance to present his side. The rule is well settled that the essence of due
process in administrative proceedings is that a party be afforded a reasonable
opportunity to be heard and to submit any evidence he may have in support of his
defense.[7] The records clearly show that on October 1, 1993 petitioner submitted his
letter-response dated September 30, 1993 to the administrative charged filed against

Admin. Law | 20

him. Aside from his letter, he also submitted various documents attached as annexes to
his letter, all of which are evidences supporting his defense. Prior to this, he received a
letter dated September 17, 1993 from the Investigation Committee requiring him to
explain his side concerning the charge. It cannot therefore be argued that petitioner was
denied of due process.
Let us now examine Executive Order No. 132.
As stated earlier, with the issuance of Executive Order No. 132, some of the positions
and offices, including the office of Excise Tax Services of which petitioner was the
Assistant Commissioner, were abolished or otherwise decentralized. Consequently, the
President released the list of appointed Assistant Commissioners of the BIR. Apparently,
petitioner was not included.
Initially, it is argued that there is no law yet which empowers the President to issue E.O.
No. 132 or to reorganize the BIR.
We do not agree.
Under its Preamble, E.O. No. 132 lays down the legal basis of its issuance, namely: a)
Section 48 and 62 of R.A. No. 7645, b) Section 63 of E.O. No. 127, and c) Section 20,
Book III of E.O. No. 292.
Section 48 of R.A. 7645 provides that:
"Sec. 48. Scaling Down and Phase Out of Activities of Agencies Within the Executive
Branch. -- The heads of departments, bureaus and offices and agencies are hereby
directed to identify their respective activities which are no longer essential in the delivery
of public services and which may be scaled down, phased out or abolished, subject
to civil rules and regulations. xxx. Actual scaling down, phasing out or abolition of
the activities shall be effective pursuant to Circulars or Orders issued for the purpose by
the Office of the President." (italics ours)
Said provision clearly mentions the acts of "scaling down, phasing out and abolition" of
offices only and does not cover the creation of offices or transfer of functions.
Nevertheless, the act of creating and decentralizing is included in the subsequent
provision of Section 62, which provides that:
"Sec. 62, Unauthorized Organizational Charges. -- Unless otherwise created by law or
directed by the President of the Philippines, no organizational unit or changes in key
positions in any department or agency shall be authorized in their respective
organization structures and be funded from appropriations by this Act." (italics ours)

Admin. Law | 21

The foregoing provision evidently shows that the President is authorized to effect
organizational changes including the creation of offices in the department or agency
concerned.
The contention of petitioner that the two provisions are riders deserves scant
consideration. Well settled is the rule that every law has in its favor the presumption of
constitutionality.[8] Unless and until a specific provision of the law is declared invalid and
unconstitutional, the same is valid and binding for all intents and purposes.
Another legal basis of E.O. No. 132 is Section 20, Book III of E.O. No. 292 which states:
"Sec.20. Residual Powers. -- Unless Congress provides otherwise, the President shall
exercise such other powers and functions vested in the President which are
provided for under the laws and which are not specifically enumerated above or
which are not delegated by the President in accordance with law." (italics ours)
This provision speaks of such other powers vested in the President under the law. What
law then which gives him the power to reorganize? It is Presidential Decree No.
1772[9] which amended Presidential Decree No. 1416. These decrees expressly grant
the President of the Philippines the continuing authority to reorganize the national
government, which includes the power to group, consolidate bureaus and agencies, to
abolish offices, to transfer functions, to create and classify functions, services and
activities and to standardize salaries and materials. The validity of these two decrees
are unquestionable. The 1987 Constitution clearly provides that "all laws, decrees,
executive orders, proclamations, letters of instructions and other executive issuances
not inconsistent with this Constitution shall remain operative until amended, repealed or
revoked."[10] So far, there is yet no law amending or repealing said decrees. Significantly,
the Constitution itself recognizes future reorganizations in the government as what is
revealed in Section 16 of Article XVIII, thus:
"Sec. 16. Career civil service employees separated from service not for cause but as a
result of the xxx reorganization following the ratification of this Constitution shall be
entitled to appropriate separation pay xxx."
However, We can not consider E.O. No. 127 signed on January 30, 1987 as a legal
basis for the reorganization of the BIR. E.O. No. 127 should be related to the second
paragraph of Section 11 of Republic Act No. 6656.
Section 11 provides inter alia:
"xxx

Admin. Law | 22

In the case of the 1987 reorganization of the executive branch, all departments and
agencies which are authorized by executive orders promulgated by the President to
reorganize shall have ninety days from the approval of this act within which to
implement their respective reorganization plans in accordance with the provisions of this
Act." (italics ours)
Executive Order No. 127 was part of the 1987 reorganization contemplated under said
provision. Obviously, it had become stale by virtue of the expiration of the ninety day
deadline period. It can not thus be used as a proper basis for the reorganization of the
BIR. Nevertheless, as shown earlier, there are other legal bases to sustain the authority
of the President to issue the questioned E.O. No. 132.
While the President's power to reorganize can not be denied, this does not mean
however that the reorganization itself is properly made in accordance with law. Wellsettled is the rule that reorganization is regarded as valid provided it is pursued in good
faith. Thus, in Dario vs. Mison, this court has had the occasion to clarify that:
"As a general rule, a reorganization is carried out in good faith if it is for the purpose of
economy or to make bureaucracy more efficient. In that event no dismissal or
separation actually occurs because the position itself ceases to exist. And in that case
the security of tenure would not be a Chinese Wall. Be that as it may, if the abolition
which is nothing else but a separation or removal, is done for political reasons or
purposely to defeat security of tenure, or otherwise not in good faith, no valid abolition
takes place and whatever abolition is done is void ab initio. There is an invalid abolition
as where there is merely a change of nomenclature of positions or where claims of
economy are belied by the existence of ample funds." [11]
In this regard, it is worth mentioning that Section 2 of R.A. No. 6656 lists down the
circumstances evidencing bad faith in the removal of employees as a result of the
reorganization, thus:
Sec. 2. No officer or employee in the career service shall be removed except for a valid
cause and after due notice and hearing. A valid cause for removal exist when, pursuant
to a bona fide reorganization, a position has been abolished or rendered redundant or
there is a need to merge, divide, or consolidate positions in order to meet the exigencies
of the service, or other lawful causes allowed by the Civil Service Law. The existence of
any or some of the following circumstances may be considered as evidence of bad faith
in the removals made as a result of the reorganization, giving rise to a claim for
reinstatement or reappointment by an aggrieved party:
a) Where there is a significant increase in the number of positions in the new staffing
pattern of the department or agency concerned;

Admin. Law | 23

b) Where an office is abolished and another performing substantially the same functions
is created;
c) Where incumbents are replaced by those less qualified in terms of status of
appointment, performance and merit;
d) Where there is a reclassification of offices in the department or agency concerned
and the reclassified offices perform substantially the same functions as the original
offices;
e) Where the removal violates the order of separation provided in Section 3 hereof."
A reading of some of the provisions of the questioned E.O. No. 132 clearly leads us to
an inescapable conclusion that there are circumstances considered as evidences of bad
faith in the reorganization of the BIR.
Section 1.1.2 of said executive order provides that:
"1.1.2 The Intelligence and Investigation Office and the Inspection Service are
abolished. An Intelligence and Investigation Service is hereby created to absorb
the same functions of the abolished office and service. xxx" (italics ours)
This provision is a clear illustration of the circumstance mentioned in Section 2 (b) of
R.A. No. 6656 that an office is abolished and another one performing substantially the
same function is created.
Another circumstance is the creation of services and divisions in the BIR resulting to a
significant increase in the number of positions in the said bureau as contemplated in
paragraph (a) of section 2 of R.A. No. 6656. Under Section 1.3 of E.O. No. 132, the
Information Systems Group has two newly created Systems Services. Aside from this,
six new divisions are also created. Under Section 1.2.1, three more divisions of the
Assessment Service are formed. With this newly created offices, there is no doubt that a
significant increase of positions will correspondingly follow.
Furthermore, it is perceivable that the non-reappointment of the petitioner as Assistant
Commissioner violates Section 4 of R.A. No. 6656. Under said provision, officers
holding permanent appointments are given preference for appointment to the new
positions in the approved staffing pattern comparable to their former position or in case
there are not enough comparable positions to positions next lower in rank. It is
undeniable that petitioner is a career executive officer who is holding a permanent
position. Hence, he should have given preference for appointment in the position of
Assistant Commissioner. As claimed by petitioner, Antonio Pangilinan who was one of
those appointed as Assistant Commissioner, "is an outsider of sorts to the bureau, not

Admin. Law | 24

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

Admin. Law | 25

August 8, 1989
G.R. No. 81954
CESAR Z. DARIO, petitioner,
vs.
HON. SALVADOR M. MISON, HON. VICENTE JAYME and HON. CATALINO
MACARAIG, JR., in their respective capacities as Commissioner of Customs,
Secretary of Finance, and Executive Secretary,respondents.
G.R. No. 81967
August 8, 1989
VICENTE A. FERIA JR., petitioner,
vs.
HON. SALVADOR M. MISON, HON. VICENTE JAYME, and HON. CATALINO
MACARAIG, JR., in their respective capacities as Commissioner of Customs,
Secretary of Finance, and Executive Secretary,respondents.
G.R. No. 82023
August 8, 1989
ADOLFO CASARENO, et. al., petitioners,
vs.
COMMISSIONER SALVADOR M. MISON, COMMISSIONER, BUREAU OF
CUSTOMS, respondent.
G.R. No. 83737
August 8, 1989
BENEDICTO L. AMASA and WILLIAM S. DIONISIO, petitioners,
vs.
PATRICIA A. STO. TOMAS, in her capacity as Chairman of the Civil Service
Commission and SALVADOR MISON, in his capacity as Commissioner of the
Bureau of Customs, respondents.
G.R. No. 85310
August 8, 1989
SALVADOR M. MISON, in his capacity as Commissioner of Customs, petitioner,
vs.
CIVIL SERVICE COMMISSION, ABACA, et. al., respondents.
G.R. No. 85335
August 8, 1989
FRANKLIN Z. LITTAUA, et. al., petitioners,
vs.
COM. SALVADOR M. MISON/BUREAU OF CUSTOMS and the CIVIL SERVICE
COMMISSION, respondents.
G.R. No. 86241
August 8, 1989
SALVADOR M. MISON, in his capacity as Commissioner of Customs, petitioner,
vs.
CIVIL SERVICE COMMISSION, SENEN S. DIMAGUILA, ROMEO P. ARABE
BERNARDO S. QUINTONG, GREGORIO P. REYES, and ROMULO C.
BADILLO respondents

Admin. Law | 26

SARMIENTO, J.:
The Court writes finis to this contreversy that has raged bitterly for the several months. It
does so out of ligitimate presentement of more suits reaching it as a consequence of the
government reorganization and the instability it has wrought on the performance and
efficiency of the bureaucracy. The Court is apprehensive that unless the final word is
given and the ground rules are settled, the issue will fester, and likely foment on the
constitutional crisis for the nation, itself biset with grave and serious problems.
The facts are not in dispute.
On March 25, 1986, President Corazon Aquino promulgated Proclamation No. 3,
"DECLARING A NATIONAL POLICY TO IMPLEMENT THE REFORMS MANDATED BY
THE PEOPLE, PROTECTING THEIR BASIC RIGHTS, ADOPTING A PROVISIONAL
CONSTITUTION, AND PROVIDING FOR AN ORDERLY TRANSITION TO A
GOVERNMENT UNDER A NEW CONSTITUTION." Among other things, Proclamation
No. 3 provided:
SECTION 1. ...
The President shall give priority to measures to achieve the mandate of the people to:
(a) Completely reorganize the government, eradicate unjust and oppressive structures,
and all iniquitous vestiges of the previous regime; 1
...
Pursuant thereto, it was also provided:
SECTION 1. In the reorganization of the government, priority shall be given to
measures to promote economy, efficiency, and the eradication of graft and corruption.
SECTION 2. All elective and appointive officials and employees under the 1973
Constitution shall continue in office until otherwise provided by proclamation or
executive order or upon the appointment and qualification of their successors, if such is
made within a period of one year from February 25, 1986.
SECTION 3. Any public officer or employee separated from the service as a result of the
organization effected under this Proclamation shall, if entitled under the laws then in
force, receive the retirement and other benefits accruing thereunder.
SECTION 4. The records, equipment, buildings, facilities and other properties of all
government offices shall be carefully preserved. In case any office or body is abolished

Admin. Law | 27

or reorganized pursuant to this Proclamation, its FUNDS and properties shall be

transferred to the office or body to which its powers, functions and responsibilities
substantially pertain. 2
Actually, the reorganization process started as early as February 25, 1986, when the
President, in her first act in office, called upon "all appointive public officials to submit
their courtesy resignation(s) beginning with the members of the Supreme Court." 3 Later
on, she abolished the Batasang Pambansa 4 and the positions of Prime Minister and
Cabinet 5 under the 1973 Constitution.
Since then, the President has issued a number of executive orders and directives
reorganizing various other government offices, a number of which, with respect to
elected local officials, has been challenged in this Court, 6and two of which, with respect
to appointed functionaries, have likewise been questioned herein. 7
On May 28, 1986, the President enacted Executive Order No. 17, "PRESCRIBING
RULES AND REGULATIONS FOR THE IMPLEMENTATION OF SECTION 2, ARTICLE
III OF THE FREEDOM CONSTITUTION." Executive Order No. 17 recognized the
"unnecessary anxiety and demoralization among the deserving officials and employees"
the ongoing government reorganization had generated, and prescribed as "grounds for
the separation/replacement of personnel," the following:
SECTION 3. The following shall be the grounds for separation replacement of
personnel:
1) Existence of a case for summary dismissal pursuant to Section 40 of the Civil Service
Law;
2) Existence of a probable cause for violation of the Anti-Graft and Corrupt Practices Act
as determined by the Mnistry Head concerned;
3) Gross incompetence or inefficiency in the discharge of functions;
4) Misuse of public office for partisan political purposes;
5) Any other analogous ground showing that the incumbent is unfit to remain in the
service or his separation/replacement is in the interest of the service. 8
On January 30, 1987, the President promulgated Executive Order No. 127,
"REORGANIZING THE MINISTRY OF FINANCE." 9 Among other offices, Executive
Order No. 127 provided for the reorganization of the Bureau of Customs 10 and
prescribed a new staffing pattern therefor.

Admin. Law | 28

Three days later, on February 2, 1987,

Constitution.

11

the Filipino people adopted the new

On January 6, 1988, incumbent Commissioner of Customs Salvador Mison issued a

Memorandum, in the nature of "Guidelines on the Implementation of Reorganization
Executive Orders," 12 prescribing the procedure in personnel placement. It also
provided:
1. By February 28, 1988, the employees covered by Executive Order 127 and the grace
period extended to the Bureau of Customs by the President of the Philippines on
reorganization shall be:
a) informed of their re-appointment, or
b) offered another position in the same department or agency or
c) informed of their termination.

13

On the same date, Commissioner Mison constituted a Reorganization Appeals Board

charged with adjudicating appeals from removals under the above Memorandum. 14 On
January 26, 1988, Commissioner Mison addressed several notices to various Customs
officials, in the tenor as follows:
Sir:
Please be informed that the Bureau is now in the process of implementing the
Reorganization Program under Executive Order No. 127.
Pursuant to Section 59 of the same Executive Order, all officers and employees of the
Department of Finance, or the Bureau of Customs in particular, shall continue to
perform their respective duties and responsibilities in a hold-over capacity, and that
those incumbents whose positions are not carried in the new reorganization pattern, or
who are not re- appointed, shall be deemed separated from the service.
In this connection, we regret to inform you that your services are hereby terminated as
of February 28, 1988. Subject to the normal clearances, you may receive the retirement
benefits to which you may be entitled under existing laws, rules and regulations.
In the meantime, your name will be included in the consolidated list compiled by the
Civil Service Commission so that you may be given priority for future employment with
the Government as the need arises.

Admin. Law | 29

Sincerely
(Sgd)
Commissioner15

SALVADOR

yours,
MISON

M.

As far as the records will yield, the following were recipients of these notices:
(too many to mention)
xxx
Cesar Dario is the petitioner in G.R. No. 81954; Vicente Feria, Jr., is the petitioner in
G.R. No. 81967; Messrs. Adolfo Caserano Pacifico Lagleva Julian C. Espiritu, Dennis A.
Azarraga Renato de Jesus, Nicasio C. Gamboa, Mesdames Corazon Rallos Nieves and
Felicitacion R. Geluz Messrs. Leodegario H. Floresca, Subaer Pacasum Ms. Zenaida
Lanaria Mr. Jose B. Ortiz, Ms. Gliceria R. Dolar, Ms. Cornelia Napa, Pablo B. Santos,
Fermin Rodriguez, Ms. Daligay Bautista, Messrs. Leonardo Jose, Alberto Lontok,
Porfirio Tabino Jose Barredo, Roberto Arnaldo, Ms. Ester Tan, Messrs. Pedro Bakal,
Rosario David, Rodolfo Afuang, Lorenzo Catre,, Ms. Leoncia Catre, and Roberto Abaca,
are the petitioners in G.R. No. 82023; the last 279 16 individuals mentioned are the
private respondents in G.R. No. 85310.
As far as the records will likewise reveal, 17 a total of 394 officials and employees of the
Bureau of Customs were given individual notices of separation. A number supposedly
sought reinstatement with the Reorganization Appeals Board while others went to the
Civil Service Commission. The first thirty-one mentioned above came directly to this
Court.
On June 30, 1988, the Civil Service Commission promulgated its ruling ordering the
reinstatement of the 279 employees, the 279 private respondents in G.R. No. 85310,
the dispositive portion of which reads as follows:
WHEREFORE, it is hereby ordered that:
1. Appellants be immediately reappointed to positions of comparable or equivalent rank
in the Bureau of Customs without loss of seniority rights;
2. Appellants be paid their back salaries reckoned from the dates of their illegal
termination based on the rates under the approved new staffing pattern but not lower
than their former salaries.
This action of the Commission should not, however, be interpreted as an exoneration of
the appellants from any accusation of wrongdoing and, therefore, their reappointments
are without prejudice to:

Admin. Law | 30

1. Proceeding with investigation of appellants with pending administrative cases, and

where investigations have been finished, to promptly, render the appropriate decisions;
2. The filing of appropriate administrative complaints against appellants with derogatory
reports or information if evidence so warrants.
SO ORDERED. 18
On July 15, 1988, Commissioner Mison, represented by the Solicitor General, filed a
motion for reconsideration Acting on the motion, the Civil Service Commission, on
September 20, 1988, denied reconsideration. 19
On October 20, 1988, Commissioner Mison instituted certiorari proceedings with this
Court, docketed, as above-stated, as G.R. No. 85310 of this Court.
On November 16,1988, the Civil Service Commission further disposed the appeal (from
the resolution of the Reorganization Appeals Board) of five more employees, holding as
follows:
WHEREFORE, it is hereby ordered that:
1. Appellants be immediately reappointed to positions of comparable or equivalent rank
in the Bureau of Customs without loss of seniority rights; and
2. Appellants be paid their back salaries to be reckoned from the date of their illegal
termination based on the rates under the approved new staffing pattern but not lower
than their former salaries.
This action of the Commission should not, however, be interpreted as an exoneration of
the herein appellants from any accusation of any wrongdoing and therefore, their
reappointments are without prejudice to:
1. Proceeding with investigation of appellants with pending administrative cases, if any,
and where investigations have been finished, to promptly, render the appropriate
decisions; and
2. The filing of appropriate administrative complaints against appellant with derogatory
reports or information, if any, and if evidence so warrants.
SO ORDERED. 20
On January 6, 1989, Commissioner Mison challenged the Civil Service Commission's
Resolution in this Court; his petitioner has been docketed herein as G.R. No. 86241.

Admin. Law | 31

The employees ordered to be reinstated are Senen Dimaguila, Romeo Arabe, Bemardo
Quintong,Gregorio Reyes, and Romulo Badillo. 21
On June 10, 1988, Republic Act No. 6656, "AN ACT TO PROTECT THE SECURITY OF
TENURE OF CIVIL SERVICE OFFICERS AND EMPLOYEES IN THE
IMPLEMENTATION OF GOVERNMENT REORGANIZATION," 22was signed into law.
Under Section 7, thereof:
Sec. 9. All officers and employees who are found by the Civil Service Commission to
have been separated in violation of the provisions of this Act, shall be ordered reinstated
or reappointed as the case may be without loss of seniority and shall be entitled to full
pay for the period of separation. Unless also separated for cause, all officers and
employees, including casuals and temporary employees, who have been separated
pursuant to reorganization shall, if entitled thereto, be paid the appropriate separation
pay and retirement and other benefits under existing laws within ninety (90) days from
the date of the effectivity of their separation or from the date of the receipt of the
resolution of their appeals as the case may be: Provided, That application for clearance
has been filed and no action thereon has been made by the corresponding department
or agency. Those who are not entitled to said benefits shall be paid a separation gratuity
in the amount equivalent to one (1) month salary for every year of service. Such
separation pay and retirement benefits shall have priority of payment out of the savings
of the department or agency concerned. 23
On June 23, 1988, Benedicto Amasa and William Dionisio, customs examiners
appointed by Commissioner Mison pursuant to the ostensible reorganization subject of
this controversy, petitioned the Court to contest the validity of the statute. The petition is
docketed as G.R. No. 83737.
On October 21, 1988, thirty-five more Customs officials whom the Civil Service
Commission had ordered reinstated by its June 30,1988 Resolution filed their own
petition to compel the Commissioner of Customs to comply with the said Resolution.
The petition is docketed as G.R. No. 85335.
On November 29, 1988, we resolved to consolidate all seven petitions.
On the same date, we resolved to set the matter for hearing on January 12, 1989. At the
said hearing, the parties, represented by their counsels (a) retired Justice Ruperto
Martin; (b) retired Justice Lino Patajo. (c) former Dean Froilan Bacungan (d) Atty. Lester
Escobar (e) Atty. Faustino Tugade and (f) Atty. Alexander Padilla, presented their
arguments. Solicitor General Francisco Chavez argued on behalf of the Commissioner
of Customs (except in G.R. 85335, in which he represented the Bureau of Customs and
the Civil Service Commission).lwph1.t Former Senator Ambrosio Padilla also

Admin. Law | 32

appeared and argued as amicus curiae Thereafter, we resolved to require the parties to
submit their respective memoranda which they did in due time.
There is no question that the administration may validly carry out a government
reorganization insofar as these cases are concerned, the reorganization of the
Bureau of Customs by mandate not only of the Provisional Constitution, supra, but
also of the various Executive Orders decreed by the Chief Executive in her capacity as
sole lawmaking authority under the 1986-1987 revolutionary government. It should also
be noted that under the present Constitution, there is a recognition, albeit implied, that a
government reorganization may be legitimately undertaken, subject to certain
conditions. 24
The Court understands that the parties are agreed on the validity of a
reorganization per se the only question being, as shall be later seen: What is the nature
and extent of this government reorganization?
The Court disregards the questions raised as to procedure, failure to exhaust
administrative remedies, the standing of certain parties to sue, 25 and other technical
objections, for two reasons, "[b]ecause of the demands of public interest, including the
need for stability in the public service," 26 and because of the serious implications of
these cases on the administration of the Philippine civil service and the rights of public
servants.
The urgings in G.R. Nos. 85335 and 85310, that the Civil Service Commission's
Resolution dated June 30, 1988 had attained a character of finality for failure of
Commissioner Mison to apply for judicial review or ask for reconsideration seasonalbly
under Presidential Decree No. 807, 27 or under Republic Act No. 6656, 28 or under the
Constitution, 29 are likewise rejected. The records show that the Bureau of Customs had
until July 15, 1988 to ask for reconsideration or come to this Court pursuant to Section
39 of Presidential Decree No. 807. The records likewise show that the Solicitor General
filed a motion for reconsideration on July 15, 1988. 30 The Civil Service Commission
issued its Resolution denying reconsideration on September 20, 1988; a copy of this
Resolution was received by the Bureau on September 23, 1988. 31 Hence the Bureau
had until October 23, 1988 to elevate the matter on certiorari to this Court.32 Since the
Bureau's petition was filed on October 20, 1988, it was filed on time.
We reject, finally, contentions that the Bureau's petition (in G.R. 85310) raises no
jurisdictional questions, and is therefore bereft of any basis as a petition
for certiorari under Rule 65 of the Rules of Court. 33 We find that the questions raised in
Commissioner Mison's petition (in G.R. 85310) are, indeed, proper for certiorari, if by
"jurisdictional questions" we mean questions having to do with "an indifferent disregard
of the law, arbitrariness and caprice, or omission to weigh pertinent considerations, a

Admin. Law | 33

decision arrived at without rational deliberation, 34 as distinguished from questions that

require "digging into the merits and unearthing errors of judgment 35 which is the office,
on the other hand, of review under Rule 45 of the said Rules. What cannot be denied is
the fact that the act of the Civil Service Commission of reinstating hundreds of Customs
employees Commissioner Mison had separated, has implications not only on the entire
reorganization process decreed no less than by the Provisional Constitution, but on the
Philippine bureaucracy in general; these implications are of such a magnitude that it
cannot be said that assuming that the Civil Service Commission erred the
Commission committed a plain "error of judgment" that Aratuc says cannot be corrected
by the extraordinary remedy of certiorari or any special civil action. We reaffirm the
teaching of Aratuc as regards recourse to this Court with respect to rulings of the
Civil Service Commission which is that judgments of the Commission may be
brought to the Supreme Court through certiorari alone, under Rule 65 of the Rules of
Court.
In Aratuc we declared:
It is once evident from these constitutional and statutory modifications that there is a
definite tendency to enhance and invigorate the role of the Commission on Elections as
the independent constitutional body charged with the safeguarding of free, peaceful and
honest elections. The framers of the new Constitution must be presumed to have
definite knowledge of what it means to make the decisions, orders and rulings of the
Commission "subject to review by the Supreme Court'. And since instead of maintaining
that provision intact, it ordained that the Commission's actuations be instead 'brought to
the Supreme Court on certiorari", We cannot insist that there was no intent to change
the nature of the remedy, considering that the limited scope of certiorari, compared to a
review, is well known in remedial law.36
We observe no fundamental difference between the Commission on Elections and the
Civil Service Commission (or the Commission on Audit for that matter) in terms of the
constitutional intent to leave the constitutional bodies alone in the enforcement of laws
relative to elections, with respect to the former, and the civil service, with respect to the
latter (or the audit of government accounts, with respect to the Commission on Audit).
As the poll body is the "sole judge" 37 of all election cases, so is the Civil Service
Commission the single arbiter of all controversies pertaining to the civil service.
It should also be noted that under the new Constitution, as under the 1973 Charter, "any
decision, order, or ruling of each Commission may be brought to the Supreme Court
on certiorari," 38 which, as Aratuc tells us, "technically connotes something less than
saying that the same 'shall be subject to review by the Supreme Court,' " 39 which in turn
suggests an appeal by petition for review under Rule 45. Therefore, our jurisdiction over

Admin. Law | 34

cases emanating from the Civil Service Commission is limited to complaints of lack or
excess of jurisdiction or grave abuse of discretion tantamount to lack or excess of
jurisdiction, complaints that justify certiorari under Rule 65.
While Republic Act No. 6656 states that judgments of the Commission are "final and
executory"40 and hence, unappealable, under Rule 65, certiorari precisely lies in the
absence of an appeal. 41
Accordingly, we accept Commissioner Mison petition (G.R. No. 85310) which clearly
charges the Civil Service Commission with grave abuse of discretion, a proper subject
of certiorari, although it may not have so stated in explicit terms.
As to charges that the said petition has been filed out of time, we reiterate that it has
been filed seasonably. It is to be stressed that the Solicitor General had thirty days from
September 23, 1988 (the date the Resolution, dated September 20,1988, of the Civil
Service Commission, denying reconsideration, was received) to commence the
instant certiorari proceedings. As we stated, under the Constitution, an aggrieved party
has thirty days within which to challenge "any decision, order, or ruling" 42 of the
Commission. To say that the period should be counted from the Solicitor's receipt of the
main Resolution, dated June 30, 1988, is to say that he should not have asked for
reconsideration But to say that is to deny him the right to contest (by a motion for
reconsideration) any ruling, other than the main decision, when, precisely, the
Constitution gives him such a right. That is also to place him at a "no-win" situation
because if he did not move for a reconsideration, he would have been faulted for
demanding certioraritoo early, under the general rule that a motion for reconsideration
should preface a resort to a special civil action. 43Hence, we must reckon the thirty-day
period from receipt of the order of denial.
We come to the merits of these cases.
G.R. Nos. 81954, 81967, 82023, and 85335:
The Case for the Employees
The petitioner in G.R. No. 81954, Cesar Dario was one of the Deputy Commissioners of
the Bureau of Customs until his relief on orders of Commissioner Mison on January 26,
1988. In essence, he questions the legality of his dismiss, which he alleges was upon
the authority of Section 59 of Executive Order No. 127, supra, hereinbelow reproduced
as follows:
SEC. 59. New Structure and Pattern. Upon approval of this Executive Order, the officers
and employees of the Ministry shall, in a holdover capacity, continue to perform their

Admin. Law | 35

respective duties and responsibilities and receive the corresponding salaries and
benefits unless in the meantime they are separated from government service pursuant
to Executive Order No. 17 (1986) or Article III of the Freedom Constitution.
The new position structure and staffing pattern of the Ministry shall be approved and
prescribed by the Minister within one hundred twenty (120) days from the approval of
this Executive Order and the authorized positions created hereunder shall be filled with
regular appointments by him or by the President, as the case may be. Those
incumbents whose positions are not included therein or who are not reappointed shall
be deemed separated from the service. Those separated from the service shall receive
the retirement benefits to which they may be entitled under existing laws, rules and
regulations. Otherwise, they shall be paid the equivalent of one month basic salary for
every year of service, or the equivalent nearest fraction thereof favorable to them on the
basis of highest salary received but in no case shall such payment exceed the
equivalent of 12 months salary.
No court or administrative body shall issue any writ of preliminary injunction or
restraining order to enjoin the separation/replacement of any officer or employee
effected under this Executive Order.44
a provision he claims the Commissioner could not have legally invoked. He avers that
he could not have been legally deemed to be an "[incumbent] whose [position] [is] not
included therein or who [is] not reappointed" 45 to justify his separation from the service.
He contends that neither the Executive Order (under the second paragraph of the
section) nor the staffing pattern proposed by the Secretary of Finance 46 abolished the
office of Deputy Commissioner of Customs, but, rather, increased it to three. 47 Nor can
it be said, so he further maintains, that he had not been "reappointed" 48 (under the
second paragraph of the section) because "[[r]eappointment therein presupposes that
the position to which it refers is a new one in lieu of that which has been abolished or
although an existing one, has absorbed that which has been abolished." 49 He claims,
finally, that under the Provisional Constitution, the power to dismiss public officials
without cause ended on February 25, 1987, 50 and that thereafter, public officials enjoyed
security of tenure under the provisions of the 1987 Constitution. 51
Like Dario Vicente Feria, the petitioner in G.R. No. 81967, was a Deputy Commissioner
at the Bureau until his separation directed by Commissioner Mison. And like Dario he
claims that under the 1987 Constitution, he has acquired security of tenure and that he
cannot be said to be covered by Section 59 of Executive Order No. 127, having been
appointed on April 22, 1986 during the effectivity of the Provisional Constitution. He
adds that under Executive Order No. 39, "ENLARGING THE POWERS AND
FUNCTIONS OF THE COMMISSIONER OF CUSTOMS," 52 the Commissioner of

Admin. Law | 36

Customs has the power "[t]o appoint all Bureau personnel, except those appointed by
the President," 53 and that his position, which is that of a Presidential appointee, is
beyond the control of Commissioner Mison for purposes of reorganization.
The petitioners in G.R. No. 82023, collectors and examiners in venous ports of the
Philippines, say, on the other hand, that the purpose of reorganization is to end
corruption at the Bureau of Customs and that since there is no finding that they are
guilty of corruption, they cannot be validly dismissed from the service.
The Case for Commissioner Mison
In his comments, the Commissioner relies on this Court's resolution in Jose
v. Arroyo54 in which the following statement appears in the last paragraph thereof:
The contention of petitioner that Executive Order No. 127 is violative of the provision of
the 1987 Constitution guaranteeing career civil service employees security of tenure
overlooks the provisions of Section 16, Article XVIII (Transitory Provisions) which
explicitly authorize the removal of career civil service employees "not for cause but as a
result of the reorganization pursuant to Proclamation No. 3 dated March 25, 1986 and
the reorganization following the ratification of this Constitution." By virtue of said
provision, the reorganization of the Bureau of Customs under Executive Order No. 127
may continue even after the ratification of the Constitution, and career civil service
employees may be separated from the service without cause as a result of such
reorganization.55
For this reason, Mison posits, claims of violation of security of tenure are allegedly no
defense. He further states that the deadline prescribed by the Provisional Constitution
(February 25, 1987) has been superseded by the 1987 Constitution, specifically, the
transitory provisions thereof, 56 which allows a reorganization thereafter (after February
25, 1987) as this very Court has so declared in Jose v. Arroyo. Mison submits that
contrary to the employees' argument, Section 59 of Executive Order No. 127 is
applicable (in particular, to Dario and Feria in the sense that retention in the Bureau,
under the Executive Order, depends on either retention of the position in the new
staffing pattern or reappointment of the incumbent, and since the dismissed employees
had not been reappointed, they had been considered legally separated. Moreover,
Mison proffers that under Section 59 incumbents are considered on holdover status,
"which means that all those positions were considered vacant." 57 The Solicitor General
denies the applicability of Palma-Fernandez v. De la Paz 58 because that case
supposedly involved a mere transfer and not a separation. He rejects, finally, the force
and effect of Executive Order Nos. 17 and 39 for the reason that Executive Order No.
17, which was meant to implement the Provisional Constitution, 59 had ceased to have
force and effect upon the ratification of the 1987 Constitution, and that, under Executive

Admin. Law | 37

Order No. 39, the dismissals contemplated were "for cause" while the separations now
under question were "not for cause" and were a result of government reorganize
organization decreed by Executive Order No. 127. Anent Republic Act No. 6656, he
expresses doubts on the constitutionality of the grant of retroactivity therein (as regards
the reinforcement of security of tenure) since the new Constitution clearly allows
reorganization after its effectivity.
G.R. Nos. 85310 and 86241
The Position of Commissioner Mison
Commissioner's twin petitions are direct challenges to three rulings of the Civil Service
Commission: (1) the Resolution, dated June 30, 1988, reinstating the 265 customs
employees above-stated; (2) the Resolution, dated September 20, 1988, denying
reconsideration; and (3) the Resolution, dated November 16, 1988, reinstating five
employees. The Commissioner's arguments are as follows:
1. The ongoing government reorganization is in the nature of a
"progressive" 60 reorganization "impelled by the need to overhaul the entire government
bureaucracy" 61 following the people power revolution of 1986;
2. There was faithful compliance by the Bureau of the various guidelines issued by the
President, in particular, as to deliberation, and selection of personnel for appointment
under the new staffing pattern;
3. The separated employees have been, under Section 59 of Executive Order No. 127,
on mere holdover standing, "which means that all positions are declared vacant;" 62
4. Jose v. Arroyo has declared the validity of Executive Order No. 127 under the
transitory provisions of the 1987 Constitution;
5. Republic Act No. 6656 is of doubtful constitutionality.
The Ruling of the Civil Service Commission
The position of the Civil Service Commission is as follows:
1. Reorganizations occur where there has been a reduction in personnel or redundancy
of functions; there is no showing that the reorganization in question has been carried
out for either purpose on the contrary, the dismissals now disputed were carried out
by mere service of notices;

Admin. Law | 38

2. The current Customs reorganization has not been made according to Malaca;ang
guidelines; information on file with the Commission shows that Commissioner Mison
has been appointing unqualified personnel;
3. Jose v. Arroyo, in validating Executive Order No. 127, did not countenance illegal
removals;
4. Republic Act No. 6656 protects security of tenure in the course of reorganizations.

The Court's ruling

Reorganization, Fundamental Principles of.
I.
The core provisions of law involved is Section 16 Article XVIII, of the 1987 Constitution.
We quote:
Sec. 16. Career civil service employees separated from the service not for cause but as
a result of the reorganization pursuant to Proclamation No. 3 dated March 25, 1986 and
the reorganization following the ratification of this Constitution shag be entitled to
appropriate separation pay and to retirement and other benefits accruing to them under
the laws of general application in force at the time of their separation. In lieul thereof, at
the option of the employees, they may be considered for employment in the
Government or in any of its subdivisions, instrumentalities, or agencies, including
government-owned or controlled corporations and their subsidiaries. This provision also
applies to career officers whose resignation, tendered in line with the existing policy, had
been accepted. 63
The Court considers the above provision critical for two reasons: (1) It is the only
provision in so far as it mentions removals not for cause that would arguably
support the challenged dismissals by mere notice, and (2) It is the single existing law on
reorganization after the ratification of the 1987 Charter, except Republic Act No. 6656,
which came much later, on June 10, 1988. [Nota been Executive Orders No. 116
(covering the Ministry of Agriculture & Food), 117 (Ministry of Education, Culture &
Sports), 119 (Health), 120 (Tourism), 123 (Social Welfare & Development), 124 (Public
Works & Highways), 125 transportation & Communications), 126 (Labor &
Employment), 127 (Finance), 128 (Science & Technology), 129 (Agrarian Reform), 131
(Natural Resources), 132 (Foreign Affairs), and 133 (Trade & Industry) were all
promulgated on January 30,1987, prior to the adoption of the Constitution on February
2, 1987].64

Admin. Law | 39

It is also to be observed that unlike the grants of power to effect reorganizations under
the past Constitutions, the above provision comes as a mere recognition of the right of
the Government to reorganize its offices, bureaus, and instrumentalities. Under Section
4, Article XVI, of the 1935 Constitution:
Section 4. All officers and employees in the existing Government of the Philippine
Islands shall continue in office until the Congress shall provide otherwise, but all officers
whose appointments are by this Constitution vested in the President shall vacate their
respective office(s) upon the appointment and qualification of their successors, if such
appointment is made within a period of one year from the date of the inauguration of the
Commonwealth of the Philippines. 65
Under Section 9, Article XVII, of the 1973 Charter:
Section 9. All officials and employees in the existing Government of the Republic of the
Philippines shall continue in office until otherwise provided by law or decreed by the
incumbent President of the Philippines, but all officials whose appointments are by this
Constitution vested in the Prime Minister shall vacate their respective offices upon the
appointment and qualification of their successors. 66
The Freedom Constitution is, as earlier seen, couched in similar language:
SECTION 2. All elective and appointive officials and employees under the 1973
Constitution shall continue in office until otherwise provided by proclamation or
executive order or upon the appointment and qualification of their successors, if such is
made within a period of one year from February 25, 1986. 67
Other than references to "reorganization following the ratification of this Constitution,"
there is no provision for "automatic" vacancies under the 1987 Constitution.
Invariably, transition periods are characterized by provisions for "automatic" vacancies.
They are dictated by the need to hasten the passage from the old to the new
Constitution free from the "fetters" of due process and security of tenure.
At this point, we must distinguish removals from separations arising from abolition of
office (not by virtue of the Constitution) as a result of reorganization carried out by
reason of economy or to remove redundancy of functions. In the latter case, the
Government is obliged to prove good faith. 68 In case of removals undertaken to comply
with clear and explicit constitutional mandates, the Government is not hard put to prove
anything, plainly and simply because the Constitution allows it.
Evidently, the question is whether or not Section 16 of Article XVIII of the 1987
Constitution is a grant of a license upon the Government to remove career public

Admin. Law | 40

officials it could have validly done under an "automatic" vacancy-authority and to

remove them without rhyme or reason.
As we have seen, since 1935, transition periods have been characterized by provisions
for "automatic" vacancies. We take the silence of the 1987 Constitution on this matter as
a restraint upon the Government to dismiss public servants at a moment's notice.
What is, indeed, apparent is the fact that if the present Charter envisioned an
"automatic" vacancy, it should have said so in clearer terms, as its 1935, 1973, and
1986 counterparts had so stated.
The constitutional "lapse" means either one of two things: (1) The Constitution meant to
continue the reorganization under the prior Charter (of the Revolutionary Government),
in the sense that the latter provides for "automatic" vacancies, or (2) It meant to put a
stop to those 'automatic" vacancies. By itself, however, it is ambiguous, referring as it
does to two stages of reorganization the first, to its conferment or authorization under
Proclamation No. 3 (Freedom Charter) and the second, to its implementation on its
effectivity date (February 2, 1987).lwph1.t But as we asserted, if the intent of
Section 16 of Article XVIII of the 1987 Constitution were to extend the effects of
reorganize tion under the Freedom Constitution, it should have said so in clear terms. It
is illogical why it should talk of two phases of reorganization when it could have simply
acknowledged the continuing effect of the first reorganization.
Second, plainly the concern of Section 16 is to ensure compensation for victims" of
constitutional revamps whether under the Freedom or existing Constitution and
only secondarily and impliedly, to allow reorganization. We turn to the records of the
Constitutional Commission:
INQUIRY OF MR. PADILLA
On the query of Mr. Padilla whether there is a need for a specific reference to
Proclamation No. 3 and not merely state "result of the reorganization following the
ratification of this Constitution', Mr. Suarez, on behalf of the Committee, replied that it is
necessary, inasmuch as there are two stages of reorganization covered by the Section.
Mr. Padilla pointed out that since the proposal of the Commission on Government
Reorganization have not been implemented yet, it would be better to use the phrase
"reorganization before or after the ratification of the Constitution' to simplify the Section.
Mr. Suarez instead suggested the phrase "as a result of the reorganization effected
before or after the ratification of the Constitution' on the understanding that the provision
would apply to employees terminated because of the reorganization pursuant to
Proclamation No. 3 and even those affected by the reorganization during the Marcos

Admin. Law | 41

regime. Additionally, Mr. Suarez pointed out that it is also for this reason that the
Committee specified the two Constitutions the Freedom Constitution and the 1986
[1987] Constitution. 69
Simply, the provision benefits career civil service employees separated from the service.
And the separation contemplated must be due to or the result of (1) the reorganization
pursuant to Proclamation No. 3 dated March 25, 1986, (2) the reorganization from
February 2, 1987, and (3) the resignations of career officers tendered in line with the
existing policy and which resignations have been accepted. The phrase "not for cause"
is clearly and primarily exclusionary, to exclude those career civil service employees
separated "for cause." In other words, in order to be entitled to the benefits granted
under Section 16 of Article XVIII of the Constitution of 1987, two requisites, one
negative and the other positive, must concur, to wit:
1. the separation must not be for cause, and
2. the separation must be due to any of the three situations mentioned above.
By its terms, the authority to remove public officials under the Provisional Constitution
ended on February 25, 1987, advanced by jurisprudence to February 2, 1987. 70 It Can
only mean, then, that whatever reorganization is taking place is upon the authority of the
present Charter, and necessarily, upon the mantle of its provisions and safeguards.
Hence, it can not be legitimately stated that we are merely continuing what the
revolutionary Constitution of the Revolutionary Government had started. We are through
with reorganization under the Freedom Constitution the first stage. We are on the
second stage that inferred from the provisions of Section 16 of Article XVIII of the
permanent basic document.
This is confirmed not only by the deliberations of the Constitutional Commission, supra,
but is apparent from the Charter's own words. It also warrants our holding
in Esguerra and Palma-Fernandez, in which we categorically declared that after
February 2, 1987, incumbent officials and employees have acquired security of tenure,
which is not a deterrent against separation by reorganization under the quondam
fundamental law.
Finally, there is the concern of the State to ensure that this reorganization is no "purge"
like the execrated reorganizations under martial rule. And, of course, we also have the
democratic character of the Charter itself.
Commissioner Mison would have had a point, insofar as he contends that the
reorganization is open-ended ("progressive"), had it been a reorganization under the
revolutionary authority, specifically of the Provisional Constitution. For then, the power

Admin. Law | 42

to remove government employees would have been truly wide ranging and limitless, not
only because Proclamation No. 3 permitted it, but because of the nature of revolutionary
authority itself, its totalitarian tendencies, and the monopoly of power in the men and
women who wield it.
What must be understood, however, is that notwithstanding her immense revolutionary
powers, the President was, nevertheless, magnanimous in her rule. This is apparent
from Executive Order No. 17, which established safeguards against the strong arm and
ruthless propensity that accompanies reorganizations notwithstanding the fact that
removals arising therefrom were "not for cause," and in spite of the fact that such
removals would have been valid and unquestionable. Despite that, the Chief Executive
saw, as we said, the "unnecessary anxiety and demoralization" in the government rank
and file that reorganization was causing, and prescribed guidelines for personnel action.
Specifically, she said on May 28, 1986:
WHEREAS, in order to obviate unnecessary anxiety and demoralization among the
deserving officials and employees, particularly in the career civil service, it is necessary
to prescribe the rules and regulations for implementing the said constitutional provision
to protect career civil servants whose qualifications and performance meet the
standards of service demanded by the New Government, and to ensure that only those
found corrupt, inefficient and undeserving are separated from the government service; 71
Noteworthy is the injunction embodied in the Executive Order that dismissals should be
made on the basis of findings of inefficiency, graft, and unfitness to render public
service.*
The President's Memorandum of October 14, 1987 should furthermore be considered.
We quote, in part:
Further to the Memorandum dated October 2, 1987 on the same subject, I have ordered
that there will be no further layoffs this year of personnel as a result of the government
reorganization. 72
Assuming, then, that this reorganization allows removals "not for cause" in a manner
that would have been permissible in a revolutionary setting as Commissioner Mison so
purports, it would seem that the Commissioner would have been powerless, in any
event, to order dismissals at the Customs Bureau left and right. Hence, even if we
accepted his "progressive" reorganization theory, he would still have to come to terms
with the Chief Executive's subsequent directives moderating the revolutionary
authority's plenary power to separate government officials and employees.

Admin. Law | 43

Reorganization under the 1987 Constitution, Nature, Extent, and Limitations of; Jose v.
Arroyo, clarified.
The controversy seems to be that we have, ourselves, supposedly extended the effects
of government reorganization under the Provisional Constitution to the regime of the
1987 Constitution. Jose v. Arroyo73 is said to be the authority for this argument.
Evidently, if Arroyo indeed so ruled, Arroyo would be inconsistent with the earlier
pronouncement of Esguerra and the later holding of Palma-Fernandez. The question,
however, is: Did Arroyo, in fact, extend the effects of reorganization under the
revolutionary Charter to the era of the new Constitution?
There are a few points about Arroyo that have to be explained. First, the opinion
expressed therein that "[b]y virtue of said provision the reorganization of the Bureau of
Customs under Executive Order No. 127 may continue even after the ratification of this
constitution and career civil service employees may be separated from the service
without cause as a result of such reorganization" 74 is in the nature of an obiter dictum.
We dismissed Jose's petition 75 primarily because it was "clearly premature, speculative,
and purely anticipatory, based merely on newspaper reports which do not show any
direct or threatened injury," 76 it appearing that the reorganization of the Bureau of
Customs had not been, then, set in motion. Jose therefore had no cause for complaint,
which was enough basis to dismiss the petition. The remark anent separation "without
cause" was therefore not necessary for the disposition of the case. In Morales v.
Parades,77 it was held that an obiter dictum "lacks the force of an adjudication and
should not ordinarily be regarded as such." 78
Secondly, Arroyo is an unsigned resolution while Palma Fernandez is a full-blown
decision, although both are en banc cases. While a resolution of the Court is no less
forceful than a decision, the latter has a special weight.
Thirdly, Palma-Fernandez v. De la Paz comes as a later doctrine. (Jose v. Arroyo was
promulgated on August 11, 1987 while Palma-Fernandez was decided on August 31,
1987.) It is well-established that a later judgment supersedes a prior one in case of an
inconsistency.
As we have suggested, the transitory provisions of the 1987 Constitution allude to two
stages of the reorganization, the first stage being the reorganization under Proclamation
No. 3 which had already been consummated the second stage being that
adverted to in the transitory provisions themselves which is underway. Hence, when
we spoke, in Arroyo, of reorganization after the effectivity of the new Constitution, we
referred to the second stage of the reorganization. Accordingly, we cannot be said to
have carried over reorganization under the Freedom Constitution to its 1987
counterpart.

Admin. Law | 44

Finally, Arroyo is not necessarily incompatible with Palma-Fernandez (or Esguerra).

As we have demonstrated, reorganization under the aegis of the 1987 Constitution is
not as stern as reorganization under the prior Charter. Whereas the latter, sans the
President's subsequently imposed constraints, envisioned a purgation, the same cannot
be said of the reorganization inferred under the new Constitution because, precisely, the
new Constitution seeks to usher in a democratic regime. But even if we concede ex
gratia argumenti that Section 16 is an exception to due process and no-removal-"except
for cause provided by law" principles enshrined in the very same 1987
Constitution, 79 which may possibly justify removals "not for cause," there is no
contradiction in terms here because, while the former Constitution left the axe to fall
where it might, the present organic act requires that removals "not for cause" must be
as a result of reorganization. As we observed, the Constitution does not provide for
"automatic" vacancies. It must also pass the test of good faith a test not obviously
required under the revolutionary government formerly prevailing, but a test wellestablished in democratic societies and in this government under a democratic Charter.
When, therefore, Arroyo permitted a reorganization under Executive Order No. 127 after
the ratification of the 1987 Constitution, Arroyo permitted a reorganization provided that
it is done in good faith. Otherwise, security of tenure would be an insuperable
implement. 80
Reorganizations in this jurisdiction have been regarded as valid provided they are
pursued in good faith. 81 As a general rule, a reorganization is carried out in "good faith"
if it is for the purpose of economy or to make bureaucracy more efficient. In that event,
no dismissal (in case of a dismissal) or separation actually occurs because the position
itself ceases to exist. And in that case, security of tenure would not be a Chinese wall.
Be that as it may, if the "abolition," which is nothing else but a separation or removal, is
done for political reasons or purposely to defeat sty of tenure, or otherwise not in good
faith, no valid "abolition' takes place and whatever "abolition' is done, is void ab initio.
There is an invalid "abolition" as where there is merely a change of nomenclature of
positions, 82 or where claims of economy are belied by the existence of ample funds. 83
It is to be stressed that by predisposing a reorganization to the yardstick of good faith,
we are not, as a consequence, imposing a "cause" for restructuring. Retrenchment in
the course of a reorganization in good faith is still removal "not for cause," if by "cause"
we refer to "grounds" or conditions that call for disciplinary action.**
Good faith, as a component of a reorganization under a constitutional regime, is judged
from the facts of each case. However, under Republic Act No. 6656, we are told:

Admin. Law | 45

SEC. 2. No officer or employee in the career service shall be removed except for a valid
cause and after due notice and hearing. A valid cause for removal exists when, pursuant
to a bona fide reorganization, a position has been abolished or rendered redundant or
there is a need to merge, divide, or consolidate positions in order to meet the exigencies
of the service, or other lawful causes allowed by the Civil Service Law. The existence of
any or some of the following circumstances may be considered as evidence of bad faith
in the removals made as a result of reorganization, giving rise to a claim for
reinstatement or reappointment by an aggrieved party: (a) Where there is a significant
increase in the number of positions in the new staffing pattern of the department or
agency concerned; (b) Where an office is abolished and another performing
substantially the same functions is created; (c) Where incumbents are replaced by
those less qualified in terms of status of appointment, performance and merit; (d) Where
there is a reclassification of offices in the department or agency concerned and the
reclassified offices perform substantially the same functions as the original offices; (e)
Where the removal violates the order of separation provided in Section 3 hereof. 84
It is in light hereof that we take up questions about Commissioner Mison's good faith, or
lack of it.
Reorganization of the Bureau of Customs,
Lack of Good Faith in.
The Court finds that after February 2, 1987 no perceptible restructuring of the Customs
hierarchy except for the change of personnel has occurred, which would have
justified (an things being equal) the contested dismisses. The contention that the
staffing pattern at the Bureau (which would have furnished a justification for a personnel
movement) is the same s pattern prescribed by Section 34 of Executive Order No. 127
already prevailing when Commissioner Mison took over the Customs helm, has not
been successfully contradicted 85 There is no showing that legitimate structural changes
have been made or a reorganization actually undertaken, for that matter at the
Bureau since Commissioner Mison assumed office, which would have validly prompted
him to hire and fire employees. There can therefore be no actual reorganization to
speak of, in the sense, say, of reduction of personnel, consolidation of offices, or
abolition thereof by reason of economy or redundancy of functions, but a revamp of
personnel pure and simple.
The records indeed show that Commissioner Mison separated about 394 Customs
personnel but replaced them with 522 as of August 18, 1988. 86 This betrays a clear
intent to "pack" the Bureau of Customs. He did so, furthermore, in defiance of the
President's directive to halt further layoffs as a consequence of reorganization. 87Finally,

Admin. Law | 46

he was aware that layoffs should observe the procedure laid down by Executive Order
No. 17.
We are not, of course, striking down Executive Order No. 127 for repugnancy to the
Constitution. While the act is valid, still and all, the means with which it was
implemented is not. 88
Executive Order No. 127, Specific Case of.
With respect to Executive Order No. 127, Commissioner Mison submits that under
Section 59 thereof, "[t]hose incumbents whose positions are not included therein or who
are not reappointed shall be deemed separated from the service." He submits that
because the 394 removed personnel have not been "reappointed," they are considered
terminated. To begin with, the Commissioner's appointing power is subject to the
provisions of Executive Order No. 39. Under Executive Order No. 39, the Commissioner
of Customs may "appoint all Bureau personnel, except those appointed by the
President." 89
Accordingly, with respect to Deputy Commissioners Cesar Dario and Vicente Feria, Jr.,
Commissioner Mison could not have validly terminated them, they being Presidential
appointees.
Secondly, and as we have asserted, Section 59 has been rendered inoperative
according to our holding in Palma-Fernandez.
That Customs employees, under Section 59 of Executive Order No. 127 had been on a
mere holdover status cannot mean that the positions held by them had become vacant.
In Palma-Fernandez, we said in no uncertain terms:
The argument that, on the basis of this provision, petitioner's term of office ended on 30
January 1987 and that she continued in the performance of her duties merely in a hold
over capacity and could be transferred to another position without violating any of her
legal rights, is untenable. The occupancy of a position in a hold-over capacity was
conceived to facilitate reorganization and would have lapsed on 25 February 1987
(under the Provisional Constitution), but advanced to February 2, 1987 when the 1987
Constitution became effective (De Leon. et al., vs. Hon. Benjamin B. Esquerra, et. al.,
G.R. No. 78059, 31 August 1987). After the said date the provisions of the latter on
security of tenure govern. 90
It should be seen, finally, that we are not barring Commissioner Mison from carrying out
a reorganization under the transitory provisions of the 1987 Constitution. But such a
reorganization should be subject to the criterion of good faith.

Admin. Law | 47

Resume.
In resume, we restate as follows:
1. The President could have validly removed government employees, elected or
appointed, without cause but only before the effectivity of the 1987 Constitution on
February 2, 1987 (De Leon v. Esguerra, supra; Palma-Fernandez vs. De la Paz, supra);
in this connection, Section 59 (on non-reappointment of incumbents) of Executive Order
No. 127 cannot be a basis for termination;
2. In such a case, dismissed employees shall be paid separation and retirement
benefits or upon their option be given reemployment opportunities (CONST. [1987], art.
XVIII, sec. 16; Rep. Act No. 6656, sec. 9);
3. From February 2, 1987, the State does not lose the right to reorganize the
Government resulting in the separation of career civil service employees [CONST.
(1987), supra] provided, that such a reorganization is made in good faith. (Rep. Act No.
6656, supra.)
G.R. No. 83737
This disposition also resolves G.R. No. 83737. As we have indicated, G.R. No. 83737 is
a challenge to the validity of Republic Act No. 6656. In brief, it is argued that the Act,
insofar as it strengthens security of tenure 91 and as far as it provides for a retroactive
effect, 92 runs counter to the transitory provisions of the new Constitution on removals
not for cause.
It can be seen that the Act, insofar as it provides for reinstatament of employees
separated without "a valid cause and after due notice and hearing" 93 is not contrary to
the transitory provisions of the new Constitution. The Court reiterates that although the
Charter's transitory provisions mention separations "not for cause," separations
thereunder must nevertheless be on account of a valid reorganization and which do not
come about automatically. Otherwise, security of tenure may be invoked. Moreover, it
can be seen that the statute itself recognizes removals without cause. However, it also
acknowledges the possibility of the leadership using the artifice of reorganization to
frustrate security of tenure. For this reason, it has installed safeguards. There is nothing
unconstitutional about the Act.
We recognize the injury Commissioner Mison's replacements would sustain. We also
commisserate with them. But our concern is the greater wrong inflicted on the dismissed
employees on account of their regal separation from the civil service.

Admin. Law | 48

WHEREFORE, THE RESOLUTIONS OF THE CIVIL SERVICE COMMISSION, DATED

JUNE 30, 1988, SEPTEMBER 20, 1988, NOVEMBER 16, 1988, INVOLVED IN G.R.
NOS. 85310, 85335, AND 86241, AND MAY 8, 1989, INVOLVED IN G.R. NO. 85310,
ARE AFFIRMED.
THE PETITIONS IN G.R. NOS. 81954, 81967, 82023, AND 85335 ARE GRANTED.
THE PETITIONS IN G.R. NOS. 83737, 85310 AND 86241 ARE DISMISSED.
THE COMMISSIONER OF CUSTOMS IS ORDERED TO REINSTATE THE
EMPLOYEES SEPARATED AS A RESULT OF HIS NOTICES DATED JANUARY 26,
1988.
THE EMPLOYEES WHOM COMMISSIONER MISON MAY HAVE APPOINTED AS
REPLACEMENTS ARE ORDERED TO VACATE THEIR POSTS SUBJECT TO THE
PAYMENT OF WHATEVER BENEFITS THAT MAY BE PROVIDED BY LAW.
NO COSTS.
IT IS SO ORDERED.

Admin. Law | 49

July 17, 2007

G.R. No. 167324

TONDO MEDICAL CENTER EMPLOYEES ASSOCIATION, RESEARCH INSTITUTE

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

CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari, under Rule 45 of the Rules of Court, assailing
the Decision,[1] promulgated by the Court of Appeals on 26 November 2004, denying a
petition for the nullification of the Health Sector Reform Agenda (HSRA) Philippines
1999-2004 of the Department of Health (DOH); and Executive Order No. 102,
Redirecting the Functions and Operations of the Department of Health, which was
issued by then President Joseph Ejercito Estrada on 24 May 1999.
Prior hereto, petitioners originally filed a Petition for Certiorari, Prohibition and
Mandamus under Rule 65 of the 1997 Revised Rules of Civil Procedure before the
Supreme Court on 15 August 2001. However, the Supreme Court, in a Resolution dated
29 August 2001, referred the petition to the Court of Appeals for appropriate action.

Admin. Law | 50

HEALTH SECTOR REFORM AGENDA (HSRA)

In 1999, the DOH launched the HSRA, a reform agenda developed by the HSRA
Technical Working Group after a series of workshops and analyses with inputs from
several consultants, program managers and technical staff possessing the adequate
expertise and experience in the health sector. It provided for five general areas of
reform: (1) to provide fiscal autonomy to government hospitals; (2) secure funding for
priority public health programs; (3) promote the development of local health systems
and ensure its effective performance; (4) strengthen the capacities of health regulatory
agencies; and (5) expand the coverage of the National Health Insurance Program
(NHIP).[2]
Petitioners questioned the first reform agenda involving the fiscal autonomy of
government hospitals, particularly the collection of socialized user fees and the
corporate restructuring of government hospitals. The said provision under the HSRA
reads:
Provide fiscal autonomy to government hospitals. Government hospitals must be allowed to
collect socialized user fees so they can reduce the dependence on direct subsidies from the
government. Their critical capacities like diagnostic equipment, laboratory facilities and medical
staff capability must be upgraded to effectively exercise fiscal autonomy.Such investment must
be cognizant of complimentary capacity provided by public-private networks. Moreover such
capacities will allow government hospitals to supplement priority public health
programs. Appropriate institutional arrangement must be introduced such as allowing them
autonomy towards converting them into government corporations without compromising their
social responsibilities. As a result, government hospitals are expected to be more competitive
and responsive to health needs.
Petitioners also assailed the issuance of a draft administrative order issued by the DOH, dated 5
January 2001, entitled Guidelines and Procedure in the Implementation of the Corporate
Restructuring of Selected DOH Hospitals to Achieve Fiscal Autonomy, and Managerial Flexibility
to Start by January 2001; [3] and Administrative Order No. 172 of the DOH, entitled Policies and
Guidelines on the Private Practice of Medical and Paramedical Professionals in Government
Health Facilities,[4] dated 9 January 2001, for imposing an added burden to indigent Filipinos,
who cannot afford to pay for medicine and medical services.[5]

Petitioners alleged that the implementation of the aforementioned reforms had resulted in
making free medicine and free medical services inaccessible to economically disadvantaged
Filipinos. Thus, they alleged that the HSRA is void for being in violation of the following
constitutional provisions:[6]

Admin. Law | 51

ART. III, SEC. 1. No person shall be deprived of life, liberty or property without due process of
law, nor shall any person be denied the equal protection of the law.
ART II, SEC. 5. The maintenance of peace and order, the protection of life, liberty, and property,
and the promotion of the general welfare are essential for the enjoyment of all the people of the
blessings of democracy.
ART II, SEC. 9. The State shall promote a just and dynamic social order that will ensure the
prosperity and independence of the nation and free the people from poverty through policies
that provide adequate social services, promote full employment, a rising standard of living and
an improved quality of life for all.
ART II, SEC. 10. The State shall promote social justice in all phases of national development.
ART II, SEC. 11. The State values the dignity of every human person and guarantees full
respect for human rights.
ART II, SEC. 13. The State recognizes the vital role of the youth in nation-building and shall
promote and protect their physical, moral, spiritual, intellectual and social well-being x x x.
ART II, SEC. 18. The State affirms labor as a primary social economic force. It shall protect the
rights of workers and promote their welfare.
ART XV, SEC. 1. The State recognizes the Filipino family as the foundation of the
nation. Accordingly, it shall strengthen its solidarity and actively promote its total development.
ART XV, SEC. 3. The State shall defend:
xxxx
(2) the right of children to assistance, including proper care and nutrition, and special protection
from all forms of neglect, abuse, cruelty, exploitation and other conditions prejudicial to their
development.
xxxx
ART XIII, SEC. 14. The State shall protect working women by providing safe and healthful
working conditions, taking into account their maternal functions, and such facilities and
opportunities that will enhance their welfare and enable them to realize their full potential in the
service of the nation.
ART II, SEC. 15. The State shall protect and promote the right to health of the people and instill
health consciousness among them.
ART XIII, SEC. 11. The State shall adopt an integrated and comprehensive approach to health
development which shall endeavor to make essential goods, health and other social services
available to all people at affordable cost. There shall be priority for the needs of the

Admin. Law | 52

underprivileged sick, elderly, disabled, women, and children. The State shall endeavor to
provide free medical care to paupers.

EXECUTIVE ORDER NO. 102

On 24 May 1999, then President Joseph Ejercito Estrada issued Executive Order No.
102, entitled Redirecting the Functions and Operations of the Department of Health,
which provided for the changes in the roles, functions, and organizational processes of
the DOH. Under the assailed executive order, the DOH refocused its mandate from
being the sole provider of health services to being a provider of specific health services
and technical assistance, as a result of the devolution of basic services to local
government units. The provisions for the streamlining of the DOH and the deployment of
DOH personnel to regional offices and hospitals read:
Sec. 4. Preparation of a Rationalization and Streamlining Plan. In view of the functional and
operational redirection in the DOH, and to effect efficiency and effectiveness in its activities, the
Department shall prepare a Rationalization and Streamlining Plan (RSP) which shall be the
basis of the intended changes. The RSP shall contain the following:
a)
b)
c)
d)

the specific shift in policy directions, functions, programs and activities/strategies;

the structural and organizational shift, stating the specific functions and activities by
organizational unit and the relationship of each units;
the staffing shift, highlighting and itemizing the existing filled and unfilled positions; and
the resource allocation shift, specifying the effects of the streamline set-up on the agency
budgetary allocation and indicating where possible, savings have been generated.
The RSP shall [be] submitted to the Department of Budget and Management for approval before
the corresponding shifts shall be affected (sic) by the DOH Secretary.
Sec. 5. Redeployment of Personnel. The redeployment of officials and other personnel on the
basis of the approved RSP shall not result in diminution in rank and compensation of existing
personnel. It shall take into account all pertinent Civil Service laws and rules.
Section 6. Funding. The financial resources needed to implement the Rationalization and
Streamlining Plan shall be taken from funds available in the DOH, provided that the total
requirements for the implementation of the revised staffing pattern shall not exceed available
funds for Personnel Services.
Section 7. Separation Benefits. Personnel who opt to be separated from the service as a
consequence of the implementation of this Executive Order shall be entitled to the benefits
under existing laws. In the case of those who are not covered by existing laws, they shall be
entitled to separation benefits equivalent to one month basic salary for every year of service or
proportionate share thereof in addition to the terminal fee benefits to which he/she is entitled
under existing laws.

Admin. Law | 53

Executive Order No. 102 was enacted pursuant to Section 17 of the Local Government
Code (Republic Act No. 7160), which provided for the devolution to the local
government units of basic services and facilities, as well as specific health-related
functions and responsibilities.[7]
Petitioners contended that a law, such as Executive Order No. 102, which effects the
reorganization of the DOH, should be enacted by Congress in the exercise of its
legislative function. They argued that Executive Order No. 102 is void, having been
issued in excess of the Presidents authority.[8]
Moreover, petitioners averred that the implementation of the Rationalization and
Streamlining Plan (RSP) was not in accordance with law. The RSP was allegedly
implemented even before the Department of Budget and Management (DBM) approved
it. They also maintained that the Office of the President should have issued an
administrative order to carry out the streamlining, but that it failed to do so. [9]
Furthermore, petitioners Elsa O. Guevarra, Arcadio B. Gonzales, Jose G. Galang,
Domingo
P. Manay,
Eduardo
P. Galope, Remedios M. Ysmael,
Alfredo
U. Bacuata and Edgardo J. Damicog, all DOH employees, assailed the validity of
Executive Order No. 102 on the ground that they were likely to lose their jobs, and that
some of them were suffering from the inconvenience of having to travel a longer
distance to get to their new place of work, while other DOH employees had to relocate
to far-flung areas.[10]
Petitioners also pointed out several errors in the implementation of the RSP. Certain
employees allegedly suffered diminution of compensation, [11] while others were
supposedly assigned to positions for which they were neither qualified nor suited. [12] In
addition, new employees were purportedly hired by the DOH and appointed to positions
for which they were not qualified, despite the fact that the objective of the ongoing
streamlining was to cut back on costs. [13] It was also averred that DOH employees were
deployed or transferred even during the three-month period before the national and
local elections in May 2001, [14] in violation of Section 2 of the Republic Act No. 7305,
also known as Magna Carta for Public Health Workers.[15] Petitioners, however, failed to
identify the DOH employees referred to above, much less include them as parties to the
petition.
The Court of Appeals denied the petition due to a number of procedural defects, which
proved fatal: 1) Petitioners failed to show capacity or authority to sign the certification of
non-forum shopping and the verification; 2) Petitioners failed to show any particularized
interest for bringing the suit, nor any direct or personal injury sustained or were in the
immediate danger of sustaining; 3) the Petition, brought before the Supreme Court on
15 August 1999, was filed out of time, or beyond 60 days from the time the

Admin. Law | 54

reorganization methods were implemented in 2000; and 4) certiorari, Prohibition and

Mandamus will not lie where the President, in issuing the assailed Executive Order, was
not acting as a tribunal, board or officer exercising judicial or quasi-judicial functions.
In resolving the substantial issues of the case, the Court of Appeals ruled that the HSRA
cannot be declared void for violating Sections 5, 9, 10, 11, 13, 15, 18 of Article II;
Section 1 of Article III; Sections 11 and 14 of Article XIII; and Sections 1 and 3(2) of
Article XV, all of the 1987 Constitution, which directly or indirectly pertain to the duty of
the State to protect and promote the peoples right to health and well-being. It reasoned
that the aforementioned provisions of the Constitution are not self-executing; they are
not judicially enforceable constitutional rights and can only provide guidelines for
legislation.
Moreover, the Court of Appeals held that the petitioners assertion that Executive Order
No. 102 is detrimental to the health of the people cannot be made
a justiciable issue. The question of whether the HSRA will bring about the development
or disintegration of the health sector is within the realm of the political department.
Furthermore, the Court of Appeals decreed that the President was empowered to issue
Executive Order No. 102, in accordance with Section 17 Article VII of the 1987
Constitution. It also declared that the DOH did not implement Executive Order No. 102
in bad faith or with grave abuse of discretion, as alleged by the petitioners, as the DOH
issued Department Circular No. 275-C, Series of 2000, which created the different
committees tasked with the implementation of the RSP, only after both the DBM
and Presidential Committee on Effective Governance (PCEG) approved the RSP on 8
July 2000 and 17 July 2000, respectively.
Petitioners filed with the Court of Appeals a Motion for Reconsideration of the Decision
rendered on 26 November 2004, but the same was denied in a Resolution dated 7
March 2005.

Admin. Law | 55

Hence, the present petition, where the following issues are raised:
I.
THE HONORABLE COURT OF APPEALS COMMITTED MANIFEST ERROR IN
RULING THAT ANY QUESTION ON THE WISDOM AND EFFICACY OF THE HEALTH
SECTOR REFORM AGENDA IS NOT A JUSTICIABLE CONTROVERSY AND THAT
THE CONSTITUTIONAL PROVISIONS PROTECTING THE HEALTH OF THE
FILIPINO PEOPLE ARE NOT JUDICIALLY ENFORCEABLE;
II.
THE HONORABLE COURT OF APPEALS COMMITTED MANIFEST ERROR IN
RULING THAT PETITIONERS COMPLAINT THAT EXECUTIVE ORDER NO. 102 IS
DETRIMENTAL TO THE FILIPINO IS LIKEWISE NOT A JUSTICIABLE
CONTROVERSY AND THAT THE PRESIDENT HAS THE AUTHORITY TO ISSUE
SAID ORDER; AND
III.
THE HONORABLE COURT OF APPEALS COMMITTED MANIFEST ERROR IN
UPHOLDING TECHNICALITIES OVER AND ABOVE THE ISSUES OF
TRANSCENDENTAL IMPORTANCE RAISED IN THE PETITION BELOW. [16]

The Court finds the present petition to be without merit.

Petitioners allege that the HSRA should be declared void, since it runs counter to the
aspiration and ideals of the Filipino people as embodied in the Constitution. [17] They
claim that the HSRAs policies of fiscal autonomy, income generation, and revenue
enhancement violate Sections 5, 9, 10, 11, 13, 15 and 18 of Article II, Section 1 of
Article III; Sections 11 and 14 of Article XIII; and Sections 1 and 3 of Article XV of the
1987 Constitution. Such policies allegedly resulted in making inaccessible free medicine
and free medical services. This contention is unfounded.
As a general rule, the provisions of the Constitution are considered self-executing, and
do not require future legislation for their enforcement. For if they are not treated as selfexecuting, the mandate of the fundamental law can be easily nullified by the inaction of
Congress.[18] However, some provisions have already been categorically declared by
this Court as non self-executing.
In Tanada v. Angara,[19] the Court specifically set apart the sections found under Article II
of the 1987 Constitution as non self-executing and ruled that such broad principles need
legislative enactments before they can be implemented:

Admin. Law | 56

By its very title, Article II of the Constitution is a declaration of principles and state
policies. x x x. These principles in Article II are not intended to be self-executing
principles ready for enforcement through the courts. They are used by the judiciary as
aids or as guides in the exercise of its power of judicial review, and by the legislature in
its enactment of laws.
In Basco v. Philippine Amusement and Gaming Corporation,[20] this Court declared that
Sections 11, 12, and 13 of Article II; Section 13 of Article XIII; and Section 2 of Article
XIV of the 1987 Constitution are not self-executing provisions. In Tolentino v. Secretary
of Finance,[21] the Court referred to Section 1 of Article XIII and Section 2 of Article XIV
of the Constitution as moral incentives to legislation, not as judicially enforceable
rights. These provisions, which merely lay down a general principle, are distinguished
from other constitutional provisions as non self-executing and, therefore, cannot give
rise to a cause of action in the courts; they do not embody judicially enforceable
constitutional rights.[22]
Some of the constitutional provisions invoked in the present case were taken from
Article II of the Constitution -- specifically, Sections 5, 9, 10, 11, 13, 15 and 18 -- the
provisions of which the Court categorically ruled to be non self-executing in
the aforecited case of Taada v. Angara.[23]
Moreover, the records are devoid of any explanation of how the HSRA supposedly
violated the equal protection and due process clauses that are embodied in Section 1 of
Article III of the Constitution. There were no allegations of discrimination or of the lack of
due process in connection with the HSRA. Since they failed to substantiate how these
constitutional guarantees were breached, petitioners are unsuccessful in establishing
the relevance of this provision to the petition, and consequently, in annulling the HSRA.
In the remaining provisions, Sections 11 and 14 of Article XIII and Sections 1 and 3 of
Article XV, the State accords recognition to the protection of working women and the
provision for safe and healthful working conditions; to the adoption of an integrated and
comprehensive approach to health; to the Filipino family; and to the right of children to
assistance and special protection, including proper care and nutrition. Like the
provisions that were declared as non self-executory in the cases of Basco v. Philippine
Amusement and Gaming Corporation[24] and Tolentino v. Secretary of Finance,[25] they
are mere statements of principles and policies.As such, they are mere directives
addressed to the executive and the legislative departments. If unheeded, the remedy
will not lie with the courts; but rather, the electorates displeasure may be manifested in
their votes.
The rationale for this is given by Justice Dante Tinga in his Separate Opinion in the case
of Agabon v. National Labor Relations Commission[26]:

Admin. Law | 57

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

The HSRA cannot be nullified based solely on petitioners bare allegations that it violates
the general principles expressed in the non self-executing provisions they cite
herein. There are two reasons for denying a cause of action to an alleged infringement
of broad constitutional principles: basic considerations of due process and the
limitations of judicial power.[27]
Petitioners also claim that Executive Order No. 102 is void on the ground that it was
issued by the President in excess of his authority. They maintain that the structural and
functional reorganization of the DOH is an exercise of legislative functions, which the
President usurped when he issued Executive Order No. 102. [28]This line of argument is
without basis.
This Court has already ruled in a number of cases that the President may, by executive
or administrative order, direct the reorganization of government entities under the
Executive Department.[29] This is also sanctioned under the Constitution, as well as
other statutes.
Section 17, Article VII of the 1987 Constitution, clearly states: [T]he president shall have
control of all executive departments, bureaus and offices. Section 31, Book III, Chapter
10 of Executive Order No. 292, also known as the Administrative Code of 1987 reads:
SEC. 31. Continuing Authority of the President to Reorganize his Office - The President,
subject to the policy in the Executive Office and in order to achieve simplicity, economy
and efficiency, shall have continuing authority to reorganize the administrative structure
of the Office of the President. For this purpose, he may take any of the following
actions:
(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;

Admin. Law | 58

(2) Transfer any function under the Office of the President to any other Department or
Agency as well as transfer functions to the Office of the President from other
Departments or Agencies; and
(3) Transfer any agency under the Office of the President to any other department or
agency as well as transfer agencies to the Office of the President from other
Departments or agencies.

In Domingo v. Zamora,[30] this Court explained the rationale behind the Presidents
continuing authority under the Administrative Code to reorganize the administrative
structure of the Office of the President. The law grants the President the power to
reorganize the Office of the President in recognition of the recurring need of every
President to reorganize his or her office to achieve simplicity, economy and
efficiency. To remain effective and efficient, it must be capable of being shaped and
reshaped by the President in the manner the Chief Executive deems fit to carry out
presidential directives and policies.
The Administrative Code provides that the Office of the President consists of the Office
of the President Proper and the agencies under it. [31] The agencies under the Office of
the President are identified in Section 23, Chapter 8, Title II of the Administrative Code:
Sec. 23. The Agencies under the Office of the President.The agencies under the Office
of the President refer to those offices placed under the chairmanship of the
President, those under the supervision and control of the President, those under
the administrative supervision of the Office of the President, those attached to it for
policy and program coordination, and those that are not placed by law or order creating
them under any specific department. (Emphasis provided.)
Section 2(4) of the Introductory Provisions of the Administrative Code defines the term
agency of the government as follows:
Agency of the Government refers to any of the various units of the Government,
including a department, bureau, office, instrumentality, or government-owned or
controlled corporation, or a local government or a distinct unit therein.
Furthermore, the DOH is among the cabinet-level departments enumerated under Book
IV of the Administrative Code, mainly tasked with the functional distribution of the work
of the President.[32] Indubitably, the DOH is an agency which is under the supervision
and control of the President and, thus, part of the Office of the President. Consequently,
Section 31, Book III, Chapter 10 of the Administrative Code, granting the President the
continued authority to reorganize the Office of the President, extends to the DOH.

Admin. Law | 59

The power of the President to reorganize the executive department is likewise

recognized in general appropriations laws. As early as 1993, Sections 48 and 62 of
Republic Act No. 7645, the General Appropriations Act for Fiscal Year 1993, already
contained a provision stating that:
Sec. 48. Scaling Down and Phase Out of Activities Within the Executive Branch.The
heads of departments, bureaus and offices and agencies are hereby directed to identify
their respective activities which are no longer essential in the delivery of public services
and which may be scaled down, phased out, or abolished, subject to civil service rules
and regulations. x x x. Actual scaling down, phasing out, or abolition of activities
shall be effected pursuant to Circulars or Orders issued for the purpose by the
Office of the President. (Emphasis provided.)
Sec. 62. Unauthorized Organizational Changes. Unless otherwise created by law or
directed by the President of the Philippines, no organizational unit or changes in key
positions in any department or agency shall be authorized in their respective
organizational structures and be funded form appropriations by this Act.
Again, in the year when Executive Order No. 102 was issued, The General
Appropriations Act of Fiscal Year 1999 (Republic Act No. 8745) conceded to the
President the power to make any changes in any of the key positions and organizational
units in the executive department thus:
Sec. 77. Organized Changes. Unless otherwise provided by law or directed by the
President of the Philippines, no changes in key positions or organizational units in any
department or agency shall be authorized in their respective organizational structures
and funded from appropriations provided by this Act.
Clearly, Executive Order No. 102 is well within the constitutional power of the President
to issue. The President did not usurp any legislative prerogative in issuing Executive
Order No. 102. It is an exercise of the Presidents constitutional power of control over
the executive department, supported by the provisions of the Administrative Code,
recognized by other statutes, and consistently affirmed by this Court.
Petitioners also pointed out several flaws in the implementation of Executive Order No.
102, particularly the RSP. However, these contentions are without merit and are
insufficient to invalidate the executive order.
The RSP was allegedly implemented even before the DBM approved it. The facts show
otherwise. It was only after the DBM approved the Notice of Organization, Staffing and
Compensation Action on 8 July 2000, [33] and after the Presidential Committee on
Effective Governance (PCEG) issued on 17 July 2000 Memorandum Circular No. 62,

Admin. Law | 60

[34]

approving the RSP, that then DOH Secretary Alberto G. Romualdez issued on 28
July 2000 Department Circular No. 275-C, Series of 2000, [35] creating the different
committees to implement the RSP.
Petitioners also maintain that the Office of the President should have issued an
administrative order to carry out the streamlining, but that it failed to do so. Such
objection cannot be given any weight considering that the acts of the DOH Secretary, as
an alter ego of the President, are presumed to be the acts of the President. The
members of the Cabinet are subject at all times to the disposition of the President since
they are merely his alter egos. [36] Thus, their acts, performed and promulgated in the
regular course of business, are, unless disapproved by the President, presumptively
acts of the President.[37] Significantly, the acts of the DOH Secretary were clearly
authorized by the President, who, thru the PCEG, issued the aforementioned
Memorandum Circular No. 62, sanctioning the implementation of the RSP.
Petitioners Elsa Odonzo Guevarra, Arcadio B. Gonzales, Jose G. Galang, Domingo
P. Manay,
Eduardo
P. Galope, Remedios M. Ysmael,
Alfredo
U. Bacuata,
and Edgardo Damicog, all DOH employees, assailed the validity of Executive Order No.
102 on the ground that they were likely to lose their jobs, and that some of them were
suffering from the inconvenience of having to travel a longer distance to get to their new
place of work, while other DOH employees had to relocate to far-flung areas.

In several cases, this Court regarded reorganizations of government units or

departments as valid, for so long as they are pursued in good faiththat is, for the
purpose of economy or to make bureaucracy more efficient. [38] On the other hand, if the
reorganization is done for the purpose of defeating security of tenure or for ill-motivated
political purposes, any abolition of position would be invalid. None of these
circumstances are applicable since none of the petitioners were removed from public
service, nor did they identify any action taken by the DOH that would unquestionably
result in their dismissal. The reorganization that was pursued in the present case was
made in good faith. The RSP was clearly designed to improve the efficiency of the
department and to implement the provisions of the Local Government Code on the
devolution of health services to local governments. While this Court recognizes the
inconvenience suffered by public servants in their deployment to distant areas, the
executive departments finding of a need to make health services available to these
areas and to make delivery of health services more efficient and more compelling is far
from being unreasonable or arbitrary, a determination which is well within its authority. In
all, this Court finds petitioners contentions to be insufficient to invalidate Executive
Order No. 102.

Admin. Law | 61

Without identifying the DOH employees concerned, much less including them as parties
to the petition, petitioners went on identifying several errors in the implementation of
Executive Order No. 102. First, they alleged that unidentified DOH employees suffered
from a diminution of compensation by virtue of the provision on Salaries and Benefits
found in Department Circular No. 312, Series of 2000, issued on 23 October 2000,
which reads:

2. Any employee who was matched to a position with lower salary grade (SG) shall not
suffer a reduction in salary except where his/her current salary is higher than the
maximum step of the SG of the new position, in which case he/she shall be paid the
salary corresponding to the maximum step of the SG of the new position. RATA shall no
longer be received, if employee was matched to a Non-Division Chief Position.
Incidentally, the petition shows that none of the petitioners, who are working in the DOH,
were entitled to receive RATA at the time the petition was filed. Nor was it alleged that
they suffered any diminution of compensation. Secondly, it was claimed that certain
unnamed DOH employees were matched with unidentified positions for which they were
supposedly neither qualified nor suited. New employees, again unnamed and not
included as parties, were hired by the DOH and appointed to unidentified positions for
which they were purportedly not qualified, despite the fact that the objective of the
ongoing streamlining was to cut back on costs. Lastly, unspecified DOH employees
were deployed or transferred during the three-month period before the national and
local elections in May 2001, in violation of Section 2 of the Republic Act No. 7305, also
known as Magna Carta for Public Health Workers.
Petitioners allegations are too general and unsubstantiated by the records for the Court
to pass upon. The persons involved are not identified, details of their appointments and
transfers such as position, salary grade, and the date they were appointed - are not
given; and the circumstances which attended the alleged violations are not specified.
Even granting that these alleged errors were adequately proven by the petitioners, they
would still not invalidate Executive Order No. 102. Any serious legal errors in laying
down the compensation of the DOH employees concerned can only invalidate the
pertinent provisions of Department Circular No. 312, Series of 2000. Likewise, any
questionable appointments or transfers are properly addressed by an appeal process
provided under Administrative Order No. 94, series of 2000; [39] and if the appeal is
meritorious, such appointment or transfer may be invalidated. The validity of Executive
Order No. 102 would, nevertheless, remain unaffected. Settled is the rule that courts are
not at liberty to declare statutes invalid, although they may be abused or misabused,
and may afford an opportunity for abuse in the manner of application. The validity of a

Admin. Law | 62

statute or ordinance is to be determined from its general purpose and its efficiency to
accomplish the end desired, not from its effects in a particular case. [40]
In a number of cases, [41] the Court upheld the standing of citizens who filed suits,
wherein the transcendental importance of the constitutional question justified the
granting of relief. In spite of these rulings, the Court, in Domingo v. Carague,
[42]
dismissed the petition when petitioners therein failed to show any present substantial
interest. It demonstrated how even in the cases in which the Court declared that the
matter of the case was of transcendental importance, the petitioners must be able to
assert substantial interest. Present substantial interest, which will enable a party to
question the validity of the law, requires that a party sustained or will sustain direct injury
as a result of its enforcement.[43] It is distinguished from a mere expectancy or future,
contingent, subordinate, or inconsequential interest. [44]
In the same way, the Court, in Telecommunications & Broadcast Attorneys of the
Philippines, Inc. v. Comelec,[45] ruled that a citizen is allowed to raise a constitutional
question only when he can show that he has personally suffered some actual or
threatened injury as a result of the allegedly illegal conduct of the government; the injury
is fairly traceable to the challenged action; and the injury is likely to be redressed by a
favorable action. This case likewise stressed that the rule on constitutional questions
which are of transcendental importance cannot be invoked where a partys substantive
claim is without merit. Thus, a partys standing is determined by the substantive merit of
his case or a preliminary estimate thereof. After a careful scrutiny of the petitioners
substantive claims, this Court finds that the petitioners miserably failed to show any
merit to their claims.

IN VIEW OF THE FOREGOING, the instant Petition is DENIED. This

Court AFFIRMS the assailed Decision of the Court of Appeals, promulgated on 26
November 2004, declaring both the HSRA and Executive Order No. 102 as valid. No
costs.
SO ORDERED.

Admin. Law | 63

April 20, 2010

G.R. No. 166620

ATTY. SYLVIA BANDA, CONSORICIA O. PENSON, RADITO V. PADRIGANO, JEAN

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

LEONARDO-DE CASTRO, J.:

The present controversy arose from a Petition for Certiorari and prohibition challenging
the constitutionality of Executive Order No. 378 dated October 25, 2004, issued by
President Gloria Macapagal Arroyo (President Arroyo). Petitioners characterize their
action as a class suit filed on their own behalf and on behalf of all their co-employees at
the National Printing Office (NPO).
The NPO was formed on July 25, 1987, during the term of former President Corazon
C. Aquino (President Aquino), by virtue of Executive Order No. 285 [1]which provided,
among others, the creation of the NPO from the merger of the Government Printing
Office and the relevant printing units of the Philippine Information Agency (PIA). Section
6 of Executive Order No. 285 reads:
SECTION 6. Creation of the National Printing Office. There is hereby created a
National Printing Office out of the merger of the Government Printing Office and the

Admin. Law | 64

relevant printing units of the Philippine Information Agency. The Office shall have
exclusive printing jurisdiction over the following:
a. Printing, binding and distribution of all standard and accountable forms of national,
provincial, city and municipal governments, including government corporations;
b. Printing of officials ballots;
c. Printing of public documents such as the Official Gazette, General Appropriations
Act, Philippine Reports, and development information materials of the Philippine
Information Agency.
The
Office
may
also
accept
other
government
printing
jobs,
including government publications, aside from those enumerated above, but not in an
exclusive basis.
The details of the organization, powers, functions, authorities, and related
management aspects of the Office shall be provided in the implementing details which
shall be prepared and promulgated in accordance with Section II of this Executive
Order.
The Office shall be attached to the Philippine Information Agency.
On October 25, 2004, President Arroyo issued the herein assailed Executive Order
No. 378, amending Section 6 of Executive Order No. 285 by, inter alia, removing the
exclusive jurisdiction of the NPO over the printing services requirements of government
agencies and instrumentalities. The pertinent portions of Executive Order No. 378, in
turn, provide:
SECTION 1. The NPO shall continue to provide printing services to government
agencies and instrumentalities as mandated by law. However, it shall no longer enjoy
exclusive jurisdiction over the printing services requirements of the government over
standard and accountable forms. It shall have to compete with the private sector, except
in the printing of election paraphernalia which could be shared with the Bangko Sentral ng
Pilipinas, upon the discretion of the Commission on Elections consistent with the provisions of
the Election Code of 1987.
SECTION 2. Government agencies/instrumentalities may source printing services outside
NPO provided that:
2.1 The printing services to be provided by the private sector is superior in quality and at a
lower cost than what is offered by the NPO; and
2.2 The private printing provider is flexible in terms of meeting the target completion time of the
government agency.
SECTION 3. In the exercise of its functions, the amount to be appropriated for the
programs, projects and activities of the NPO in the General Appropriations Act (GAA)
shall be limited to its income without additional financial support from the
government. (Emphases and underscoring supplied.)

Admin. Law | 65

Pursuant to Executive Order No. 378, government agencies and instrumentalities are
allowed to source their printing services from the private sector through competitive
bidding, subject to the condition that the services offered by the private supplier be of
superior quality and lower in cost compared to what was offered by the NPO. Executive
Order No. 378 also limited NPOs appropriation in the General Appropriations Act to its
income.
Perceiving Executive Order No. 378 as a threat to their security of tenure as
employees of the NPO, petitioners now challenge its constitutionality, contending that:
(1) it is beyond the executive powers of President Arroyo to amend or repeal Executive
Order No. 285 issued by former President Aquino when the latter still exercised
legislative powers; and (2) Executive Order No. 378 violates petitioners security of
tenure, because it paves the way for the gradual abolition of the NPO.

We dismiss the petition.

Before proceeding to resolve the substantive issues, the Court must first delve into a
procedural matter. Since petitioners instituted this case as a class suit, the Court, thus,
must first determine if the petition indeed qualifies as one. In Board of Optometry v.
Colet,[2] we held that [c]ourts must exercise utmost caution before allowing a class suit,
which is the exception to the requirement of joinder of all indispensable parties. For
while no difficulty may arise if the decision secured is favorable to the plaintiffs, a
quandary would result if the decision were otherwise as those who were deemed
impleaded by their self-appointed representatives would certainly claim denial of due
process.
Section 12, Rule 3 of the Rules of Court defines a class suit, as follows:
Sec. 12. Class suit. When the subject matter of the controversy is one of common or general
interest to many persons so numerous that it is impracticable to join all as parties, a number of
them which the court finds to be sufficiently numerous and representative as to fully protect the
interests of all concerned may sue or defend for the benefit of all. Any party in interest shall
have the right to intervene to protect his individual interest.

From the foregoing definition, the requisites of a class suit are: 1) the subject matter of
controversy is one of common or general interest to many persons; 2) the parties
affected are so numerous that it is impracticable to bring them all to court; and 3) the
parties bringing the class suit are sufficiently numerous or representative of the class
and can fully protect the interests of all concerned.

Admin. Law | 66

In Mathay v. The Consolidated Bank and Trust Company,[3] the Court held that:
An action does not become a class suit merely because it is designated as such in the
pleadings. Whether the suit is or is not a class suit depends upon the attending facts,
and the complaint, or other pleading initiating the class action should allege the
existence of the necessary facts, to wit, the existence of a subject matter of common
interest, and the existence of a class and the number of persons in the alleged
class, in order that the court might be enabled to determine whether the members
of the class are so numerous as to make it impracticable to bring them all before
the court, to contrast the number appearing on the record with the number in the
class and to determine whether claimants on record adequately represent the
class and the subject matter of general or common interest. (Emphases ours.)
Here, the petition failed to state the number of NPO employees who would be affected
by the assailed Executive Order and who were allegedly represented by petitioners. It
was the Solicitor General, as counsel for respondents, who pointed out that there were
about 549 employees in the NPO.[4] The 67 petitioners undeniably comprised a small
fraction of the NPO employees whom they claimed to represent. Subsequently, 32 of
the original petitioners executed an Affidavit of Desistance, while one signed a letter
denying ever signing the petition, [5] ostensibly reducing the number of petitioners to
34. We note that counsel for the petitioners challenged the validity of the desistance or
withdrawal of some of the petitioners and insinuated that such desistance was due to
pressure from people close to the seat of power.[6] Still, even if we were to disregard the
affidavit of desistance filed by some of the petitioners, it is highly doubtful that a
sufficient, representative number of NPO employees have instituted this purported class
suit. A perusal of the petition itself would show that of the 67 petitioners who signed the
Verification/Certification of Non-Forum Shopping, only 20 petitioners were in fact
mentioned in the jurat as having duly subscribed the petition before the notary public. In
other words, only 20 petitioners effectively instituted the present case.
Indeed, in MVRS Publications, Inc. v. Islamic Dawah Council of the Philippines, Inc.,
[7]
we observed that an element of a class suit or representative suit is the adequacy of
representation. In determining the question of fair and adequate representation of
members of a class, the court must consider (a) whether the interest of the named party
is coextensive with the interest of the other members of the class; (b) the proportion of
those made a party, as it so bears, to the total membership of the class; and (c) any
other factor bearing on the ability of the named party to speak for the rest of the class.
Previously, we held in Ibaes v. Roman Catholic Church[8] that where the interests of the
plaintiffs and the other members of the class they seek to represent are diametrically
opposed, the class suit will not prosper.

Admin. Law | 67

It is worth mentioning that a Manifestation of Desistance, [9] to which the previously

mentioned Affidavit of Desistance [10] was attached, was filed by the President of the
National Printing Office Workers Association (NAPOWA). The said manifestation
expressed NAPOWAs opposition to the filing of the instant petition in any court. Even if
we take into account the contention of petitioners counsel that the NAPOWA President
had no legal standing to file such manifestation, the said pleading is a clear indication
that there is a divergence of opinions and views among the members of the class
sought to be represented, and not all are in favor of filing the present suit. There is here
an apparent conflict between petitioners interests and those of the persons whom they
claim to represent. Since it cannot be said that petitioners sufficiently represent the
interests of the entire class, the instant case cannot be properly treated as a class suit.
As to the merits of the case, the petition raises two main grounds to assail the
constitutionality of Executive Order No. 378:
First, it is contended that President Arroyo cannot amend or repeal Executive Order
No. 285 by the mere issuance of another executive order (Executive Order No.
378). Petitioners maintain that former President Aquinos Executive Order No. 285 is a
legislative enactment, as the same was issued while President Aquino still had
legislative powers under the Freedom Constitution; [11] thus, only Congress through
legislation can validly amend Executive Order No. 285.
Second, petitioners maintain that the issuance of Executive Order No. 378 would lead
to the eventual abolition of the NPO and would violate the security of tenure of NPO
employees.
Anent the first ground raised in the petition, we find the same patently without merit.
It is a well-settled principle in jurisprudence that the President has the power to
reorganize the offices and agencies in the executive department in line with the
Presidents constitutionally granted power of control over executive offices and by virtue
of previous delegation of the legislative power to reorganize executive offices under
existing statutes.
In Buklod ng Kawaning EIIB v. Zamora,[12] the Court pointed out that Executive Order
No. 292 or the Administrative Code of 1987 gives the President continuing authority to
reorganize and redefine the functions of the Office of the President. Section 31, Chapter
10, Title III, Book III of the said Code, is explicit:
Sec. 31. Continuing Authority of the President to Reorganize his Office. The President,
subject to the policy in the Executive Office and in order to achieve simplicity,
economy and efficiency, shall have continuing authority to reorganize the

Admin. Law | 68

administrative structure of the Office of the President. For this purpose, he may
take any of the following actions:
(1) Restructure the internal organization of the Office of the President Proper,
including the immediate Offices, the President Special Assistants/Advisers System and
the Common Staff Support System, by abolishing, consolidating or merging units
thereof or transferring functions from one unit to another;
(2) Transfer any function under the Office of the President to any other
Department or Agency as well as transfer functions to the Office of the
President from other Departments and Agencies; and
(3) Transfer any agency under the Office of the President to any other
department or agency as well as transfer agencies to the Office of the
President from other Departments or agencies. (Emphases ours.)
Interpreting the foregoing provision, we held in Buklod ng Kawaning EIIB, thus:
But of course, the list of legal basis authorizing the President to reorganize any
department or agency in the executive branch does not have to end here. We must not
lose sight of the very source of the power that which constitutes an express grant of
power. Under Section 31, Book III of Executive Order No. 292 (otherwise known as the
Administrative Code of 1987), the President, subject to the policy in the Executive Office
and in order to achieve simplicity, economy and efficiency, shall have the continuing
authority to reorganize the administrative structure of the Office of the President. For
this purpose, he may transfer the functions of other Departments or Agencies to the
Office of the President. In Canonizado v. Aguirre [323 SCRA 312 (2000)], we ruled
that reorganization involves the reduction of personnel, consolidation of offices,
or abolition thereof by reason of economy or redundancy of functions. It takes
place when there is an alteration of the existing structure of government offices
or units therein, including the lines of control, authority and responsibility
between them. The EIIB is a bureau attached to the Department of Finance. It falls
under the Office of the President. Hence, it is subject to the Presidents continuing
authority to reorganize.[13] (Emphasis ours.)

It is undisputed that the NPO, as an agency that is part of the Office of the Press
Secretary (which in various times has been an agency directly attached to the Office of
the Press Secretary or as an agency under the Philippine Information Agency), is part of
the Office of the President.[14]

Admin. Law | 69

Pertinent to the case at bar, Section 31 of the Administrative Code of 1987 quoted
above authorizes the President (a) to restructure the internal organization of the Office
of the President Proper, including the immediate Offices, the President Special
Assistants/Advisers System and the Common Staff Support System, by abolishing,
consolidating or merging units thereof or transferring functions from one unit to another,
and (b) to transfer functions or offices from the Office of the President to any other
Department or Agency in the Executive Branch, and vice versa.
Concomitant to such power to abolish, merge or consolidate offices in the Office of the
President Proper and to transfer functions/offices not only among the offices in the
Office of President Proper but also the rest of the Office of the President and the
Executive Branch, the President implicitly has the power to effect less radical or less
substantive changes to the functional and internal structure of the Office of the
President, including the modification of functions of such executive agencies as the
exigencies of the service may require.
In the case at bar, there was neither an abolition of the NPO nor a removal of any of its
functions to be transferred to another agency. Under the assailed Executive Order No.
378, the NPO remains the main printing arm of the government for all kinds of
government forms and publications but in the interest of greater economy and
encouraging efficiency and profitability, it must now compete with the private sector for
certain government printing jobs, with the exception of election paraphernalia which
remains the exclusive responsibility of the NPO, together with the Bangko Sentral ng
Pilipinas, as the Commission on Elections may determine.At most, there was a mere
alteration of the main function of the NPO by limiting the exclusivity of its printing
responsibility to election forms.[15]
There is a view that the reorganization actions that the President may take with
respect to agencies in the Office of the President are strictly limited to transfer of
functions and offices as seemingly provided in Section 31 of the Administrative Code of
1987.
However, Section 20, Chapter 7, Title I, Book III of the same Code significantly
provides:
Sec. 20. Residual Powers. Unless Congress provides otherwise, the President shall
exercise such other powers and functions vested in the President which are
provided for under the laws and which are not specifically enumerated above, or
which are not delegated by the President in accordance with law. (Emphasis ours.)
Pursuant to Section 20, the power of the President to reorganize the Executive Branch
under Section 31 includes such powers and functions that may be provided for under

Admin. Law | 70

other laws. To be sure, an inclusive and broad interpretation of the Presidents power to
reorganize executive offices has been consistently supported by specific provisions
in general appropriations laws.
In the oft-cited Larin v. Executive Secretary,[16] the Court likewise adverted to certain
provisions of Republic Act No. 7645, the general appropriations law for 1993, as among
the statutory bases for the Presidents power to reorganize executive agencies, to wit:
Section 48 of R.A. 7645 provides that:
Sec. 48. Scaling Down and Phase Out of Activities of Agencies Within the Executive
Branch. The heads of departments, bureaus and offices and agencies are hereby
directed to identify their respective activities which are no longer essential in the delivery
of public services and which may be scaled down, phased out or abolished, subject to
civil [service] rules and regulations. x x x. Actual scaling down, phasing out or abolition
of the activities shall be effected pursuant to Circulars or Orders issued for the purpose
by the Office of the President.
Said provision clearly mentions the acts of "scaling down, phasing out and
abolition" of offices only and does not cover the creation of offices or transfer of
functions. Nevertheless, the act of creating and decentralizing is included in the
subsequent provision of Section 62, which provides that:
Sec. 62. Unauthorized organizational changes. Unless otherwise created by law or
directed by the President of the Philippines, no organizational unit or changes in key
positions in any department or agency shall be authorized in their respective
organization structures and be funded from appropriations by this Act.
The foregoing provision evidently shows that the President is authorized to
effect organizational changes including the creation of offices in the department or
agency concerned.
The contention of petitioner that the two provisions are riders deserves scant
consideration. Well settled is the rule that every law has in its favor the presumption of
constitutionality. Unless and until a specific provision of the law is declared invalid and
unconstitutional, the same is valid and binding for all intents and purposes.
[17]
(Emphases ours)
Buklod ng Kawaning EIIB v. Zamora,[18] where the Court upheld as valid then President
Joseph Estradas Executive Order No. 191 deactivating the Economic Intelligence and
Investigation Bureau (EIIB) of the Department of Finance, hewed closely to the
reasoning in Larin. The Court, among others, also traced from the General
Appropriations Act[19] the Presidents authority to effect organizational changes in the
department or agency under the executive structure, thus:

Admin. Law | 71

We adhere to the precedent or ruling in Larin that this provision recognizes the
authority of the President to effect organizational changes in the department or agency
under the executive structure. Such a ruling further finds support in Section 78 of
Republic Act No. 8760. Under this law, the heads of departments, bureaus, offices and
agencies and other entities in the Executive Branch are directed (a) to conduct a
comprehensive review of their respective mandates, missions, objectives, functions,
programs, projects, activities and systems and procedures; (b) identify activities which
are no longer essential in the delivery of public services and which may be scaled down,
phased-out or abolished; and (c) adopt measures that will result in the streamlined
organization and improved overall performance of their respective agencies.
Section 78 ends up with the mandate that the actual streamlining and productivity
improvement in agency organization and operation shall be effected pursuant to
Circulars or Orders issued for the purpose by the Office of the President. x x x.
[20]
(Emphasis ours)
Notably, in the present case, the 2003 General Appropriations Act, which was
reenacted in 2004 (the year of the issuance of Executive Order No. 378), likewise gave
the President the authority to effect a wide variety of organizational changes in any
department or agency in the Executive Branch. Sections 77 and 78 of said Act provides:
Section 77. Organized Changes. Unless otherwise provided by law or directed by
the President of the Philippines, no changes in key positions or organizational units in
any department or agency shall be authorized in their respective organizational
structures and funded from appropriations provided by this Act.
Section 78. Institutional Strengthening and Productivity Improvement in Agency
Organization and Operations and Implementation of Organization/Reorganization
Mandated by Law. The Government shall adopt institutional strengthening and
productivity improvement measures to improve service delivery and enhance
productivity in the government, as directed by the President of the Philippines. The
heads of departments, bureaus, offices, agencies, and other entities of the Executive
Branch shall accordingly conduct a comprehensive review of their respective
mandates, missions, objectives, functions, programs, projects, activities and systems
and procedures; identify areas where improvements are necessary; and implement
corresponding structural, functional and operational adjustments that will result
in streamlined organization and operations and improved performance and
productivity: PROVIDED, That actual streamlining and productivity improvements in
agency organization and operations, as authorized by the President of the Philippines
for the purpose, including the utilization of savings generated from such activities, shall
be in accordance with the rules and regulations to be issued by the DBM, upon

Admin. Law | 72

consultation with the Presidential Committee on Effective Governance: PROVIDED,

FURTHER, That in the implementation of organizations/reorganizations, or
specific changes in agency structure, functions and operations as a result of
institutional strengthening or as mandated by law, the appropriation, including
the functions, projects, purposes and activities of agencies concerned may be
realigned as may be necessary: PROVIDED, FINALLY, That any unexpended
balances or savings in appropriations may be made available for payment of retirement
gratuities and separation benefits to affected personnel, as authorized under existing
laws. (Emphases and underscoring ours.)
Implicitly, the aforequoted provisions in the appropriations law recognize the power of
the President to reorganize even executive offices already funded by the said
appropriations act, including the power to implement structural, functional, and
operational adjustments in the executive bureaucracy and, in so doing, modify or
realign appropriations of funds as may be necessary under such reorganization. Thus,
insofar as petitioners protest the limitation of the NPOs appropriations to its own income
under Executive Order No. 378, the same is statutorily authorized by the above
provisions.
In the 2003 case of Bagaoisan v. National Tobacco Administration,[21] we upheld the
streamlining of the National Tobacco Administration through a reduction of its personnel
and deemed the same as included in the power of the President to reorganize executive
offices granted under the laws, notwithstanding that such streamlining neither involved
an abolition nor a transfer of functions of an office. To quote the relevant portion of that
decision:
In the recent case of Rosa Ligaya C. Domingo, et al. vs. Hon. Ronaldo D. Zamora, in
his capacity as the Executive Secretary, et al., this Court has had occasion to also delve
on the Presidents power to reorganize the Office of the President under Section 31(2)
and (3) of Executive Order No. 292 and the power to reorganize the Office of the
President Proper. x x x
xxxx
The first sentence of the law is an express grant to the President of a continuing
authority to reorganize the administrative structure of the Office of the President. The
succeeding numbered paragraphs are not in the nature of provisos that unduly
limit the aim and scope of the grant to the President of the power to reorganize
but are to be viewed in consonance therewith. Section 31(1) of Executive Order No.
292 specifically refers to the Presidents power to restructure the internal organization of
the Office of the President Proper, by abolishing, consolidating or merging units hereof
or transferring functions from one unit to another, while Section 31(2) and (3) concern
executive offices outside the Office of the President Proper allowing the President to

Admin. Law | 73

transfer any function under the Office of the President to any other Department or
Agency and vice-versa, and the transfer of any agency under the Office of the President
to any other department or agency and vice-versa.
In the present instance, involving neither an abolition nor transfer of offices, the
assailed action is a mere reorganization under the general provisions of the law
consisting mainly of streamlining the NTA in the interest of simplicity, economy
and efficiency. It is an act well within the authority of the President motivated and
carried out, according to the findings of the appellate court, in good faith, a factual
assessment that this Court could only but accept. [22] (Emphases and underscoring
supplied.)
In the more recent case of Tondo Medical Center Employees Association v. Court of
Appeals,[23] which involved a structural and functional reorganization of the
Department of Health under an executive order, we reiterated the principle that the
power of the President to reorganize agencies under the executive department by
executive or administrative order is constitutionally and statutorily recognized. We held
in that case:
This Court has already ruled in a number of cases that the President may, by
executive or administrative order, direct the reorganization of government entities
under the Executive Department. This is also sanctioned under the Constitution, as
well as other statutes.
Section 17, Article VII of the 1987 Constitution, clearly states: [T]he president shall
have control of all executive departments, bureaus and offices. Section 31, Book
III, Chapter 10 of Executive Order No. 292, also known as the Administrative Code of
1987 reads:
SEC. 31. Continuing Authority of the President to Reorganize his Office - The
President, subject to the policy in the Executive Office and in order to achieve simplicity,
economy and efficiency, shall have continuing authority to reorganize the administrative
structure of the Office of the President. For this purpose, he may take any of the
following actions:
xxxx
In Domingo v. Zamora [445 Phil. 7 (2003)], this Court explained the rationale behind
the Presidents continuing authority under the Administrative Code to reorganize the
administrative structure of the Office of the President. The law grants the President
the power to reorganize the Office of the President in recognition of the recurring
need of every President to reorganize his or her office to achieve simplicity,
economy and efficiency. To remain effective and efficient, it must be capable of being

Admin. Law | 74

shaped and reshaped by the President in the manner the Chief Executive deems fit to
carry out presidential directives and policies.
The Administrative Code provides that the Office of the President consists of the
Office of the President Proper and the agencies under it. The agencies under the
Office of the President are identified in Section 23, Chapter 8, Title II of the
Administrative Code:
Sec. 23. The Agencies under the Office of the President.The agencies under
the Office of the President refer to those offices placed under the chairmanship of the
President, those under the supervision and control of the President, those under
the administrative supervision of the Office of the President, those attached to it for
policy and program coordination, and those that are not placed by law or order creating
them under any specific department. x x x x
The power of the President to reorganize the executive department is likewise
recognized in general appropriations laws. x x x.
xxx
Clearly, Executive Order No. 102 is well within the constitutional power of the
President to issue. The President did not usurp any legislative prerogative in
issuing Executive Order No. 102. It is an exercise of the Presidents constitutional
power of control over the executive department, supported by the provisions of
the Administrative Code, recognized by other statutes, and consistently affirmed
by this Court.[24] (Emphases supplied.)
Subsequently, we
Secretary[25] that:

ruled

in Anak

Mindanao Party-List

Group

v.

Executive

The Constitutions express grant of the power of control in the President justifies an
executive action to carry out reorganization measures under a broad authority of law.
In enacting a statute, the legislature is presumed to have deliberated with full
knowledge of all existing laws and jurisprudence on the subject. It is thus reasonable to
conclude that in passing a statute which places an agency under the Office of the
President, it was in accordance with existing laws and jurisprudence on the Presidents
power to reorganize.
In establishing an executive department, bureau or office, the legislature necessarily
ordains an executive agencys position in the scheme of administrative structure. Such
determination is primary, but subject to the Presidents continuing authority to reorganize
the administrative structure. As far as bureaus, agencies or offices in the executive
department are concerned, the power of control may justify the President to deactivate

Admin. Law | 75

the functions of a particular office. Or a law may expressly grant the President the
broad authority to carry out reorganization measures. The Administrative Code of 1987
is one such law.[26]
The issuance of Executive Order No. 378 by President Arroyo is an exercise of a
delegated legislative power granted by the aforementioned Section 31, Chapter 10, Title
III, Book III of the Administrative Code of 1987, which provides for the continuing
authority of the President to reorganize the Office of the President, in order to achieve
simplicity, economy and efficiency. This is a matter already well-entrenched in
jurisprudence. The reorganization of such an office through executive or administrative
order is also recognized in the Administrative Code of 1987. Sections 2 and 3, Chapter
2, Title I, Book III of the said Code provide:
Sec. 2. Executive Orders. - Acts of the President providing for rules of a general or
permanent character in implementation or execution of constitutional or statutory
powersshall be promulgated in executive orders.
Sec. 3. Administrative Orders. - Acts of the President which relate to particular
aspects of governmental operations in pursuance of his duties as administrative
head shall be promulgated in administrative orders. (Emphases supplied.)
To reiterate, we find nothing objectionable in the provision in Executive Order No. 378
limiting the appropriation of the NPO to its own income. Beginning with Larin and in
subsequent cases, the Court has noted certain provisions in the general
appropriations laws as likewise reflecting the power of the President to reorganize
executive offices or agencies even to the extent of modifying and realigning
appropriations for that purpose.
Petitioners contention that the issuance of Executive Order No. 378 is an invalid
exercise of legislative power on the part of the President has no legal leg to stand on.
In all, Executive Order No. 378, which purports to institute necessary reforms in
government in order to improve and upgrade efficiency in the delivery of public services
by redefining the functions of the NPO and limiting its funding to its own income and to
transform it into a self-reliant agency able to compete with the private sector, is well
within the prerogative of President Arroyo under her continuing delegated legislative
power to reorganize her own office. As pointed out in the separate concurring opinion of
our learned colleague, Associate Justice Antonio T. Carpio, the objective behind
Executive Order No. 378 is wholly consistent with the state policy contained in Republic
Act No. 9184 or the Government Procurement Reform Act to encourage
competitiveness by extending equal opportunity to private contracting parties who are
eligible and qualified.[27]

Admin. Law | 76

To be very clear, this delegated legislative power to reorganize pertains only to the
Office of the President and the departments, offices and agencies of the executive
branch and does not include the Judiciary, the Legislature or the constitutionally-created
or mandated bodies. Moreover, it must be stressed that the exercise by the President of
the power to reorganize the executive department must be in accordance with the
Constitution, relevant laws and prevailing jurisprudence.
In this regard, we are mindful of the previous pronouncement of this Court in Dario v.
Mison[28] that:
Reorganizations in this jurisdiction have been regarded as valid provided they
are pursued in good faith. As a general rule, a reorganization is carried out in good
faith if it is for the purpose of economy or to make bureaucracy more efficient. In that
event, no dismissal (in case of a dismissal) or separation actually occurs because the
position itself ceases to exist. And in that case, security of tenure would not be a
Chinese wall. Be that as it may, if the abolition, which is nothing else but a separation or
removal, is done for political reasons or purposely to defeat security of tenure, or
otherwise not in good faith, no valid abolition takes place and whatever abolition is
done, is void ab initio. There is an invalid abolition as where there is merely a change of
nomenclature of positions, or where claims of economy are belied by the existence of
ample funds. (Emphasis ours.)
Stated alternatively, the presidential power to reorganize agencies and offices in
the executive branch of government is subject to the condition that such reorganization
is carried out in good faith.
If the reorganization is done in good faith, the abolition of positions, which results in
loss of security of tenure of affected government employees, would be valid. In Buklod
ng Kawaning EIIB v. Zamora,[29] we even observed that there was no such thing as an
absolute right to hold office. Except those who hold constitutional offices, which provide
for special immunity as regards salary and tenure, no one can be said to have any
vested right to an office or salary.[30]
This brings us to the second ground raised in the petition that Executive Order No.
378, in allowing government agencies to secure their printing requirements from the
private sector and in limiting the budget of the NPO to its income, will purportedly lead
to the gradual abolition of the NPO and the loss of security of tenure of its present
employees. In other words, petitioners avow that the reorganization of the NPO under
Executive Order No. 378 is tainted with bad faith. The basic evidentiary rule is that he
who asserts a fact or the affirmative of an issue has the burden of proving it. [31]

Admin. Law | 77

A careful review of the records will show that petitioners utterly failed to substantiate
their claim. They failed to allege, much less prove, sufficient facts to show that the
limitation of the NPOs budget to its own income would indeed lead to the abolition of the
position, or removal from office, of any employee. Neither did petitioners present any
shred of proof of their assertion that the changes in the functions of the NPO were for
political considerations that had nothing to do with improving the efficiency of, or
encouraging operational economy in, the said agency.
In sum, the Court finds that the petition failed to show any constitutional infirmity or
grave abuse of discretion amounting to lack or excess of jurisdiction in President
Arroyos issuance of Executive Order No. 378.

WHEREFORE, the petition is hereby DISMISSED and the prayer for a Temporary
Restraining Order and/or a Writ of Preliminary Injunction is hereby DENIED. No costs.
SO ORDERED.

Admin. Law | 78

January 8, 2013

G.R. No. 188056

SPOUSES AUGUSTO G. DACUDAO AND OFELIA R. DACUDAO, Petitioners,

vs.
SECRETARY OF JUSTICE RAUL M. GONZALES OF THE DEPARTMENT OF
JUSTICE, Respondent.

BERSAMIN, J.:
Petitioners - residents of Bacaca Road, Davao City - were among the investors whom
Celso G. Delos Angeles, Jr. and his associates in the Legacy Group of Companies
(Legacy Group) allegedly defrauded through the Legacy Group's "buy back agreement"
that earned them check payments that were dishonored. After their written demands for
the return of their investments went unheeded, they initiated a number of charges for
syndicated estafa against Delos Angeles, Jr., et al. in the Office of the City Prosecutor of
Davao City on February 6, 2009. Three of the cases were docketed as NPS Docket No.
XI-02-INV.-09-A-00356, Docket No. XI-02-INV.-09-C-00752, and Docket No. XI-02-INV.09-C-00753.1
On March 18, 2009, the Secretary of Justice issued Department of Justice (DOJ) Order
No. 182 (DO No. 182), directing all Regional State Prosecutors, Provincial Prosecutors,
and City Prosecutors to forward all cases already filed against Delos Angeles, Jr., et al.
to the Secretariat of the DOJ Special Panel in Manila for appropriate action.
DO No. 182 reads:2
All cases against Celso G. delos Angeles, Jr., et al. under Legacy Group of Companies,
may be filed with the docket section of the National Prosecution Service, Department of
Justice, Padre Faura, Manila and shall be forwarded to the Secretariat of the Special
Panel for assignment and distribution to panel members, per Department Order No. 84
dated February 13, 2009.
However, cases already filed against Celso G. delos Angeles, Jr. et al. of Legacy group
of Companies in your respective offices with the exemption of the cases filed in
Cagayan de Oro City which is covered by Memorandum dated March 2, 2009, should
be forwarded to the Secretariat of the Special Panel at Room 149, Department of
Justice, Padre Faura, Manila, for proper disposition.
For information and guidance.

Admin. Law | 79

Pursuant to DO No. 182, the complaints of petitioners were forwarded by the Office of
the City Prosecutor of Davao City to the Secretariat of the Special Panel of the DOJ. 3
Aggrieved by such turn of events, petitioners have directly come to the Court via petition
for certiorari, prohibition and mandamus, ascribing to respondent Secretary of Justice
grave abuse of discretion in issuing DO No. 182. They claim that DO No. 182 violated
their right to due process, their right to the equal protection of the laws, and their right to
the speedy disposition of cases. They insist that DO No. 182 was an obstruction of
justice and a violation of the rule against enactment of laws with retroactive effect.
Petitioners also challenge as unconstitutional the issuance of DOJ Memorandum dated
March 2, 2009 exempting from the coverage of DO No. No. 182 all the cases for
syndicated estafa already filed and pending in the Office of the City Prosecutor of
Cagayan de Oro City. They aver that DOJ Memorandum dated March 2, 2009 violated
their right to equal protection under the Constitution.
The Office of the Solicitor General (OSG), representing respondent Secretary of Justice,
maintains the validity of DO No. 182 and DOJ Memorandum dated March 2, 2009, and
prays that the petition be dismissed for its utter lack of merit.
Issues
The following issues are now to be resolved, to wit:
1. Did petitioners properly bring their petition for certiorari, prohibition and
mandamus directly to the Court?
2. Did respondent Secretary of Justice commit grave abuse of discretion in issuing
DO No. 182?
3. Did DO No. 182 and DOJ Memorandum dated March 2, 2009 violate petitioners
constitutionally guaranteed rights?
Ruling
The petition for certiorari, prohibition and mandamus, being bereft of substance and
merit, is dismissed.
Firstly, petitioners have unduly disregarded the hierarchy of courts by coming directly to
the Court with their petition for certiorari, prohibition and mandamus without tendering
therein any special, important or compelling reason to justify the direct filing of the
petition.
We emphasize that the concurrence of jurisdiction among the Supreme Court, Court of
Appeals and the Regional Trial Courts to issue the writs of certiorari, prohibition,

Admin. Law | 80

mandamus, quo warranto, habeas corpus and injunction did not give petitioners the
unrestricted freedom of choice of court forum.4 An undue disregard of this policy against
direct resort to the Court will cause the dismissal of the recourse. In Baez, Jr. v.
Concepcion,5 we explained why, to wit:
The Court must enjoin the observance of the policy on the hierarchy of courts, and now
affirms that the policy is not to be ignored without serious consequences. The strictness
of the policy is designed to shield the Court from having to deal with causes that are
also well within the competence of the lower courts, and thus leave time to the Court to
deal with the more fundamental and more essential tasks that the Constitution has
assigned to it. The Court may act on petitions for the extraordinary writs of certiorari,
prohibition and mandamus only when absolutely necessary or when serious and
important reasons exist to justify an exception to the policy. This was why the Court
stressed in Vergara, Sr. v. Suelto:
x x x. The Supreme Court is a court of last resort, and must so remain if it is to
satisfactorily perform the functions assigned to it by the fundamental charter and
immemorial tradition. It cannot and should not be burdened with the task of dealing with
causes in the first instance. Its original jurisdiction to issue the so-called extraordinary
writs should be exercised only where absolutely necessary or where serious and
important reasons exist therefor. Hence, that jurisdiction should generally be exercised
relative to actions or proceedings before the Court of Appeals, or before constitutional or
other tribunals, bodies or agencies whose acts for some reason or another are not
controllable by the Court of Appeals. Where the issuance of an extraordinary writ is also
within the competence of the Court of Appeals or a Regional Trial Court, it is in either of
these courts that the specific action for the writs procurement must be presented. This
is and should continue to be the policy in this regard, a policy that courts and lawyers
must strictly observe. (Emphasis supplied)
In People v. Cuaresma, the Court has also amplified the need for strict adherence to the
policy of hierarchy of courts. There, noting "a growing tendency on the part of litigants
and lawyers to have their applications for the so-called extraordinary writs, and
sometimes even their appeals, passed upon and adjudicated directly and immediately
by the highest tribunal of the land," the Court has cautioned lawyers and litigants
against taking a direct resort to the highest tribunal, viz:
x x x. This Courts original jurisdiction to issue writs of certiorari (as well as prohibition,
mandamus, quo warranto, habeas corpus and injunction) is not exclusive. It is shared
by this Court with Regional Trial Courts x x x, which may issue the writ, enforceable in
any part of their respective regions. It is also shared by this Court, and by the Regional
Trial Court, with the Court of Appeals x x x, although prior to the effectivity of Batas

Admin. Law | 81

Pambansa Bilang 129 on August 14, 1981, the latter's competence to issue the
extraordinary writs was restricted to those "in aid of its appellate jurisdiction." This
concurrence of jurisdiction is not, however, to be taken as according to parties seeking
any of the writs an absolute, unrestrained freedom of choice of the court to which
application therefor will be directed. There is after all a hierarchy of courts. That
hierarchy is determinative of the venue of appeals, and should also serve as a general
determinant of the appropriate forum for petitions for the extraordinary writs. A becoming
regard for that judicial hierarchy most certainly indicates that petitions for the issuance
of extraordinary writs against first level ("inferior") courts should be filed with the
Regional Trial Court, and those against the latter, with the Court of Appeals. A direct
invocation of the Supreme Court's original jurisdiction to issue these writs should be
allowed only when there are special and important reasons therefor, clearly and
specifically set out in the petition. This is established policy. It is a policy that is
necessary to prevent inordinate demands upon the Courts time and attention which are
better devoted to those matters within its exclusive jurisdiction, and to prevent further
over-crowding of the Court's docket. Indeed, the removal of the restriction on the
jurisdiction of the Court of Appeals in this regard, supra resulting from the deletion of
the qualifying phrase, "in aid of its appellate jurisdiction" was evidently intended
precisely to relieve this Court pro tanto of the burden of dealing with applications for the
extraordinary writs which, but for the expansion of the Appellate Court corresponding
jurisdiction, would have had to be filed with it.1wphi1
xxxx
The Court therefore closes this decision with the declaration for the information and
evidence of all concerned, that it will not only continue to enforce the policy, but will
require a more strict observance thereof. (Emphasis supplied)
Accordingly, every litigant must remember that the Court is not the only judicial forum
from which to seek and obtain effective redress of their grievances. As a rule, the Court
is a court of last resort, not a court of the first instance. Hence, every litigant who brings
the petitions for the extraordinary writs of certiorari, prohibition and mandamus should
ever be mindful of the policy on the hierarchy of courts, the observance of which is
explicitly defined and enjoined in Section 4 of Rule 65, Rules of Court, viz:
Section 4. When and where petition filed. - The petition shall be filed not later than sixty
(60) days from notice of the judgment, order or resolution. In case a motion for
reconsideration or new trial is timely filed, whether such motion is required or not, the
sixty (60) day period shall be counted from notice of the denial of the said motion.
The petition shall be filed in the Supreme Court or, if it relates to the acts or omissions of
a lower court or of a corporation, board, officer or person, in the Regional Trial Court

Admin. Law | 82

exercising jurisdiction over the territorial area as defined by the Supreme Court. It may
also be filed in the Court of Appeals whether or not the same is in the aid of its appellate
jurisdiction, or in the Sandiganbayan if it is in aid of its appellate jurisdiction. If it involves
the acts or omissions of a quasi-judicial agency, unless otherwise provided by law or
these rules, the petition shall be filed in and cognizable only by the Court of Appeals.
In election cases involving an act or an omission of a municipal or a regional trial court,
the petition shall be filed exclusively with the Commission on Elections, in aid of its
appellate jurisdiction.6
Secondly, even assuming arguendo that petitioners direct resort to the Court was
permissible, the petition must still be dismissed.
The writ of certiorari is available only when any tribunal, board or officer exercising
judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction,
or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is
no appeal, nor any plain, speedy, and adequate remedy in the ordinary course of
law.7"The sole office of the writ of certiorari," according to Delos Santos v. Metropolitan
Bank and Trust Company:8
x x x is the correction of errors of jurisdiction, which includes the commission of grave
abuse of discretion amounting to lack of jurisdiction. In this regard, mere abuse of
discretion is not enough to warrant the issuance of the writ. The abuse of discretion
must be grave, which means either that the judicial or quasi-judicial power was
exercised in an arbitrary or despotic manner by reason of passion or personal hostility,
or that the respondent judge, tribunal or board evaded a positive duty, or virtually
refused to perform the duty enjoined or to act in contemplation of law, such as when
such judge, tribunal or board exercising judicial or quasi-judicial powers acted in a
capricious or whimsical manner as to be equivalent to lack of jurisdiction.
For a special civil action for certiorari to prosper, therefore, the following requisites must
concur, namely: (a) it must be directed against a tribunal, board or officer exercising
judicial or quasi-judicial functions; (b) the tribunal, board, or officer must have acted
without or in excess of jurisdiction or with grave abuse of discretion amounting to lack or
excess of jurisdiction; and (c) there is no appeal nor any plain, speedy, and adequate
remedy in the ordinary course of law.9 The burden of proof lies on petitioners to
demonstrate that the assailed order was issued without or in excess of jurisdiction or
with grave abuse of discretion amounting to lack or excess of jurisdiction.
Yet, petitioners have not shown a compliance with the requisites. To start with, they
merely alleged that the Secretary of Justice had acted without or in excess of his
jurisdiction. Also, the petition did not show that the Secretary of Justice was an officer

Admin. Law | 83

exercising judicial or quasi-judicial functions. Instead, the Secretary of Justice would

appear to be not exercising any judicial or quasi-judicial functions because his
questioned issuances were ostensibly intended to ensure his subordinates efficiency
and economy in the conduct of the preliminary investigation of all the cases involving
the Legacy Group. The function involved was purely executive or administrative.
The fact that the DOJ is the primary prosecution arm of the Government does not make
it a quasi-judicial office or agency. Its preliminary investigation of cases is not a quasijudicial proceeding. Nor does the DOJ exercise a quasi-judicial function when it reviews
the findings of a public prosecutor on the finding of probable cause in any case. Indeed,
in Bautista v. Court of Appeals,10 the Supreme Court has held that a preliminary
investigation is not a quasi-judicial proceeding, stating:
x x x the prosecutor in a preliminary investigation does not determine the guilt or
innocence of the accused. He does not exercise adjudication nor rule-making functions.
Preliminary investigation is merely inquisitorial, and is often the only means of
discovering the persons who may be reasonably charged with a crime and to enable the
fiscal to prepare his complaint or information. It is not a trial of the case on the merits
and has no purpose except that of determining whether a crime has been committed
and whether there is probable cause to believe that the accused is guilty thereof. While
the fiscal makes that determination, he cannot be said to be acting as a quasi-court, for
it is the courts, ultimately, that pass judgment on the accused, not the fiscal. 11
There may be some decisions of the Court that have characterized the public
prosecutors power to conduct a preliminary investigation as quasi-judicial in nature.
Still, this characterization is true only to the extent that the public prosecutor, like a
quasi-judicial body, is an officer of the executive department exercising powers akin to
those of a court of law.
But the limited similarity between the public prosecutor and a quasi-judicial body quickly
endsthere. For sure, a quasi-judicial body is an organ of government other than a court
of law or a legislative office that affects the rights of private parties through either
adjudication or rule-making; it performs adjudicatory functions, and its awards and
adjudications determine the rights of the parties coming before it; its decisions have the
same effect as the judgments of a court of law. In contrast, that is not the effect
whenever a public prosecutor conducts a preliminary investigation to determine
probable cause in order to file a criminal information against a person properly charged
with the offense, or whenever the Secretary of Justice reviews the public prosecutors
orders or resolutions.
Petitioners have self-styled their petition to be also for prohibition. However, we do not
see how that can be. They have not shown in their petition in what manner and at what

Admin. Law | 84

point the Secretary of Justice, in handing out the assailed issuances, acted without or in
excess of his jurisdiction, or with grave abuse of discretion amounting to lack or excess
of jurisdiction. On the other hand, we already indicated why the issuances were not
infirmed by any defect of jurisdiction. Hence, the blatant omissions of the petition
transgressed Section 2, Rule 65 of the Rules of Court, to wit:
Section 2. Petition for prohibition. When the proceedings of any tribunal, corporation,
board, officer or person, whether exercising judicial, quasi-judicial or ministerial
functions, are without or in excess of its or his jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction, and there is no appeal or any
other plain, speedy, and adequate remedy in the ordinary course of law, a person
aggrieved thereby may file a verified petition in the proper court, alleging the facts with
certainty and praying that judgment be rendered commanding the respondent to desist
from further proceedings in the action or matter specified therein, or otherwise granting
such incidental reliefs as law and justice may require.
The petition shall likewise be accompanied by a certified true copy of the judgment,
order or resolution subject thereof, copies of all pleadings and documents relevant and
pertinent thereto, and a sworn certification of non-forum shopping as provided in the
third paragraph of section 3, Rule 46. (2a) Similarly, the petition could not be one for
mandamus, which is a remedy available only when "any tribunal, corporation, board,
officer or person unlawfully neglects the performance of an act which the law specifically
enjoins as a duty resulting from an office, trust, or station, or unlawfully excludes
another from the use and enjoyment of a right or office to which such other is entitled,
and there is no other plain, speedy and adequate remedy in the ordinary course of law,
the person aggrieved thereby may file a verified petition in the proper court." 12 The main
objective of mandamus is to compel the performance of a ministerial duty on the part of
the respondent. Plainly enough, the writ of mandamus does not issue to control or
review the exercise of discretion or to compel a course of conduct, 13 which, it quickly
seems to us, was what petitioners would have the Secretary of Justice do in their favor.
Consequently, their petition has not indicated how and where the Secretary of Justices
assailed issuances excluded them from the use and enjoyment of a right or office to
which they were unquestionably entitled.
Thirdly, there is no question that DO No. 182 enjoyed a strong presumption of its
validity. In ABAKADA Guro Party List v. Purisima, 14 the Court has extended the
presumption of validity to legislative issuances as well as to rules and regulations issued
by administrative agencies, saying:
Administrative regulations enacted by administrative agencies to implement and
interpret the law which they are entrusted to enforce have the force of law and are

Admin. Law | 85

entitled to respect. Such rules and regulations partake of the nature of a statute and are
just as binding as if they have been written in the statute itself. As such, they have the
force and effect of law and enjoy the presumption of constitutionality and legality until
they are set aside with finality in an appropriate case by a competent court. 15
DO No. 182 was issued pursuant to Department Order No. 84 that the Secretary of
Justice had promulgated to govern the performance of the mandate of the DOJ to
"administer the criminal justice system in accordance with the accepted processes
thereof"16 as expressed in Republic Act No. 10071 (Prosecution Service Act of 2010)
and Section 3, Chapter I, Title III and Section 1, Chapter I, Title III of Book IV of
Executive Order 292 (Administrative Code of 1987).
To overcome this strong presumption of validity of the questioned issuances, it became
incumbent upon petitioners to prove their unconstitutionality and invalidity, either by
showing that the Administrative Code of 1987 did not authorize the Secretary of Justice
to issue DO No. 182, or by demonstrating that DO No. 182 exceeded the bounds of the
Administrative Code of 1987 and other pertinent laws. They did not do so. They must
further show that the performance of the DOJs functions under the Administrative Code
of 1987 and other pertinent laws did not call for the impositions laid down by the
assailed issuances. That was not true here, for DO No 182 did not deprive petitioners in
any degree of their right to seek redress for the alleged wrong done against them by the
Legacy Group. Instead, the issuances were designed to assist petitioners and others
like them expedite the prosecution, if warranted under the law, of all those responsible
for the wrong through the creation of the special panel of state prosecutors and
prosecution attorneys in order to conduct a nationwide and comprehensive preliminary
investigation and prosecution of the cases. Thereby, the Secretary of Justice did not act
arbitrarily or oppressively against petitioners.
Fourthly, petitioners attack the exemption from the consolidation decreed in DO No. 182
of the cases filed or pending in the Office of the City Prosecutor of Cagayan de Oro City,
claiming that the exemption traversed the constitutional guaranty in their favor of the
equal protection of law.17
The exemption is covered by the assailed DOJ Memorandum dated March 2, 2009, to
wit:
It has come to the attention of the undersigned that cases for syndicated estafa were
filed with your office against officers of the Legacy Group of Companies. Considering
the distance of the place of complainants therein to Manila, your Office is hereby
exempted from the directive previously issued by the undersigned requiring prosecution
offices to forward the records of all cases involving Legacy Group of Companies to the
Task Force.

Admin. Law | 86

Anent the foregoing, you are hereby directed to conduct preliminary investigation of all
cases involving the Legacy Group of Companies filed in your office with dispatch and to
file the corresponding informations if evidence warrants and to prosecute the same in
court.
Petitioners attack deserves no consideration. The equal protection clause of the
Constitution does not require the universal application of the laws to all persons or
things without distinction; what it requires is simply equality among equals as
determined according to a valid classification. 18 Hence, the Court has affirmed that if a
law neither burdens a fundamental right nor targets a suspect class, the classification
stands as long as it bears a rational relationship to some legitimate government end. 19
That is the situation here. In issuing the assailed DOJ Memorandum dated March 2,
2009, the Secretary of Justice took into account the relative distance between Cagayan
de Oro, where many complainants against the Legacy Group resided, and Manila,
where the preliminary investigations would be conducted by the special panel. He also
took into account that the cases had already been filed in the City Prosecutors Office of
Cagayan de Oro at the time he issued DO No. 182. Given the considerable number of
complainants residing in Cagayan de Oro City, the Secretary of Justice was fully
justified in excluding the cases commenced in Cagayan de Oro from the ambit of DO
No. 182. The classification taken into consideration by the Secretary of Justice was
really valid. Resultantly, petitioners could not inquire into the wisdom behind the
exemption upon the ground that the non-application of the exemption to them would
cause them some inconvenience.
Fifthly, petitioners contend that DO No. 182 violated their right to the speedy disposition
of cases guaranteed by the Constitution. They posit that there would be considerable
delay in the resolution of their cases that would definitely be "a flagrant transgression of
petitioners constitutional rights to speedy disposition of their cases." 20
We cannot favor their contention.
In The Ombudsman v. Jurado, 21 the Court has clarified that although the Constitution
guarantees the right to the speedy disposition of cases, such speedy disposition is a
flexible concept. To properly define that concept, the facts and circumstances
surrounding each case must be evaluated and taken into account. There occurs a
violation of the right to a speedy disposition of a case only when the proceedings are
attended by vexatious, capricious, and oppressive delays, or when unjustified
postponements of the trial are sought and secured, or when, without cause or justifiable
motive, a long period of time is allowed to elapse without the party having his case
tried.22 It is cogent to mention that a mere mathematical reckoning of the time involved
is not determinant of the concept.23

Admin. Law | 87

The consolidation of the cases against Delos Angeles, Jr., et al. was ordered obviously
to obtain expeditious justice for the parties with the least cost and vexation to them.
Inasmuch as the cases filed involved similar or related questions to be dealt with during
the preliminary investigation, the Secretary of Justice rightly found the consolidation of
the cases to be the most feasible means of promoting the efficient use of public
resources and of having a comprehensive investigation of the cases.
On the other hand, we do not ignore the possibility that there would be more cases
reaching the DOJ in addition to those already brought by petitioners and other parties.
Yet, any delays in petitioners cases occasioned by such other and subsequent cases
should not warrant the invalidation of DO No. 182. The Constitution prohibits only the
delays that are unreasonable, arbitrary and oppressive, and tend to render rights
nugatory.24 In fine, we see neither undue delays, nor any violation of the right of
petitioners to the speedy disposition of their cases.
Sixthly, petitioners assert that the assailed issuances should cover only future cases
against Delos Angeles, Jr., et al., not those already being investigated. They maintain
that DO No. 182 was issued in violation of the prohibition against passing laws with
retroactive effect.
Petitioners assertion is baseless.
As a general rule, laws shall have no retroactive effect. However, exceptions exist, and
one such exception concerns a law that is procedural in nature. The reason is that a
remedial statute or a statute relating to remedies or modes of procedure does not create
new rights or take away vested rights but only operates in furtherance of the remedy or
the confirmation of already existing rights. 25 A statute or rule regulating the procedure of
the courts will be construed as applicable to actions pending and undetermined at the
time of its passage. All procedural laws are retroactive in that sense and to that extent.
The retroactive application is not violative of any right of a person who may feel
adversely affected, for, verily, no vested right generally attaches to or arises from
procedural laws.
Finally, petitioners have averred but failed to establish that DO No. 182 constituted
obstruction of justice. This ground of the petition, being unsubstantiated, was
unfounded.
Nonetheless, it is not amiss to reiterate that the authority of the Secretary of Justice to
assume jurisdiction over matters involving the investigation of crimes and the
prosecution of offenders is fully sanctioned by law. Towards that end, the Secretary of
Justice exercises control and supervision over all the regional, provincial, and city
prosecutors of the country; has broad discretion in the discharge of the DOJs functions;

Admin. Law | 88

and administers the DOJ and its adjunct offices and agencies by promulgating rules and
regulations to carry out their objectives, policies and functions.
Consequently, unless and until the Secretary of Justice acts beyond the bounds of his
authority, or arbitrarily, or whimsically, or oppressively, any person or entity who may feel
to be thereby aggrieved or adversely affected should have no right to call for the
invalidation or nullification of the rules and regulations issued by, as well as other
actions taken by the Secretary of Justice.
WHEREFORE, the Court DISMISSES the omnibus petition for certiorari, prohibition,
and mandamus for lack of merit.
Petitioners shall pay the costs of suit.
SO ORDERED.

Admin. Law | 89

August 13, 2008

G. R. No. 174350

SPOUSES BERNYL BALANGAUAN & KATHERENE BALANGAUAN, Petitioners,

- versus THE HONORABLE COURT OF APPEALS, SPECIAL NINETEENTH (19 TH)
DIVISION,CEBU CITY &
THE
HONGKONG
AND
SHANGHAI
BANKING
CORPORATION, LTD., Respondents.
CHICO-NAZARIO, J.:
Before Us is a Petition for Certiorari under Rule 65 of the Revised Rules of Court
assailing the 28 April 2006 Decision[1] and 29 June 2006 Resolution[2] of the Court of
Appeals in CA-G.R. CEB-SP No. 00068, which annulled and set aside the 6 April
2004[3] and 30 August 2004[4] Resolutions of the Department of Justice (DOJ) in I.S. No.
02-9230-I, entitled The Hongkong and Shanghai Banking Corporation v. Katherine
Balangauan, et al. The twin resolutions of the DOJ affirmed, in essence,
the Resolution of the Office of the City Prosecutor,[5] Cebu City, which dismissed for lack
of probable cause the criminal complaint for Estafa and/or Qualified Estafa, filed against
petitioner-Spouses Bernyl Balangauan (Bernyl) and Katherene Balangauan (Katherene)
by respondent Hong Kong and Shanghai Banking Corporation, Ltd. (HSBC).
In this Petition for Certiorari, petitioners Bernyl and Katherene urge this Court to
reverse and set aside the Decision of the Court of Appeals, Special nineteenth (sic)
[19th] division (sic), Cebu City (sic) and accordingly, dismiss the complaint against the
[petitioners Bernyl and Katherene] in view of the absence of probable cause to warrant
the filing of an information before the Court and for utter lack of merit. [6]
As culled from the records, the antecedents of the present case are as follows:
Petitioner Katherene was a Premier Customer Services Representative (PCSR) of
respondent bank, HSBC. As a PCSR, she managed the accounts of HSBC depositors
with Premier Status. One such client and/or depositor handled by her was Roger
Dwayne York (York).
York maintained several accounts with respondent HSBC. Sometime in April 2002,
he went to respondent HSBCs Cebu Branch to transact with petitioner Katherene
respecting his Dollar and Peso Accounts. Petitioner Katherene being on vacation at the
time, York was attended to by another PCSR. While at the bank,York inquired about the
status of his time deposit in the amount of P2,500,000.00. The PCSR representative

Admin. Law | 90

who attended to him, however, could not find any record of said placement in the banks
data base.
York adamantly insisted, though, that through petitioner Katherene, he made a
placement of the aforementioned amount in a higher-earning time deposit. Yorkfurther
elaborated that petitioner Katherene explained to him that the alleged higher-earning
time deposit scheme was supposedly being offered to Premier clients only. Upon further
scrutiny and examination, respondent HSBCs bank personnel discovered that: (1) on 18
January 2002, York pre-terminated a P1,000,000.00 time deposit; (2) there were cash
movement tickets and withdrawal slips all signed by York for the amount
of P1,000,000.00; and (3) there were regular movements in Yorks accounts, i.e.,
beginning in the month of January 2002, monthly deposits in the amount of P12,500.00
and P8,333.33 were made, which York denied ever making, but surmised were the
regular interest earnings from the placement of the P2,500,000.00.
It was likewise discovered that the above-mentioned deposits were transacted using
petitioner Katherenes computer and work station using the code or personal password
CEO8. The significance of code CEO8, according to the bank personnel of respondent
HSBC, is that, [i]t is only Ms. Balangauan who can transact from [the] computer in the
work station CEO-8, as she is provided with a swipe card which she keeps sole custody
of and only she can use, and which she utilizes for purposes of performing bank
transactions from that computer.[7]
Bank personnel of respondent HSBC likewise recounted in their affidavits that prior
to the filing of the complaint for estafa and/or qualified estafa, they were in contact with
petitioners Bernyl and Katherene. Petitioner Bernyl supposedly met with them on two
occasions. At first he disavowed any knowledge regarding the whereabouts of Yorks
money but later on admitted that he knew that his wife invested the funds with Shell
Company. He likewise admitted that he made the phone banking deposit to credit Yorks
account with the P12,500.00 and the P8,333.33 using their landline telephone. With
respect to petitioner Katherene, she allegedly spoke to the bank personnel and York on
several occasions and admitted that the funds were indeed invested with Shell
Company but that York knew about this.
So as not to ruin its name and goodwill among its clients, respondent HSBC
reimbursed York the P2,500,000.00.
Based on the foregoing factual circumstances, respondent HSBC, through its
personnel, filed a criminal complaint for Estafa and/or Qualified Estafa before the Office
of the City Prosecutor, Cebu City.

Admin. Law | 91

Petitioners Bernyl and Katherene submitted their joint counter-affidavit basically

denying the allegations contained in the affidavits of the aforenamed employees of
respondent HSBC as well as that made by York. They argued that the allegations in the
Complaint-Affidavits were pure fabrications. Specifically, petitioner Katherene denied 1)
having spoken on the telephone with Dy and York; and 2) having admitted to the
personnel of respondent HSBC and York that she took the P2,500,000.00 of York and
invested the same with Shell Corporation. Petitioner Bernyl similarly denied 1) having
met with Dy, Iigo, Cortes and Arcuri; and 2) having admitted to them that York knew
about petitioner Katherenes move of investing the formers money with Shell
Corporation.
Respecting the P12,500.00 and P8,333.33 regular monthly deposits to Yorks
account made using the code CEO8, petitioners Bernyl and Katherene, in their defense,
argued that since it was a deposit, it was her duty to accept the funds for deposit. As
regards Yorks time deposit with respondent HSBC, petitioners Bernyl and Katherene
insisted that the funds therein were never entrusted to Katherene in the latters capacity
as PCSR Employee of the former because monies deposited at any bank would not and
will not be entrusted to specific bank employee but to the bank as a whole.
Following the requisite preliminary investigation, Assistant City Prosecutor (ACP)
Victor C. Laborte, Prosecutor II of the OCP, Cebu City, in a Resolution[8]dated 21
February 2003, found no probable cause to hold petitioners Bernyl and Katherene liable
to stand trial for the criminal complaint of estafa and/or qualified estafa, particularly
Article 315 of the Revised Penal Code. Accordingly, the ACP recommended the
dismissal of respondent HSBCs complaint.
The ACP explained his finding, viz:
As in any other cases, we may never know the ultimate truth of this controversy. But
on balance, the evidence on record tend to be supportive of respondents contention
rather than that of complaint.
xxxx
First of all, it is well to dwell on what Mr. York said in his affidavit. Thus:
`18. For purposes of opening these two time deposits (sic) accounts, Ms.
Balangauan asked me to sign several Bank documents on several occasions, the
nature of which I was unfamiliar with.
`20. I discovered later that these were withdrawal slips and cash movement
tickets, with which documents Ms. Balangauan apparently was able to withdraw the
amount from my accounts, and take the same from the premises of the Bank.

Admin. Law | 92

In determining the credibility of an evidence, it is well to consider the probability or

improbability of ones statements for it has been said that there is no test of the truth of
human testimony except its conformity to our knowledge, observation and experience.
Mr. York could not have been that unwary and unknowingly innocent to claim
unfamiliarity with withdrawal slips and cash movement tickets which Ms. Balangauan
made him to sign on several occasions. He is a premier client of HSBC maintaining an
account in millions of pesos. A withdrawal slip and cash movement tickets could not
have had such intricate wordings or terminology so as to render them nonunderstandable even to an ordinary account holder. Mr. York admittedly is a longstanding client of the bank. Within the period of long-standing he certainly must have
effected some withdrawals. It goes without saying therefore that the occasions that Ms.
Balangauan caused him to sign withdrawal slips are not his first encounter with such
kinds of documents.
The one ineluctable conclusion therefore that can be drawn from the premises is
that Mr. York freely and knowingly knew what was going on with his money, who has in
possession of them and where it was invested. These take out the elements of deceit,
fraud, abuse of confidence and without the owners consent in the crimes charged.
The other leg on which complainants cause of action stands rest on its claim for
sum of money against respondents allegedly after it reimbursed Mr. York for his missing
account supposedly taken/withdrawn by Ms. Balangauan. The banks action against
respondents would be a civil suit against them which apparently it already did after the
bank steps into the shoes of Mr. York and becomes the creditor of Ms. Balangauan. [9]
The ACP then concluded that:
By and large, the evidence on record do (sic) not engender enough bases to
establish a probable cause against respondents. [10]
On 1 July 2003, respondent HSBC appealed the above-quoted resolution and
foregoing comment to the Secretary of the DOJ by means of a Petition for Review.
In a Resolution dated 6 April 2004, the Chief State Prosecutor, Jovencito R. Zuo, for
the Secretary of the DOJ, dismissed the petition. In denying respondent HSBCs
recourse, the Chief State Prosecutor held that:
Sec. 12 (c) of Department Circular No. 70 dated July 2, 2000 provides that the
Secretary of Justice may, motu proprio, dismiss outright the petition if there is no
showing of any reversible error in the questioned resolution.

Admin. Law | 93

We carefully examined the petition and its attachments and found no reversible
error that would justify a reversal of the assailed resolution which is in accord with the
law and evidence on the matter.
Respondent HSBCs Motion for Reconsideration was likewise denied with finality by
the DOJ in a lengthier Resolution dated 30 August 2004.
The DOJ justified its ruling in this wise:
A perusal of the motion reveals no new matter or argument which was not taken into
consideration in our review of the case. Hence, we find no cogent reason to reconsider
our resolution. Appellant failed to present any iota of evidence directly showing that
respondent Katherene Balangauan took the money and invested it somewhere else. All
it tried to establish was that Katherene unlawfully took the money and fraudulently
invested it somewhere else x x x, because after the withdrawals were made, the money
never reached Roger York as appellant adopted hook, line and sinker the latters
declaration, despite Yorks signatures on the withdrawal slips covering the total amount
of P2,500,000.00 x x x. While appellant has every reason to suspect Katherene for the
loss of the P2,500,000.00 as per Yorks bank statements, the cash deposits were
identified by the numerals CEO8 and it was only Katherene who could transact from the
computer in the work station CEO-8, plus alleged photographs showing Katherene
leaving her office at 5:28 p.m. with a bulky plastic bag presumably containing cash since
a portion of the funds was withdrawn, we do not, however, dwell on possibilities,
suspicion and speculation. We rule based on hard facts and solid evidence.
Moreover, an examination of the petition for review reveals that appellant failed to
append thereto all annexes to respondents urgent manifestations x x x together
with supplemental affidavits of Melanie de Ocampo and Rex B. Balucan x x x, which are
pertinent documents required under Section 5 of Department Circular No. 70 dated July
3, 2000.[11]
Respondent HSBC then went to the Court of Appeals by means of a Petition
for Certiorari under Rule 65 of the Revised Rules of Court.
On 28 April 2006, the Court of Appeals promulgated its Decision granting
respondent HSBCs petition, thereby annulling and setting aside the twin resolutions of
the DOJ.
The fallo of the assailed decision reads:
WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by
us GRANTING the petition filed in this case. The assailed Resolutions dated April 6,
2004 and August 30, 2004 are ANNULLED and SET ASIDE.

Admin. Law | 94

The City Prosecutor of Cebu City is hereby ORDERED to file the appropriate
Information against the private respondents.[12]
Petitioners Bernyl and Katherenes motion for reconsideration proved futile, as it was
denied by the appellate court in a Resolution dated 29 June 2006.
Hence, this petition for certiorari filed under Rule 65 of the Revised Rules of Court.
Petitioners Bernyl and Katherene filed the present petition on the argument that
the Court of Appeals committed grave abuse of discretion in reversing and setting aside
the resolutions of the DOJ when: (1) [i]t reversed the resolution of the Secretary of
Justice, Manila dated August 30, 2004 and correspondingly, gave due course to the
Petition for Certiorari filed by HSBC on April 28, 2006 despite want of probable cause to
warrant the filing of an information against the herein petitioners [13]; (2) [i]t appreciated
the dubious evidence adduced by HSBC albeit the absence of legal standing or
personality of the latter[14]; (3) [i]t denied the motions for reconsideration on June 29,
2006 notwithstanding the glaring evidence proving the innocence of the petitioners [15];
(4) [i]t rebuffed the evidence of the herein petitioners in spite of the fact that, examining
such evidence alone would establish that the money in question was already withdrawn
by Mr. Roger Dwayne York[16]; and (5) [i]t failed to dismiss outright the petition by HSBC
considering that the required affidavit of service was not made part or attached in the
said petition pursuant to Section 13, Rule 13 in relation to Section 3, Rule 46, and
Section 2, Rule 56 of the Rules of Court.[17]
Required to comment on the petition, respondent HSBC remarked that the filing of
the present petition is improper and should be dismissed. It argued that the correct
remedy is an appeal by certiorari under Rule 45 of the Revised Rules of Court.
Petitioners Bernyl and Katherene, on the other hand, asserted in their Reply[18] that
the petition filed under Rule 65 was rightfully filed considering that not only questions of
law were raised but questions of fact and error of jurisdiction as well. They insist that the
Court of Appeals clearly usurped into the jurisdiction and authority of the Public
Prosecutor/Secretary of justice (sic) x x x.[19]
Given the foregoing arguments, there is need to address, first, the issue of the
mode of appeal resorted to by petitioners Bernyl and Katherene. The present petition is
one for certiorari under Rule 65 of the Revised Rules of Court. Notice that what is being
assailed in this recourse is the decision and resolution of the Court of Appeals dated 28
April 2006 and 29 June 2006, respectively. The Revised Rules of Court, particularly
Rule 45 thereof, specifically provides that an appeal by certiorari from the judgments or

Admin. Law | 95

final orders or resolutions of the appellate court is by verified petition for review
on certiorari.[20]
In the present case, there is no question that the 28 April 2006 Decision and 29
June 2006 Resolution of the Court of Appeals granting the respondent HSBCs petition
in CA-G.R. CEB. SP No. 00068 is already a disposition on the merits. Therefore, both
decision and resolution, issued by the Court of Appeals, are in the nature of a final
disposition of the case set before it, and which, under Rule 45, are appealable to this
Court via a Petition for Review on Certiorari, viz:
SECTION 1. Filing of petition with Supreme Court. A party desiring to appeal
by certiorari from a judgment or final order or resolution of the Court of Appeals, the
Sandiganbayan, the Regional Trial Court or other courts whenever authorized by
law, may file with the Supreme Court a verified petition for review on certiorari. The
petition shall raise only questions of law which must be distinctly set forth. (Emphasis
supplied.)
It is elementary in remedial law that a writ of certiorari will not issue where the
remedy of appeal is available to an aggrieved party. A remedy is considered "plain,
speedy and adequate" if it will promptly relieve the petitioners from the injurious effects
of the judgment and the acts of the lower court or agency.[21] In this case, appeal was
not only available but also a speedy and adequate remedy. [22] And while it is true that in
accordance with the liberal spirit pervading the Rules of Court and in the interest of
substantial justice,[23] this Court has, before,[24] treated a petition for certiorari as a
petition for review on certiorari, particularly if the petition for certiorari was filed within
the reglementary period within which to file a petition for review on certiorari;[25] this
exception is not applicable to the present factual milieu.
Pursuant to Sec. 2, Rule 45 of the Revised Rules of Court:
SEC. 2. Time for filing; extension. The petition shall be filed within fifteen (15) days
from notice of the judgment or final order or resolution appealed from, or of the denial of
the petitioners motion for new trial or reconsideration filed in due time after notice of the
judgment. x x x.
a party litigant wishing to file a petition for review on certiorari must do so within 15
days from receipt of the judgment, final order or resolution sought to be appealed. In
this case, petitioners Bernyl and Katherenes motion for reconsideration of the appellate
courts Resolution was denied by the Court of Appeals in its Resolution dated 29 June
2006, a copy of which was received by petitioners on 4 July 2006. The present petition
was filed on 1 September 2006; thus, at the time of the filing of said petition, 59 days
had elapsed, way beyond the 15-day period within which to file a petition for review

Admin. Law | 96

under Rule 45, and even beyond an extended period of 30 days, the maximum period
for extension allowed by the rules had petitioners sought to move for such extra
time. As the facts stand, petitioners Bernyl and Katherene had lost the right to
appeal via Rule 45.
Be that as it may, alternatively, if the decision of the appellate court is attended by
grave abuse of discretion amounting to lack or excess of jurisdiction, then such ruling is
fatally defective on jurisdictional ground and may be questioned even after the lapse of
the period of appeal under Rule 45 [26] but still within the period for filing a petition
for certiorari under Rule 65.
We have previously ruled that grave abuse of discretion may arise when a lower
court or tribunal violates and contravenes the Constitution, the law or existing
jurisprudence. By grave abuse of discretion is meant such capricious and whimsical
exercise of judgment as is equivalent to lack of jurisdiction. The abuse of discretion
must be grave, as where the power is exercised in an arbitrary or despotic manner by
reason of passion or personal hostility and must be so patent and gross as to amount to
an evasion of positive duty or to a virtual refusal to perform the duty enjoined by or to
act at all in contemplation of law.[27] The word capricious, usually used in tandem with
the term arbitrary, conveys the notion of willful and unreasoning action. Thus, when
seeking the corrective hand of certiorari, a clear showing of caprice and arbitrariness in
the exercise of discretion is imperative.[28]
In reversing and setting aside the resolutions of the DOJ, petitioners Bernyl and
Katherene contend that the Court of Appeals acted with grave abuse of discretion
amounting to lack or excess of jurisdiction.
The Court of Appeals, when it resolved to grant the petition in CA-G.R. CEB. SP No.
00068, did so on two grounds, i.e., 1) that the public respondent (DOJ) gravely abused
his discretion in finding that there was no reversible error on the part of the Cebu City
Prosecutor dismissing the case against the private respondent without stating the facts
and the law upon which this conclusion was made [29]; and 2) that the public respondent
(DOJ) made reference to the facts and circumstances of the case leading to his finding
that no probable cause exists, x x x (the) very facts and circumstances (which) show
that there exists a probable cause to believe that indeed the private respondents
committed the crimes x x x charged against them.[30]
It explained that:
In refusing to file the appropriate information against the private respondents
because he does not dwell on possibilities, suspicion and speculation and that he rules
based on hard facts and solid evidence, (sic) the public respondent exceeded his

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

Admin. Law | 98

reversible error that would justify a reversal of the assailed resolution which is in accord
with the law and evidence on the matter.
It must be remembered that a preliminary investigation is not a quasi-judicial
proceeding, and that the DOJ is not a quasi-judicial agency exercising a quasi-judicial
function when it reviews the findings of a public prosecutor regarding the presence of
probable cause. In Bautista v. Court of Appeals,[34] this Court held that a preliminary
investigation is not a quasi-judicial proceeding, thus:
[T]he prosecutor in a preliminary investigation does not determine the guilt or
innocence of the accused. He does not exercise adjudication nor rule-making
functions. Preliminary investigation is merely inquisitorial, and is often the only means
of discovering the persons who may be reasonably charged with a crime and to enable
the fiscal to prepare his complaint or information. It is not a trial of the case on the
merits and has no purpose except that of determining whether a crime has been
committed and whether there is probable cause to believe that the accused is guilty
thereof. While the fiscal makes that determination, he cannot be said to be acting as a
quasi-court, for it is the courts, ultimately, that pass judgment on the accused, not the
fiscal.
Though some cases[35] describe the public prosecutors power to conduct a
preliminary investigation as quasi-judicial in nature, this is true only to the extent that,
like quasi-judicial bodies, the prosecutor is an officer of the executive department
exercising powers akin to those of a court, and the similarity ends at this point. [36] A
quasi-judicial body is an organ of government other than a court and other than a
legislature which affects the rights of private parties through either adjudication or rulemaking.[37] A quasi-judicial agency performs adjudicatory functions such that its awards,
determine the rights of parties, and their decisions have the same effect as judgments
of a court. Such is not the case when a public prosecutor conducts a preliminary
investigation to determine probable cause to file an Information against a person
charged with a criminal offense, or when the Secretary of Justice is reviewing the
formers order or resolutions. In this case, since the DOJ is not a quasi-judicial body,
Section 14, Article VIII of the Constitution finds no application. Be that as it may, the
DOJ rectified the shortness of its first resolution by issuing a lengthier one when it
resolved respondent HSBCs motion for reconsideration.
Anent the substantial merit of the case, whether or not the Court of Appeals
decision and resolution are tainted with grave abuse of discretion in finding probable
cause, this Court finds the petition dismissible.
The Court of Appeals cannot be said to have acted with grave abuse of discretion
amounting to lack or excess of jurisdiction in reversing and setting aside the resolutions

Admin. Law | 99

of the DOJ. In the resolutions of the DOJ, it affirmed the recommendation of ACP
Laborte that no probable cause existed to warrant the filing in court of an Information for
estafa and/or qualified estafa against petitioners Bernyl and Katherene. It was the
reasoning of the DOJ that [w]hile appellant has every reason to suspect Katherene for
the loss of the P2,500,000.00 as per Yorks bank statements, the cash deposits were
identified by the numerals CEO8 and it was only Katherene who could transact from the
computer in the work station CEO-8, plus alleged photographs showing Katherene
leaving her office at 5:28 p.m. with a bulky plastic bag presumably containing cash since
a portion of the funds was withdrawn, we do not, however, dwell on possibilities,
suspicion and speculation. We rule based on hard facts and solid evidence. [38]
We do not agree.
Probable cause has been defined as the existence of such facts and circumstances
as would excite belief in a reasonable mind, acting on the facts within the knowledge of
the prosecutor, that the person charged was guilty of the crime for which he was
prosecuted.[39] A finding of probable cause merely binds over the suspect to stand trial. It
is not a pronouncement of guilt.[40]
The executive department of the government is accountable for the prosecution of
crimes, its principal obligation being the faithful execution of the laws of the land. A
necessary component of the power to execute the laws is the right to prosecute their
violators,[41] the responsibility for which is thrust upon the DOJ. Hence, the determination
of whether or not probable cause exists to warrant the prosecution in court of an
accused is consigned and entrusted to the DOJ. And by the nature of his office, a public
prosecutor is under no compulsion to file a particular criminal information where he is
not convinced that he has evidence to prop up the averments thereof, or that the
evidence at hand points to a different conclusion.
But this is not to discount the possibility of the commission of abuses on the part of
the prosecutor. It is entirely possible that the investigating prosecutor has erroneously
exercised the discretion lodged in him by law. This, however, does not render his act
amenable to correction and annulment by the extraordinary remedy of certiorari, absent
any showing of grave abuse of discretion amounting to excess of jurisdiction. [42]
And while it is this Courts general policy not to interfere in the conduct of preliminary
investigations, leaving the investigating officers sufficient discretion to determine
probable cause,[43] we have nonetheless made some exceptions to the general rule,
such as when the acts of the officer are without or in excess of authority, [44] resulting
from a grave abuse of discretion. Although there is no general formula or fixed rule for
the determination of probable cause, since the same must be decided in the light of the
conditions obtaining in given situations and its existence depends to a large degree

Admin. Law | 100

upon the finding or opinion of the judge conducting the examination, such a finding
should not disregard the facts before the judge (public prosecutor) or run counter to the
clear dictates of reason.[45]
Applying the foregoing disquisition to the present petition, the reasons of DOJ for
affirming the dismissal of the criminal complaints for estafa and/or qualified estafa are
determinative of whether or not it committed grave abuse of discretion amounting to
lack or excess of jurisdiction. In requiring hard facts and solid evidenceas the basis for a
finding of probable cause to hold petitioners Bernyl and Katherene liable to stand trial
for the crime complained of, the DOJ disregards the definition of probable cause that it
is a reasonable ground of presumption that a matter is, or may be, well-founded, such a
state of facts in the mind of the prosecutor as would lead a person of ordinary caution
and prudence to believe, or entertain an honest or strong suspicion, that a thing is so.
[46]
The term does not mean actual and positive cause nor does it import absolute
certainty.[47] It is merely based on opinion and reasonable belief; [48] that is, the belief that
the act or omission complained of constitutes the offense charged. While probable
cause demands more than bare suspicion, it requires less than evidence which would
justify conviction. Herein, the DOJ reasoned as if no evidence was actually presented
by respondent HSBC when in fact the records of the case were teeming; or it
discounted the value of such substantiation when in fact the evidence presented was
adequate to excite in a reasonable mind the probability that petitioners Bernyl and
Katherene committed the crime/s complained of. In so doing, the DOJ whimsically and
capriciously exercised its discretion, amounting to grave abuse of discretion, which
rendered its resolutions amenable to correction and annulment by the extraordinary
remedy of certiorari.
From the records of the case, it is clear that a prima facie case for estafa/qualified
estafa exists against petitioners Bernyl and Katherene. A perusal of the records, i.e., the
affidavits of respondent HSBCs witnesses, the documentary evidence presented, as
well as the analysis of the factual milieu of the case, leads this Court to agree with the
Court of Appeals that, taken together, they are enough to excite the belief, in a
reasonable mind, that the Spouses Bernyl Balangauan and Katherene Balangauan are
guilty of the crime complained of. Whether or not they will be convicted by a trial court
based on the same evidence is not a consideration.It is enough that acts or omissions
complained of by respondent HSBC constitute the crime of estafa and/or qualified
estafa.
Collectively, the photographs of petitioner Katherene leaving the premises of
respondent HSBC carrying a bulky plastic bag and the affidavits of respondent HSBCs
witnesses sufficiently establish acts adequate to constitute the crime of estafa and/or
qualified estafa. What the affidavits bear out are the following: that York was a Premier

Admin. Law | 101

Client of respondent HSBC; that petitioner Katherene handled all the accounts of York;
that not one of Yorks accounts reflect the P2,500,000.00 allegedly deposited in a higher
yielding account; that prior to the discovery of her alleged acts and omissions, petitioner
Katherene supposedly persuaded York to invest in a new product of respondent
HSBC, i.e., a higher interest yielding time deposit; that York made a total
of P2,500,000.00 investment in the new product by authorizing petitioner Balangauan to
transfer said funds to it; that petitioner Katherene supposedly asked York to sign several
transaction documents in order to transfer the funds to the new product; that said
documents turned out to be withdrawal slips and cash movement tickets; that at no time
did York receive the cash as a result of signing the documents that turned out to be
withdrawal slips/cash movement tickets; that Yorks account was regularly credited loose
change in the amounts of P12,500.00 and P8,333.33 beginning in the month after the
alleged transfer of Yorks funds to the new product; that the regular deposits of loose
change were transacted with the use of petitioner Katherenes work terminal accessed
by her password CEO8; that the CEO8 password was keyed in with the use of a swipe
card always in the possession of petitioner Katherene; that one of the loose-change
deposits was transacted via the phone banking feature of respondent HSBC and that
when traced, the phone number used was the landline number of the house of
petitioners Bernyl and Katherene; that respondent HSBCs bank personnel, as well as
York, supposedly a) talked with petitioner Katherene on the phone, and that she
allegedly admitted that the missing funds were invested with Shell Company, of which
York approved, and that it was only for one year; and b) met with petitioner Bernyl, and
that the latter at first denied having knowledge of his wifes complicity, but later on
admitted that he knew of the investment with Shell Company, and that he supposedly
made the loose-change deposit via phone banking; that after 23 April 2002, York was
told that respondent HSBC had no new product or that it was promoting investment with
Shell Company; that York denied having any knowledge that his money was invested
outside of respondent HSBC; and that petitioner Katherene would not have been able to
facilitate the alleged acts or omissions without taking advantage of her position or office,
as a consequence of which, HSBC had to reimburse York the missing P2,500,000.00.
From the above, the alleged circumstances of the case at bar make up the
elements of abuse of confidence, deceit or fraudulent means, and damage under Art.
315 of the Revised Penal Code on estafa and/or qualified estafa. They give rise to the
presumption or reasonable belief that the offense of estafa has been committed; and,
thus, the filing of an Information against petitioners Bernyl and Katherene is
warranted. That respondent HSBC is supposed to have no personality to file any
criminal complaint against petitioners Bernyl and Katherene does not ipso facto clear
them of prima facie guilt. The same goes for their basic denial of the acts or omissions
complained of; or their attempt at shifting the doubt to the person of York; and their
claim that witnesses of respondent HSBC are guilty of fabricating the whole

Admin. Law | 102

scenario. These are matters of defense; their validity needs to be tested in the crucible
of a full-blown trial. Lest it be forgotten, the presence or absence of the elements of the
crime is evidentiary in nature and is a matter of defense, the truth of which can best be
passed upon after a full-blown trial on the merits. Litigation will prove petitioners Bernyl
and Katherenes innocence if their defense be true.
In fine, the relaxation of procedural rules may be allowed only when there are
exceptional circumstances to justify the same. Try as we might, this Court cannot find
grave abuse of discretion on the part of the Court of Appeals, when it reversed and set
aside the resolutions of the DOJ. There is no showing that the appellate court acted in
an arbitrary and despotic manner, so patent or gross as to amount to an evasion or
unilateral refusal to perform its legally mandated duty. On the contrary, we find the
assailed decision and resolution of the Court of Appeals to be more in accordance with
the evidence on record and relevant laws and jurisprudence than the resolutions of the
DOJ.
Considering the allegations, issues and arguments adduced and our disquisition
above, we hereby dismiss the instant petition for being the wrong remedy under the
Revised Rules of Court, as well as for petitioner Bernyl and Katherenes failure to
sufficiently show that the challenged Decision and Resolution of the Court of Appeals
were rendered in grave abuse of discretion amounting to lack or excess of jurisdiction.
WHEREFORE,
premises
considered,
the
instant
Petition
for Certiorari is DISMISSED for lack of merit. The 28 April 2006 Decision and the 29
June 2006Resolution of the Court of Appeals in CA-G.R. CEB- SP No. 00068, are
hereby AFFIRMED. With costs against petitioners -- Spouses Bernyl Balangauan and
Katherene Balangauan. SO ORDERED.
February 21, 1989

G.R. No. 81385

EDUARDO B. OLAGUER AND CONRADO S. REYES in their official capacity as

FISCAL AGENTS OF THE PRESIDENTIAL COMMISSION ON GOOD
GOVERNMENT, petitioners,
vs.
THE REGIONAL TRIAL COURT, NATIONAL CAPITAL JUDICIAL REGION, BRANCH
48, MANILA, PRESIDED BY THE HONORABLE JUDGE DEMETRIO M. BATARIO,
JR., M.B. OLIVARES, AUGUSTO VILLANUEVA, ARACELLI LINSANGAN, LUISA
LINSANGAN, ALEJANDRO MARAMAG, MANUEL SALAK, TURNITA SORIANO,
LINO SISON DOMINGO FLORES, MILAGROS HIZON and CARIDAD
ORPIADA, respondents.

Admin. Law | 103

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

Admin. Law | 104

committed certain illegal acts which gave rise to the filing of several complaints against
him. However, before these cases could be resolved, Olaguer's appointment as
member of the board of directors of DBP was terminated by President Corazon C.
Aquino effective September 9, 1987. He was informed about his termination through
two letters dated August 27 and October 12, 1987.
It is likewise alleged that, the termination notwithstanding, Olaguer continued to
exercise and retain full management and control of PJI The DBP chief legal counsel
wrote to petitioner Reyes informing him of Olaguer's removal from office and enjoining
him from implementing or complying with any instructions from Olaguer and from
disposing of the properties of PJI and disbursing any funds without prior approval of the
board of directors of PJI which will soon be elected, except such amounts needed in the
ordinary course of business. Accordingly, the DBP, acting through its Chairman, Jesus
Estanislao and its Director-in-Charge, Jose Mari Velez, entered into an Interim
Agreement with private respondents. The said agreement called for a special
stockholders meeting for the purpose of electing a new board of directors which shall
hold office until the next regular stockholders meeting to be held on February 2, 1988.
The complaint further alleges that in a letter dated December 14, 1987, the DBP
chief legal counsel informed the private respondents that the said Interim Agreement
cannot be implemented because Olaguer claims that he has just been designated the
fiscal and team leader of the Presidential Commission on Good Government (PCGG)
assigned to the PJI and that all his actions are sanctioned and reported to PCGG
Chairman Ramon A. Diaz, and that it is the PCGG which exercises the voting rights of
all PJI common stocks sequestered since 1986, including those assigned to DBP and
that the PJI qualifying share now held by PJI Directors came from shares sequestered
by the PCGG. These observations are contained in a letter dated October 31, 1987
written by petitioner Reyes in his capacity as chief legal counsel and corporate
secretary of PJI It is stated therein that Olaguer, together with Marbella, Ortigas,
Soriano, Federis, Arroyo and Villa-Real have been acting as corporate officers and/or
members of the board without their having been elected by the majority vote of
stockholders and without their owning in their own right even a single qualifying share.
In addition, it is alleged that petitioner Reyes had been sending out notices to
private respondents about an alleged stockholders meeting to be held on December 21,
1987 at the PJI building, and that in the letter written by the DBP chief legal counsel, 1 it
is stated that petitioner Olaguer and his associates who claim to be members of the
board and corporate officers of PJI do not represent DBP and that they are not
authorized to act in its behalf.
The complaint emphasizes that the claim of petitioner Reyes that Olaguer can sit as
chairman of the board of directos of PJI even if he is no longer a director of DBP but as

Admin. Law | 105

long as he is the fiscal agent and team leader of the PCGG assigned is baseless
because: (a) the writs of sequestration on the shares of respondents Hizon, Orpiada,
Maramag, Flores and Sison, served on them on or about February 19, 1987, and on
respondents Linsangan, Salak, Soriano and Villanueva, served on them on or about
April 28, 1987, bad been automatically lifted last August 19, 1987 and October 28, 1987,
respectively, pursuant to Section 26, Article XVIII of the 1987 Constitution; and only the
sequestration on the shares of respondent Olivares has not been lifted since a
complaint was filed against her before the expiration of the constitutional deadline for
filing cases; (b) the sequestered shares of respondent Olivares could not be voted upon
by petitioners herein and their companions under their claim of being PCGG fiscal
agents under the recent pronouncement of the Supreme Court in several cases clearly
stating that sequestration does not involve the right of ownership; (c) no other meeting
has been validly called for the election of a new set of directors after the members of the
board elected last October 2, 1986 had ceased to be such directors, either by virtue of
the cancellation of their qualifying shares or their resignation; (d) with the filing of Civil
Case No. 35 before the Sandiganbayan where the PJI was listed as one of the involved
corporations, all actions affecting said corporation, including those which will affect
rights of ownership and disposition of assets, must have the prior approval of the
Sandiganbayan which excercises jurisdiction over these corporations as one of the
properties in litigation; and (e) by order of President Aquino, petitioner Olaguer's
separation from the PJI was called for; that the acts of all the petitioners and their
companions of either continuing to sit in the board of directors of PJI and/or
representing and acting as its corporate officers are illegal and are the acts of usurpers
and intruders violative of the rights of private respondents as stockholders and are
causing great damage and prejudice to them as well as to the rights of the DBP under
the Deed of Assignment, and that such acts of usurpation should be enjoined by the trial
court.
Under the second cause of action for damages, it is alleged that Olaguer acted
illegally and outside the authority granted him as nominee of DBP and, accordingly,
Olivares cancelled the Deed of Assignment of one qualifying share to him as well as the
Deed of Assignment in favor of Marbella and Ortigas. The notice of cancellation was
served upon them on December 5, 1986. As a consequence of such cancellation, the
three failed to qualify to sit as members of the board of PJI.
Private respondents also alleged that despite such notice, petitioner and his
associates continued to sit in the board and that Olaguer took over the complete
management of the corporation and even caused the appointment of other members of
the board and/or corporate officers even if such appointees do not own PJI shares of
stock in their own right. It is likewise alleged that the petitioner and his associates
should be enjoined from committing further acts of usurpation and that they should be

Admin. Law | 106

held liable for all unlawful disbursements they have made. It is further alleged that some
of the private respondents had been unlawfully dismissed and/or retired one after
another thereby depriving them of all benefits they are entitled to and subjecting them to
great mental anguish, sleepless nights, deep humiliation and great anxiety for which
they must be paid damages in an amount left to the sound discretion of the court.
Private respondents also asked for exemplary damages as well as the sum of
P200,000.00 for attorney's fees and expenses of litigation.
Private respondents prayed that pending a hearing on the merits of the case, a writ
of preliminary injunction or a temporary restraining order be issued against petitioner
Reyes enjoining him from holding the special stockholders meeting scheduled at 8:00
A.M. on December 21, 1987, and enjoining Olaguer and his associates from sitting and
acting as members of the board of directors of PJI or as corporate officers. Private
respondents also prayed that such temporary restraining order and/or writ of preliminary
injunction be made permanent after due hearing and that Petitioner Olaguer and his
associates be made to pay, jointly and severally, actual damages as may be proved
after audit, including moral and exemplary damages, attorney's fees and litigation
expenses in the amount of P200,000.00, and the costs of the suit. 2
On December 18, 1987, an order was issued by the trial court setting the petition for
the issuance of a writ of preliminary injunction for bearing on January 4, 1988 at 1:30 in
the afternoon. A temporary restraining order was issued enjoining petitioner Reyes from
holding the special stockholders meeting scheduled for December 21, 1987 and
enjoining all the other petitioners including Olaguer from sitting and acting as members
of the board and/or corporate officers of PJI until further orders of the court.
On January 4, 1988, a motion to dismiss was filed by the petitioners on the ground
that the court has no jurisdiction over the persons of petitioners; that they were not
served summons and that the subject matter of the action involves controversies arising
out of intra-corporate relations between and among stockholders which are covered by
the provisions of Section 5 of Presidential Decree No. 902-A so that the matter is within
the original and exclusive jurisdiction of the Securities and Exchange Commission
(SEC); that the venue for a petition seeking injunctive relief should be the
Sandiganbayan where aforesaid PCGG Case No. 0035 against Benjamin Romualdez,
Rosario Olivares, et al. is pending, pursuant to Executive Order No. 14 defining the
jurisdiction over cases involving the alleged ill-gotten wealth of Former President
Marcos, et al.; that it is the SEC which should exercise jurisdiction over the case
pursuant to Section 6 of Presidential Decree No. 902-A; and that the complaint states
no cause of action inasmuch as the petitioners and the other defendants hold shares
emanating from the PCGG, and not from the DBP; that the shares issued to DBP for
Olivares, et al. on the basis of an erroneous DBP legal opinion have been declared
void ab initio and cancelled by the PCGG on November 4, 1987 so that the DBP is not a

Admin. Law | 107

stockholder of record; that the call for the stockholders meeting by petitioner Reyes was
with the approval of the PCGG Chairman; that PJI is a sequestered corporation listed as
item No. 49 under "Shares of Stock" in "Assets and Other Property of Benjamin
Romualdez" marked Annex "A", in Case No. 0035 for "Reconveyance, Reversion,
Accounting, Restitution and Damages," entitled "Republic of the Philippines, plaintiff
versus Benjamin (Kokoy) Romualdez, et al.,"; that the PJI pursuant to its Board
Resolution No. 43, dated November 14, 1987, has authorized the filing of criminal
complaints against Benjamin (Kokoy) Romualdez, Rosario Olivares, Tuynita Soriano,
Jose T. Abundo, Evelyn Nicasio, Alejandro Maramag, Caridad Orpiada and other former
and present PJI officers and employees who defrauded the company by conspiring in
and/or authorizing the illegal disbursements of PJI funds amounting to P 10.6 million, all
for the account and upon instructions of said Romualdez who was neither an officer,
director, stockholder of record of PJI nor a creditor or supplier thereof; that regarding the
sequestration of PJI pursuant to orders of the PCGG dated April 22, 1986 and February
19, 1987, the actual sequestration proceedings have not been terminated upon the filing
of PCGG Case No. 0035 before the Sandiganbayan on July 31, 1987.
Petitioners maintain that under the pertinent provisions of the 1987 Constitution, the
commencement of a judicial action does not ipso facto lift the sequestration order. It is
the non-filing of a judicial action within six months from the ratification of the 1987
Constitution if the sequestration order is issued before the ratification, or within six
months from the time sequestration order was issued if the same was issued after such
ratification, which will automatically lift the sequestration order. Petitioners also stated
that while the PJI suffered huge loses under the administration of private respondents,
the corporation realized profits under the management of petitioner Olaguer. All the
common and preferred stocks of private respondents have been sequestered pursuant
to the orders of the PCGG dated April 22, 1986 and February 19, 1987 and it is the
PCGG which exercises the voting rights pertaining to said sequestered shares pursuant
to the Memorandum of President Aquino to the PCGG dated June 26, 1986.
A Memorandum in support of the prayer for the issuance of a writ of preliminary
injunction and opposition to the motion to dismiss was filed by counsel for private
respondents.
On January 14, 1988, an order was issued by the trial court denying the motion to
dismiss and issuing a writ of preliminary injunction as prayed for upon a bond in the
amount of P50,000.00 to be filed by private respondents.
Hence, the herein petition for certiorari and prohibition with a prayer for the issuance
of a temporary restraining order and/ or a writ of preliminary injunction wherein the main
issue is whether or not the trial court has jurisdiction over the subject matter of the
action.

Admin. Law | 108

On January 26, 1988, a resolution was issued by this Court requiring the
respondents to comment therein within ten (10) days from notice. A temporary
restraining order was issued enjoining the respondent judge to cease and desist from
enforcing the order of the trial court dated January 14, 1988 in Civil Case No. 87-43156
as well as the writ of preliminary injunction issued against petitioners.
Acting on the manifestation and motion filed by counsel for private respondents on
February 4, 1988, this Court issued a resolution enjoining petitioner Reyes and/or the
corporate officers of PJI from holding another special stockholders meeting on February
5, 1988 or at any date thereafter pending resolution of this case, and directing the
parties to maintain the status quo until further orders from the Court.
The private respondents filed their comment on the petition. Thereafter, the
petitioners filed their reply. On April 5, 1988, the court resolved to give due course to the
petition and considered the case submitted for decision. Nevertheless, the private
respondents filed a rejoinder.
The petition is impressed with merit. There is no dispute that the PJI is now under
sequestration by the PCGG and that Civil Case No. 0035 was filed in the
Sandiganbayan wherein the PJI is listed as among the corporations involved in the
unexplained wealth case against former President Marcos, Romualdez and many
others. The records likewise show that petitioner Olaguer, among others, is a fiscal
agent of the PCGG and that as Chairman of the Board of Directors of the PJI he was
acting for and in behalf of the PCGG. Under Section 2 of Executive Order No. 14, the
Sandiganbayan has exclusive and original jurisdiction over all cases regarding "the
funds, moneys, assets and properties illegally acquired by Former President Ferdinand
E. Marcos, Mrs. Imelda Romualdez Marcos, their close relatives, subordinates,
business associates, dummies, agents, or nominees," 3 civil or criminal, including
incidents arising from such cases. The Decision of the Sandiganbayan is subject to
review on certiorari exclusively by the Supreme Court. 4
In the exercise of its functions, the PCGG is a co-equal body with the regional trial
courts and co-equal bodies have no power to control the other. 5 The regional trial
courts and the Court of Appeals have no jurisdiction over the PCGG in the exercise of
its powers under the applicable Executive Orders and Section 26, Article XVIII of the
1987 Constitution and, therefore, may not interfere with and restrain or set aside the
orders and actions of the PCGG. 6 By the same token, the regional trial courts have no
jurisdiction over the acts of fiscal agents of the PCGG acting for and in behalf of said
commission.
The Commission should not be embroiled in and swamped by legal suits before
inferior courts all over the land. Otherwise, the Commission will be forced to spend

Admin. Law | 109

valuable time defending all its actuations in such courts. This will defeat the very
purpose behind the creation of the Commission. Accordingly, Section 4(a) of Executive
Order No. 1 expressly accorded the Commission and its members immunity from suit
for damages in that: "No civil action shall lie against the Commission or any member
thereof for anything done or omitted in the discharge of the task contemplated by this
order."
Civil Case No. 87-43156 pending before the respondent judge is denominated as
one for "injunction with prayer for writ of preliminary injunction and/or temporary
restraining order and damages." Particularly, under paragraph 17(d) of the complaint,
private respondents admitted that the PJI is listed as one of the involved corporations in
Civil Case No. 0035 pending before the Sandiganbayan which now exercises
jurisdiction over the said corporation. Petitioners Olaguer and Reyes appear to be fiscal
agents of the PCGG. There can be no doubt, therefore, that the subject matter of the
action (the PJI its properties and assets) falls within the exclusive jurisdiction of the
Sandiganbayan.
Petitioners, as fiscal agents of the PCGG, cannot be sued in such capacity before
the ordinary courts. The tribunal for such purpose is the Sandiganbayan.
It necessarily follows that the issues raised by the private respondents before the
respondent judge to the effect that petitioners are usurpers and have no right to sit in
the board of directors or act as corporate officers of the PJI are issues which should be
addressed to the Sandiganbayan.
WHEREFORE, the petition is GRANTED. The respondent judge is permanently
enjoined from enforcing the order of the trial court dated January 14, 1988. The
restraining order issued by this Court dated February 4, 1988 enjoining petitioner Reyes
and/or the corporate officers of the PJI from holding the special stockholders meeting on
February 5, 1988 or at any date thereafter, and to preserve and maintain the status quo,
is hereby lifted. The order of the trial court dated January 14, 1988 is hereby SET
ASIDE and another order is hereby issued dismissing the complaint, without
pronouncement as to costs. This Decision is immediately executory.
SO ORDERED.

Admin. Law | 110

October 14, 2002

G.R. No. 141949.
CEFERINO PADUA, petitioner, vs. HON. SANTIAGO RANADA, PRESIDING JUDGE
OF MAKATI, RTC, BRANCH 137, PHILIPPINE NATIONAL CONSTRUCTION CORP.,
TOLL REGULATORY BOARD, DEPARTMENT OF PUBLIC WORKS AND
HIGHWAYS, and REPUBLIC OF THE PHILIPPINES, respondents.
G.R. No. 151108. October 14, 2002]
EDUARDO C. ZIALCITA, petitioner, vs. TOLL REGULATORY BOARD AND CITRA
METRO MANILA TOLLWAYS CORPORATION, respondents.

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

CLASS 1
Elevated Portion

Toll Rates for Implementation

Unrounded Toll Rates

75.00

75.00

CLASS 2
150.00

CLASS 3
225.00

At-Grade Portion

Admin. Law | 111

Magallanes to Bicutan

19.35

19.50

38.50

Bicutan to Sucat

11.21

11.00

22.50

Sucat to Alabang

10.99

11.00

21.00

58.00
34.00
32.50

* includes C5 entry/exit and Merville exit.

For implementation starting January 1, 2002 after its publication once a week for
three (3) consecutive weeks in a newspaper of general circulation and that said
Provisional Toll Rate Increase shall remain in effect until such time that the TRB Board
has determined otherwise:
Be APPROVED as it is hereby APPROVED.
RESOLVED FURTHERMORE, as it is hereby RESOLVED that the Provisional Toll
Rates be implemented in two (2) stages in accordance with the following schedule:

Section

Unrounded Toll Rates

as Maximum for One (1) Year

Toll Rates for Implementation For Class 1 as

Reference

JANUARY 1, 2002
to JUNE 30, 2002
Elevated Portion

75.00

65.00

Magallanes to Bicutan

19.35

15.00

Bicutan to Sucat

11.21

9.00

Sucat to Alabang

10.99

9.00

JULY 1, 2002 to
DECEMBER 31, 2002
75.00

At-Grade Portion
20.00
11.00
11.00

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

Admin. Law | 112

a. The Investor and/or the Operator shall be entitled to apply for and if warranted, to
be granted an interim adjustment of Toll Rates upon the occurrence of any of the
following events:
xxxxxx
(ii) a significant currency devaluation
xxxxxx
(i) A currency devaluation shall be deemed significant if it results in a depreciation of
the value of the Philippine peso relative to the US dollar by at least 10%. For
purposes hereof the exchange rate between the Philippine peso and the US dollar
which shall be applicable shall be the exchange rate between the above mentioned
currencies in effect as of the date of approval of the prevailing preceding Toll Rate.
(ii) The Investors right to apply for an interim Toll Rate adjustment under section
7.04 (3) (a) (ii) shall be effective only while any Financing is outstanding and have
not yet been paid in full.
xxxxxx
(iv) An interim adjustment in Toll Rate shall be considered such amount as may be
required to provide interim relief to the Investor from a substantial increase in debtservice burden resulting from the devaluation. [5]
Claiming that the peso exchange rate to a U.S. dollar had devaluated from
P26.1671 in 1995 to P48.00 in 2000, CITRA alleged that there was a compelling need
for the increase of the toll rates to meet the loan obligations of the Project and the
substantial increase in debt-service burden.
Due to heavy opposition, CITRAs petition remained unresolved. This prompted
CITRA to file on October 9, 2001 an Urgent Motion for Provisional Approval, [6] this time,
invoking Section 3, Rule 10 of the Rules of Practice and Procedure Governing Hearing
Before the Toll Regulatory Board (TRB Rules of Procedure) which provides:
SECTION 3. Provisional Relief. Upon the filing of an application or petition for the approval
of the initial toll rate or toll rate adjustment, or at any stage, thereafter, the Board may grant
on motion of the pleader or in its own initiative, the relief prayed for without prejudice to
a final decision after completion of the hearing should the Board find that the pleading,
together with the affidavits and supporting documents attached thereto and such additional
evidence as may have been requested and presented, substantially support the provisional
order; Provided: That the Board may, motu proprio, continue to issue orders or grant relief in the
exercise of its powers of general supervision under existing laws. Provided: Finally, that pending
finality of the decision, the Board may require the Petitioner to deposit in whole or in part in
escrow the provisionally approved adjustment or initial toll rates. (Emphasis supplied)

On October 30, 2001, CITRA moved to withdraw[7] its Urgent Motion for Provisional
Approval without prejudice to its right to seek or be granted provisional relief under the

Admin. Law | 113

above-quoted provisions of the TRB Rules of Procedure, obviously, referring to the

power of the Board to act on its own initiative.
On November 7, 2001, CITRA wrote a letter [8] to TRB expressing its concern over
the undue delay in the proceeding, stressing that any further setback would bring the
Projects financial condition, as well as the Philippine banking system, to a total
collapse. CITRA recounted that out of the US$354 million funding from creditors, twothirds (2/3) thereof came from the Philippine banks and financial institutions, such as the
Landbank of the Philippines and the Government Service Insurance Services. Thus,
CITRA requested TRB to find a timely solution to its predicament.
On November 9, 2001, TRB granted CITRAs motion to withdraw [9] the Urgent
Motion for Provisional Approval and, at the same time, issued Resolution No. 2001-89,
[10]
earlier quoted.
Hence, petitioners Ceferino Padua and Eduardo Zialcita assail before this Court the
validity and legality of TRB Resolution No. 2001-89.
Petitioner Ceferino Padua, as a toll payer, filed an Urgent Motion for a Temporary
Restraining Order to Stop Arbitrary Toll Fee Increases [11] in G.R. No. 141949,[12] a
petition for mandamus earlier filed by him. In that petition, Padua seeks to compel
respondent Judge Santiago Ranada of the Regional Trial Court, Branch 137, Makati
City, to issue a writ of execution for the enforcement of the Court of Appeals Decision
dated August 4, 1989 in CA-G.R. SP No. 13235. In its Decision, the Court of Appeals
ordered the exclusion of certain portions of the expressways (from Villamor Air Base to
Alabang in the South, and from Balintawak to Tabang in the North) from the franchise of
the PNCC.
In his urgent motion, petitioner Padua claims that: (1) Resolution No. 2001-89 was
issued without the required publication and in violation of due process; (2) alone, TRB
Executive Director Jaime S. Dumlao, Jr., could not authorize the provisional toll rate
adjustments because the TRB is a collegial body; and (3) CITRA has no standing to
apply for a toll fee increase since it is an investor and not a franchisee-operator.
On January 4, 2002, petitioner Padua filed a Supplemental Urgent Motion for a TRO
against Toll Fee Increases,[13] arguing further that: (1) Resolution 2001-89 refers
exclusively to the Metro Manila Skyway Project, hence, there is no legal basis for the
imposition of the increased rate at the at-grade portions; (2) Resolution No. 2001-89
was issued without basis considering that while it was signed by three (3) of the five
members of the TRB, none of them actually attended the hearing; and 3) the

Admin. Law | 114

computation of the rate adjustment under the STOA is inconsistent with the rate
adjustment formula under Presidential Decree No. 1894. [14]
On January 10, 2002, the Office of the Solicitor General (OSG) filed, in behalf of
public respondent TRB, Philippine National Construction Corporation (PNCC),
Department of Public Works and Highways (DPWH) and Judge Ranada, a Consolidated
Comment[15] contending that: (1) the TRB has the exclusive jurisdiction over all matters
relating to toll rates; (2) Resolution No. 2001-89 covers both the Skyway and the atgrade level of the South Luzon Expressway as provided under the STOA; (3) that while
Resolution No. 2001-89 does not mention any factual basis to justify its issuance,
however, it does not mean that TRB's finding of facts is not supported by evidence;
and (4) petitioner Padua cannot assail the validity of the STOA because he is not a
party thereto.
Upon the other hand, on January 9, 2002, petitioner Eduardo Zialcita, as a taxpayer
and as Congressman of Paraaque City, filed the present petition for prohibition [16] with
prayer for a temporary restraining order and/or writ of preliminary injunction against TRB
and CITRA, docketed as G.R. No. 151108, impugning the same Resolution No. 200189.
Petitioner Zialcita asserts that the provisional toll rate adjustments are exorbitant
and that the TRB violated its own Charter, Presidential Decree No. 1112, [17] when it
promulgated Resolution No. 2001-89 without the benefit of any public hearing. He also
maintains that the TRB violated the Constitution when it did not express clearly and
distinctly the facts and the law on which Resolution No. 2001-89 was based. And lastly,
he claims that Section 3, Rule 10 of the TRB Rules of Procedure is not sanctioned by
P.D. No. 1112.
Private respondent CITRA, in its comment[18] on Congressman Zialcitas petition,
counters that: (1) the TRB has primary administrative jurisdiction over all matters
relating to toll rates; (2) prohibition is an inappropriate remedy because its function is to
restrain acts about to be done and not acts already accomplished; (3) Resolution No.
2001-89 was issued in accordance with law; (4) Section 3, Rule 10 of the TRB Rules is
constitutional; and (5) private respondent and the Republic of the Philippines would
suffer more irreparable damages than petitioner.
The TRB, through the OSG, filed a separate comment [19] reiterating the same
arguments raised by private respondent CITRA.
On January 11, 2002, this Court resolved to consolidate the instant petitions, G.R.
No. 141949 and G.R. No. 151108.[20]
We rule for the respondents.

Admin. Law | 115

In assailing Resolution No. 2001-89, petitioners came to us via two unconventional

remedies one is an urgent motion for a TRO to stop arbitrary toll fee increases; and the
other is a petition for prohibition. Unfortunately, both are procedurally impermissible.
I
Petitioner Paduas motion is a leap to a legal contest of different dimension. As
previously stated, G.R. No. 141949 is a petition for mandamus seeking to compel
respondent Judge Ranada to issue a writ of execution for the enforcement of the Court
of Appeals Decision dated August 4, 1989 in CA-G.R. SP No. 13235. The issue therein
is whether the application for a writ of execution should be by a mere motion or by an
action for revival of judgment. Thus, for petitioner Padua to suddenly interject in the
same petition the issue of whether Resolution No. 2001-89 is valid is to drag this Court
to his web of legal convolution. Courts cannot, as a case progresses, resolve the
intrinsic merit of every issue that comes along its way, particularly those which bear no
relevance to the resolution of the case.
Certainly, petitioner Paduas recourse in challenging the validity of TRB Resolution
No. 2001-89 should have been to institute an action, separate and independent from
G.R. No. 141949.
II
The remedy of prohibition initiated by petitioner Zialcita in G.R. No. 151108 also
suffers several infirmities. Initially, it violates the twin doctrine of primary administrative
jurisdiction and non-exhaustion of administrative remedies.
P.D. No. 1112 explicitly provides that the decisions of the TRB on petitions for the
increase of toll rate shall be appealable to the Office of the President within ten (10)
days from the promulgation thereof.[21] P.D. No. 1894 reiterates this instruction and
further provides:
SECTION 9. The GRANTEE shall have the right and authority to adjust any existing toll
being charged the users of the Expressways under the following guidelines:
xxxxxx
c) Any interested Expressways user shall have the right to file, within a period of
ninety (90) days after the date of publication of the adjusted toll rate (s), a petition
with the Toll Regulatory Board for a review of the adjusted toll rate
(s); provided, however, that notwithstanding the filing of such petition and the pendency
of the resolution thereof, the adjusted toll shall be enforceable and collectible by the
GRANTEE effective on the first day of January in accordance with the immediately
preceding paragraph. x x x x x x

Admin. Law | 116

e) Decisions of the Toll Regulatory Board on petitions for review of adjusted toll shall be
appealable to the Office of the President within ten (10) days from the promulgation
thereof.
These same provisions are incorporated in the TRB Rules of Procedure, particularly
in Section 6, Rule 5 and Section 1, Rule 12 thereof. [22]
Obviously, the laws and the TRB Rules of Procedure have provided the remedies of
an interested Expressways user.[23] The initial proper recourse is to file a petition for
review of the adjusted toll rates with the TRB. The need for a prior resort to this body is
with reason. The TRB, as the agency assigned to supervise the collection of toll fees
and the operation of toll facilities, has the necessary expertise, training and skills to
judiciously decide matters of this kind. As may be gleaned from the petition, the main
thrust of petitioner Zialcitas argument is that the provisional toll rate adjustments are
exorbitant, oppressive, onerous and unconscionable. This is obviously a
question of fact requiring knowledge of the formula used and the factors
considered in determining the assailed rates. Definitely, this task is within the
province of the TRB.
We take cognizance of the wealth of jurisprudence on the doctrine of primary
administrative jurisdiction and exhaustion of administrative remedies. In this era of
clogged court dockets, the need for specialized administrative boards or commissions
with the special knowledge, experience and capability to hear and determine promptly
disputes on technical matters or intricate questions of facts, subject to judicial review in
case of grave abuse of discretion, is indispensable. Between the power lodged in an
administrative body and a court, the unmistakable trend is to refer it to the
former."[24] In Industrial Enterprises, Inc. vs. Court of Appeals,[25] we ruled:
x x x, if the case is such that its determination requires the expertise, specialized
skills and knowledge of the proper administrative bodies because technical matters
or intricate questions of facts are involved, then relief must first be obtained in an
administrative proceeding before a remedy will be supplied by the courts even
though the matter is within the proper jurisdiction of a court.
Moreover, petitioner Zialcitas resort to prohibition is intrinsically inappropriate. It
bears stressing that the office of this remedy is not to correct errors of judgment but to
prevent or restrain usurpation of jurisdiction or authority by inferior tribunals and to
compel them to observe the limitation of their jurisdictions. G.R. No. 151108, while
designated as a petition for prohibition, has for its object the setting aside of
Resolution No. 2001-89 on the ground that it was issued without prior notice,
hearing and publication and that the provisional toll rate adjustments are
exorbitant. This is not the proper subject of prohibition because as long as the inferior

Admin. Law | 117

court, tribunal or board has jurisdiction over the person and subject matter of the
controversy, the writ will not lie to correct errors and irregularities in procedure, or
to prevent an erroneous decision or an enforcement of an erroneous judgment. And
even in cases of encroachment, usurpation, and improper assumption of jurisdiction, the
writ will not issue where an adequate and applicable remedy by appeal, writ or
error, certiorari, or other prescribed methods of review are available.[26] In this
case, petitioner Zialcita should have sought a review of the assailed Resolution before
the TRB.
III
Even granting that petitioners recourse to the instant remedies is in order, still, we
cannot rule in their favor.
For one, it is not true that the provisional toll rate adjustments were not published
prior to its implementation on January 1, 2002. Records show that they were published
on December 17, 24 and 31, 2001 [27] in three newspapers of general circulation,
particularly the Philippine Star, Philippine Daily Inquirer and The Manila Bulletin. Surely,
such publications sufficiently complied with Section 5 of P.D. No. 1112 which mandates
that no new rates shall be collected unless published in a newspaper of general
publication at least once a week for three consecutive weeks. At any rate, it must
be pointed out that under Letter of Instruction No. 1334-A, [28] the TRB may grant and
issue ex-parte to any petitioner, without need of notice, publication or
hearing, provisional authority to collect, pending hearing and decision on the merits of
the petition, the increase in rates prayed for or such lesser amount as the TRB may in
its discretion provisionally grant. That LOI No. 1334-A has the force and effect of law
finds support in a catena of cases decreeing that all proclamations, orders,
decrees, instructions, and acts promulgated, issued, or done by the former President
(Ferdinand E. Marcos) are part of the law of the land, and shall remain valid, legal,
binding, and effective, unless modified, revoked or superseded by subsequent
proclamations, orders, decrees, instructions, or other acts of the President.
[29]
In Association of Small Landowners in the Philippines, Inc. vs. Secretary of Agrarian
Reform,[30] this Court held:
The Court wryly observes that during the past dictatorship, every presidential
issuance, by whatever name it was called, had the force and effect of law because it
came from President Marcos.Such are the ways of despots. Hence, it is futile to argue,
as the petitioners do in G.R. No. 79744, that LOI 474 could not have repealed P.D. No.
27 because the former was only a letter of instruction. The important thing is that it
was issued by President Marcos, whose word was law during that time. (Emphasis
supplied)

Admin. Law | 118

For another, it is not true that it was TRB Executive Director Dumlao, Jr. alone who
issued Resolution No. 2001-89. The Resolution itself contains the signature of the four
TRB Directors, namely, Simeon A. Datumanong, Emmanuel P. Bonoan, Ruben S.
Reinoso, Jr. and Mario K. Espinosa. [31] Petitioner Padua would argue that while these
Directors signed the Resolution, none of them personally attended the hearing. This
argument is misplaced. Under our jurisprudence, an administrative agency may employ
other persons, such as a hearing officer, examiner or investigator, to receive evidence,
conduct hearing and make reports, on the basis of which the agency shall render its
decision. Such a procedure is a practical necessity.[32] Thus, in Mollaneda vs. Umacob,
[33]
we ruled:
x x x At any rate, it cannot be gainsaid that the term administrative body or
agency includes the subordinate officials upon whose hand the body or
agency delegates a portion of its authority. Included therein are the hearing
officers through whose eyes and ears the administrative body or agency
observes the demeanor, conduct and attitude of the witnesses and listens to
their testimonies.
It must be emphasized that the appointment of competent officers to hear and
receive evidence is commonly resorted to by administrative bodies or agencies in the
interest of an orderly and efficient disposition of administrative cases. x x x
x x x Corollarily, in a catena of cases, this Court laid down the cardinal requirements
of due process in administrative proceedings, one of which is that the tribunal or body or
any of its judges must act on its or his own independent consideration of the law and
facts of the controversy, and not simply accept the views of a subordinate. Thus, it is
logical to say that this mandate was rendered precisely to ensure that in cases
where the hearing or reception of evidence is assigned to a subordinate, the body
or agency shall not merely rely on his recommendation but instead shall
personally weigh and assess the evidence which the said subordinate has
gathered.
Be that as it may, we must stress that the TRBs authority to grant provisional toll
rate adjustments does not require the conduct of a hearing. Pertinent laws and
jurisprudence support this conclusion.
It may be recalled that Former President Ferdinand E. Marcos promulgated P.D. No.
1112 creating the TRB on March 31, 1977. The end in view was to authorize the
collection of toll fees for the use of certain public improvements in order to attract private
sector investment in the government infrastructure projects. The TRB was tasked to
supervise the collection of toll fees and the operation of toll facilities. One of its powers
is to issue, modify and promulgate from time to time the rates of toll that will be

Admin. Law | 119

charged the direct users of toll facilities and upon notice and hearing, to approve
or disapprove petitions for the increase thereof.[34]
To clarify the intent of P.D. No. 1112 as to the extent of the TRBs power,[35] Former
President Marcos further issued LOI No. 1334-A expressly allowing the TRB to
grant ex-parte provisional or temporary increase in toll rates, thus:
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Republic of the
Philippines, by virtue of the powers vested in me by the Constitution, do hereby direct,
order and instruct the Toll Regulatory Board to grant and issue ex-parte to any
petitioner, without need of notice, publication or hearing, provisional authority to
collect, pending hearing of and decision on the merits of such petition, the
increase in rates prayed for or such lesser amount as the Board may in its
discretion provisionally grant, upon (a) a finding that the said petition is sufficient in
form and substance, (b) the submission of an affidavit by the petitioner showing that the
increase in rates substantially conforms to the formula, if any stipulated in the franchise
or toll operation agreement/certificate of the petitioner and that failure to immediately
impose and collect the increase in rates would result in outright delay or stoppage of
urgently needed improvements, expansion or repairs of toll facilities and/or in great
irreparable injury to the petitioner, and (c) the submission by the petitioner to the Board
of a bond, in such amount and from such surety or sureties and under such terms and
conditions as the Board shall fix, to guarantee the refund of the increase in rates to the
affected toll payers in case it is finally determined, after notice and hearing, that the
petitioner is not entitled, in whole or in part, to the same. Any provisional toll rate
increases shall be effective immediately upon approval without need of
publication.
Thereafter, the TRB promulgated as part of its Rules of Procedure, the following
provision:
RULE 5. PROCEDURE FOR APPROVAL OF TOLL RATE
Section 2. Provisional Relief Upon initial findings of the Board that the Petition for
the approval of initial toll rate or the petition for toll rate adjustment is in accordance
with Sections 1 and 2 of Rule 2, Section 2 of Rule 3 and Section 1 of Rule 4 hereof,
the Board within a reasonable time after the filing of the Petition, may in an en banc
decision provisionally approve the initial toll rate or toll rate adjustment, without
the necessity of any notice and hearing.
From the foregoing, it is clear that a hearing is not necessary for the grant of provisional
toll rate adjustment. The language of LOI No. 1334-A is not susceptible of
equivocation. It directs, orders and instructs the TRB to issue provisional toll rates
adjustment ex-parte without the need of notice, hearing and publication. All that is
necessary is that it be issued upon (1) a finding that the main petition is sufficient in

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form and substance; (2) the submission of an affidavit showing that the increase in rates
substantially conforms to the formula, if any is stipulated in the franchise or toll
operation agreement, and that failure to immediately impose and collect the increase
in rates would result in great irreparable injury to the petitioner; and (3) the submission
of a bond. Again, whether or not CITRA complied with these requirements is an
issue that must be addressed to the TRB.
The practice is not something peculiar. We have ruled in a number of cases that an
administrative agency may be empowered to approve provisionally, when demanded by
urgent public need, rates of public utilities without a hearing. The reason is easily
discerned from the fact that provisional rates are by their nature temporary and
subject to adjustment in conformity with the definitive rates approved after final
hearing.[36] In Maceda vs. Energy Regulatory Board,[37] we ruled that while the ERB is
not precluded from conducting a hearing on the grant of provisional authority which is of
course, the better procedure however, it can not be stigmatized if it failed to conduct
one. Citing Citizens Alliance for Consumer Protection vs. Energy Regulatory Board,
[38]
this Court held:
In the light of Section 8 quoted above, public respondent Board need not even have
conducted formal hearings in these cases prior to issuance of its Order of 14 August
1987 granting a provisional increase of prices. The Board, upon its own
discretion and on the basis of documents and evidence submitted by private
respondents, could have issued an order granting provisional relief
immediately upon filing by private respondents of their respective
applications. In this respect, the Court considers the evidence presented by private
respondents in support of their applications -.i.e., evidence showing that importation
costs of petroleum products had gone up; that the peso had depreciated in value;
and that the Oil Price Stabilization Fund (OPSF) had been depleted as substantial
and hence constitutive of at least prima facie basis for issuance by the Board of a
provisional relief order granting an increase in the prices of petroleum products.
Anent petitioner Paduas contention that CITRA has no standing to apply for a toll
fee increase, suffice it to say that CITRAs right stems from the STOA which was entered
into by no less than the Republic of the Philippines and by the PNCC. Section 7.04 of
the STOA provides that the Investor, CITRA, and/or the Operator, PNCC, shall be
entitled to apply for and if warranted, to be granted an interim adjustment of toll rates
in case of force majeure and a significant currency valuation. [39] Now, unless set aside
through proper action, the STOA has the force and effect of law between the contracting
parties, and is entitled to recognition by this Court. [40] On the same breath, we cannot
sustain Paduas contention that the term Metro Manila Skyway Project excludes the atgrade portions of the South Luzon Expressway considering that under the same STOA
the Metro Manila Skyway includes: (a) the South Metro Manila Skyway, coupled with the

Admin. Law | 121

rehabilitated at-grade portion of the South Luzon Expressway, from Alabang to

Quirino Avenue; (b) the Central Metro Manila Skyway, from Quirino Avenue to A.
Bonifacio Avenue; x x x.[41]
Petitioner Zialcita faults the TRB for not stating the facts and the law on which
Resolution No. 2001-89 is based. Petitioner is wrong. Suffice it to state that while
Section 14, Article VIII of the 1987 Constitution provides that no decision shall be
rendered by any court without expressing therein clearly and distinctly the facts and the
law on which it is based, this rule applies only to a decision of a court of justice, not
TRB.[42]
At this point, let it be stressed that we are not passing upon the
reasonableness of the provisional toll rate adjustments. As we have earlier
mentioned, this matter is best addressed to the TRB.
IV
In fine, as what we intimated in Philippine National Construction Corp. vs. Court of
Appeals,[43] we commend petitioners for devoting their time and effort on a matter so
imbued with public interest as in this case. But we can do no better than to brush aside
their chief objections to the provisional toll rate adjustments, for a different approach
would lead this Court astray into the field of factual conflict where its pronouncements
would not rest on solid grounds. Time and again, we have impressed that this Court is
not a trier of facts, more so, in the consideration of an extraordinary remedy of
prohibition where only questions of lack or excess of jurisdiction or grave abuse of
discretion is to be entertained.
And to accord the main petition for mandamus in G.R. No. 141949 the full
deliberation it deserves, we deem it appropriate to discuss its merit on another
occasion. Anyway, G.R. No. 141949 was consolidated with G.R. No. 151108 only by
reason of petitioner Paduas deviant motion assailing Resolution 2001-89. As we have
previously said, the main petition in G.R. No. 141949 presents an entirely different issue
and is set on a different factual landscape.
WHEREFORE, petitioner Paduas Urgent Motion for Temporary Restraining Order to
Stop Arbitrary Toll Fee Increases is DENIED and petitioner Zialcitas Petition for
Prohibition is DISMISSED.
SO ORDERED.
March 31, 1995

G.R. No. 115863

AIDA D. EUGENIO, petitioner,

vs.

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CIVIL SERVICE COMMISSION, HON. TEOFISTO T. GUINGONA, JR. & HON.

SALVADOR ENRIQUEZ, JR.,respondents.

PUNO, J.:
The power of the Civil Service Commission to abolish the Career Executive Service
Board is challenged in this petition for certiorari and prohibition.
First the facts. Petitioner is the Deputy Director of the Philippine Nuclear Research
Institute. She applied for a Career Executive Service (CES) Eligibility and a CESO rank
on August 2, 1993, she was given a CES eligibility. On September 15, 1993, she was
recommended to the President for a CESO rank by the Career Executive Service
Board. 1
All was not to turn well for petitioner. On October 1, 1993, respondent Civil Service
Commission 2 passed Resolution No. 93-4359, viz:
RESOLUTION NO. 93-4359
WHEREAS, Section 1(1) of Article IX-B provides that Civil Service shall be administered
by the Civil Service Commission, . . .;
WHEREAS, Section 3, Article IX-B of the 1987 Philippine Constitution provides that
"The Civil Service Commission, as the central personnel agency of the government, is
mandated to establish a career service and adopt measures to promote morale,
efficiency, integrity, responsiveness, progresiveness and courtesy in the civil service, . .
WHEREAS, Section 12 (1), Title I, Subtitle A, Book V of the Administrative Code of 1987
grants the Commission the power, among others, to administer and enforce the
constitutional and statutory provisions on the merit system for all levels and ranks in the
Civil Service;
WHEREAS, Section 7, Title I, Subtitle A, Book V of the Administrative Code of 1987
Provides, among others, that The Career Service shall be characterized by (1) entrance
based on merit and fitness to be determined as far as practicable by competitive
examination, or based highly technical qualifications; (2) opportunity for advancement to
higher career positions; and (3) security of tenure;
WHEREAS, Section 8 (c), Title I, Subtitle A, Book V of the administrative Code of 1987
provides that "The third level shall cover Positions in the Career Executive Service";

Admin. Law | 123

WHEREAS, the Commission recognizes the imperative need to consolidate, integrate

and unify the administration of all levels of positions in the career service.
WHEREAS, the provisions of Section 17, Title I, Subtitle A. Book V of the Administrative
Code of 1987 confers on the Commission the power and authority to effect changes in
its organization as the need arises.
WHEREAS, Section 5, Article IX-A of the Constitution provides that the Civil Service
Commission shall enjoy fiscal autonomy and the necessary implications thereof;
NOW THEREFORE, foregoing premises considered, the Civil Service Commission
hereby resolves to streamline reorganize and effect changes in its organizational
structure. Pursuant thereto, the Career Executive Service Board, shall now be known as
the Office for Career Executive Service of the Civil Service Commission. Accordingly,
the existing personnel, budget, properties and equipment of the Career Executive
Service Board shall now form part of the Office for Career Executive Service.
The above resolution became an impediment. to the appointment of petitioner as Civil
Service Officer, Rank IV. In a letter to petitioner, dated June 7, 1994, the Honorable
Antonio T. Carpio, Chief Presidential legal Counsel, stated:
xxx xxx xxx
On 1 October 1993 the Civil Service Commission issued CSC Resolution No. 93-4359
which abolished the Career Executive Service Board.
Several legal issues have arisen as a result of the issuance of CSC Resolution No. 934359, including whether the Civil Service Commission has authority to abolish the
Career Executive Service Board. Because these issues remain unresolved, the Office of
the President has refrained from considering appointments of career service eligibles to
career executive ranks.
xxx xxx xxx
You may, however, bring a case before the appropriate court to settle the legal issues
arising from issuance by the Civil Service Commission of CSC Resolution No. 93-4359,
for guidance of all concerned.
Thank You.
Finding herself bereft of further administrative relief as the Career Executive Service
Board which recommended her CESO Rank IV has been abolished, petitioner filed the

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petition at bench to annul, among others, resolution No. 93-4359. The petition is
anchored on the following arguments:
A. IN VIOLATION OF THE CONSTITUTION, RESPONDENT COMMISSION
USURPED THE LEGISLATIVE FUNCTIONS OF CONGRESS WHEN IT
ABOLISHED THE CESB, AN OFFICE CREATED BY LAW, THROUGH THE
ISSUANCE OF CSC: RESOLUTION NO. 93-4359;
B. ALSO IN VIOLATION OF THE CONSTITUTION, RESPONDENT CSC USURPED
THE LEGISLATIVE FUNCTIONS OF CONGRESS WHEN IT ILLEGALLY
AUTHORIZED THE TRANSFER OF PUBLIC MONEY, THROUGH THE ISSUANCE
OF CSC RESOLUTION NO. 93-4359.
Required to file its Comment, the Solicitor General agreed with the contentions of
petitioner. Respondent Commission, however, chose to defend its ground. It posited the
following position:

I.
II.

III.

IV.

ARGUMENTS FOR PUBLIC RESPONDENT-CSC

THE INSTANT PETITION STATES NO CAUSE OF ACTION AGAINST THE PUBLIC
RESPONDENT-CSC.
THE RECOMMENDATION SUBMITTED TO THE PRESIDENT FOR APPOINTMENT
TO A CESO RANK OF PETITIONER EUGENIO WAS A VALID ACT OF THE CAREER
EXECUTIVE SERVICE BOARD OF THE CIVIL SERVICE COMMISSION AND IT
DOES NOT HAVE ANY DEFECT.
THE OFFICE OF THE PRESIDENT IS ESTOPPED FROM QUESTIONING THE
VALIDITY OF THE RECOMMENDATION OF THE CESB IN FAVOR OF PETITIONER
EUGENIO SINCE THE PRESIDENT HAS PREVIOUSLY APPOINTED TO CESO
RANK FOUR (4) OFFICIALS SIMILARLY SITUATED AS SAID PETITIONER.
FURTHERMORE, LACK OF MEMBERS TO CONSTITUTE A QUORUM. ASSUMING
THERE WAS NO QUORUM, IS NOT THE FAULT OF PUBLIC RESPONDENT CIVIL
SERVICE COMMISSION BUT OF THE PRESIDENT WHO HAS THE POWER TO
APPOINT THE OTHER MEMBERS OF THE CESB.
THE INTEGRATION OF THE CESB INTO THE COMMISSION IS AUTHORIZED BY
LAW (Sec. 12 (1), Title I, Subtitle A, Book V of the Administrative Code of the 1987).
THIS PARTICULAR ISSUE HAD ALREADY BEEN SETTLED WHEN THE
HONORABLE COURT DISMISSED THE PETITION FILED BY THE HONORABLE
MEMBERS OF THE HOUSE OF REPRESENTATIVES, NAMELY: SIMEON A.
DATUMANONG, FELICIANO R. BELMONTE, JR., RENATO V. DIAZ, AND MANUEL
M. GARCIA IN G.R. NO. 114380. THE AFOREMENTIONED PETITIONERS ALSO
QUESTIONED THE INTEGRATION OF THE CESB WITH THE COMMISSION.
We find merit in the petition. 3

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The controlling fact is that the Career Executive Service Board (CESB) was created in
the Presidential Decree (P.D.) No. 1 on September 1, 1974 4 which adopted the
Integrated Plan. Article IV, Chapter I, Part of the III of the said Plan provides:
Article IV Career Executive Service
1. A Career Executive Service is created to form a continuing pool of well-selected and
development oriented career administrators who shall provide competent and faithful
service.
2. A Career Executive Service hereinafter referred to in this Chapter as the Board, is
created to serve as the governing body of the Career Executive Service. The Board
shall consist of the Chairman of the Civil Service Commission as presiding officer,
the Executive Secretary and the Commissioner of the Budget as ex-officio members
and two other members from the private sector and/or the academic community who
are familiar with the principles and methods of personnel administration.
xxx xxx xxx
5. The Board shall promulgate rules, standards and procedures on the selection,
classification, compensation and career development of members of the Career
Executive Service. The Board shall set up the organization and operation of the service.
(Emphasis supplied)
It cannot be disputed, therefore, that as the CESB was created by law, it can only be
abolished by the legislature. This follows an unbroken stream of rulings that the creation
and abolition of public offices is primarily a legislative function. As aptly summed up in
AM JUR 2d on Public Officers and Employees, 5 viz:
Except for such offices as are created by the Constitution, the creation of public offices
is primarily a legislative function. In so far as the legislative power in this respect is not
restricted by constitutional provisions, it supreme, and the legislature may decide for
itself what offices are suitable, necessary, or convenient. When in the exigencies of
government it is necessary to create and define duties, the legislative department has
the discretion to determine whether additional offices shall be created, or whether these
duties shall be attached to and become ex-officio duties of existing offices. An office
created by the legislature is wholly within the power of that body, and it may prescribe
the mode of filling the office and the powers and duties of the incumbent, and if it sees
fit, abolish the office.
In the petition at bench, the legislature has not enacted any law authorizing the abolition
of the CESB. On the contrary, in all the General Appropriations Acts from 1975 to 1993,
the legislature has set aside funds for the operation of CESB. Respondent Commission,
however, invokes Section 17, Chapter 3, Subtitle A. Title I, Book V of the Administrative
Code of 1987 as the source of its power to abolish the CESB. Section 17 provides:

Admin. Law | 126

Sec. 17. Organizational Structure. Each office of the Commission shall be headed by
a Director with at least one Assistant Director, and may have such divisions as are
necessary independent constitutional body, the Commission may effect changes in the
organization as the need arises.
But as well pointed out by petitioner and the Solicitor General, Section 17 must be read
together with Section 16 of the said Code which enumerates the offices under the
respondent Commission, viz:
Sec. 16. Offices in the Commission. The Commission shall have the following offices:
(1) The Office of the Executive Director headed by an Executive Director, with a Deputy
Executive Director shall implement policies, standards, rules and regulations
promulgated by the Commission; coordinate the programs of the offices of the
Commission and render periodic reports on their operations, and perform such other
functions as may be assigned by the Commission.
(2) The Merit System Protection Board composed of a Chairman and two (2) members
shall have the following functions: xxx xxx xxx
(3) The Office of Legal Affairs shall provide the Chairman with legal advice and
assistance; render counselling services; undertake legal studies and researches;
prepare opinions and ruling in the interpretation and application of the Civil Service
law, rules and regulations; prosecute violations of such law, rules and regulations;
and represent the Commission before any court or tribunal.
(4) The Office of Planning and Management shall formulate development plans,
programs and projects; undertake research and studies on the different aspects of
public personnel management; administer management improvement programs; and
provide fiscal and budgetary services.
(5) The Central Administrative Office shall provide the Commission with personnel,
financial, logistics and other basic support services.
(6) The Office of Central Personnel Records shall formulate and implement policies,
standards, rules and regulations pertaining to personnel records maintenance,
security, control and disposal; provide storage and extension services; and provide
and maintain library services.
(7) The Office of Position Classification and Compensation shall formulate and
implement policies, standards, rules and regulations relative to the administration of
position classification and compensation.
(8) The Office of Recruitment, Examination and Placement shall provide leadership and
assistance in developing and implementing the overall Commission programs
relating to recruitment, execution and placement, and formulate policies, standards,
rules and regulations for the proper implementation of the Commission's
examination and placement programs.

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

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the purpose of attaching one functionally inter-related government agency to another is

to attain "policy and program coordination." This is clearly etched out in Section 38(3),
Chapter 7, Book IV of the aforecited Code, to wit:
(3) Attachment. (a) This refers to the lateral relationship between the department or
its equivalent and attached agency or corporation for purposes of policy and program
coordination. The coordination may be accomplished by having the department
represented in the governing board of the attached agency or corporation, either as
chairman or as a member, with or without voting rights, if this is permitted by the charter;
having the attached corporation or agency comply with a system of periodic reporting
which shall reflect the progress of programs and projects; and having the department or
its equivalent provide general policies through its representative in the board, which
shall serve as the framework for the internal policies of the attached corporation or
agency.
Respondent Commission also relies on the case of Datumanong, et al., vs. Civil Service
Commission, G. R. No. 114380 where the petition assailing the abolition of the CESB
was dismissed for lack of cause of action. Suffice to state that the reliance is misplaced
considering that the cited case was dismissed for lack of standing of the petitioner,
hence, the lack of cause of action.
IN VIEW WHEREOF, the petition is granted and Resolution No. 93-4359 of the
respondent Commission is hereby annulled and set aside. No costs.
SO ORDERED.

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August 9, 1988

G.R. No. L-34526

HIJO PLANTATION INC., DAVAO FRUITS CORPORATION, TWIN RIVERS

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

Admin. Law | 130

b. In the case of molasses, coconut oil, dessicated coconut, iron ore and concentrates, chromite
ore and concentrates, copra meal or cake, unmanufactured abaca, unmanufactured tobacco,
veneer core and sheets, plywood (including plywood panels faced with plastics), lumber, canned
pineapples, and bunker fuel oil;
Eight per centum of the F.O.B. peso proceeds of exports shipped on or after the date of
effectivity of this Act to June thirty, nineteen hundred seventy-one;
Six per centum of the F.O.B. peso proceeds of exports shipped from July first, nineteen hundred
seventy one to June thirty nineteen hundred seventy- two;
Four per centum of the F.O.B. peso proceeds of exports shipped from July first, nineteen
hundred seventy-two to June thirty nineteen hundred seventy-three; and
Two per centum of the F.O.B. peso proceeds of exports shipped from July first, nineteen
hundred seventy three to June thirty nineteen hundred seventy-four.

Any export product the aggregate annual F.O.B. value of which shall exceed five million
United States dollars in any one calendar year during the effectivity of this Act shall
likewise be subject to the rates of tax in force during the fiscal years following its
reaching the said aggregate value. (Emphasis supplied).
During the first nine (9) months of calendar year 1971, the total banana export
amounted to an annual aggregate F.O.B. value of P8,949,000.00 (Answer, Rollo, p. 73)
thus exceeding the aggregate F.O.B. value of five million United States Dollar, bringing it
within the ambit of Republic Act No. 6125. Consequently, the banana industry was in a
dilemma as to when the stabilization tax was to become due and collectible from it and
under what schedule of Section 1 (b) of Republic Act 6125 should said tax be collected.
Accordingly, petitioners through their counsel, by letter dated November 5, 1971, sought
the authoritative pronouncement of the Central Bank (herein referred to as respondent),
therein advancing the opinion that the stabilization tax does not become due and
collectible from the petitioners until July 1, 1972 at the rate of 4% of the F.O.B. peso
proceeds of the exports shipped from July 1, 1972 to June 30,1973. Replying by letter
dated December 17,1971 (Rollo, p. 11), the Central Bank called attention to Monetary
Board Resolution No. 1995 dated December 3, 1971 which clarified that:
1) For exports of bananas shipped during the period from January 1, 1972 to June 30, 1972; the
stabilization tax shall be at the rate of 6%;
2) For exports of bananas shipped during the period from July 1, 1972 to June 30, 1973, the stabilization
tax shall be at the rate of 4%; and
3) For exports of bananas shipped during the period from July 1, 1973, to June 30, 1974, the
stabilization tax shall be at the rate of 2%."

Contending that said Board Resolution No. 1995 was manifestly contrary to the
legislative intent, petitioners sought a reconsideration of said Board Resolution by letter
dated December 27, 1971 (Rollo, p. 12) which request for reconsideration was denied
by the respondent, also by letter dated January 20, 1972 (Rollo, p. 24). With the denial
of petitioners' request for reconsideration, respondent thru its agent Bank, Rizal

Admin. Law | 131

Commercial Banking Corporation has been collecting from the petitioners who have
been forced to pay under protest, such stabilization tax.
Petitioners view respondent's act as a clear violation of the provision of Republic Act No.
6125, and as an act in excess of its jurisdiction, hence, this petition.
The sole issue in this case is whether or not respondent acted with grave abuse of
discretion amounting to lack of jurisdiction when it issued Monetary Board Resolution
No. 1995, series of 1971 which in effect reaffirmed Central Bank Circular No. 309,
enacted pursuant to Monetary Board Resolution No. 1179.
There is here no dispute that the banana industry is liable to pay the stabilization tax
prescribed under Republic Act No. 1995, it being the admission of both parties, that the
Industry has indeed reached and for the first time in the calendar year 1971, a total
banana export exceeding the aggregate annual F.O.B. value of five million United
States dollars. The crux of the controversy, however, is the manner of implementation of
Republic Act No. 6125.
Section 1 of R.A. 6125 clearly provides as follows:
An export product the aggregate annual F.O.B. value of which shall exceed five million US
dollars in any one calendar year during the effectivity of the act shall likewise be subject to the
rates of tax in force during the fiscal year following its reaching the said aggregate value."

Petitioners contend that the stabilization tax to be collected from the banana industry
does not become due and collectible until July 1, 1972 at the rate of 4% of the F.O.B.
peso proceeds of the export shipped from July 1, 1972 to June 30,1973. They further
contend that respondent gave retroactive effect to the law (RA 6125) by ruling in
Monetary Board Resolution No. 1995 dated December 3, 1 971, that the export
stabilization tax on banana industry would start to accrue on January 1, 1972 at the rate
of 6% of the F.O.B. peso proceeds of export shipped from July 1, 1971 to June 30, 1972
(Rollo, pp. 3-4).
Respondent, on the other hand, contends that the aforecited provision of RA 6125
merely prescribes the rates that may be imposed but does not provide when the tax
shall be collected and makes no reference to any definite fixed period when the tax shall
begin to be collected (Rollo, pp. 77-78).
There is merit in this petition.
In the very nature of things, in many cases it becomes impracticable for the legislative
department of the Government to provide general regulations for the various and
varying details for the management of a particular department of the Government. It
therefore becomes convenient for the legislative department of the government, by law,
in a most general way, to provide for the conduct, control, and management of the work

Admin. Law | 132

of the particular department of the government; to authorize certain persons, in charge

of the management and control of such department (United States v. Tupasi Molina, 29
Phil. 119 [19141).
Such is the case in RA 6125, which provided in its Section 6, as follows:
All rules and regulations for the purpose of carrying out the provisions of the act shall be
promulgated by the Central Bank of the Philippines and shall take effect fifteen days
after publication in three newspapers of general circulation throughout the Philippines,
one of which shall be in the national language.
Such regulations have uniformly been held to have the force of law, whenever they are
found to be in consonance and in harmony with the general purposes and objects of the
law. Such regulations once established and found to be in conformity with the general
purposes of the law, are just as binding upon all the parties, as if the regulation had
been written in the original law itself (29 Phil. 119, Ibid). Upon the other hand, should the
regulation conflict with the law, the validity of the regulation cannot be sustained
(Director of Forestry vs. Muroz 23 SCRA 1183).
Pursuant to the aforecited provision, the Monetary Board issued Resolution No. 1179
which contained the rules and regulations for the implementation of said provision which
Board resolution was subsequently embodied in Central Bank Circular No. 309, dated
August 10, 1970 (duly published in the Official Gazette, Vol. 66, No. 34, August 24,
1940, p. 7855 and in three newspapers of general circulation throughout the Philippines
namely, the Manila Times, Manila Chronicle and Manila Daily Bulletin). Section 3 of
Central Bank Circular No. 309, "provides that the stabilization tax shall begin to apply on
January first following the calendar year during which such export products shall have
reached the aggregate annual F.O.B. value of more than $5 million and the applicable
tax rates shall be the rates prescribed in schedule (b) of Section 1 of RA No. 6125 for
the fiscal year following the reaching of the said aggregate value." Central Bank Circular
No. 309 was subsequently reaffirmed in Monetary Board Resolution No. 1995 herein
assailed by petitioners for being null and void (Rollo, pp. 97- 98).
In its comment (Rollo, p. 40), respondent argues that the request for authoritative
pronouncement of petitioners was made because there was no express provision in
Section 1 of RA 6125 which categorically states, when the stabilization tax shall begin to
accrue on those aggregate annual F.O.B. values exceeding five (5) million United States
dollars in any one calendar year during the effectivity of said act. For which reason, the
law itself authorized it under Section 7 to promulgate rules and regulations to carry out
the provisions of said law.
In petitioner's reply (Rollo, p. 154) they argue that since the Banana Exports reached
the aggregate annual F.O.B. value of US $5 million in August 1971, the stabilization tax

Admin. Law | 133

on banana should be imposed only on July 1, 1972, the fiscal year following the
calendar year during which the industry attained the $5 million mark. Their argument
finds support in the very language of the law and upon congressional record where a
clarification on the applicability of the law was categorically made by the then Senator
Aytona who stated that the tax shall be applicable only after the $5 million aggregate
value is reached, making such tax prospective in application and for a period of one
year- referring to the fiscal year (Annex 8, Comment of Respondent; Rollo, p. 60).
Clearly such clarification was indicative of the legislative intent. Further, they argue that
respondent bank through the Monetary Board clearly overstepped RA 6125 which
empowered it to promulgate rules and regulations for the purpose of carrying out the
provisions of said act, because while Section 1 of the law authorizes it to levy a
stabilization tax on petitioners only in the fiscal year following their reaching the
aggregate annual F.O.B. value of US $5 million, that is, the fiscal year July 1, 1972 to
June 30, 1973, at a tax rate of 4% of the F.O.B. peso proceeds, respondent in gross
violation of the law, instead issued Resolution No. 1995 which impose a 6% stabilization
tax for the calendar year January 1, 1972 to June 30, 1972, which obviously is in excess
of its jurisdiction. It was further argued that in directing its agent bank to collect the
stabilization tax in accordance with Monetary Board Resolution No. 1995, it acted
whimsically and capriciously. (Rollo, p. 155).
It will be observed that while Monetary Board Resolution No. 1995 cannot be said to be
the product of grave abuse of discretion but rather the result of respondent's
overzealous desire to carry into effect the provisions of RA 6125, it is evident that the
Board acted beyond its authority under the law and the Constitution. Hence, the petition
for certiorari and prohibition in the case at bar, is proper.
Moreover, there is no dispute that in case of discrepancy between the basic law and a
rule or regulation issued to implement said law, the basic law prevails because said rule
or regulation cannot go beyond the terms and provisions of the basic law (People vs.
Lim, 108 Phil. 1091). Rules that subvert the statute cannot be sanctioned (University of
Sto. Tomas v. Board of Tax Appeals, 93 Phil. 376; Del Mar v. Phil. Veterans
Administration, 51 SCRA 340). Except for constitutional officials who can trace their
competence to act to the fundamental law itself, a public official must locate to the
statute relied upon a grant of power before he can exercise it. Department zeal may not
be permitted to outrun the authority conferred by statute (Radio Communications of the
Philippines, Inc. v. Santiago L-29236, August 21, 1974, 58 SCRA 493; cited in Tayug
Rural Bank v. Central Bank, L-46158, November 28,1986,146 SCRA 120,130).
PREMISES CONSIDERED, this petition is hereby GRANTED.
SO ORDERED.

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G.R. No. L-29236 August 21, 1974

RADIO
COMMUNICATIONS
OF
THE
PHILIPPINES,
INC., petitioner,
vs.
FRANCISCO SANTIAGO and ENRIQUE MEDINA, as Commissioner, Public Service
Commission,respondents.
G.R. No. L-29247 August 21, 1974
RADIO
COMMUNICATIONS
OF
THE
PHILIPPINES,
INC., petitioner,
vs.
CONSTANCIO JAUGAN and ENRIQUE MEDINA, Commissioner, Public Service
Commission, respondents..

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

Admin. Law | 135

The allegation by petitioner that it was devoid of such competence is based on the
express limitation found in the Public Service Act 6 expressly exempting radio
companies from the jurisdiction, supervision and control of such body "except with
respect to the fixing of rates." 7 In the face of the provision itself, it is rather apparent that
the Public Service Commission lacked the required power to proceed against petitioner.
There is nothing in Section 21 thereof which impowers it to impose a fine that calls for a
different conclusion. 8 We have to reverse.
There is no dispute as to the facts. The challenged order in Radio Communications
of the Phil., Inc. v. Santiago and Medina stated: "It is admitted by respondent [now
petitioner] that on July 12, 1966, a telegram was filed with respondent-company and the
amount of P1.50 was paid for the transmission of said telegram to Zamboanga City ....
The telegram, however, was never transmitted until now. The respondent not only did
not give any valid explanation, but did not present any evidence to explain why the said
telegram was not forwarded to the addressee until now.
This is, therefore, a clear case where the respondent, taking advantage of the rates
fixed by this Commission collected the sum of P1.50 and promised to render a service
to the complainant, i.e. the transmission of his telegram filed on July 12, 1966; but, after
receiving the sum of P1.50, respondent failed to render the promised
service," 9 in Radio Communications of the Phil., Inc. v. Jaugan and Medina, the order
sought to be reviewed had this to say: "The evidence presented shows that on August
1, 1967, complainant Constancio Jaugan filed a telegram at the branch office of
respondent in Dumaguete City, ... addressed to Commissioner Enrique Medina, PSC,
Manila. The telegram was received by an employee of the respondent, Mrs. Jesusa A.
Orge, as shown by the receipt ... dated August 1, 1967, and the sum of P2.64 was
collected in payment of said telegram.
The telegram, ... in effect, advised Commissioner Medina that the Land Registration
Case where he was cited by subpoena to testify before the CFI of Oriental Negros on
August 14 and 15, 1967, was transferred and, therefore, there was no necessity for the
said Commissioner to proceed to Negros Oriental on those dates. It appears that the
said telegram received by Jesusa Orge at Dumaguete City on August 1, 1967, was
transmitted to Manila, on the same date, but was never delivered to the addressee, and
on August 14 and 15, when Commissioner Medina appeared before the Dumaguete
Court, he was advised that the case was postponed since August 1 and that a telegram
was sent to the said Commissioner.
Inquiries were made, why the telegram was not received by the Commissioner in
Manila; the Dumaguete Office communicated with the Manila Office, on the same date,
August 14, 1967 and it was only on August 15, 1967 that the telegram was relayed to
the Public Service Commission and was received by one of the employees of the

Admin. Law | 136

Commission, in the absence of Commissioner Medina who was then in Negros Oriental.
... ." 10 It was the manifest failure in both cases to render the service expected of a
responsible operator that led to the imposition of the penalty.
The motions for reconsideration in both cases having proved futile, the matter was
elevated to this Court.
As noted at the outset, a reversal is called for.
1. Except for constitutional officials who can trace their competence to act to the
fundamental law itself, a public official must locate in the statute relied upon a grant of
power before he can exercise it. It need not be express. It may be implied from the
wording of the law. Absent such a requisite, however, no warrant exists for the
assumption of authority.
The act performed, if properly challenged, cannot meet the test of validity. It must be
set aside. So it must be in these two petitions. That is to defer to a principle reiterated
by this Court time and time again. 11
That doctrine goes back to a 1916 decision, Bautista v. Angeles, 12 where Chief
Justice Arellano stated the following: "It devolves upon the judicial power to convince
the private individual, the party governed, that he has no right to do what he did in
violating orders of the administrative authorities issued by them in the exercise of their
rights.
Once he is convinced, the administrative authorities, by virtue of their own powers,
impose the weight of their authority upon him. If they, the administrative authorities of
public officials, exceed lawful limits in the exercise of their power of execution, the law
provides what shall be done before the judicial power can step in and repair the damage
to the private interest, or apply the law by declaring what was properly or improperly
done in exercising public power." 13
There is likewise this relevant excerpt from Villegas v. Subido: 14 "Nothing is better
settled in the law than that a public official exercises power, not rights. The government
itself is merely an agency through which the will of the state is expressed and enforced.
Its officers therefore are likewise agents entrusted with the responsibility of discharging
its functions. As such there is no presumption that they are empowered to act.
There must be a delegation of such authority, either express or implied. In the
absence of a valid grant, they are devoid of power. What they do suffers from a fatal
infirmity. That principle cannot be sufficiently stressed. In the appropriate language of
Chief Justice Hughes: 'It must be conceded that departmental zeal may not be
permitted to outrun the authority conferred by statute.' Neither the high dignity of the

Admin. Law | 137

office nor the righteousness of the motive then is an acceptable substitute. Otherwise
the rule of law becomes a myth.
Such an eventuality, we must take all pains to avoid." 15Such a fundamental
postulate applies to the Executive itself. So it has been attested by a number of cases
involving the President of the Philippines. 16
There can be no justification then for the Public Service Commission imposing the
fines in these two petitions. The law cannot be any clearer. The only power it possessed
over radio companies, as noted was the fix rates. 17 It could not take to task a radio
company for any negligence or misfeasance. It was bereft of such competence. It was
not vested with such authority. What it did then in these two petitions lacked the impress
of validity.
2. The Public Service Commission having been abolished by virtue of a Presidential
Decree, as set forth at the outset, and a new Board of Communications having been
created to take its place, nothing said in this decision has reference to whatever powers
are now lodged in the latter body. It is to be understood, likewise, that insofar as the
complainants are concerned, this decision goes no further than to rule adversely on the
exercise of authority by the Public Service Commission when it took disciplinary action
against petitioner.
WHEREFORE, in L-29236, Radio Communications of the Phil., Inc. v. Francisco
Santiago and Enrique Medina, the order of former Commissioner Enrique Medina of
October 13, 1967 as affirmed by the order of the Public Service Commission en banc of
May 3, 1968, is reversed and set aside, and in L-29247, Radio Communications of the
Phil., Inc. v. Constancio Jaugan and Enrique Medina, the order of former Commissioner
Enrique Medina of October 10, 1967 as affirmed by the order of the Public Service
Commission en banc of April 4, 1968, is reversed and set aside. No costs.

Admin. Law | 138

November 28, 1986

G.R. No. L-46158

TAYUG RURAL BANK, plaintiff-appellee,

vs.
CENTRAL BANK OF THE PHILIPPINES, defendant-appellant.

PARAS, J.:p
Submitted on May 20, 1977 for decision by this Court is this appeal from the
decision dated January 6, 1971 rendered by the Court of First Instance of Manila,
Branch III in Civil Case No. 76920, the decretal portion of which states as follows:
WHEREFORE, judgment is rendered for the plaintiff on the complaint and the
defendant is ordered to further credit the plaintiff the amounts collected as 10%
penalty in the sum of P19,335.88 or up to July 15, 1969 and to refrain from
collecting the said 10% penalty on the remaining past due loans of plaintiff with
the defendant.
With respect to defendant's counterclaim, judgment is hereby rendered
against the plaintiff and the defendant is ordered to pay the Central Bank of the
Philippines the outstanding balance of its past overdue accounts in the sum of
P444,809,45 plus accrued interest at the rate of 1/2 of 1 % per annum with respect
to the promissory notes (Annexes 1 to 1-E of defendant's Answer) and 2-1/2% per
annum with respect to the promissory notes (Annexes 1-f to 1-i of the Answer).
From this amount shall be deducted the sum of P19,335.88 collected as 10%
penalty.
The facts of the case based on the parties' stipulation of facts (Record on Appeal p. 67),
are as follows:
Plaintiff-Appellee, Tayug Rural Bank, Inc., is a banking corporation in Tayug,
Pangasinan. During the period from December 28, 1962 to July 30, 1963, it obtained
thirteen (13) loans from Defendant-Appellant, Central Bank of the Philippines, by way of
rediscounting, at the rate of 1/2 of 1% per annum from 1962 to March 28, 1963 and
thereafter at the rate of 2-1/2% per anum. The loans, amounting to P813,000.00 as of
July 30, 1963, were all covered by corresponding promissory notes prescribing the
terms and conditions of the aforesaid loans (Record on Appea, pp. 15-53). As of July
15, 1969, the outstanding balance was P 444,809.45 (Record on Appeal, p. 56).
On December 23, 1964, Appellant, thru the Director of the Department of Loans and
Credit, issued Memorandum Circular No. DLC-8, informing all rural banks that an
additional penalty interest rate of ten per cent (10%) per annum would be assessed on

Admin. Law | 139

all past due loans beginning January 4, 1965. Said Memorandum Circular was actually
enforced on all rural banks effective July 4, 1965.
On June 27, 1969, Appellee Rural Bank sued Appellant in the Court of First Instance of
Manila, Branch III, to recover the 10% penalty imposed by Appellant amounting to
P16,874.97, as of September 27, 1968 and to restrain Appellant from continuing the
imposition of the penalty. Appellant filed a counterclaim for the outstanding balance and
overdue accounts of Appellee in the total amount of P444,809.45 plus accrued interest
and penalty at 10% per annum on the outstanding balance until full payment. (Record
on Appeal, p. 13). Appellant justified the imposition of the penalty by way of affirmative
and special defenses, stating that it was legally imposed under the provisions of Section
147 and 148 of the Rules and Regulations Governing Rural Banks promulgated by the
Monetary Board on September 5, 1958, under authority of Section 3 of Republic Act No.
720, as amended (Record on Appeal, p. 8, Affirmative and Special Defenses Nos. 2 and
3).
In its answer to the counterclaim, Appellee prayed for the dismissal of the counterclaim,
denying Appellant's allegations stating that if Appellee has any unpaid obligations with
Appellant, it was due to the latter's fault on account of its flexible and double standard
policy in the granting of rediscounting privileges to Appellee and its subsequent arbitrary
and illegal imposition of the 10% penalty (Record on Appeal, p. 57). In its Memorandum
filed on November 11, 1970, Appellee also asserts that Appellant had no basis to
impose the penalty interest inasmuch as the promissory notes covering the loans
executed by Appellee in favor of Appellants do not provide for penalty interest rate of
10% per annum on just due loans beginning January 4, 1965 (Record on Appeal p. 96).
The lower court, in its Order dated March 3, 1970, stated that "only a legal question has
been raised in the pleadings" and upholding the stand of plaintiff Rural Bank, decided
the case in its favor. (Rollo, p. 34).
Appellant appealed the decision of the trial court to the Court of Appeals, for
determination of questions of facts and of law. However, in its decision promulgated
April 13, 1977, the Court of Appeals, finding no controverted facts and taking note of the
statement of the lower court in its pre-trial Order dated March 3, 1970 that only a legal
question has been raised in the pleadings, (Record on Appeal, p. 61), ruled that the
resolution of the appeal will solely depend on the legal issue of whether or not the
Monetary Board had authority to authorize Appellant Central Bank to impose a penalty
rate of 10% per annum on past due loans of rural banks which had failed to pay their
accounts on time and ordered the certification of this case to this Court for proper
determination (Rollo, pp. 34-35).

Admin. Law | 140

On April 20, 1977, the entire record of the case was forwarded to this Court (Rollo, p.
36). In the resolution of May 20, 1977, the First Division of this Court, ordered the case
docketed and as already stated declared the same submitted for decision (Rollo, p. 38).
In its Brief, Appellant assigns the following errors:
I. THE LOWER COURT ERRED IN HOLDING THAT IT IS BEYOND THE REACH OF
THE MONETARY BOARD TO METE OUT PENALTIES ON PAST DUE LOANS OF
RURAL BANKS ESPECIALLY SINCE NO PENAL CLAUSE HAS BEEN INCLUDED IN
THE PROMISSORY NOTES.
II. THE LOWER COURT ERRED IN HOLDING THAT THE IMPOSITION OF THE
PENALTY IS AN IMPAIRMENT OF THE OBLIGATION OF CONTRACT WITHOUT DUE
PROCESS.
III. THE LOWER COURT ERRED IN NOT FINDING JUDGMENT AGAINST PLAINTIFF
FOR 10% COST OF COLLECTION OF THE PROMISSORY NOTE AS PROVIDED
THEREIN.
It is undisputed that no penal clause has been included in the promissory notes. For this
reason, the trial court is of the view that Memorandum Circular DLC-8 issued on
December 23, 1964 prescribing retroactive effect on all past due loans, impairs the
obligation of contract and deprives the plaintiff of its property without due process of law.
(Record on Appel, p. 40).
On the other hand appellant without opposing appellee's right against impairment of
contracts, contends that when the promissory notes were signed by appellee, it was
chargeable with knowledge of Sections 147 and 148 of the rules and regulations
authorizing the Central Bank to impose additional reasonable penalties, which became
part of the agreement. (ibid).
Accordingly, the issue is reduced to the sole question as to whether or not the Central
Bank can validly impose the 10% penalty on Appellee's past overdue loans beginning
July 4, 1965, by virtue of Memorandum Circular No. DLC-8 dated December 23, 1964.
The answer is in the negative.
Memorandum Circular No. DLC-8 issued by the Director of Appellant's Department of
Loans and Credit on December 23, 1964, reads as follows:
Pursuant to Monetary Board Resolution No. 1813 dated December 18, 1964, and in
consonance with Section 147 and 148 of the Rules and Regulations Governing Rural
Banks concerning the responsibility of a rural bank to remit immediately to the Central

Admin. Law | 141

Bank payments received on papers rediscounted with the latter including the loan value
of rediscounted papers as they mature, and to liquidate fully its maturing loan
obligations with the Central Bank, personal checks, for purposes of repayment, shall
considered only after such personal checks shall have been honored at clearing.
In addition, rural banks which shall default in their loan obligations, thus incurring past
due accounts with the Central Bank, shall be assessed an additional penalty interest
rate of ten per cent (10%) per annum on such past due accounts with the Central Bank
over and above the customary interest rate(s) at which such loans were originally
secured from the Central Bank. (Record on Appeal, p. 135).
The above-quoted Memorandum Circular was issued on the basis of Sections 147 and
148 of the Rules and Regulations Governing Rural Banks of the Philippines approved
on September 5, 1958, which provide:
Section 147. Duty of Rural Bank to turn over payment received for papers discounted or
used for collateral. A Rural Bank receiving any payment on account of papers
discounted or used for collateral must turn the same over to the creditor bank before the
close of the banking day next following the receipt of payment, as long as the aggregate
discounting on loan amount is not fully paid, unless the Rural Bank substitutes the same
with another eligible paper with at least the same or earlier maturity and the same or
greater value.
A Rural Bank failing to comply with the provisions of the preceding paragraph shall ipso
facto lose its right to the rediscounting or loan period, without prejudice to the Central
Bank imposing additional reasonable penalties, including curtailment or withdrawal of
financial assistance.
Sec. 148. Default and other violations of obligation by Rural Bank, effect. A Rural
Bank becomes in default upon the expiration of the maturity period of its note, or that of
the papers discounted or used as collateral, without the necessity of demand.
A Rural Bank incurring default, or in any other manner, violating any of the stipulations
in its note, shall suffer the consequences provided in the second paragraph of the
preceding section. (Record on Appeal, p. 136.)
The "Rules and Regulations Governing Rural Banks" was published in the Official
Gazette, 55 O.G., on June 13, 1959, pp. 5186-5289. It is by virtue of these same Rules
that Rural Banks re-discount their loan papers with the Central Bank at 2-1/2% interest
per annum and in turn lend the money to the public at 12% interest per annum
(Defendant's Reply to Plaintiff's Memorandum, Record on Appeal, p. 130).

Admin. Law | 142

Appellant maintains that it is pursuant to Section 3 of R.A. No. 720, as amended, that
the Monetary Board has adopted the set of Rules and Regulations Governing Rural
Banks. It reads:
SEC. 3. In furtherance of this policy, the Monetary Board of the Central Bank of the
Philippines shall formulate the necessary rules and regulations governing the
establishment and operatives of Rural Banks for the purpose of providing adequate
credit facilities to small farmers and merchants, or to cooperatives of such farmers or
merchants and to supervise the operation of such banks.
The specific provision under the law claimed as basis for Sections 147 and 148 of the
Rules and Regulations Governing Rural Banks, that is, on Appellant's authority to
extend loans to Rural Banks by way of rediscounting is Section 13 of R.A. 720, as
amended, which provides:
SEC. 13. In an emergency or when a financial crisis is imminent the Central Bank may
give a loan to any Rural Bank against assets of the Rural Bank which may be
considered acceptable by a concurrent vote of at least, five members of the Monetary
Board.
In normal times, the Central Bank may re-discount against papers evidencing a loan
granted by a Rural Bank to any of its customers which can be liquefied within a period
of two hundred and seventy days: PROVIDED, HOWEVER, That for the purpose of
implementing a nationwide program of agricultural and industrial development, Rural
Banks are hereby authorized under such terms and conditions as the Central Bank shall
prescribe to borrow on a medium or long term basis, funds that the Central Bank or any
other government financing institutions shall borrow from the International Bank for
Reconstruction and Development or other international or foreign lending institutions for
the specific purpose of financing the above stated agricultural and industrial program.
Repayment of loans obtained by the Central Bank of the Philippines or any other
government financing institution from said foreign lending institutions under this section
shall be guaranteed by the Republic of the Philippines.
As to the supervising authority of the Monetary Board of the Central Bank over Rural
Banks, the same is spelled-out under Section 10 of R.A. 720, as follows:
SEC. 10. The power to supervise the operation of any Rural Bank by the Monetary
Board of the Central Bank as herein indicated, shall consist in placing limits to the
maximum credit allowed any individual borrower; in prescribing the interest rate; in
determining the loan period and loan procedure; in indicating the manner in which
technical assistance shall be extended to Rural Banks; in imposing a uniform
accounting system and manner of keeping the accounts and records of the Rural

Admin. Law | 143

Banks; in undertaking regular credit examination of the Rural Banks: in instituting

periodic surveys of loan and lending procedures, audits, test check of cash and other
transactions of the Rural Banks; in conducting training courses for personnel of Rural
Banks; and, in general in supervising the business operation of the Rural Banks.
Nowhere in any of the above-quoted pertinent provisions of R.A. 720 nor in any other
provision of R.A. 720 for that matter, is the monetary Board authorized to mete out on
rural banks an additional penalty rate on their past due accounts with Appellant. As
correctly stated by the trial court, while the Monetary Board possesses broad
supervisory powers, nonetheless, the retroactive imposition of administrative penalties
cannot be taken as a measure supervisory in character. (Record on Appeal, p. 141).
Administrative rules and regulations have the force and effect of law (Valerio v. Hon.
Secretary of Agriculture and Natural Resources, 7 SCRA 719; Commissioner of Civil
Service v. Cruz, 15 SCRA 638; R.B. Industrial Development Company, Ltd. v. Enage, 24
SCRA 365; Director of Forestry v. Munoz, 23 SCRA 1183; Gonzalo Sy v. Central Bank
of the Philippines, 70 SCRA 570).
There are, however, limitations to the rule-making power of administrative agencies. A
rule shaped out by jurisprudence is that when Congress authorizes promulgation of
administrative rules and regulations to implement given legislation, all that is required is
that the regulation be not in contradiction with it, but conform to the standards that the
law prescribes (Director of Forestry v. Munoz, 23 SCRA 1183). The rule delineating the
extent of the binding force to be given to administrative rules and regulations was
explained by the Court in Teoxon v. Member of the Board of Administrators (33 SCRA
588), thus: "The recognition of the power of administrative officials to promulgate rules
in the implementation of the statute, as necessarily limited to what is provided for in the
legislative enactment, may be found as early as 1908 in the case of United States v.
Barrias (11 Phil. 327) in 1914 U.S. v. Tupasi Molina (29 Phil. 119), in 1936 People v.
Santos(63 Phil. 300), in 1951 Chinese Flour Importers Ass. v. Price Stabilization
Board (89 Phil. 439), and in 1962 Victorias Milling Co., Inc. v. Social Security
Commission (4 SCRA 627). The Court held in the same case that "A rule is binding on
the courts so long as the procedure fixed for its promulgation is followed and its scope is
within the statute granted by the legislature, even if the courts are not in agreement with
the policy stated therein or its innate wisdom ...." On the other hand, "administrative
interpretation of the law is at best merely advisory, for it is the courts that finally
determine what the law means." Indeed, it cannot be otherwise as the Constitution limits
the authority of the President, in whom all executive power resides, to take care that the
laws be faithfully executed. No lesser administrative, executive office, or agency then
can, contrary to the express language of the Constitution, assert for itself a more
extensive prerogative. Necessarily, it is bound to observe the constitutional mandate.

Admin. Law | 144

There must be strict compliance with the legislative enactment. The rule has prevailed
over the years, the latest restatement of which was made by the Court in the case of
Bautista v. Junio (L-50908, January 31, 1984, 127 SCRA 342).
In case of discrepancy between the basic law and a rule or regulation issued to
implement said law, the basic law prevails because said rule or regulation cannot go
beyond the terms and provisions of the basic law (People v. Lim, 108 Phil. 1091). Rules
that subvert the statute cannot be sanctioned (University of St. Tomas v. Board of Tax
Appeals, 93 Phil. 376; Del Mar v. Phil. Veterans Administration, 51 SCRA 340). Except
for constitutional officials who can trace their competence to act to the fundamental law
itself, a public official must locate in the statute relied upon a grant of power before he
can exercise it. Department zeal may not be permitted to outrun the authority conferred
by statute (Radio Communications of the Philippines, Inc. v. Santiago, L-29236, August
21, 1974, 58 SCRA 493).
When promulgated in pursuance of the procedure or authority conferred upon the
administrative agency by law, the rules and regulations partake of the nature of a
statute, and compliance therewith may be enforced by a penal sanction provided in the
law (Victorias Milling Co., Inc. v. Social Security Commission, 114 Phil. 555; People v.
Maceren, L-32166, October 18, 1977, 79 SCRA 462; Daza v. Republic, L-43276,
September 28, 1984, 132 SCRA 267). Conversely, the rule is likewise clear. Hence an
administrative agency cannot impose a penalty not so provided in the law authorizing
the promulgation of the rules and regulations, much less one that is applied
retroactively.
The records show that DLC Form No. 11 (Folder of Exhibits, p. 16) was revised
December 23, 1964 to include the penal clause, as follows:
In the event that this note becomes past due, the undersigned shall pay a penalty at the
rate of _____ per cent ( ) per annum on such past due account over and above the
interest rate at which such loan was originally secured from the Central Bank.
Such clause was not a part of the promissory notes executed by Appellee to secure its
loans. Appellant inserted the clause in the revised DLC Form No. 11 to make it a part of
the contractual obligation of rural banks securing loans from the Central Bank, after
December 23, 1964. Thus, while there is now a basis for the imposition of the 10%
penalty rate on overdue accounts of rural banks, there was none during the period that
Appellee contracted its loans from Appellant, the last of which loan was on July 30,
1963. Surely, the rule cannot be given retroactive effect.
Finally, on March 31, 1970, the Monetary Board in its Resolution No. 475 effective April
1, 1970, revoked its Resolution No. 1813, dated December 18, 1964 imposing the

Admin. Law | 145

questioned 10% per annum penalty rate on past due loans of rural banks and amended
sub-paragraph (a), Section 10 of the existing guidelines governing rural banks'
applications for a loan or rediscount, dated May 7, 1969 (Folder of Exhibits, p. 19). As
stated by the trial court, this move on the part of the Monetary Board clearly shows an
admission that it has no power to impose the 10% penalty interest through its rules and
regulations but only through the terms and conditions of the promissory notes executed
by the borrowing rural banks. Appellant evidently hoped that the defect could be
adequately accomplished by the revision of DLC Form No. 11.
The contention that Appellant is entitled to the 10% cost of collection in case of suit and
should therefore, have been awarded the same by the court below, is well taken. It is
provided in all the promissory notes signed by Appellee that in case of suit for the
collection of the amount of the note or any unpaid balance thereof, the Appellee Rural
Bank shall pay the Central Bank of the Philippines a sum equivalent to ten (10%) per
cent of the amount unpaid not in any case less than five hundred (P500.00) pesos as
attorney's fees and costs of suit and collection. Thus, Appellee cannot be allowed to
come to Court seeking redress for an wrong done against it and then be allowed to
renege on its corresponding obligations.
PREMISES CONSIDERED, the decision of the trial court is hereby AFFIRMED with
modification that Appellee Rural Bank is ordered to pay a sum equivalent to 10% of the
outstanding balance of its past overdue accounts, but not in any case less than P500.00
as attorney's fees and costs of suit and collection.
SO ORDERED.

Admin. Law | 146

January 21, 1987

G.R. No. L-27520

GLOBE WIRELESS LTD., petitioner,

vs.
PUBLIC SERVICE COMMISSION and ANTONIO B. ARNAIZ, respondents.
RESOLUTION
G.R. No. 27520 [Globe Wireless Ltd., vs. Public Service Commission and Antonio B.
Arnaiz]. Challenged in this petition for certiorari is the jurisdiction of the defunct
Public Service Commission [PSC] under Section 21 of Commonwealth Act No. 146, as
amended, to discipline and impose a fine upon petitioner, Globe Wireless, Ltd., a duly
organized Philippines corporation engaged in ;international telecommunication business
under a franchise granted by Public Acts Nos. 3495, 3692 and 4150 as amended by
Republic Act No. 4630.
A message addressed to Maria Diaz, Monte Esquina 30, Madrid, Spain, filed by private
respondent Antonio B. Arnaiz with the telegraph office of the Bureau of
Telecommunications in Dumaguete City was transmitted to the Bureau of
Telecommunications in Manila. It was forwarded to petitioner Globe Wireless Ltd. for
transmission to Madrid. Petitioner sent the message to the American Cable and Radio
Corporation in New York, which, in turn, transmitted the same to the Empresa Nacional
de Telecommunicaciones in Madrid. The latter, however, mislaid said message,
resulting in its non-delivery to the addressee.
After being informed of said fact, private respondent Arnaiz, sent to then Public Service
Commissioner Enrique Medina an unverified letter-complaint relating the incident. The
complaint was docketed as PSC Case No. 65-39-OC and petitioner was required to
answer the same. Petitioner, in its answer, questioned PSC's jurisdiction over the
subject matter of the letter-complaint, even as it denied liability for the non-delivery of
the message to the addressee.
Hearing ensued, after which the PSC issued an order finding petitioner "responsible for
the inadequate and unsatisfactory service complained of, in violation of the Public
Service Act" and ordering it "to pay a fine of TWO HUNDRED [P200.00] PESOS under
Sec. 21 of Com. Act 146, as amended." petitioner was likewise required to refund the
sum of P19.14 to the remitter of the undelivered message. [Annex "C", petition, .
23, Rollo].
Its motion for reconsideration having been denied, petitioner instituted the instant
petition.

Admin. Law | 147

We find for petitioner.

Verily, Section 13 of Commonwealth Act No. 146, as amended otherwise known as the
Public Service Act, vested in the Public Service Commission jurisdiction, supervision
and control over all Public services and their franchises, equipment and other
properties. However, Section 5 of Republic Act No. 4630, the legislative franchise under
which petitioner was operating, limited respondent Commission's jurisdiction over
petitioner only to the rate which petitioner may charge the Public. Thus,
Sec. 5. The Public Service Commission is hereby given jurisdiction over the
grantee only with respect to the rates which the grantee may charge the public subject
to international commitments made or adhered to by the Republic of the Philippines.
(Emphasis supplied.)
The act complained of consisted in petitioner having allegedly failed to deliver the
telegraphic message of private respondent to the addressee in Madrid, Spain.
Obviously, such imputed negligence had nothing whatsoever to do with the subject
matter of the very limited jurisdiction of the Commission over petitioner.
Moreover, under Section 21 of C.A. No. 146, as amended, the Commission was
empowered to impose an administrative fine in cases of violation of or failure by a
Public service to comply with the terms and conditions of any certificate or any orders,
decisions or regulations of the Commission. petitioner operated under a legislative
franchise, so there were no terms nor conditions of any certificate issued by the
Commission to violate. Neither was there any order, decision or regulation from the
Commission applicable to petitioner that the latter had allegedly violated, disobeyed,
defied or disregarded.
Too basic in administrative law to need citation of jurisprudence is the rule that the
jurisdiction and powers of administrative agencies, like respondent Commission, are
limited to those expressly granted or necessarily implied from those granted in the
legislation creating such body; and any order without or beyond such jurisdiction is void
and ineffective. The order under consideration belonged to this category.
ACCORDINGLY, the instant petition is hereby granted and the order of respondent
Public Service Commission in PSC Case No. 65-39-OC is set aside for being null and
void.

Admin. Law | 148

G.R. No. 140563. July 14, 2000]

DANTE M. POLLOSO, petitioner,
vs.
HON. CELSO D. GANGAN, Chairman, COMMISSION ON AUDIT, HON. RAUL C.
FLORES, COMMISSIONER, COMMISSION ON AUDIT, HON. EMMANUEL M.
DALMAN, COMMISSIONER, COMMISSION ON AUDIT. respondents.

KAPUNAN, J.:
Before this Court is a petition for review from the decision of the Commission on Audit
(COA), dated 28 September 1999 of herein petitioner Dante M. Polloso, from the
disallowance by the COA Unit Auditor of the amount of P283,763.39 representing
payment of legal services rendered by Atty. Benemerito A. Satorre to the National
Power Corporation (NPC).
The facts of the case are undisputed.
In 1994, the National Power Corporation (NPC), represented by its President Dr.
Francisco L. Viray entered into a service contract with Atty. Benemerito A. Satorre.
Under said contract, Satorre was to perform the following services for the Leyte-Cebu
and Leyte-Luzon Interconnection Projects of the NPC:
1. .....Provide services on administrative and legal matters.
2. .....Facilitate, coordinate between the Office of the Project Director and the Project
Manager, and the Office of the Regional Legal Counsel and other NPC Offices,
Local Government Units and Agencies of Government involving administrative cases
and legal problems.
3. .....Provide direction, supervision, coordination and control of right-of-way activities in
the project.
4. .....Perform other pertinent services as may be assigned him by the Project Director
and Project Manager from time to time.[1]
The contract provided that in consideration for services rendered, Satorre would receive
a monthly salary P21,749.00 plus representation and transportation allowance of
P5,300.[2]
On 12 January 1995, Unit Auditor Alexander A. Tan, NPC-VRC, Cebu City issued Notice
of Disallowance No. 95-0001-135-94 for the payment of the services rendered by Atty.
Satorre for the period covering March to December 1995 in the total amount of
P283,763.39. The following reasons were cited for said disallowance:

Admin. Law | 149

1. ....The contract for services did not have the written conformity and acquiescence
of the Solicitor General or the Corporate Counsel and concurrence of the
Commission on Audit as required under COA Circular No. 86-255 dated April 2,
1986.
2. ....The contract was not supported with Certificate of Availability of Funds as
required under Sec. 86 of P.D. 1445.
3. ....The contract was not submitted to the Civil Service Commission for final
review and was not forwarded to the Compensation and Position Confirmation
and Classification Bureau, DBM for appropriate action as required in CSC MC #
5 Series of 1985.[3]
Accordingly, the following were held to be personally liable for the amounts due to Atty.
Satorre: Dr. Francisco Viray, NPC contracting party; Manolo C. Marquez, for certifying
the claim as necessary, lawful and authorized; Andrea B. Roa and Romeo Gallego, for
verifying the supporting documents to be complete and proper; Jesus Alio, for reviewing
the supporting documents to be complete and proper; Dante M. Polloso, Project
Manager II, Leyte-Cebu Interconnection Project (LCIP), National Power CorporationVisayas Regional Center, for approving the claim; and Benemerito Satorre, as the
payee.[4]
On 27 January 1995, only petitioner Dante Polloso submitted a letter-explanation
refuting the alleged violation contained in the Notice of Disallowance and sought
reconsideration thereof.[5] This was denied by the Unit Auditor in a resolution, dated 30
March 1995.[6]
On 10 October 1995, petitioner appealed the denial of the Unit Auditor to the Regional
Director, COA Regional Office No. VII;[7] the latter denied the same.[8]
On 29 June 1998, a petition for review was filed before the Commission Proper,
Commission on Audit, Central Office. [9] On 29 October 1999, the COA issued the
decision assailed before this Court. The dispositive portion thereof, reads:
Thus, it is crystal clear from the aforequoted provision of law and regulations that the
service contract entered into by and between the National Power Corporation and Atty.
Satorre is in contravention thereof.
Upon the foregoing considerations, the instant appeal of MR. DANTE M. POLLOSO,
has to be, as it is hereby denied. Accordingly, the disallowance of P283,763.39 is
hereby affirmed.[10]

Hence, this appeal, petitioner raising the following issues:

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I
DOES THE PROHIBITION UNDER COA CIRCULAR NO. 86-255 DATED APRIL 2,
1986 AND SEC. 212 OF THE GOVERNMENT ACCOUNTING AND AUDITING
MANUAL IMPOSED ON GOVERNMENT AGENCIES FROM HIRING PRIVATE
LAWYERS "TO HANDLE THEIR LEGAL CASES" APPLY TO A LAWYER HIRED BY
VIRTUE OF A SERVICE CONTRACT BUT WHO ACTUALLY HANDLE PURELY
RIGHT-OF-WAY MATTERS (EXCLUDING HANDLING OF COURT CASES)?
II
WILL COA CIRCULAR NO. 86-255 DATED APRIL 2, 1986 AND SEC. 212, VOLUME I
OF THE GOVERNMENT ACCOUNTING AND AUDITING MANUAL OPERATE TO
RESTRICT THE PRACTICE OF THE LAW PROFESSION AND THEREFORE
REPUGNANT TO SEC. 5, ARTICLE VII OF THE 1987 PHILIPPINE CONSTITUTION?
III
DOES SECTION 38, CHAPTER 9, BOOK I OF EXECUTIVE ORDER NO. 292,
OTHERWISE KNOWN AS THE ADMINISTRATIVE CODE OF 1987 APPLY TO
PETITIONER FOR HAVING ACTED IN GOOD FAITH AND WITHOUT MALICE AND
MERELY IMPLEMENTED A VALID CONTRACT ENTERED INTO BY THE PRESIDENT
OF THE NATIONAL POWER CORPORATION?
IV
DOES THE PRINCIPLE OF "QUANTUM MERUIT" APPLY TO THE SERVICES
RENDERED BY ATTY. SATORRE WHICH BENEFITTED THE NATIONAL POWER
CORPORATION?[11]
The petition is without merit.
In the main, petitioner posits that the phrase "handling of legal cases" should be
construed to mean as conduct of cases or handling of court cases or litigation and not to
other legal matters, such as legal documentation, negotiations, counseling or right of
way matters.
To test the accuracy of such an interpretation, an examination of the subject COA
Circular is in order:
SUBJECT: Inhibition against employment by government agencies and
instrumentalities, including government-owned or controlled corporations, of private
lawyers to handle their legal cases.
It has come to the attention of this Commission that notwithstanding restrictions or
prohibitions on the matter under existing laws, certain government agencies,
instrumentalities, and government-owned and/or controlled corporations, notably
government banking and financing institutions, persist in hiring or employing private
lawyers or law practitioners to render legal services for them and/or to handle their legal
cases in consideration of fixed retainer fees, at times in unreasonable amounts, paid
from public funds. In keeping with the retrenchment policy of the present administration,
this Commission frowns upon such a practice.

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Accordingly, it is hereby directed that, henceforth, the payment out of public funds of
retainer fees to private law practitioners who are so hired or employed without the prior
written conformity and acquiescence of the Office of the Solicitor General or the
Government Corporate Counsel, as the case may be, as well as the written
concurrence of the Commission on Audit shall be disallowed in audit and the same shall
be a personal liability of the officials concerned. [underscoring supplied]
What can be gleaned from a reading of the above circular is that government agencies
and instrumentalities are restricted in their hiring of private lawyers to render legal
services or handle their cases. No public funds will be disbursed for the payment to
private lawyers unless prior to the hiring of said lawyer, there is a written conformity and
acquiescence from the Solicitor General or the Government Corporate Counsel.
Contrary to the view espoused by petitioner, the prohibition covers the hiring of private
lawyers to render any form of legal service. It makes no distinction as to whether or not
the legal services to be performed involve an actual legal controversy or court litigation.
Petitioner insists that the prohibition pertains only to "handling of legal cases," perhaps
because this is what is stated in the title of the circular. To rely on the title of the circular
would go against a basic rule in statutory construction that a particular clause should not
be studied as a detached and isolated expression, but the whole and every part of the
statute must be considered in fixing the meaning of any of its part. [12] Petitioner, likewise,
insists that the service contract in question falls outside the ambit of the circular as what
is being curtailed is the payment of retainer fees and not the payment of fees for legal
services actually rendered.
A retainer fee has been defined as a "preliminary fee to an attorney or counsel to insure
and secure his future services, and induce him to act for the client. It is intended to
remunerate counsel for being deprived, by being retained by one party, of the
opportunity of rendering services to the other and of receiving pay from him, and
payment of such fee, in the absence of an express understanding to the contrary, is
neither made nor received in payment of the services contemplated; its payment has no
relation to the obligation of the client to pay his attorney for the services for which he
has retained him to perform."[13] To give such a technical interpretation to the term
"retainer fees" would go against the purpose of the circular and render the same
ineffectual. In his resolution, Unit Auditor Alexander Tan expounded on the purpose of
the circular, as enunciated therein:
On the claim that COA Circular 86-255 is not applicable in this case because the
inhibition provided for in said Circular relates to the handling of legal cases of a
government agency and that the contractor was not hired in that capacity but to handle
legal matters (sic) involving right-of-way, it is maintained that the contracted service falls

Admin. Law | 152

within the scope of the inhibition which clearly includes "the hiring or employing private
lawyers or law practitioners to render legal services for them and/or to handle their legal
cases" Moreover, it is important to mention that the intention of said Circular is to curb
the observed and persistent violation of existing laws and regulations, including CSC
MC # 5 series of 1985 pertaining to the employment of private lawyers on a contractual
basis in government agencies which involves the disbursement of public funds by
subjecting the same to the conformity and concurrence requirements of said Circular.
Being so, the manner of agreed payment or consideration, whether termed as a fixed
retainer basis or a fixed contract price patterned after existing salary scale of existing
and comparable positions in NPC-VRC is immaterial as both still involve the outlay of
public funds and also the contractual employment/hiring of a private lawyer.
Hence, while the circular uses the phrase "retainer fees," such should not be given its
technical interpretation but should mean any "fee" paid for any legal service rendered.
As pointed out by the Office of the Solicitor General, any interpretation of subject
circular to the contrary would open the floodgate to future circumventions thereof by the
simple expedience of hiring private lawyers to service the legal needs of the
government not on a retainer basis but by way of service contract akin to that which
Atty. Satorre and the NPC entered into. [14] No dictum is more fundamental in statutory
interpretation than that the intent of the law must prevail over the letter thereof, for
whatever is within the spirit of the statute is within the statute, since adherence to the
letter would result in an absurdity, injustice and contradictions and would defeat the
plain and vital purpose of the statute. [15]
It bears repeating that the purpose of the circular is to curtail the unauthorized and
unnecessary disbursement of public funds to private lawyers for services rendered to
the government. This is in line with the Commission on Audits constitutional mandate to
promulgate accounting and auditing rules and regulations including those for the
prevention and disallowance of irregular, unnecessary, excessive, extravagant or
unconscionable expenditures or uses of government funds and properties. [16] Having
determined the intent of the law, this Court has the imperative duty to give it effect even
if the policy goes beyond the letter or words of the statute. [17]
Hence, as the hiring of Atty. Satorre was clearly done without the prior conformity and
acquiescence of the Office of the Solicitor General or the Government Corporate
Counsel, as well as the written concurrence of the Commission on Audit, the payment of
fees to Atty. Satorre was correctly disallowed in audit by the COA.
Thus being said, it is no longer necessary to delve into whether or not the hiring of Atty.
Satorre is in accord with the rules of the Civil Service Commission.

Admin. Law | 153

Petitioners claim that the Circular is unconstitutional for being an invalid restriction to the
practice of the law profession, is clearly bereft of any merit. The Government has its
own counsel, which is the Office of the Solicitor General headed by the Solicitor
General,[18] while the Office of the Government Corporate Counsel (OGCC) acts as the
principal law office of the government-owned or controlled corporations. [19] It is only in
special cases where these government entities may engage the services of private
lawyers because of their expertise in certain fields. The questioned COA circular simply
sets forth the prerequisites for a government agency instrumentality in hiring a private
lawyer, which are reasonable safeguards to prevent irregular, unnecessary, excessive,
extravagant or unconscionable expenditures or uses of government funds and
properties. We fail to see how the restrictions contained in the COA circular can be
considered as a curtailment on the practice of the legal profession.
Anent petitioners argument that he cannot be held liable for effecting payment of the
disallowed amount because he is not privy to the service contract, we find the same to
be unmeritorious. This is because petitioners liability arose from the fact that as project
manager, he approved the said claim. In addition, his assertion that a refusal on his part
to certify payment of the same would subject him to criminal and civil liabilities cannot
hold water simply because it was his duty not to approve the same for payment upon
finding that such was irregular and in contravention of COA Circular No. 86-255, dated 2
April 1986.
We cannot grant the prayer of the petitioner that Atty. Satorre should be compensated
based on the principle of quantum meruit, on the ground that the government will be
unjustly enriched at the expense of another. We do not deny that Atty. Satorre has
indeed rendered legal services to the government. However to allow the disbursement
of public funds to pay for his services, despite the absence of requisite consent to his
hiring from the OSG or OGCC would precisely allow circumvention of COA Circular No.
86-255. In any event, it is not Atty. Satorre who is liable to return the money already paid
him, rather the same shall be the responsibility of the officials concerned, among whom
include herein petitioner.
WHEREFORE, the petition is hereby DENIED for lack of showing that the respondents
committed a reversible error.
SO ORDERED.

August 15, 2007

G.R. No. 164527

FRANCISCO I. CHAVEZ, Petitioner,

Admin. Law | 154

vs
NATIONAL HOUSING AUTHORITY, R-II BUILDERS INC., R-II HOLDINGS,
INC., HARBOUR CENTRE PORT TERMINAL, INC., and MR. REGHIS ROMERO II,
Respondents.

VELASCO, JR., J.:

In this Petition for Prohibition and Mandamus with Prayer for Temporary Restraining
Order and/or Writ of Preliminary Injunction under Rule 65, petitioner, in his capacity as
taxpayer, seeks:
to declare NULL AND VOID the Joint Venture Agreement (JVA) dated March 9, 1993
between the National Housing Authority and R-II Builders, Inc. and the Smokey
Mountain Development and Reclamation Project embodied therein; the subsequent
amendments to the said JVA; and all other agreements signed and executed in relation
thereto including, but not limited to the Smokey Mountain Asset Pool Agreement dated
26 September 1994 and the separate agreements for Phase I and Phase II of the
Projectas well as all other transactions which emanated therefrom, for
being UNCONSTITUTIONAL and INVALID;
to enjoin respondentsparticularly respondent NHAfrom further implementing and/or
enforcing the said project and other agreements related thereto, and from further
deriving and/or enjoying any rights, privileges and interest therefrom x x x; and
to compel respondents to disclose all documents and information relating to the
projectincluding, but not limited to, any subsequent agreements with respect to the
different phases of the project, the revisions over the original plan, the additional works
incurred thereon, the current financial condition of respondent R-II Builders, Inc., and
the transactions made respecting the project.[1]

The Facts
On March 1, 1988, then President Corazon C. Aquino issued Memorandum Order No.
(MO) 161[2] approving and directing the implementation of the Comprehensive and
Integrated Metropolitan Manila Waste Management Plan (the Plan). The Metro Manila
Commission, in coordination with various government agencies, was tasked as the lead
agency to implement the Plan as formulated by the Presidential Task Force on Waste
Management created by Memorandum Circular No. 39. A day after, on March 2, 1988,
MO 161-A[3] was issued, containing the guidelines which prescribed the functions and

Admin. Law | 155

responsibilities of fifteen (15) various government departments and offices tasked to

implement the Plan, namely: Department of Public Works and Highway (DPWH),
Department of Health (DOH), Department of Environment and Natural Resources
(DENR), Department of Transportation and Communication, Department of Budget and
Management, National Economic and Development Authority (NEDA), Philippine
Constabulary Integrated National Police, Philippine Information Agency and the Local
Government Unit (referring to the City of Manila), Department of Social Welfare and
Development, Presidential Commission for Urban Poor, National Housing Authority
(NHA), Department of Labor and Employment, Department of Education, Culture and
Sports (now Department of Education), and Presidential Management Staff.
Specifically, respondent NHA was ordered to conduct feasibility studies and develop
low-cost housing projects at the dumpsite and absorb scavengers in NHA
resettlement/low-cost housing projects.[4] On the other hand, the DENR was tasked to
review and evaluate proposed projects under the Plan with regard to their
environmental impact, conduct regular monitoring of activities of the Plan to ensure
compliance with environmental standards and assist DOH in the conduct of the study on
hospital waste management.[5]
At the time MO 161-A was issued by President Aquino, Smokey Mountain was a
wasteland in Balut, Tondo, Manila, where numerous Filipinos resided in subhuman
conditions, collecting items that may have some monetary value from the
garbage. The Smokey Mountain dumpsite is bounded on the north by the Estero
Marala, on the south by the property of the National Government, on the east by the
property of B and I Realty Co., and on the west by Radial Road 10 (R-10).
Pursuant to MO 161-A, NHA prepared the feasibility studies of the Smokey Mountain
low-cost housing project which resulted in the formulation of the Smokey Mountain
Development Plan and Reclamation of the Area Across R-10 or the Smokey Mountain
Development and Reclamation Project (SMDRP; the Project). The Project aimed to
convert the Smokey Mountain dumpsite into a habitable housing project, inclusive of the
reclamation of the area across R-10, adjacent to the SmokeyMountain as the enabling
component of the project.[6] Once finalized, the Plan was submitted to President Aquino
for her approval.

On July 9, 1990, the Build-Operate-and-Transfer (BOT) Law (Republic Act No. [RA]
6957) was enacted.[7] Its declared policy under Section 1 is [t]o recognize the
indispensable role of the private sector as the main engine for national growth and
development and provide the most appropriate favorable incentives to mobilize private
resources for the purpose. Sec. 3 authorized and empowered [a]ll government

Admin. Law | 156

infrastructure agencies, including government-owned and controlled corporations and

local government units x x x to enter into contract with any duly pre-qualified private
contractor for the financing, construction, operation and maintenance of any financially
viable infrastructure facilities through the build-operate-transfer or build and transfer
scheme.
RA 6957 defined build-and-transfer scheme as [a] contractual arrangement whereby the
contractor undertakes the construction, including financing, of a given infrastructure
facility, and its turnover after the completion to the government agency or local
government unit concerned which shall pay the contractor its total investment expended
on the project, plus reasonable rate of return thereon. The last paragraph of Sec. 6 of
the BOT Law provides that the repayment scheme in the case of land reclamation or the
building of industrial estates may consist of [t]he grant of a portion or percentage of the
reclaimed land or industrial estate built, subject to the constitutional requirements with
respect to the ownership of lands.
On February 10, 1992, Joint Resolution No. 03 [8] was passed by both houses of
Congress. Sec. 1 of this resolution provided, among other things, that:
Section 1. There is hereby approved the following national infrastructure projects for
implementation under the provisions of Republic Act No. 6957 and its implementing
rules and regulations: x x x x
(d) Port infrastructure like piers, wharves, quays, storage handling, ferry service and
related facilities; x x x x
(k) Land reclamation, dredging and other related development facilities;
(l) Industrial estates, regional industrial centers and export processing zones including
steel mills, iron-making and petrochemical complexes and related infrastructure and
utilities; x x x x
(p) Environmental and solid waste management-related facilities such as collection
equipment, composting plants, incinerators, landfill and tidal barriers, among others;
and
(q) Development of new townsites and communities and related facilities.

Admin. Law | 157

This resolution complied with and conformed to Sec. 4 of the BOT Law requiring the
approval of all national infrastructure projects by the Congress.
On January 17, 1992, President Aquino proclaimed MO 415 [9] approving and directing
the implementation of the SMDRP. Secs. 3 and 4 of the Memorandum Order stated:
Section 3. The National Housing Authority is hereby directed to implement the Smokey
Mountain Development Plan and Reclamation of the Area Across R-10 through a
private sector joint venture scheme at the least cost to the government.
Section 4. The land area covered by the Smokey Mountain dumpsite is hereby
conveyed to the National Housing Authority as well as the area to be reclaimed across
R-10.(Emphasis supplied.
In addition, the Public Estates Authority (PEA) was directed to assist in the evaluation of
proposals regarding the technical feasibility of reclamation, while the DENR was
directed to (1) facilitate titling of Smokey Mountain and of the area to be reclaimed and
(2) assist in the technical evaluation of proposals regarding environmental impact
statements.[10]
In the same MO 415, President Aquino created an Executive Committee (EXECOM) to
oversee the implementation of the Plan, chaired by the National Capital Region-Cabinet
Officer for Regional Development (NCR-CORD) with the heads of the NHA, City
of Manila, DPWH, PEA, Philippine Ports Authority (PPA), DENR, and Development
Bank of the Philippines (DBP) as members. [11] The NEDA subsequently became a
member of the EXECOM. Notably, in a September 2, 1994Letter,[12] PEA General
Manager Amado Lagdameo approved the plans for the reclamation project prepared by
the NHA.
In conformity with Sec. 5 of MO 415, an inter-agency technical committee (TECHCOM)
was created composed of the technical representatives of the EXECOM [t]o assist the
NHA in the evaluation of the project proposals, assist in the resolution of all issues and
problems in the project to ensure that all aspects of the development from squatter
relocation, waste management, reclamation, environmental protection, land and house
construction meet governing regulation of the region and to facilitate the completion of
the project.[13]
Subsequently, the TECHCOM put out the Public Notice and Notice to Pre-Qualify and
Bid for the right to become NHAs joint venture partner in the implementation of the
SMDRP. The notices were published in newspapers of general circulation on January
23 and 26 and February 1, 14, 16, and 23, 1992, respectively. Out of the thirteen (13)
contractors who responded, only five (5) contractors fully complied with the required

Admin. Law | 158

pre-qualification documents. Based on the evaluation of the pre-qualification

documents, the EXECOM declared the New San Jose Builders, Inc. and R-II Builders,
Inc. (RBI) as the top two contractors.[14]
Thereafter, the TECHCOM evaluated the bids (which include the Pre-feasibility Study
and Financing Plan) of the top two (2) contractors in this manner:
(1) The DBP, as financial advisor to the Project, evaluated their Financial Proposals;
(2) The DPWH, PPA, PEA and NHA evaluated the Technical Proposals for the Housing
Construction and Reclamation;
(3) The DENR evaluated Technical Proposals on Waste Management and Disposal by
conducting the Environmental Impact Analysis; and
(4) The NHA and the City of Manila evaluated the socio-economic benefits presented by
the proposals.

On June 30, 1992, Fidel V. Ramos assumed the Office of the President (OP) of
the Philippines.
On August 31, 1992, the TECHCOM submitted its recommendation to the EXECOM to
approve the R-II Builders, Inc. (RBI) proposal which garnered the highest score of
88.475%.
Subsequently, the EXECOM made a Project briefing to President Ramos. As a result,
President Ramos issued Proclamation No. 39[15] on September 9, 1992, which reads:
WHEREAS, the National Housing Authority has presented a viable conceptual plan to
convert the Smokey Mountain dumpsite into a habitable housing project, inclusive of the
reclamation of the area across Road Radial 10 (R-10) adjacent to the Smokey Mountain
as the enabling component of the project;

xxxx
These parcels of land of public domain are hereby placed under the
administration and disposition of the National Housing Authority to develop,
subdivide and dispose to qualified beneficiaries, as well as its development for
mix land use (commercial/industrial) to provide employment opportunities to onsite families and additional areas for port-related activities.

Admin. Law | 159

In order to facilitate the early development of the area for disposition, the Department of
Environment and Natural Resources, through the Lands and Management Bureau, is
hereby directed to approve the boundary and subdivision survey and to issue a special
patent and title in the name of the National Housing Authority, subject to final survey and
private rights, if any there be. (Emphasis supplied.)
On October 7, 1992, President Ramos authorized NHA to enter into a Joint Venture
Agreement with RBI [s]ubject to final review and approval of the Joint Venture
Agreement by the Office of the President.[16]
On March 19, 1993, the NHA and RBI entered into a Joint Venture Agreement [17] (JVA)
for the development of the Smokey Mountain dumpsite and the reclamation of the area
across R-10 based on Presidential Decree No. (PD) 757 [18] which mandated NHA [t]o
undertake the physical and socio-economic upgrading and development of lands of the
public domain identified for housing, MO 161-A which required NHA to conduct the
feasibility studies and develop a low-cost housing project at the Smokey Mountain, and
MO 415 as amended by MO 415-A which approved the Conceptual Plan for Smokey
Mountain and creation of the EXECOM and TECHCOM. Under the JVA, the Project
involves the clearing of Smokey Mountain for eventual development into a low cost
medium rise housing complex and industrial/commercial site with the reclamation of the
area directly across [R-10] to act as the enabling component of the Project. [19] The JVA
covered a lot in Tondo,Manila with an area of two hundred twelve thousand two hundred
thirty-four (212,234) square meters and another lot to be reclaimed also in Tondo with
an area of four hundred thousand (400,000) square meters.

The Scope of Work of RBI under Article II of the JVA is as follows:

a) To fully finance all aspects of development of Smokey Mountain and reclamation of
no more than 40 hectares of Manila Bay area across Radial Road 10.
b) To immediately commence on the preparation of feasibility report and detailed
engineering with emphasis to the expedient acquisition of the Environmental Clearance
Certificate (ECC) from the DENR.
c) The construction activities will only commence after the acquisition of the ECC, and
d) Final details of the contract, including construction, duration and delivery timetables,
shall be based on the approved feasibility report and detailed engineering.

Admin. Law | 160

Other obligations of RBI are as follows:

2.02 The [RBI] shall develop the PROJECT based on the Final Report and Detailed
Engineering as approved by the Office of the President. All costs and expenses for
hiring technical personnel, date gathering, permits, licenses, appraisals, clearances,
testing and similar undertaking shall be for the account of the [RBI].
2.03 The [RBI] shall undertake the construction of 3,500 temporary housing units
complete with basic amenities such as plumbing, electrical and sewerage facilities
within the temporary housing project as staging area to temporarily house the squatter
families from the Smokey Mountain while development is being undertaken. These
temporary housing units shall be turned over to the [NHA] for disposition.
2.04 The [RBI] shall construct 3,500 medium rise low cost permanent housing units on
the leveled Smokey Mountain complete with basic utilities and amenities, in accordance
with the plans and specifications set forth in the Final Report approved by the
[NHA]. Completed units ready for mortgage take out shall be turned over by the [RBI] to
NHA on agreed schedule.
2.05 The [RBI] shall reclaim forty (40) hectares of Manila Bay area directly across [R-10]
as contained in Proclamation No. 39 as the enabling component of the project and
payment to the [RBI] as its asset share.
2.06 The [RBI] shall likewise furnish all labor materials and equipment necessary to
complete all herein development works to be undertaken on a phase to phase basis in
accordance with the work program stipulated therein.

The profit sharing shall be based on the approved pre-feasibility report submitted to the
EXECOM, viz:
For the developer (RBI):
1. To own the forty (40) hectares of reclaimed land.
2. To own the commercial area at the Smokey Mountain area composed of 1.3
hectares, and
3. To own all the constructed units of medium rise low cost permanent housing units
beyond the 3,500 units share of the [NHA].

Admin. Law | 161

For the NHA:

1. To own the temporary housing consisting of 3,500 units.
2. To own the cleared and fenced incinerator site consisting of 5 hectares situated at
the Smokey Mountain area.
3. To own the 3,500 units of permanent housing to be constructed by [RBI] at
the Smokey Mountain area to be awarded to qualified on site residents.
4. To own the Industrial Area site consisting of 3.2 hectares, and
5. To own the open spaces, roads and facilities within the Smokey Mountain area.
In the event of extraordinary increase in labor, materials, fuel and non-recoverability of
total project expenses,[20] the OP, upon recommendation of the NHA, may approve a
corresponding adjustment in the enabling component.
The functions and responsibilities of RBI and NHA are as follows:
For RBI:
4.01 Immediately commence on the preparation of the FINAL REPORT with emphasis
to the expedient acquisition, with the assistance of the [NHA] of Environmental
Compliance Certificate (ECC) from the Environmental Management Bureau (EMB) of
the [DENR]. Construction shall only commence after the acquisition of the ECC. The
Environment Compliance Certificate (ECC) shall form part of the FINAL REPORT.
The FINAL REPORT shall provide the necessary subdivision and housing plans,
detailed engineering and architectural drawings, technical specifications and other
related and required documents relative to the Smokey Mountain area.
With respect to the 40-hectare reclamation area, the [RBI] shall have the discretion to
develop the same in a manner that it deems necessary to recover the [RBIs]
investment, subject to environmental and zoning rules.
4.02 Finance the total project cost for land development, housing construction and
reclamation of the PROJECT.
4.03 Warrant that all developments shall be in compliance with the requirements of the
FINAL REPORT.
4.04 Provide all administrative resources for the submission of project accomplishment
reports to the [NHA] for proper evaluation and supervision on the actual implementation.

Admin. Law | 162

4.05 Negotiate and secure, with the assistance of the [NHA] the grant of rights of way to
the PROJECT, from the owners of the adjacent lots for access road, water, electrical
power connections and drainage facilities.
4.06 Provide temporary field office and transportation vehicles (2 units), one (1)
complete set of computer and one (1) unit electric typewriter for the [NHAs] field
personnel to be charged to the PROJECT.
For the NHA:
4.07 The [NHA] shall be responsible for the removal and relocation of all squatters
within Smokey Mountain to the Temporary Housing Complex or to other areas prepared
as relocation areas with the assistance of the [RBI]. The [RBI] shall be responsible in
releasing the funds allocated and committed for relocation as detailed in the FINAL
REPORT.
4.08 Assist the [RBI] and shall endorse granting of exemption fees in the acquisition of
all necessary permits, licenses, appraisals, clearances and accreditations for the
PROJECT subject to existing laws, rules and regulations.
4.09 The
[NHA]
shall
inspect,
evaluate
and
monitor
all
works
at
the Smokey Mountain and Reclamation Area while the land development and
construction of housing units are in progress to determine whether the development and
construction works are undertaken in accordance with the FINAL REPORT. If in its
judgment, the PROJECT is not pursued in accordance with the FINAL REPORT, the
[NHA] shall require the [RBI] to undertake necessary remedial works. All expenses,
charges and penalties incurred for such remedial, if any, shall be for the account of the
[RBI].
4.10 The [NHA] shall assist the [RBI] in the complete electrification of the PROJECT. x x
4.11 Handle the processing and documentation of all sales transactions related to its
assets shares from the venture such as the 3,500 units of permanent housing and the
allotted industrial area of 3.2 hectares.
4.12 All advances outside of project costs made by the [RBI] to the [NHA] shall be
deducted from the proceeds due to the [NHA].
4.13 The [NHA] shall be responsible for the acquisition of the Mother Title for
the Smokey Mountain and Reclamation Area within 90 days upon submission of Survey
returns to the Land Management Sector. The land titles to the 40-hectare reclaimed
land, the 1.3 hectare commercial area at the Smokey Mountain area and the
constructed units of medium-rise permanent housing units beyond the 3,500 units share

Admin. Law | 163

of the [NHA] shall be issued in the name of the [RBI] upon completion of the
project. However, the [RBI] shall have the authority to pre-sell its share as indicated in
this agreement.
The final details of the JVA, which will include the construction duration, costs, extent of
reclamation, and delivery timetables, shall be based on the FINAL REPORT which will
be contained in a Supplemental Agreement to be executed later by the parties.
The JVA may be modified or revised by written agreement between the NHA and RBI
specifying the clauses to be revised or modified and the corresponding amendments.
If the Project is revoked or terminated by the Government through no fault of RBI or by
mutual agreement, the Government shall compensate RBI for its actual expenses
incurred in the Project plus a reasonable rate of return not exceeding that stated in the
feasibility study and in the contract as of the date of such revocation, cancellation, or
termination on a schedule to be agreed upon by both parties.
As a preliminary step in the project implementation, consultations and dialogues were
conducted with the settlers of the Smokey Mountain Dumpsite Area. At the same time,
DENR started processing the application for the Environmental Clearance Certificate
(ECC) of the SMDRP. As a result however of the consultative dialogues, public
hearings, the report on the on-site field conditions, the Environmental Impact Statement
(EIS) published on April 29 and May 12, 1993 as required by the Environmental
Management Bureau of DENR, the evaluation of the DENR, and the recommendations
from other government agencies, it was discovered that design changes and additional
work have to be undertaken to successfully implement the Project. [21]

Thus, on February 21, 1994, the parties entered into another agreement denominated
as the Amended and Restated Joint Venture Agreement [22] (ARJVA) which delineated
the different phases of the Project. Phase I of the Project involves the construction of
temporary housing units for the current residents of the SmokeyMountain dumpsite, the
clearing and leveling-off of the dumpsite, and the construction of medium-rise low-cost
housing units at the cleared and leveled dumpsite. [23]Phase II of the Project involves the
construction of an incineration area for the on-site disposal of the garbage at the
dumpsite.[24] The enabling component or consideration for Phase I of the Project was
increased from 40 hectares of reclaimed lands across R-10 to 79 hectares. [25] The
revision also provided for the enabling component for Phase II of 119 hectares of
reclaimed lands contiguous to the 79 hectares of reclaimed lands for Phase I.
[26]
Furthermore, the amended contract delineated the scope of works and the terms and
conditions of Phases I and II, thus:

Admin. Law | 164

The PROJECT shall consist of Phase I and Phase II.

Phase I shall involve the following:
a. the construction of 2,992 units of temporary housing for the affected residents while
clearing and development of Smokey Mountain [are] being undertaken
b. the clearing of Smokey Mountain and the subsequent construction of 3,520 units of
medium rise housing and the development of the industrial/commercial site within
the Smokey Mountain area
c.
the reclamation and development of a 79 hectare area directly across
Radial Road 10 to serve as the enabling component of Phase I
Phase II shall involve the following:
a. the construction and operation of an incinerator plant that will conform to the
emission standards of the DENR
b. the reclamation and development of 119-hectare area contiguous to that to be
reclaimed under Phase I to serve as the enabling component of Phase II.
Under the ARJVA, RBI shall construct 2,992 temporary housing units, a reduction from
3,500 units under the JVA. [27] However, it was required to construct 3,520 medium-rise
low-cost permanent housing units instead of 3,500 units under the JVA. There was a
substantial change in the design of the permanent housing units such that a loft shall be
incorporated in each unit so as to increase the living space from 20 to 32 square
meters. The additions and changes in the Original Project Component are as follows:
ORIGINAL CHANGES/REVISIONS
1. TEMPORARY HOUSING
Wood/Plywood, ga. 31 G.I. Concrete/Steel Frame Structure Sheet usable life of 3
years, gauge 26 G.I. roofing sheets future 12 SM floor area. use as permanent
structures for factory and warehouses mixed 17 sm & 12 sm floor area.
2. MEDIUM RISE MASS
HOUSING
Box type precast Shelter Conventional
and
precast
component
20
square
meter concrete structures, 32 square floor area with 2.4 meter meter floor area with loft

Admin. Law | 165

floor height;
bare
type,
160
units/ (sleeping
quarter) 3.6
m.
building. height, painted and improved architectural faade, 80 units/ building.

floor

3. MITIGATING MEASURES
3.1 For reclamation work Use of clean dredgefill material below the MLLW and SM
material mixed with dredgefill above MLLW.
a. 100% use of Smokey Mountain material as dredgefill Use of Steel Sheet Piles
needed for longer depth of embedment.
b. Concrete Sheet Piles short depth of embedment
c. Silt removal approximately Need to remove more than 3.0
1.0 meter only meters of silt after sub-soil investigation.[28]
These material and substantial modifications served as justifications for the increase in
the share of RBI from 40 hectares to 79 hectares of reclaimed land.
Under the JVA, the specific costs of the Project were not stipulated but under the
ARJVA, the stipulated cost for Phase I was pegged at six billion six hundred ninetythree million three hundred eighty-seven thousand three hundred sixty-four pesos (PhP
6,693,387,364).
In his February 10, 1994 Memorandum, the Chairperson of the SMDRP EXECOM
submitted the ARJVA for approval by the OP. After review of said agreement, the OP
directed that certain terms and conditions of the ARJVA be further clarified or amended
preparatory to its approval. Pursuant to the Presidents directive, the parties reached an
agreement on the clarifications and amendments required to be made on the ARJVA.
On August 11, 1994, the NHA and RBI executed an Amendment To the Amended and
Restated Joint Venture Agreement (AARJVA)[29] clarifying certain terms and condition of
the ARJVA, which was submitted to President Ramos for approval, to wit:
Phase II shall involve the following:
a.
the construction and operation of an incinerator plant that will conform to the
emission standards of the DENR
b. the reclamation and development of 119-hectare area contiguous to that to be
reclaimed under Phase I to serve as the enabling component of Phase II, the exact
size and configuration of which shall be approved by the SMDRP Committee[30]

Admin. Law | 166

Other substantial amendments are the following:

4. Paragraph 2.05 of Article II of the ARJVA is hereby amended to read as follows:
2.05. The DEVELOPER shall reclaim seventy nine (79) hectares of the Manila Bay area
directly across Radial Road 10 (R-10) to serve as payment to the DEVELOPER as its
asset share for Phase I and to develop such land into commercial area with port
facilities; provided, that the port plan shall be integrated with the Philippine Port
Authoritys North Harbor plan for the Manila Bay area and provided further, that the final
reclamation and port plan for said reclaimed area shall be submitted for approval by the
Public Estates Authority and the Philippine Ports Authority, respectively: provided finally,
that subject to par. 2.02 above, actual reclamation work may commence upon approval
of the final reclamation plan by the Public Estates Authority. x x x x
9. A new paragraph to be numbered 5.05 shall be added to Article V of the ARJVA, and
shall read as follows:
5.05. In the event this Agreement is revoked, cancelled or terminated by the
AUTHORITY through no fault of the DEVELOPER, the AUTHORITY shall compensate
the DEVELOPER for the value of the completed portions of, and actual expenditures on
the PROJECT plus a reasonable rate of return thereon, not exceeding that stated in the
Cost Estimates of Items of Work previously approved by the SMDRP Executive
Committee and the AUTHORITY and stated in this Agreement, as of the date of such
revocation, cancellation, or termination, on a schedule to be agreed upon by the parties,
provided that said completed portions of Phase I are in accordance with the approved
FINAL REPORT.
Afterwards, President Ramos issued Proclamation No. 465 dated August 31,
1994[31] increasing the proposed area for reclamation across R-10 from 40 hectares to
79 hectares,[32] to wit:
NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the Philippines,
by virtue of the powers vested in me by the law, and as recommended by the SMDRP
Executive Committee, do hereby authorize the increase of the area of foreshore or
submerged lands of Manila Bay to be reclaimed, as previously authorized under
Proclamation No. 39 (s. 1992) and Memorandum Order No. 415 (s. 1992), from Four
Hundred Thousand (400,000) square meters, more or less, to Seven Hundred Ninety
Thousand (790,000) square meters, more or less.

Admin. Law | 167

On September 1, 1994, pursuant to Proclamation No. 39, the DENR issued Special
Patent No. 3591 conveying in favor of NHA an area of 211,975 square meters covering
the Smokey Mountain Dumpsite.
In its September 7, 1994 letter to the EXECOM, the OP through then Executive
Secretary Teofisto T. Guingona, Jr., approved the ARJVA as amended by the AARJVA.
On September 8, 1994, the DENR issued Special Patent 3592 pursuant to Proclamation
No. 39, conveying in favor of NHA a 401,485-square meter area.
On September 26, 1994, the NHA, RBI, Home Insurance and Guaranty Corporation
(HIGC), now known as the Home Guaranty Corporation, and the Philippine National
Bank (PNB)[33] executed the Smokey Mountain Asset Pool Formation Trust Agreement
(Asset Pool Agreement).[34] Thereafter, a Guaranty Contract was entered into by NHA,
RBI, and HIGC.
On June 23, 1994, the Legislature passed the Clean Air Act. [35] The Act made the
establishment of an incinerator illegal and effectively barred the implementation of the
planned incinerator project under Phase II. Thus, the off-site disposal of the garbage at
the Smokey Mountain became necessary.[36]
The land reclamation was completed in August 1996. [37]
Sometime later in 1996, pursuant likewise to Proclamation No. 39, the DENR issued
Special Patent No. 3598 conveying in favor of NHA an additional 390,000 square meter
area.
During the actual construction and implementation of Phase I of the SMDRP, the InterAgency Technical Committee found and recommended to the EXECOM on December
17, 1997 that additional works were necessary for the completion and viability of the
Project. The EXECOM approved the recommendation and so, NHA instructed RBI to
implement the change orders or necessary works.[38]
Such necessary works comprised more than 25% of the original contract price and as a
result, the Asset Pool incurred direct and indirect costs. Based on C1 12 A of the
Implementing Rules and Regulations of PD 1594, a supplemental agreement is required
for all change orders and extra work orders, the total aggregate cost of which being
more than twenty-five (25%) of the escalated original contract price.
The EXECOM requested an opinion from the Department of Justice (DOJ) to determine
whether a bidding was required for the change orders and/or necessary works. The
DOJ, through DOJ Opinion Nos. 119 and 155 dated August 26, 1993 and November 12,
1993, opined that a rebidding, pursuant to the aforequoted provisions of the

Admin. Law | 168

implementing rules (referring to PD 1594) would not be necessary where the change
orders inseparable from the original scope of the project, in which case, a negotiation
with the incumbent contractor may be allowed.
Thus, on February 19, 1998, the EXECOM issued a resolution directing NHA to enter
into a supplemental agreement covering said necessary works.
On March 20, 1998, the NHA and RBI entered into a Supplemental Agreement covering
the aforementioned necessary works and submitted it to the President on March 24,
1998 for approval.
Outgoing President Ramos decided to endorse the consideration of the Supplemental
Agreement to incoming President Joseph E. Estrada. On June 30, 1998, Estrada
became the 13th Philippine President.
However, the approval of the Supplemental Agreement was unacted upon for five
months. As a result, the utilities and the road networks were constructed to cover only
the 79-hectare original enabling component granted under the ARJVA. The 220-hectare
extension of the 79-hectare area was no longer technically feasible.Moreover, the
financial crises and unreliable real estate situation made it difficult to sell the remaining
reclaimed lots. The devaluation of the peso and the increase in interest cost led to the
substantial increase in the cost of reclamation.
On August 1, 1998, the NHA granted RBIs request to suspend work on the SMDRP due
to the delay in the approval of the Supplemental Agreement, the consequent absence of
an enabling component to cover the cost of the necessary works for the project, and the
resulting inability to replenish the Asset Pool funds partially used for the completion of
the necessary works.[39]
As of August 1, 1998 when the project was suspended, RBI had already accomplished
a portion of the necessary works and change orders which resulted in [RBI] and the
Asset Pool incurring advances for direct and indirect cost which amount can no longer
be covered by the 79-hectare enabling component under the ARJVA. [40]
Repeated demands were made by RBI in its own capacity and on behalf of the asset
pool on NHA for payment for the advances for direct and indirect costs subject to NHA
validation.
In November 1998, President Estrada issued Memorandum Order No. 33 reconstituting
the SMDRP EXECOM and further directed it to review the Supplemental Agreement
and submit its recommendation on the completion of the SMDRP.

Admin. Law | 169

The reconstituted EXECOM conducted a review of the project and recommended the
amendment of the March 20, 1998 Supplemental Agreement to make it more feasible
and to identify and provide new sources of funds for the project and provide for a new
enabling component to cover the payment for the necessary works that cannot be
covered by the 79-hectare enabling component under the ARJVA. [41]
The EXECOM passed Resolution Nos. 99-16-01 and 99-16-02 [42] which approved the
modification of the Supplemental Agreement, to wit:
a) Approval of 150 hectares additional reclamation in order to make the reclamation
feasible as part of the enabling component.
b) The conveyance of the 15-hectare NHA Vitas property (actually 17 hectares based
on surveys) to the SMDRP Asset Pool.
c) The inclusion in the total development cost of other additional, necessary and
indispensable infrastructure works and the revision of the original cost stated in the
Supplemental Agreement dated March 20, 1998 from PhP 2,953,984,941.40 to PhP
2,969,134,053.13.
d) Revision in the sharing agreement between the parties.
In the March 23, 2000 OP Memorandum, the EXECOM was authorized to proceed and
complete the SMDRP subject to certain guidelines and directives.
After the parties in the case at bar had complied with the March 23, 2000 Memorandum,
the NHA November 9, 2000 Resolution No. 4323 approved the conveyance of the 17hectare Vitas property in favor of the existing or a newly created Asset Pool of the
project to be developed into a mixed commercial-industrial area, subject to certain
conditions.
On January 20, 2001, then President Estrada was considered resigned. On the same
day, President Gloria M. Arroyo took her oath as the 14th President of thePhilippines.
As of February 28, 2001, the estimated total project cost of the SMDRP has reached
P8.65 billion comprising of P4.78 billion in direct cost and P3.87 billion in indirect cost,
[43]
subject to validation by the NHA.
On August 28, 2001, NHA issued Resolution No. 4436 to pay for the various necessary
works/change orders to SMDRP, to effect the corresponding enabling component
consisting of the conveyance of the NHAs Vitas Property and an additional 150-hectare
reclamation area and to authorize the release by NHA of PhP 480 million as advance to

Admin. Law | 170

the project to make the Permanent Housing habitable, subject to reimbursement from
the proceeds of the expanded enabling component. [44]
On November 19, 2001, the Amended Supplemental Agreement (ASA) was signed by
the parties, and on February 28, 2002, the Housing and Urban Development
Coordinating Council (HUDCC) submitted the agreement to the OP for approval.
In the July 20, 2002 Cabinet Meeting, HUDCC was directed to submit the works
covered by the PhP 480 million [advance to the Project] and the ASA to public bidding.
[45]
On August 28, 2002, the HUDCC informed RBI of the decision of the Cabinet.
In its September 2, 2002 letter to the HUDCC Chairman, RBI lamented the decision of
the government to bid out the remaining works under the ASA thereby unilaterally
terminating the Project with RBI and all the agreements related thereto. RBI demanded
the payment of just compensation for all accomplishments and costs incurred in
developing the SMDRP plus a reasonable rate of return thereon pursuant to Section
5.05 of the ARJVA and Section 6.2 of the ASA.[46]
Consequently, the parties negotiated the terms of the termination of the JVA and other
subsequent agreements.
On August 27, 2003, the NHA and RBI executed a Memorandum of Agreement (MOA)
whereby both parties agreed to terminate the JVA and other subsequent agreements,
thus:
1. TERMINATION
1.1 In compliance with the Cabinet directive dated 30 July 2002 to submit the works
covered by the P480 Million and the ASA to public bidding, the following agreements
executed by and between the NHA and the DEVELOPER are hereby terminated, to wit:
a. Joint Venture Agreement (JVA) dated 19 March 1993
b. Amended and Restated Joint Venture Agreement (ARJVA) dated 21 February 1994
c. Amendment and Restated Joint Venture Agreement dated 11 August 1994
d. Supplemental Agreement dated 24 March 1998
e. Amended Supplemental Agreement (ASA) dated 19 November 2001.
xxxx
5. SETTLEMENT OF CLAIMS

Admin. Law | 171

5.1 Subject to the validation of the DEVELOPERs claims, the NHA hereby agrees to
initially compensate the Developer for the abovementioned costs as follows:
a. Direct payment to DEVELOPER of the amounts herein listed in the following manner:
a.1 P250 Million in cash from the escrow account in accordance with Section 2
herewith;
a.2 Conveyance of a 3 hectare portion of the Vitas Industrial area immediately after joint
determination of the appraised value of the said property in accordance with the
procedure herein set forth in the last paragraph of Section 5.3. For purposes of all
payments to be made through conveyance of real properties, the parties shall secure
from the NHA Board of Directors all documents necessary and sufficient to effect the
transfer of title over the properties to be conveyed to RBI, which documents shall be
issued within a reasonable period.
5.2 Any unpaid balance of the DEVELOPERS claims determined after the validation
process referred to in Section 4 hereof, may be paid in cash, bonds or through the
conveyance of properties or any combination thereof. The manner, terms and conditions
of payment of the balance shall be specified and agreed upon later within a period of
three months from the time a substantial amount representing the unpaid balance has
been validated pursuant hereto including, but not limited to the programming of
quarterly cash payments to be sourced by the NHA from its budget for debt servicing,
from its income or from any other sources.
5.3 In any case the unpaid balance is agreed to be paid, either partially or totally
through conveyance of properties, the parties shall agree on which properties shall be
subject to conveyance. The NHA and DEVELOPER hereby agree to determine the
valuation of the properties to be conveyed by getting the average of the appraisals to be
made by two (2) mutually acceptable independent appraisers.

Meanwhile, respondent Harbour Centre Port Terminal, Inc. (HCPTI) entered into an
agreement with the asset pool for the development and operations of a port in the
Smokey Mountain Area which is a major component of SMDRP to provide a source of
livelihood and employment for Smokey Mountain residents and spur economic
growth. A Subscription Agreement was executed between the Asset Pool and HCPTI
whereby the asset pool subscribed to 607 million common shares and 1,143 million
preferred shares of HCPTI. The HCPTI preferred shares had a premium and penalty
interest of 7.5% per annum and a mandatory redemption feature. The asset pool paid
the subscription by conveying to HCPTI a 10-hectare land which it acquired from the

Admin. Law | 172

NHA being a portion of the reclaimed land of the SMDRP.Corresponding certificates of

titles were issued to HCPTI, namely: TCT Nos. 251355, 251356, 251357, and 251358.
Due to HCPTIs failure to obtain a license to handle foreign containerized cargo from
PPA, it suffered a net income loss of PhP 132,621,548 in 2002 and a net loss of PhP
15,540,063 in 2003. The Project Governing Board of the Asset Pool later conveyed by
way of dacion en pago a number of HCPTI shares to RBI in lieu of cash payment for the
latters work in SMDRP.
On August 5, 2004, former Solicitor General Francisco I. Chavez, filed the instant
petition which impleaded as respondents the NHA, RBI, R-II Holdings, Inc. (RHI),
HCPTI, and Mr. Reghis Romero II, raising constitutional issues.
The NHA reported that thirty-four (34) temporary housing structures and twenty-one (21)
permanent housing structures had been turned over by respondent RBI. It claimed that
2,510 beneficiary-families belonging to the poorest of the poor had been transferred to
their permanent homes and benefited from the Project.

The Issues
The grounds presented in the instant petition are:
I
NEITHER RESPONDENT NHA NOR RESPONDENT R-II BUILDERS MAY VALIDLY
RECLAIM FORESHORE AND SUBMERGED LAND BECAUSE:
1. RESPONDENT NHA AND R-II BUILDERS WERE NEVER GRANTED ANY POWER
AND AUTHORITY TO RECLAIM LANDS OF THE PUBLIC DOMAIN AS THIS
POWER IS VESTED EXCLUSIVELY WITH THE PEA.
2. EVEN ASSUMING THAT RESPONDENTS NHA AND R-II BUILDERS WERE GIVEN
THE POWER AND AUTHORITY TO RECLAIM FORESHORE AND SUBMERGED
LAND, THEY WERE NEVER GIVEN THE AUTHORITY BY THE DENR TO DO SO.
II
RESPONDENT R-II BUILDERS CANNOT ACQUIRE THE RECLAIMED FORESHORE
AND SUBMERGED LAND AREAS BECAUSE:
1. THE RECLAIMED FORESHORE AND SUBMERGED PARCELS OF LAND ARE
INALIENABLE PUBLIC LANDS WHICH ARE BEYOND THE COMMERCE OF MAN.
2. ASSUMING ARGUENDO THAT THE SUBJECT RECLAIMED FORESHORE AND
SUBMERGED PARCELS OF LAND WERE ALREADY DECLARED ALIENABLE
LANDS OF THE PUBLIC DOMAIN, RESPONDENT R-II BUILDERS STILL COULD
NOT ACQUIRE THE SAME BECAUSE THERE WAS NEVER ANY DECLARATION
THAT THE SAID LANDS WERE NO LONGER NEEDED FOR PUBLIC USE.

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3. EVEN ASSUMING THAT THE SUBJECT RECLAIMED LANDS ARE ALIENABLE

AND NO LONGER NEEDED FOR PUBLIC USE, RESPONDENT R-II BUILDERS
STILL CANNOT ACQUIRE THE SAME BECAUSE THERE WAS NEVER ANY LAW
AUTHORIZING THE SALE THEREOF.
4. THERE WAS NEVER ANY PUBLIC BIDDING AWARDING OWNERSHIP OF
THE SUBJECT LAND TO RESPONDENT R-II BUILDERS.
5. ASSUMING THAT ALL THE REQUIREMENTS FOR A VALID TRANSFER OF
ALIENABLE PUBLIC HAD BEEN PERFORMED, RESPONDENT R-II BUILDERS,
BEING PRIVATE CORPORATION IS NONETHELESS EXPRESSLYPROHIBITED
BY THE PHILIPPINE CONSTITUTION TO ACQUIRE LANDS OF THE PUBLIC
DOMAIN.
III
RESPONDENT HARBOUR, BEING A PRIVATE CORPORATION WHOSE MAJORITY
STOCKS ARE OWNED AND CONTROLLED BY RESPONDENT ROMEROS
CORPORATIONS R-II BUILDERS AND R-II HOLDINGS IS DISQUALIFIED FROM
BEING A TRANSFEREE OF PUBLIC LAND.
IV
RESPONDENTS MUST BE COMPELLED TO DISCLOSE ALL INFORMATION
RELATED TO THE SMOKEY MOUNTAIN DEVELOPMENT AND RECLAMATION
PROJECT.
The Courts Ruling
Before we delve into the substantive issues raised in this petition, we will first deal with
several procedural matters raised by respondents.

Whether petitioner has the requisite locus standi to file this case
Respondents argue that petitioner Chavez has no legal standing to file the petition.
Only a person who stands to be benefited or injured by the judgment in the suit or
entitled to the avails of the suit can file a complaint or petition. [47]Respondents claim that
petitioner is not a proper party-in-interest as he was unable to show that he has
sustained or is in immediate or imminent danger of sustaining some direct and personal
injury as a result of the execution and enforcement of the assailed contracts or
agreements.[48] Moreover, they assert that not all government contracts can justify a
taxpayers suit especially when no public funds were utilized in contravention of the
Constitution or a law.
We explicated in Chavez v. PCGG[49] that in cases where issues of transcendental
public importance are presented, there is no necessity to show that petitioner has

Admin. Law | 174

experienced or is in actual danger of suffering direct and personal injury as the requisite
injury is assumed. We find our ruling in Chavez v. PEA[50] as conclusive authority
on locus standi in the case at bar since the issues raised in this petition are averred to
be in breach of the fair diffusion of the countrys natural resources and the constitutional
right of a citizen to information which have been declared to be matters of
transcendental public importance. Moreover, the pleadings especially those of
respondents readily reveal that public funds have been indirectly utilized in the Project
by means of Smokey Mountain Project Participation Certificates (SMPPCs) bought by
some government agencies.
Hence, petitioner, as a taxpayer, is a proper party to the instant petition before the court.

Whether petitioners direct recourse to this Court was proper

Respondents are one in asserting that petitioner circumvents the principle of hierarchy
of courts in his petition. Judicial hierarchy was made clear in the case of People v.
Cuaresma, thus:
There is after all a hierarchy of courts. That hierarchy is determinative of the venue of
appeals, and should also serve as a general determinant of the appropriate forum for
petitions for the extraordinary writs. A becoming regard for that judicial hierarchy most
certainly indicates that petitions for the issuance of extraordinary writs against first level
(inferior) courts should be filed with the Regional Trial Court, and those against the
latter, with the Court of Appeals. A direct invocation of the Supreme Courts original
jurisdiction to issue these writs should be allowed only when there are special and
important reasons therefor, clearly and specifically set out in the petition. This is
established policy. It is a policy that is necessary to prevent inordinate demands upon
the Courts time and attention which are better devoted to those matters within its
exclusive jurisdiction, and to prevent further over-crowding of the Courts docket. [51] x x x
The OSG claims that the jurisdiction over petitions for prohibition and mandamus is
concurrent with other lower courts like the Regional Trial Courts and the Court of
Appeals. Respondent NHA argues that the instant petition is misfiled because it does
not introduce special and important reasons or exceptional and compelling
circumstances to warrant direct recourse to this Court and that the lower courts are
more equipped for factual issues since this Court is not a trier of facts.Respondents RBI
and RHI question the filing of the petition as this Court should not be unduly burdened
with repetitions, invocation of jurisdiction over constitutional questions it had previously
resolved and settled.

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In the light of existing jurisprudence, we find paucity of merit in respondents postulation.

While direct recourse to this Court is generally frowned upon and discouraged, we have
however ruled in Santiago v. Vasquez that such resort to us may be allowed in certain
situations, wherein this Court ruled that petitions for certiorari, prohibition, or
mandamus, though cognizable by other courts, may directly be filed with us if the
redress desired cannot be obtained in the appropriate courts or where exceptional
compelling circumstances justify availment of a remedy within and calling for the
exercise of [this Courts] primary jurisdiction.[52]
The instant petition challenges the constitutionality and legality of the SMDRP involving
several hectares of government land and hundreds of millions of funds of several
government agencies. Moreover, serious constitutional challenges are made on the
different aspects of the Project which allegedly affect the right of Filipinos to the
distribution of natural resources in the country and the right to information of a
citizenmatters which have been considered to be of extraordinary significance and
grave consequence to the public in general. These concerns in the instant action
compel us to turn a blind eye to the judicial structure meant to provide an orderly
dispensation of justice and consider the instant petition as a justified deviation from an
established precept.

Core factual matters undisputed

Respondents next challenge the projected review by this Court of the alleged factual
issues intertwined in the issues propounded by petitioner. They listed a copious number
of questions seemingly factual in nature which would make this Court a trier of facts. [53]
We find the position of respondents bereft of merit.
For one, we already gave due course to the instant petition in our January 18,
2005 Resolution.[54] In said issuance, the parties were required to make clear and
concise statements of established facts upon which our decision will be based.
Secondly, we agree with petitioner that there is no necessity for us to make any factual
findings since the facts needed to decide the instant petition are well established from
the admissions of the parties in their pleadings [55] and those derived from the documents
appended to said submissions. Indeed, the core facts which are the subject matter of
the numerous issues raised in this petition are undisputed.
Now we will tackle the issues that prop up the instant petition.

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Since petitioner has cited our decision in PEA as basis for his postulations in a number
of issues, we first resolve the queryis PEA applicable to the case at bar?
A juxtaposition of the facts in the two cases constrains the Court to rule in the negative.
The Court finds that PEA is not a binding precedent to the instant petition because the
facts in said case are substantially different from the facts and circumstances in the
case at bar, thus:
(1) The reclamation project in PEA was undertaken through a JVA entered into
between PEA and AMARI. The reclamation project in the instant NHA case was
undertaken by the NHA, a national government agency in consultation with PEA and
with the approval of two Philippine Presidents;
(2) In PEA, AMARI and PEA executed a JVA to develop the Freedom Islands and
reclaim submerged areas without public bidding on April 25, 1995. In the instant NHA
case, the NHA and RBI executed a JVA after RBI was declared the winning bidder
on August 31, 1992 as the JVA partner of the NHA in the SMDRP after compliance with
the requisite public bidding.
(3) In PEA, there was no law or presidential proclamation classifying the lands to be
reclaimed as alienable and disposal lands of public domain. In this RBI case, MO 415 of
former President Aquino and Proclamation No. 39 of then President Ramos, coupled
with Special Patents Nos. 3591, 3592, and 3598, classified the reclaimed lands as
alienable and disposable;
(4) In PEA, the Chavez petition was filed before the amended JVA was executed by
PEA and AMARI. In this NHA case, the JVA and subsequent amendments were already
substantially implemented. Subsequently, the Project was terminated through a MOA
signed on August 27, 2003. Almost one year later on August 5, 2004, the Chavez
petition was filed;
(5) In PEA, AMARI was considered to be in bad faith as it signed the amended JVA
after the Chavez petition was filed with the Court and after Senate Committee Report
No. 560 was issued finding that the subject lands are inalienable lands of public
domain. In the instant petition, RBI and other respondents are considered to have
signed the agreements in good faith as the Project was terminated even before the
Chavez petition was filed;

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(6) The PEA-AMARI JVA was executed as a result of direct negotiation between the
parties and not in accordance with the BOT Law. The NHA-RBI JVA and subsequent
amendments constitute a BOT contract governed by the BOT Law; and
(7) In PEA, the lands to be reclaimed or already reclaimed were transferred to PEA, a
government entity tasked to dispose of public lands under Executive Order No. (EO)
525.[56] In the NHA case, the reclaimed lands were transferred to NHA, a government
entity NOT tasked to dispose of public land and therefore said alienable lands were
converted to patrimonial lands upon their transfer to NHA. [57]
Thus the PEA Decision[58] cannot be considered an authority or precedent to the instant
case. The principle of stare decisis[59] has no application to the different factual setting of
the instant case.
We will now dwell on the substantive issues raised by petitioner. After a perusal of the
grounds raised in this petition, we find that most of these issues are moored on
our PEA Decision which, as earlier discussed, has no application to the instant
petition. For this reason alone, the petition can already be rejected.Nevertheless, on the
premise of the applicability of said decision to the case at bar, we will proceed to resolve
said issues.

First Issue: Whether respondents NHA and RBI have been granted the power and
authority to reclaim lands of the public domain as this power is vested
exclusively in PEA as claimed by petitioner
Petitioner contends that neither respondent NHA nor respondent RBI may validly
reclaim foreshore and submerged land because they were not given any power and
authority to reclaim lands of the public domain as this power was delegated by law to
PEA.
Asserting that existing laws did not empower the NHA and RBI to reclaim lands of public
domain, the Public Estates Authority (PEA), petitioner claims, is the primary authority for
the reclamation of all foreshore and submerged lands of public domain, and relies
on PEA where this Court held:
Moreover, Section 1 of Executive Order No. 525 provides that PEA shall be primarily
responsible for integrating, directing, and coordinating all reclamation projects for and
on behalf of the National Government. The same section also states that [A]ll
reclamation projects shall be approved by the President upon recommendation of the
PEA, and shall be undertaken by the PEA or through a proper contract executed by it

Admin. Law | 178

with any person or entity; x x x. Thus, under EO No. 525, in relation to PD No. 3-A and
PD No. 1084, PEA became the primary implementing agency of the National
Government to reclaim foreshore and submerged lands of the public domain. EO No.
525 recognized PEA as the government entity to undertake the reclamation of lands and
ensure their maximum utilization in promoting public welfare and interests. Since large
portions of these reclaimed lands would obviously be needed for public service, there
must be a formal declaration segregating reclaimed lands no longer needed for public
service from those still needed for public service. [60]
In the Smokey Mountain Project, petitioner clarifies that the reclamation was not done
by PEA or through a contract executed by PEA with another person or entity but by the
NHA through an agreement with respondent RBI. Therefore, he concludes that the
reclamation is null and void.
Petitioners contention has no merit.
EO 525 reads:
Section 1. The Public Estates Authority (PEA) shall be primarily responsible for
integrating, directing, and coordinating all reclamation projects for and on behalf of the
National Government. All reclamation projects shall be approved by the President upon
recommendation of the PEA, and shall be undertaken by the PEA or through a proper
contract executed by it with any person or entity; Provided, that, reclamation projects
of any national government agency or entity authorized under its charter shall be
undertaken in consultation with the PEA upon approval of the
President. (Emphasis supplied.)
The aforequoted provision points to three (3) requisites for a legal and valid reclamation
project, viz:
(1) approval by the President;
(2) favorable recommendation of PEA; and
(3) undertaken by any of the following:
a. by PEA
b. by any person or entity pursuant to a contract it executed with PEA
c. by the National Government agency or entity authorized under its charter to
reclaim lands subject to consultation with PEA
Without doubt, PEA under EO 525 was designated as the agency primarily responsible
for integrating, directing, and coordinating all reclamation projects. Primarily means
mainly, principally, mostly, generally. Thus, not all reclamation projects fall under PEAs
authority of supervision, integration, and coordination. The very charter of PEA, PD
1084,[61] does not mention that PEA has the exclusive and sole power and authority to

Admin. Law | 179

reclaim lands of public domain. EO 525 even reveals the exceptionreclamation projects
by a national government agency or entity authorized by its charter to reclaim land. One
example is EO 405 which authorized the Philippine Ports Authority (PPA) to reclaim and
develop submerged areas for port related purposes. Under its charter, PD 857, PPA has
the power to reclaim, excavate, enclose or raise any of the lands vested in it.
Thus, while PEA under PD 1084 has the power to reclaim land and under EO 525 is
primarily responsible for integrating, directing and coordinating reclamation projects,
such authority is NOT exclusive and such power to reclaim may be granted or
delegated to another government agency or entity or may even be undertaken by the
National Government itself, PEA being only an agency and a part of the National
Government.
Let us apply the legal parameters of Sec. 1, EO 525 to the reclamation phase of
SMDRP. After a scrutiny of the facts culled from the records, we find that the project met
all the three (3) requirements, thus:
1. There was ample approval by the President of the Philippines; as a matter of fact, two
Philippine Presidents approved the same, namely: Presidents Aquino and
Ramos. President Aquino sanctioned the reclamation of both the SMDRP housing and
commercial-industrial sites through MO 415 (s. 1992) which approved the SMDRP
under Sec. 1 and directed NHA x x x to implement the Smokey Mountain Development
Plan and Reclamation of the Area across R-10 through a private sector joint venture
scheme at the least cost to government under Section 3.

For his part, then President Ramos issued Proclamation No. 39 (s. 1992) which
expressly reserved the Smokey Mountain Area and the Reclamation Area for a
housing project and related commercial/industrial development.
Moreover, President Ramos issued Proclamation No. 465 (s. 1994) which
authorized the increase of the Reclamation Area from 40 hectares of foreshore and
submerged land of the Manila Bay to 79 hectares. It speaks of the reclamation of
400,000 square meters, more or less, of the foreshore and submerged lands
ofManila Bay adjoining R-10 as an enabling component of the SMDRP.
As a result of Proclamations Nos. 39 and 465, Special Patent No. 3591 covering
211,975 square meters of Smokey Mountain, Special Patent No. 3592 covering 401,485
square meters of reclaimed land, and Special Patent No. 3598 covering another
390,000 square meters of reclaimed land were issued by the DENR.

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Thus, the first requirement of presidential imprimatur on the SMDRP has been satisfied.
2. The requisite favorable endorsement of the reclamation phase was impliedly granted
by PEA. President Aquino saw to it that there was coordination of the project with PEA
by designating its general manager as member of the EXECOM tasked to supervise the
project implementation. The assignment was made in Sec. 2 of MO 415 which provides:
Section 2. An Executive Committee is hereby created to oversee the implementation of
the Plan, chaired by the NCR-CORD, with the heads of the following agencies as
members: The National Housing Authority, the City of Manila, the Department of Public
Works and Highways, the Public Estates Authority, the Philippine Ports Authority, the
Department of Environment and Natural Resources and the Development Bank of the
Philippines. (Emphasis supplied.)
The favorable recommendation by PEA of the JVA and subsequent amendments were
incorporated as part of the recommendations of the EXECOM created under MO 415.
While there was no specific recommendation on the SMDRP emanating solely from
PEA, we find that the approbation of the Project and the land reclamation as an
essential component by the EXECOM of which PEA is a member, and its submission of
the SMDRP and the agreements on the Project to the President for approval amply met
the second requirement of EO 525.
3. The third element was also presentthe reclamation was undertaken either by PEA or
any person or entity under contract with PEA or by the National Government agency or
entity authorized under its charter to reclaim lands subject to consultation with PEA. It
cannot be disputed that the reclamation phase was not done by PEA or any person or
entity under contract with PEA. However, the reclamation was implemented by the NHA,
a national government agency whose authority to reclaim lands under consultation with
PEA is derived from its charterPD 727 and other pertinent lawsRA 7279 [62] and RA 6957
as amended by RA 7718.
While the authority of NHA to reclaim lands is challenged by petitioner, we find that the
NHA had more than enough authority to do so under existing laws. While PD 757, the
charter of NHA, does not explicitly mention reclamation in any of the listed powers of the
agency, we rule that the NHA has an implied power to reclaim land as this is vital or
incidental to effectively, logically, and successfully implement an urban land reform and
housing program enunciated in Sec. 9 of Article XIII of the 1987 Constitution.
Basic in administrative law is the doctrine that a government agency or office has
express and implied powers based on its charter and other pertinent statutes. Express
powers are those powers granted, allocated, and delegated to a government agency or
office by express provisions of law. On the other hand, implied powers are those that

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can be inferred or are implicit in the wordings of the law [63] or conferred by necessary or
fair implication in the enabling act. [64] In Angara v. Electoral Commission, the Court
clarified and stressed that when a general grant of power is conferred or duty enjoined,
every particular power necessary for the exercise of the one or the performance of the
other is also conferred by necessary implication. [65] It was also explicated that when the
statute does not specify the particular method to be followed or used by a government
agency in the exercise of the power vested in it by law, said agency has the authority to
adopt any reasonable method to carry out its functions. [66]
The power to reclaim on the part of the NHA is implicit from PD 757, RA 7279, MO 415,
RA 6957, and PD 3-A,[67] viz:
1. NHAs power to reclaim derived from PD 757 provisions:
a. Sec. 3 of PD 757 implies that reclamation may be resorted to in order to attain the
goals of NHA:
Section 3. Progress and Objectives. The Authority shall have the following purposes
and objectives: x x x x
b) To undertake housing, development, resettlement or other activities as would
enhance the provision of housing to every Filipino;
c) To harness and promote private participation in housing ventures in terms of capital
expenditures, land, expertise, financing and other facilities for the sustained growth of
the housing industry. (Emphasis supplied.)
Land reclamation is an integral part of the development of resources for some of the
housing requirements of the NHA. Private participation in housing projects may also
take the form of land reclamation.
b. Sec. 5 of PD 757 serves as proof that the NHA, as successor of the Tondo Foreshore
Development Authority (TFDA), has the power to reclaim, thus:
Section 5. Dissolution of Existing Housing Agencies. The People's Homesite and
Housing Corporation (PHHC), the Presidential Assistant on Housing Resettlement
Agency (PAHRA), the Tondo Foreshore Development Authority (TFDA), the Central
Institute for the Training and Relocation of Urban Squatters (CITRUS), the Presidential
Committee for Housing and Urban Resettlement (PRECHUR), Sapang Palay
Development Committee, Inter-Agency Task Force to Undertake the Relocation of
Families in Barrio Nabacaan, Villanueva, Misamis Oriental and all other existing
government housing and resettlement agencies, task forces and ad-hoc committees,
are hereby dissolved. Their powers and functions, balance of appropriations,

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records, assets, rights, and choses in action, are transferred to, vested in, and
assumed by the Authority. x x x (Emphasis supplied.)
PD 570 dated October 30, 1974 created the TFDA, which defined its objectives,
powers, and functions. Sec. 2 provides:
Section 2. Objectives and Purposes. The Authority shall have the following purposes
and objectives:
a) To undertake all manner of activity, business or development projects for the
establishment of harmonious, comprehensive, integrated and healthy living community
in the Tondo Foreshoreland and its resettlement site;
b) To undertake and promote the physical and socio-economic amelioration of
the Tondo Foreshore residents in particular and the nation in general (Emphasis
supplied.)
The powers and functions are contained in Sec. 3, to wit:
a) To develop and implement comprehensive and integrated urban renewal programs
for
the Tondo
Foreshore and
Dagat-dagatan
lagoon and/or
any
other
additional/alternative resettlement site and to formulate and enforce general and
specific policies for its development which shall ensure reasonable degree of
compliance with environmental standards.
b) To prescribe guidelines and standards for the reservation, conservation
and utilization of public lands covering the Tondo Foreshore land and its
resettlement sites;
c) To construct, acquire, own, lease, operate and maintain infrastructure facilities,
housing complex, sites and services;
d) To determine, regulate and supervise the establishment and operation of housing,
sites, services and commercial and industrial complexes and any other enterprises to
be constructed or established within the Tondo Foreshore and its resettlement sites;
e) To undertake and develop, by itself or through joint ventures with other public or
private entities, all or any of the different phases of development of the Tondo
Foreshore land and its resettlement sites;
f) To acquire and own property, property-rights and interests, and encumber or
otherwise dispose of the same as it may deem appropriate (Emphasis supplied.)

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From the foregoing provisions, it is readily apparent that the TFDA has the explicit
power to develop public lands covering the Tondo foreshore land and any other
additional and alternative resettlement sites under letter b, Sec. 3 of PD 570. Since the
additional and/or alternative sites adjacent to Tondo foreshore land cover foreshore and
submerged areas, the reclamation of said areas is necessary in order to convert them
into a comprehensive and integrated resettlement housing project for the slum dwellers
and squatters of Tondo. Since the powers of TFDA were assumed by the NHA, then the
NHA has the power to reclaim lands in the Tondo foreshore area which covers the 79hectare land subject of Proclamations Nos. 39 and 465 and Special Patents Nos. 3592
and 3598.
c. Sec. 6 of PD 757 delineates the functions and powers of the NHA which embrace the
authority to reclaim land, thus:
Sec. 6. Powers and functions of the Authority.The Authority shall have the following
powers and functions to be exercised by the Board in accordance with its established
national human settlements plan prepared by the Human Settlements Commission:
(a) Develop and implement the comprehensive
program provided for in Section hereof; x x x x

and

integrated

housing

(c) Prescribe guidelines and standards for the reservation, conservation and utilization
of public lands identified for housing and resettlement; x x x x
(e) Develop and undertake housing development and/or resettlement projects through
joint ventures or other arrangements with public and private entities; x x x x
(k) Enter into contracts whenever necessary under such terms and conditions as it may
deem proper and reasonable;
(l) Acquire property rights and interests and encumber or otherwise dispose the
same as it may deem appropriate; x x x x
(s) Perform such other acts not inconsistent with this Decree, as may be
necessary to effect the policies and objectives herein declared. (Emphasis
supplied.)
The NHAs authority to reclaim land can be inferred from the aforequoted provisions. It
can make use of public lands under letter (c) of Sec. 6 which includes reclaimed land as
site for its comprehensive and integrated housing projects under letter (a) which can be
undertaken through joint ventures with private entities under letter (e). Taken together
with letter (s) which authorizes NHA to perform such other activities necessary to effect
the policies and objectives of PD 757, it is safe to conclude that the NHAs power to

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reclaim lands is a power that is implied from the exercise of its explicit powers under
Sec. 6 in order to effectively accomplish its policies and objectives under Sec. 3 of its
charter. Thus, the reclamation of land is an indispensable component for the
development and construction of the SMDRP housing facilities.
2. NHAs implied power to reclaim land is enhanced by RA 7279.
PD 757 identifies NHAs mandate to [d]evelop and undertake housing development
and/or resettlement projects through joint ventures or other arrangements with public
and private entities.
The power of the NHA to undertake reclamation of land can be inferred from Secs. 12
and 29 of RA 7279, which provide:
Section 12. Disposition of Lands for Socialized Housing.The National Housing
Authority, with respect to lands belonging to the National Government, and the
local government units with respect to other lands within their respective localities, shall
coordinate with each other to formulate and make available various alternative
schemes for the disposition of lands to the beneficiaries of the Program. These
schemes shall not be limited to those involving transfer of ownership in fee simple but
shall include lease, with option to purchase, usufruct or such other variations as the
local government units or the National Housing Authority may deem most expedient in
carrying out the purposes of this Act. x x x x
Section 29. Resettlement.With two (2) years from the effectivity of this Act, the local
government units, in coordination with the National Housing Authority, shall implement
the relocation and resettlement of persons living in danger areas such as esteros,
railroad tracks, garbage dumps, riverbanks, shorelines, waterways, and in other public
places as sidewalks, roads, parks, and playgrounds. The local government unit, in
coordination with the National Housing Authority, shall provide relocation or resettlement
sites with basic services and facilities and access to employment and livelihood
opportunities sufficient to meet the basic needs of the affected families. (Emphasis
supplied.)
Lands belonging to the National Government include foreshore and submerged lands
which can be reclaimed to undertake housing development and resettlement projects.
3. MO 415 explains the undertaking of the NHA in SMDRP:

Admin. Law | 185

WHEREAS, Memorandum Order No. 161-A mandated the National Housing Authority to
conduct feasibility studies and develop low-cost housing projects at the dumpsites
of Metro Manila;
WHEREAS, the National Housing Authority has presented a viable Conceptual Plan to
convert the Smokey Mountain dumpsite into a habitable housing project inclusive of
the reclamation area across R-10 as enabling component of the Project;
WHEREAS, the said Plan requires the coordinated and synchronized efforts of the City
of Manila and other government agencies and instrumentalities to ensure effective
and efficient implementation
WHEREAS, the government encourages private
implementation of its projects. (Emphasis supplied.)

sector

initiative in

the

Proceeding from these whereas clauses, it is unequivocal that reclamation of land in

the Smokey Mountain area is an essential and vital power of the NHA to effectively
implement its avowed goal of developing low-cost housing units at
the Smokey Mountain dumpsites. The interpretation made by no less than the President
of the Philippines as Chief of the Executive Branch, of which the NHA is a part, must
necessarily command respect and much weight and credit.
4. RA 6957 as amended by RA 7718the BOT Lawserves as an exception to PD 1084
and EO 525.
Based on the provisions of the BOT Law and Implementing Rules and Regulations, it is
unequivocal that all government infrastructure agencies like the NHA can undertake
infrastructure or development projects using the contractual arrangements prescribed
by the law, and land reclamation is one of the projects that can be resorted to in the
BOT project implementation under the February 10, 1992 Joint Resolution No. 3 of the
8th Congress.

From the foregoing considerations, we find that the NHA has ample implied authority to
undertake reclamation projects.
Even without an implied power to reclaim lands under NHAs charter, we rule that the
authority granted to NHA, a national government agency, by the President under PD 3-A
reinforced by EO 525 is more than sufficient statutory basis for the reclamation of lands
under the SMDRP.

Admin. Law | 186

PD 3-A is a law issued by then President Ferdinand E. Marcos under his martial law
powers on September 23, 1972. It provided that [t]he provisions of any law to the
contrary notwithstanding, the reclamation of areas, underwater, whether foreshore or
inland, shall be limited to the National Government or any person authorized by it under
the proper contract. It repealed, in effect, RA 1899 which previously delegated the right
to reclaim lands to municipalities and chartered cities and revested it to the National
Government.[68] Under PD 3-A, national government can only mean the Executive
Branch headed by the President. It cannot refer to Congress as it was dissolved and
abolished at the time of the issuance of PD 3-A on September 23, 1972. Moreover, the
Executive Branch is the only implementing arm in the government with the equipment,
manpower, expertise, and capability by the very nature of its assigned powers and
functions to undertake reclamation projects. Thus, under PD 3-A, the Executive Branch
through the President can implement reclamation of lands through any of its
departments, agencies, or offices.
Subsequently, on February 4, 1977, President Marcos issued PD 1084 creating the
PEA, which was granted, among others, the power to reclaim land, including foreshore
and submerged areas by dredging, filling or other means or to acquire reclaimed lands.
The PEAs power to reclaim is not however exclusive as can be gleaned from its charter,
as the President retained his power under PD 3-A to designate another agency to
reclaim lands.
On February 14, 1979, EO 525 was issued. It granted PEA primary responsibility for
integrating, directing, and coordinating reclamation projects for and on behalf of the
National Government although other national government agencies can be designated
by the President to reclaim lands in coordination with the PEA. Despite the issuance of
EO 525, PD 3-A remained valid and subsisting. Thus, the National Government through
the President still retained the power and control over all reclamation projects in the
country.
The power of the National Government through the President over reclamation of areas,
that is, underwater whether foreshore or inland, was made clear in EO 543 [69] which took
effect on June 24, 2006. Under EO 543, PEA was renamed the Philippine Reclamation
Authority (PRA) and was granted the authority to approve reclamation projects, a power
previously reposed in the President under EO 525. EO 543 reads:
Section 1. The power of the President to approve reclamation projects is hereby
delegated to the Philippine Reclamation Authority [formerly PEA], through its
governing board, subject to compliance with existing laws and rules and subject to the
condition that reclamation contracts to be executed with any person or entity go through
public bidding.

Admin. Law | 187

Section 2. Nothing in the Order shall be construed as diminishing the Presidents

authority to modify, amend or nullify PRAs action.
Section 3. All executive issuances inconsistent with this Executive Order are hereby
repealed or amended accordingly. (Emphasis supplied.)
Sec. 2 of EO 543 strengthened the power of control and supervision of the President
over reclamation of lands as s/he can modify, amend, or nullify the action of PEA (now
PRA).
From the foregoing issuances, we conclude that the Presidents delegation to NHA, a
national government agency, to reclaim lands under the SMDRP, is legal and valid,
firmly anchored on PD 3-A buttressed by EO 525 notwithstanding the absence of any
specific grant of power under its charter, PD 757.

Second Issue: Whether respondents NHA and RBI were given the power and
authority by DENR to reclaim foreshore and submerged lands.

Petitioner Chavez puts forth the view that even if the NHA and RBI were granted the
authority to reclaim, they were not authorized to do so by the DENR.
Again, reliance is made on our ruling in PEA where it was held that the DENRs authority
is necessary in order for the government to validly reclaim foreshore and submerged
lands. In PEA, we expounded in this manner:
As manager, conservator and overseer of the natural resources of the State, DENR
exercises supervision and control over alienable and disposable public lands. DENR
also exercises exclusive jurisdiction on the management and disposition of all lands of
the public domain. Thus, DENR decides whether areas under water, like foreshore or
submerged areas of Manila Bay, should be reclaimed or not. This means that PEA
needs authorization from DENR before PEA can undertake reclamation projects
in Manila Bay, or in any part of the country.
DENR also exercises exclusive jurisdiction over the disposition of all lands of the public
domain. Hence, DENR decides whether reclaimed lands of PEA should be classified as
alienable under Sections 6 and 7 of CA No. 141. Once DENR decides that the
reclaimed lands should be so classified, it then recommends to the President the

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issuance of a proclamation classifying the lands as alienable or disposable lands of the

public domain open to disposition. We note that then DENR Secretary Fulgencio S.
Factoran, Jr. countersigned Special Patent No. 3517 in compliance with the Revised
Administrative Code and Sections 6 and 7 of CA No. 141.
In short, DENR is vested with the power to authorize the reclamation of areas under
water, while PEA is vested with the power to undertake the physical reclamation of
areas under water, whether directly or through private contractors. DENR is also
empowered to classify lands of the public domain into alienable or disposable lands
subject to the approval of the President. On the other hand, PEA is tasked to develop,
sell or lease the reclaimed alienable lands of the public domain. [70]
Despite our finding that PEA is not a precedent to the case at bar, we find after all that
under existing laws, the NHA is still required to procure DENRs authorization before a
reclamation project in Manila Bay or in any part of the Philippines can be
undertaken. The requirement applies to PEA, NHA, or any other government agency or
office granted with such power under the law.
Notwithstanding the need for DENR permission, we nevertheless find petitioners
position bereft of merit.
The DENR is deemed to have granted the authority to reclaim in the Smokey Mountain
Project for the following reasons:
1. Sec. 17, Art. VII of the Constitution provides that the President shall have control of
all executive departments, bureaus and offices. The President is assigned the task of
seeing to it that all laws are faithfully executed. Control, in administrative law, means 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.[71]
As such, the President can exercise executive power motu proprio and can supplant the
act or decision of a subordinate with the Presidents own. The DENR is a department in
the executive branch under the President, and it is only an alter ego of the
latter. Ordinarily the proposed action and the staff work are initially done by a
department like the DENR and then submitted to the President for approval. However,
there is nothing infirm or unconstitutional if the President decides on the implementation
of a certain project or activity and requires said department to implement it. Such is a
presidential prerogative as long as it involves the department or office authorized by law
to supervise or execute the Project. Thus, as in this case, when the President approved
and ordered the development of a housing project with the corresponding reclamation
work, making DENR a member of the committee tasked to implement the project, the

Admin. Law | 189

required authorization from the DENR to reclaim land can be deemed satisfied. It
cannot be disputed that the ultimate power over alienable and disposable public lands is
reposed in the President of the Philippines and not the DENR Secretary. To still require
a DENR authorization on the Smokey Mountain when the President has already
authorized and ordered the implementation of the Project would be a derogation of the
powers of the President as the head of the executive branch. Otherwise, any
department head can defy or oppose the implementation of a project approved by the
head of the executive branch, which is patently illegal and unconstitutional.
In Chavez v. Romulo, we stated that when a statute imposes a specific duty on the
executive department, the President may act directly or order the said department to
undertake an activity, thus:
[A]t the apex of the entire executive officialdom is the President. Section 17, Article VII
of the Constitution specifies [her] power as Chief executive departments, bureaus and
offices. [She] shall ensure that the laws be faithfully executed. As Chief Executive,
President Arroyo holds the steering wheel that controls the course of her
government. She lays down policies in the execution of her plans and
programs. Whatever policy she chooses, she has her subordinates to implement
them. In short, she has the power of control.Whenever a specific function is
entrusted by law or regulation to her subordinate, she may act directly or merely
direct the performance of a duty x x x. Such act is well within the prerogative of
her office (emphasis supplied).[72]
Moreover, the power to order the reclamation of lands of public domain is reposed first
in the Philippine President. The Revised Administrative Code of 1987 grants authority to
the President to reserve lands of public domain for settlement for any specific purpose,
thus:
Section 14. Power to Reserve Lands of the Public and Private Domain of the
Government.(1) The President shall have the power to reserve for settlement or public
use, and for specific public purposes, any of the lands of the public domain, the
use of which is not otherwise directed by law. The reserved land shall thereafter remain
subject to the specific public purpose indicated until otherwise provided by law or
proclamation. (Emphasis supplied.)
President Aquino reserved the area of the Smokey Mountain dumpsite for settlement
and issued MO 415 authorizing the implementation of the Smokey Mountain
Development Project plus the reclamation of the area across R-10. Then President
Ramos issued Proclamation No. 39 covering the 21-hectare dumpsite and the 40hectare commercial/industrial area, and Proclamation No. 465 and MO 415 increasing
the area of foreshore and submerged lands of Manila Bay to be reclaimed from 40 to 79

Admin. Law | 190

hectares. Having supervision and control over the DENR, both Presidents directly
assumed and exercised the power granted by the Revised Administrative Code to the
DENR Secretary to authorize the NHA to reclaim said lands. What can be done
indirectly by the DENR can be done directly by the President. It would be absurd if the
power of the President cannot be exercised simply because the head of a department in
the executive branch has not acted favorably on a project already approved by the
President. If such arrangement is allowed then the department head will become more
powerful than the President.
2. Under Sec. 2 of MO 415, the DENR is one of the members of the EXECOM chaired
by the NCR-CORD to oversee the implementation of the Project. The EXECOM was the
one which recommended approval of the project plan and the joint venture
agreements. Clearly, the DENR retained its power of supervision and control over the
laws affected by the Project since it was tasked to facilitate the titling of
the Smokey Mountain and of the area to be reclaimed, which shows that it had tacitly
given its authority to the NHA to undertake the reclamation.
3. Former DENR Secretary Angel C. Alcala issued Special Patents Nos. 3591 and 3592
while then Secretary Victor O. Ramos issued Special Patent No. 3598 that embraced
the areas covered by the reclamation. These patents conveyed the lands to be
reclaimed to the NHA and granted to said agency the administration and disposition of
said lands for subdivision and disposition to qualified beneficiaries and for development
for mix land use (commercial/industrial) to provide employment opportunities to on-site
families and additional areas for port related activities. Such grant of authority to
administer and dispose of lands of public domain under the SMDRP is of course subject
to the powers of the EXECOM of SMDRP, of which the DENR is a member.
4. The issuance of ECCs by the DENR for SMDRP is but an exercise of its power of
supervision and control over the lands of public domain covered by the Project.
Based on these reasons, it is clear that the DENR, through its acts and issuances, has
ratified and confirmed the reclamation of the subject lands for the purposes laid down in
Proclamations Nos. 39 and 465.

Third Issue: Whether respondent RBI can acquire reclaimed foreshore and
submerged lands considered as inalienable and outside the commerce of man.
Petitioner postulates that respondent RBI cannot acquire the reclaimed foreshore and
submerged areas as these are inalienable public lands beyond the commerce of man
based on Art. 1409 of the Civil Code which provides:

Admin. Law | 191

Article 1409. The following contracts are inexistent and void from the beginning:
(1) Those whose cause, object or purpose is contrary to law, morals, good customs,
public order or public policy; x x x x
(7) Those expressly prohibited or declared void by law.
These contracts cannot be ratified. Neither can the right to set up the defense of
illegality be waived.
Secs. 2 and 3, Art. XII of the Constitution declare that all natural resources are owned
by the State and they cannot be alienated except for alienable agricultural lands of the
public domain. One of the States natural resources are lands of public domain which
include reclaimed lands.
Petitioner contends that for these reclaimed lands to be alienable, there must be a law
or presidential proclamation officially classifying these reclaimed lands as alienable and
disposable and open to disposition or concession. Absent such law or proclamation, the
reclaimed lands cannot be the enabling component or consideration to be paid to RBI
as these are beyond the commerce of man.
We are not convinced of petitioners postulation.
The reclaimed lands across R-10 were classified alienable and disposable lands of
public domain of the State for the following reasons, viz:
First, there were three (3) presidential proclamations classifying the reclaimed lands
across R-10 as alienable or disposable hence open to disposition or concession, to wit:
(1) MO 415 issued by President Aquino, of which Sec. 4 states that [t]he land covered
by the Smokey Mountain Dumpsite is hereby conveyed to the National Housing
Authority as well as the area to be reclaimed across R-10.
The directive to transfer the lands once reclaimed to the NHA implicitly carries with it the
declaration that said lands are alienable and disposable. Otherwise, the NHA cannot
effectively use them in its housing and resettlement project.
(2) Proclamation No. 39 issued by then President Ramos by which the reclaimed lands
were conveyed to NHA for subdivision and disposition to qualified beneficiaries and for
development into a mixed land use (commercial/industrial) to provide employment
opportunities to on-site families and additional areas for port-related activities. Said
directive carries with it the pronouncement that said lands have been transformed to

Admin. Law | 192

alienable and disposable lands. Otherwise, there is no legal way to convey it to the
beneficiaries.
(3) Proclamation No. 465 likewise issued by President Ramos enlarged the reclaimed
area to 79 hectares to be developed and disposed of in the implementation of the
SMDRP. The authority put into the hands of the NHA to dispose of the reclaimed lands
tacitly sustains the conversion to alienable and disposable lands.
Secondly, Special Patents Nos. 3591, 3592, and 3598 issued by the DENR anchored
on Proclamations Nos. 39 and 465 issued by President Ramos, without doubt, classified
the reclaimed areas as alienable and disposable.
Admittedly, it cannot be said that MO 415, Proclamations Nos. 39 and 465 are explicit
declarations that the lands to be reclaimed are classified as alienable and
disposable. We find however that such conclusion is derived and implicit from the
authority given to the NHA to transfer the reclaimed lands to qualified beneficiaries.
The query is, when did the declaration take effect? It did so only after the special
patents covering the reclaimed areas were issued. It is only on such date that the
reclaimed lands became alienable and disposable lands of the public domain. This is in
line with the ruling in PEA where said issue was clarified and stressed:
PD No. 1085, coupled with President Aquinos actual issuance of a special patent
covering the Freedom Islands, is equivalent to an official proclamation classifying
theFreedom Islands as alienable or disposable lands of the public domain. PD No.
1085 and President Aquinos issuance of a land patent also constitute a declaration
that
theFreedom Islands are
no
longer
needed
for
public
service. The Freedom Islands are thus alienable or disposable lands of the public
domain, open to disposition or concession to qualified parties. [73] (Emphasis supplied.)
Thus, MO 415 and Proclamations Nos. 39 and 465 cumulatively and jointly taken
together with Special Patent Nos. 3591, 3592, and 3598 more than satisfy the
requirement in PEA that [t]here must be a law or presidential proclamation officially
classifying these reclaimed lands as alienable or disposable and open to disposition or
concession (emphasis supplied).[74]
Apropos the requisite law categorizing reclaimed land as alienable or disposable, we
find that RA 6957 as amended by RA 7718 provides ample authority for the
classification of reclaimed land in the SMDRP for the repayment scheme of the BOT
project as alienable and disposable lands of public domain. Sec. 6 of RA 6957 as
amended by RA 7718 provides:

Admin. Law | 193

For the financing, construction, operation and maintenance of any infrastructure projects
undertaken through the build-operate-and transfer arrangement or any of its variations
pursuant to the provisions of this Act, the project proponent x x x may likewise be repaid
in the form of a share in the revenue of the project or other non-monetary payments,
such as, but not limited to, the grant of a portion or percentage of the reclaimed
land, subject to the constitutional requirements with respect to the ownership of the
land. (Emphasis supplied.)
While RA 6957 as modified by RA 7718 does not expressly declare that the reclaimed
lands that shall serve as payment to the project proponent have become alienable and
disposable lands and opened for disposition; nonetheless, this conclusion is necessarily
implied, for how else can the land be used as the enabling component for the Project if
such classification is not deemed made?
It may be argued that the grant of authority to sell public lands, pursuant to PEA, does
not convert alienable lands of public domain into private or patrimonial lands. We ruled
in PEA that alienable lands of public domain must be transferred to qualified
private parties, or to government entities not tasked to dispose of public lands,
before these lands can become private or patrimonial lands (emphasis supplied).
[75]
To lands reclaimed by PEA or through a contract with a private person or entity, such
reclaimed lands still remain alienable lands of public domain which can be transferred
only to Filipino citizens but not to a private corporation.This is because PEA under PD
1084 and EO 525 is tasked to hold and dispose of alienable lands of public domain and
it is only when it is transferred to Filipino citizens that it becomes patrimonial
property. On the other hand, the NHA is a government agency not tasked to dispose of
public lands under its charterThe Revised Administrative Code of 1987. The NHA is an
end-user agency authorized by law to administer and dispose of reclaimed lands. The
moment titles over reclaimed lands based on the special patents are transferred to the
NHA by the Register of Deeds, they are automatically converted to patrimonial
properties of the State which can be sold to Filipino citizens and private corporations,
60% of which are owned by Filipinos. The reason is obvious: if the reclaimed land is not
converted to patrimonial land once transferred to NHA, then it would be useless to
transfer it to the NHA since it cannot legally transfer or alienate lands of public
domain. More importantly, it cannot attain its avowed purposes and goals since it can
only transfer patrimonial lands to qualified beneficiaries and prospective buyers to raise
funds for the SMDRP.
From the foregoing considerations, we find that the 79-hectare reclaimed land has been
declared alienable and disposable land of the public domain; and in the hands of NHA,
it has been reclassified as patrimonial property.

Admin. Law | 194

Petitioner, however, contends that the reclaimed lands were inexistent prior to the three
(3) Presidential Acts (MO 415 and Proclamations Nos. 39 and 465) and hence, the
declaration that such areas are alienable and disposable land of the public domain,
citing PEA, has no legal basis.
Petitioners contention is not well-taken.
Petitioners sole reliance on Proclamations Nos. 39 and 465 without taking into
consideration the special patents issued by the DENR demonstrates the inherent
weakness of his proposition. As was ruled in PEA cited by petitioner himself, PD No.
1085, coupled with President Aquinos actual issuance of a special patent covering
the Freedom Islands is equivalent to an official proclamation classifying the Freedom
islands as alienable or disposable lands of public domain. In a similar vein, the
combined and collective effect of Proclamations Nos. 39 and 465 with Special Patents
Nos. 3592 and 3598 is tantamount to and can be considered to be an official declaration
that the reclaimed lots are alienable or disposable lands of the public domain.
The reclaimed lands covered by Special Patents Nos. 3591, 3592, and 3598, which
evidence transfer of ownership of reclaimed lands to the NHA, are official acts of the
DENR Secretary in the exercise of his power of supervision and control over alienable
and disposable public lands and his exclusive jurisdiction over the management and
disposition of all lands of public domain under the Revised Administrative Code of
1987. Special Patent No. 3592 speaks of the transfer of Lots 1 and 2, and RI-003901000012-D with an area of 401,485 square meters based on the survey and technical
description approved by the Bureau of Lands. Lastly, Special Patent No. 3598 was
issued in favor of the NHA transferring to said agency a tract of land described in Plan
RL-00-000013 with an area of 390,000 square meters based on the survey and
technical descriptions approved by the Bureau of Lands.
The conduct of the survey, the preparation of the survey plan, the computation of the
technical description, and the processing and preparation of the special patent are
matters within the technical area of expertise of administrative agencies like the DENR
and the Land Management Bureau and are generally accorded not only respect but at
times even finality.[76] Preparation of special patents calls for technical examination and
a specialized review of calculations and specific details which the courts are ill-equipped
to undertake; hence, the latter defer to the administrative agency which is trained and
knowledgeable on such matters.[77]
Subsequently, the special patents in the name of the NHA were submitted to the
Register of Deeds of the City of Manila for registration, and corresponding certificates of
titles over the reclaimed lots were issued based on said special patents. The issuance
of certificates of titles in NHAs name automatically converts the reclaimed lands to

Admin. Law | 195

patrimonial properties of the NHA. Otherwise, the lots would not be of use to the NHAs
housing projects or as payment to the BOT contractor as the enabling component of the
BOT contract. The laws of the land have to be applied and interpreted depending on the
changing conditions and times. Tempora mutantur et legis mutantur in illis (time
changes and laws change with it). One such law that should be treated differently is the
BOT Law (RA 6957) which brought about a novel way of implementing government
contracts by allowing reclaimed land as part or full payment to the contractor of a
government project to satisfy the huge financial requirements of the undertaking. The
NHA holds the lands covered by Special Patents Nos. 3592 and 3598 solely for the
purpose of the SMDRP undertaken by authority of the BOT Law and for disposition in
accordance with said special law. The lands become alienable and disposable lands of
public domain upon issuance of the special patents and become patrimonial properties
of the Government from the time the titles are issued to the NHA.
As early as 1999, this Court in Baguio v. Republic laid down the jurisprudence that:
It is true that, once a patent is registered and the corresponding certificate of title is
issued, the land covered by them ceases to be part of the public domain and becomes
private property, and the Torrens Title issued pursuant to the patent becomes
indefeasible upon the expiration of one year from the date of issuance of such patent. [78]
The doctrine was reiterated in Republic v. Heirs of Felipe Alijaga, Sr.,[79] Heirs of Carlos
Alcaraz v. Republic,[80] and the more recent case of Doris Chiongbian-Oliva v. Republic
of the Philippines.[81] Thus, the 79-hectare reclaimed land became patrimonial property
after the issuance of certificates of titles to the NHA based on Special Patents Nos.
3592 and 3598.
One last point. The ruling in PEA cannot even be applied retroactively to the lots
covered by Special Patents Nos. 3592 (40 hectare reclaimed land) and 3598 (39hectare reclaimed land). The reclamation of the land under SMDRP was completed in
August 1996 while the PEA decision was rendered on July 9, 2002. In the meantime,
subdivided lots forming parts of the reclaimed land were already sold to private
corporations for value and separate titles issued to the buyers. The Project was
terminated through a Memorandum of Agreement signed on August 27,
2003. The PEA decision became final through the November 11, 2003 Resolution. It is a
settled precept that decisions of the Supreme Court can only be applied prospectively
as they may prejudice vested rights if applied retroactively.
In Benzonan v. Court of Appeals, the Court trenchantly elucidated the prospective
application of its decisions based on considerations of equity and fair play, thus:

Admin. Law | 196

At that time, the prevailing jurisprudence interpreting section 119 of R.A. 141 as
amended was that enunciated in Monge and Tupas cited above. The petitioners
Benzonan and respondent Pe and the DBP are bound by these decisions for pursuant
to Article 8 of the Civil Code judicial decisions applying or interpreting the laws of the
Constitution shall form a part of the legal system of the Philippines. But while our
decisions form part of the law of the land, they are also subject to Article 4 of the Civil
Code which provides that laws shall have no retroactive effect unless the contrary is
provided. This is expressed in the familiar legal maxim lex prospicit, non respicit, the law
looks forward not backward.The rationale against retroactivity is easy to perceive. The
retroactive application of a law usually divests rights that have already become vested
or impairs the obligations of contract and hence, is unconstitutional.
The same consideration underlies our rulings giving only prospective effect to decisions
enunciating new doctrines. Thus, we emphasized in People v. Jabinal, 55 SCRA 607
[1974] x x x when a doctrine of this Court is overruled and a different view is adopted,
the new doctrine should be applied prospectively and should not apply to parties who
had relied on the old doctrine and acted on the faith thereof. [82]

Fourth Issue: Whether respondent RBI can acquire reclaimed lands when there
was no declaration that said lands are no longer needed for public use.
Petitioner Chavez avers that despite the declaration that the reclaimed areas are
alienable lands of the public domain, still, the reclamation is flawed for there was never
any declaration that said lands are no longer needed for public use.
We are not moved by petitioners submission.
Even if it is conceded that there was no explicit declaration that the lands are no longer
needed for public use or public service, there was however an implicit executive
declaration that the reclaimed areas R-10 are not necessary anymore for public use or
public service when President Aquino through MO 415 conveyed the same to the NHA
partly for housing project and related commercial/industrial development intended for
disposition to and enjoyment of certain beneficiaries and not the public in general and
partly as enabling component to finance the project.
President Ramos, in issuing Proclamation No. 39, declared, though indirectly, that the
reclaimed lands of the Smokey Mountain project are no longer required for public use or
service, thus:

Admin. Law | 197

These parcels of land of public domain are hereby placed under the administration and
disposition of the National Housing Authority to develop, subdivide and dispose to
qualified beneficiaries, as well as its development for mix land use
(commercial/industrial) to provide employment opportunities to on-site families and
additional areas for port related activities. (Emphasis supplied.)
While numerical count of the persons to be benefited is not the determinant whether the
property is to be devoted to public use, the declaration in Proclamation No. 39
undeniably identifies only particular individuals as beneficiaries to whom the reclaimed
lands can be sold, namelythe Smokey Mountain dwellers. The rest of the Filipinos are
not qualified; hence, said lands are no longer essential for the use of the public in
general.
In addition, President Ramos issued on August 31, 1994 Proclamation No. 465
increasing the area to be reclaimed from forty (40) hectares to seventy-nine (79)
hectares, elucidating that said lands are undoubtedly set aside for the beneficiaries of
SMDRP and not the publicdeclaring the power of NHA to dispose of land to be
reclaimed, thus: The authority to administer, develop, or dispose lands identified and
reserved by this Proclamation and Proclamation No. 39 (s.1992), in accordance with the
SMDRP, as enhance, is vested with the NHA, subject to the provisions of existing
laws. (Emphasis supplied.)
MO 415 and Proclamations Nos. 39 and 465 are declarations that proclaimed the nonuse of the reclaimed areas for public use or service as the Project cannot be
successfully implemented without the withdrawal of said lands from public use or
service. Certainly, the devotion of the reclaimed land to public use or service conflicts
with the intended use of the Smokey Mountain areas for housing and employment of the
Smokey Mountain scavengers and for financing the Project because the latter cannot
be accomplished without abandoning the public use of the subject land. Without doubt,
the presidential proclamations on SMDRP together with the issuance of the special
patents had effectively removed the reclaimed lands from public use.
More decisive and not in so many words is the ruling in PEA which we earlier cited, that
PD No. 1085 and President Aquinos issuance of a land patent also constitute a
declaration that the Freedom Islands are no longer needed for public
service. Consequently, we ruled in that case that the reclaimed lands are open to
disposition or concession to qualified parties.[83]
In a similar vein, presidential Proclamations Nos. 39 and 465 jointly with the special
patents have classified the reclaimed lands as alienable and disposable and open to
disposition
or
concession
as
they
would
be
devoted
to
units
for Smokey Mountain beneficiaries. Hence, said lands are no longer intended for public

Admin. Law | 198

use or service and shall form part of the patrimonial properties of the State under Art.
422 of the Civil Code.[84] As discussed a priori, the lands were classified as patrimonial
properties of the NHA ready for disposition when the titles were registered in its name
by the Register of Deeds.
Moreover, reclaimed lands that are made the enabling components of a BOT
infrastructure project are necessarily reclassified as alienable and disposable lands
under the BOT Law; otherwise, absurd and illogical consequences would naturally
result. Undoubtedly, the BOT contract will not be accepted by the BOT contractor since
there will be no consideration for its contractual obligations. Since reclaimed land will be
conveyed to the contractor pursuant to the BOT Law, then there is an implied
declaration that such land is no longer intended for public use or public service and,
hence, considered patrimonial property of the State.

Fifth Issue: Whether there is a law authorizing sale of reclaimed lands.

Petitioner next claims that RBI cannot acquire the reclaimed lands because there was
no law authorizing their sale. He argues that unlike PEA, no legislative authority was
granted to the NHA to sell reclaimed land.
This position is misplaced.
Petitioner relies on Sec. 60 of Commonwealth Act (CA) 141 to support his view that the
NHA is not empowered by any law to sell reclaimed land, thus:
Section 60. Any tract of land comprised under this title may be leased or sold, as the
case may be, to any person, corporation or association authorized to purchase or lease
public lands for agricultural purposes. The area of the land so leased or sold shall be
such as shall, in the judgment of the Secretary of Agriculture and Natural Resources, be
reasonably necessary for the purposes for which such sale or lease if requested and
shall in no case exceed one hundred and forty-four hectares: Provided, however, That
this limitation shall not apply to grants, donations, transfers, made to a province,
municipality or branch or subdivision of the Government for the purposes deemed by
said entities conducive to the public interest; but the land so granted donated or
transferred to a province, municipality, or branch or subdivision of the
Government shall not be alienated, encumbered, or otherwise disposed of in a
manner affecting its title, except when authorized by Congress; Provided, further,
That any person, corporation, association or partnership disqualified from purchasing
public land for agricultural purposes under the provisions of this Act, may lease land
included under this title suitable for industrial or residential purposes, but the lease

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granted shall only be valid while such land is used for the purposes referred
to. (Emphasis supplied.)
Reliance on said provision is incorrect as the same applies only to a province,
municipality or branch or subdivision of the Government. The NHA is not a government
unit but a government corporation performing governmental and proprietary functions.
In addition, PD 757 is clear that the NHA is empowered by law to transfer properties
acquired by it under the law to other parties, thus:
Section 6. Powers and functions of the Authority. The Authority shall have the following
powers and functions to be exercised by the Boards in accordance with the established
national human settlements plan prepared by the Human Settlements Commission: x x
(k) Enter into contracts whenever necessary under such terms and conditions as it may
deem proper and reasonable;
(l) Acquire property rights and interests, and encumber or otherwise dispose the same
as it may deem appropriate (Emphasis supplied.)
Letter (l) is emphatic that the NHA can acquire property rights and interests and
encumber or otherwise dispose of them as it may deem appropriate. The transfer of the
reclaimed lands by the National Government to the NHA for housing, commercial, and
industrial purposes transformed them into patrimonial lands which are of course owned
by the State in its private or proprietary capacity. Perforce, the NHA can sell the
reclaimed lands to any Filipino citizen or qualified corporation.

Sixth Issue: Whether the transfer of reclaimed lands to RBI was done by public
bidding
Petitioner also contends that there was no public bidding but an awarding of ownership
of said reclaimed lands to RBI. Public bidding, he says, is required under Secs. 63 and
67 of CA 141 which read:
Section 63. Whenever it is decided that lands covered by this chapter are not needed
for public purposes, the Director of Lands shall ask the Secretary of Agriculture and
Commerce for authority to dispose of the same. Upon receipt of such authority, the
Director of Lands shall give notice by public advertisement in the same manner as in the
case of leases or sales of agricultural public land, that the Government will lease or sell,
as the case may be, the lots or blocks specified in the advertisement, for the purpose
stated in the notice and subject to the conditions specified in this chapter. x x x x

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Section 67. The lease or sale shall be made through oral bidding; and adjudication shall
be made to the highest bidder. However, where an applicant has made improvements
on the land by virtue of a permit issued to him by competent authority, the sale or lease
shall be made by sealed bidding as prescribed in section twenty-six of this Act, the
provisions of which shall be applied whenever applicable. If all or part of the lots remain
unleased or unsold, the Director of Lands shall from time to time announce in the
Official Gazette or in any other newspapers of general circulation, the lease of sale of
those lots, if necessary.
He finds that the NHA and RBI violated Secs. 63 and 67 of CA 141, as the reclaimed
lands were conveyed to RBI by negotiated contract and not by public bidding as
required by law.
This stand is devoid of merit.
There is no doubt that respondent NHA conducted a public bidding of the right to
become its joint venture partner in the Smokey Mountain Project. Notices or Invitations
to Bid were published in the national dailies on January 23 and 26, 1992 and February
1, 14, 16, and 23, 1992. The bidding proper was done by the Bids and Awards
Committee (BAC) on May 18, 1992. On August 31, 1992, the Inter-Agency Techcom
made up of the NHA, PEA, DPWH, PPA, DBP, and DENR opened the bids and
evaluated them, resulting in the award of the contract to respondent RBI on October 7,
1992.
On March 19, 1993, respondents NHA and RBI signed the JVA. On February 23, 1994,
said JVA was amended and restated into the ARJVA. On August 11, 1994, the ARJVA
was again amended. On September 7, 1994, the OP approved the ARJVA and the
amendments to the ARJVA. From these factual settings, it cannot be gainsaid that there
was full compliance with the laws and regulations governing public biddings involving a
right, concession, or property of the government.
Petitioner concedes that he does not question the public bidding on the right to be a
joint venture partner of the NHA, but the absence of bidding in the sale of alienable and
disposable lands of public domain pursuant to CA 141 as amended.
Petitioners theory is incorrect.
Secs. 63 and 67 of CA 141, as amended, are in point as they refer to government sale
by the Director of Lands of alienable and disposable lands of public domain.This is
not present in the case at bar. The lands reclaimed by and conveyed to the NHA are no
longer lands of public domain. These lands became proprietary lands or patrimonial
properties of the State upon transfer of the titles over the reclaimed lands to the NHA

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and hence outside the ambit of CA 141. The NHA can therefore legally transfer
patrimonial land to RBI or to any other interested qualified buyer without any bidding
conducted by the Director of Lands because the NHA, unlike PEA, is a government
agency not tasked to sell lands of public domain. Hence, it can only hold patrimonial
lands and can dispose of such lands by sale without need of public bidding.
Petitioner likewise relies on Sec. 79 of PD 1445 which requires public bidding when
government property has become unserviceable for any cause or is no longer
needed. It appears from the Handbook on Property and Supply Management System,
Chapter 6, that reclaimed lands which have become patrimonial properties of the State,
whose titles are conveyed to government agencies like the NHA, which it will use for its
projects or programs, are not within the ambit of Sec. 79. We quote the determining
factors in the Disposal of Unserviceable Property, thus:
Determining Factors in the Disposal of Unserviceable Property
Property, which can no longer be repaired or reconditioned;
Property whose maintenance costs of repair more than outweigh the benefits and
services that will be derived from its continued use;
Property that has become obsolete or outmoded because of changes in
technology;
Serviceable property that has been rendered unnecessary due to change in the
agencys function or mandate;
Unused supplies, materials and spare parts that were procured in excess of
requirements; and
Unused supplies and materials that [have] become dangerous to use because of
long storage or use of which is determined to be hazardous. [85]
Reclaimed lands cannot be considered unserviceable properties. The reclaimed lands
in question are very much needed by the NHA for the Smokey Mountain Project
because without it, then the projects will not be successfully implemented. Since the
reclaimed lands are not unserviceable properties and are very much needed by NHA,
then Sec. 79 of PD 1445 does not apply.
More importantly, Sec. 79 of PD 1445 cannot be applied to patrimonial properties like
reclaimed lands transferred to a government agency like the NHA which has entered
into a BOT contract with a private firm. The reason is obvious. If the patrimonial property
will be subject to public bidding as the only way of disposing of said property, then Sec.
6 of RA 6957 on the repayment scheme is almost impossible or extremely difficult to
implement considering the uncertainty of a winning bid during public auction. Moreover,
the repayment scheme of a BOT contract may be in the form of non-monetary payment
like the grant of a portion or percentage of reclaimed land. Even if the BOT partner
participates in the public bidding, there is no assurance that he will win the bid and

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therefore the payment in kind as agreed to by the parties cannot be performed or the
winning bid prize might be below the estimated valuation of the land. The only way to
harmonize Sec. 79 of PD 1445 with Sec. 6 of RA 6957 is to consider Sec. 79 of PD
1445 as inapplicable to BOT contracts involving patrimonial lands. The law does not
intend anything impossible (lex non intendit aliquid impossibile).

Seventh Issue: Whether RBI, being a private corporation, is barred by the

Constitution to acquire lands of public domain
Petitioner maintains that RBI, being a private corporation, is expressly prohibited by the
1987 Constitution from acquiring lands of public domain.
Petitioners proposition has no legal mooring for the following reasons:
1. RA 6957 as amended by RA 7718 explicitly states that a contractor can be paid a
portion as percentage of the reclaimed land subject to the constitutional requirement
that only Filipino citizens or corporations with at least 60% Filipino equity can acquire
the same. It cannot be denied that RBI is a private corporation, where Filipino citizens
own at least 60% of the stocks. Thus, the transfer to RBI is valid and constitutional.
2. When Proclamations Nos. 39 and 465 were issued, inalienable lands covered by said
proclamations were converted to alienable and disposable lands of public
domain. When the titles to the reclaimed lands were transferred to the NHA, said
alienable and disposable lands of public domain were automatically classified as lands
of the private domain or patrimonial properties of the State because the NHA is an
agency NOT tasked to dispose of alienable or disposable lands of public domain. The
only way it can transfer the reclaimed land in conjunction with its projects and to attain
its goals is when it is automatically converted to patrimonial properties of the
State. Being patrimonial or private properties of the State, then it has the power to sell
the same to any qualified personunder the Constitution, Filipino citizens as private
corporations, 60% of which is owned by Filipino citizens like RBI.
3. The NHA is an end-user entity such that when alienable lands of public domain are
transferred to said agency, they are automatically classified as patrimonial
properties. The NHA is similarly situated as BCDA which was granted the authority to
dispose of patrimonial lands of the government under RA 7227. The nature of the
property holdings conveyed to BCDA is elucidated and stressed in the May 6,
2003 Resolution in Chavez v. PEA, thus:

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BCDA is an entirely different government entity. BCDA is authorized by law to

sell specific government lands that have long been declared by presidential
proclamations as military reservations for use by the different services of the
armed forces under the Department of National Defense. BCDAs mandate is
specific and limited in area, while PEAs mandate is general and national. BCDA
holds government lands that have been granted to end-user government
entitiesthe military services of the armed forces. In contrast, under Executive
Order No. 525, PEA holds the reclaimed public lands, not as an end-user entity,
but as the government agency primarily responsible for integrating, directing,
and coordinating all reclamation projects for and on behalf of the National
Government.
x x x Well-settled is the doctrine that public land granted to an end-user government
agency for a specific public use may subsequently be withdrawn by Congress from
public use and declared patrimonial property to be sold to private parties. R.A. No.
7227 creating the BCDA is a law that declares specific military reservations no
longer needed for defense or military purposes and reclassifies such lands as
patrimonial property for sale to private parties.
Government owned lands, as long as they are patrimonial property, can be sold to
private parties, whether Filipino citizens or qualified private corporations. Thus,
the so-called Friar Lands acquired by the government under Act No. 1120 are
patrimonial property which even private corporations can acquire by purchase.
Likewise, reclaimed alienable lands of the public domain if sold or transferred to a public
or municipal corporation for a monetary consideration become patrimonial property in
the hands of the public or municipal corporation. Once converted to patrimonial
property, the land may be sold by the public or municipal corporation to private parties,
whether Filipino citizens or qualified private corporations. [86] (Emphasis supplied.)
The foregoing Resolution makes it clear that the SMDRP was a program adopted by the
Government under Republic Act No. 6957 (An Act Authorizing the Financing,
Construction, Operation and Maintenance of Infrastructure Projects by the Private
Sector, and For Other Purposes), as amended by RA 7718, which is a special law
similar to RA 7227. Moreover, since the implementation was assigned to the NHA, an
end-user agency under PD 757 and RA 7279, the reclaimed lands registered under the
NHA are automatically classified as patrimonial lands ready for disposition to qualified
beneficiaries.
The foregoing reasons likewise apply to the contention of petitioner that HCPTI, being a
private corporation, is disqualified from being a transferee of public land.What was
transferred to HCPTI is a 10-hectare lot which is already classified as patrimonial

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property in the hands of the NHA. HCPTI, being a qualified corporation under the 1987
Constitution, the transfer of the subject lot to it is valid and constitutional.

Eighth Issue: Whether respondents can be compelled to disclose all information

related to the SMDRP
Petitioner asserts his right to information on all documents such as contracts, reports,
memoranda, and the like relative to SMDRP.
Petitioner asserts that matters relative to the SMDRP have not been disclosed to the
public like the current stage of the Project, the present financial capacity of RBI, the
complete list of investors in the asset pool, the exact amount of investments in the asset
pool and other similar important information regarding the Project.
He prays that respondents be compelled to disclose all information regarding the
SMDRP and furnish him with originals or at least certified true copies of all relevant
documents relating to the said project including, but not limited to, the original JVA,
ARJVA, AARJVA, and the Asset Pool Agreement.
This relief must be granted.
The right of the Filipino people to information on matters of public concern is enshrined
in the 1987 Constitution, thus:
ARTICLE II x x x x
SEC. 28. Subject to reasonable conditions prescribed by law, the State adopts and
implements a policy of full public disclosure of all its transactions involving public
interest.
ARTICLE III
SEC. 7. The right of the people to information on matters of public concern shall be
recognized. Access to official records, and to documents, and 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 citizen, subject to such limitations as
may be provided by law.

In Valmonte v. Belmonte, Jr., this Court explicated this way:

[A]n essential element of these freedoms is to keep open a continuing dialogue or
process of communication between the government and the people. It is in the interest
of the State that the channels for free political discussion be maintained to the end that
the government may perceive and be responsive to the peoples will. Yet, this open

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dialogue can be effective only to the extent that the citizenry is informed and thus able
to formulate its will intelligently. Only when the participants in the discussion are aware
of the issues and have access to information relating thereto can such bear fruit. [87]
In PEA, this Court elucidated the rationale behind the right to information:
These twin provisions of the Constitution seek to promote transparency in policy-making
and in the operations of the government, as well as provide the people sufficient
information to exercise effectively other constitutional rights. These twin provisions are
essential to the exercise of freedom of expression. If the government does not disclose
its official acts, transactions and decisions to citizens, whatever citizens say, even if
expressed without any restraint, will be speculative and amount to nothing. These twin
provisions are also essential to hold public officials at all times x x x accountable to the
people, for unless citizens have the proper information, they cannot hold public officials
accountable for anything. Armed with the right information, citizens can participate in
public discussions leading to the formulation of government policies and their effective
implementation.An informed citizenry is essential to the existence and proper
functioning of any democracy.[88]
Sec. 28, Art. II compels the State and its agencies to fully disclose all of its transactions
involving public interest. Thus, the government agencies, without need of demand from
anyone, must bring into public view all the steps and negotiations leading to the
consummation of the transaction and the contents of the perfected contract. [89] Such
information must pertain to definite propositions of the government, meaning official
recommendations or final positions reached on the different matters subject of
negotiation. The government agency, however, need not disclose intra-agency or interagency recommendations or communications during the stage when common
assertions are still in the process of being formulated or are in the exploratory
stage. The limitation also covers privileged communication like information on military
and diplomatic secrets; information affecting national security; information on
investigations of crimes by law enforcement agencies before the prosecution of the
accused; information on foreign relations, intelligence, and other classified information.

It is unfortunate, however, that after almost twenty (20) years from birth of the 1987
Constitution, there is still no enabling law that provides the mechanics for the
compulsory duty of government agencies to disclose information on government
transactions. Hopefully, the desired enabling law will finally see the light of day if and
when Congress decides to approve the proposed Freedom of Access to Information
Act. In the meantime, it would suffice that government agencies post on their bulletin
boards the documents incorporating the information on the steps and negotiations that

Admin. Law | 206

produced the agreements and the agreements themselves, and if finances permit, to
upload said information on their respective websites for easy access by interested
parties. Without any law or regulation governing the right to disclose information, the
NHA or any of the respondents cannot be faulted if they were not able to disclose
information relative to the SMDRP to the public in general.
The other aspect of the peoples right to know apart from the duty to disclose is the duty
to allow access to information on matters of public concern under Sec. 7, Art. III of the
Constitution. The gateway to information opens to the public the following: (1) official
records; (2) documents and papers pertaining to official acts, transactions, or decisions;
and (3) government research data used as a basis for policy development.
Thus, the duty to disclose information should be differentiated from the duty to permit
access to information. There is no need to demand from the government agency
disclosure of information as this is mandatory under the Constitution; failing that, legal
remedies are available. On the other hand, the interested party must first request or
even demand that he be allowed access to documents and papers in the particular
agency. A request or demand is required; otherwise, the government office or agency
will not know of the desire of the interested party to gain access to such papers and
what papers are needed. The duty to disclose covers only transactions involving public
interest, while the duty to allow access has a broader scope of information which
embraces not only transactions involving public interest, but any matter contained in
official communications and public documents of the government agency.
We find that although petitioner did not make any demand on the NHA to allow access
to information, we treat the petition as a written request or demand. We order the NHA
to allow petitioner access to its official records, documents, and papers relating to
official acts, transactions, and decisions that are relevant to the said JVA and
subsequent agreements relative to the SMDRP.

Ninth Issue: Whether the operative fact doctrine applies to the instant petition
Petitioner postulates that the operative fact doctrine is inapplicable to the present case
because it is an equitable doctrine which could not be used to countenance an
inequitable result that is contrary to its proper office.
On the other hand, the petitioner Solicitor General argues that the existence of the
various agreements implementing the SMDRP is an operative fact that can no longer be
disturbed or simply ignored, citing Rieta v. People of the Philippines.[90]

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The argument of the Solicitor General is meritorious.

The operative fact doctrine is embodied in De Agbayani v. Court of Appeals, wherein it
is stated that a legislative or executive act, prior to its being declared as unconstitutional
by the courts, is valid and must be complied with, thus:
As the new Civil Code puts it: 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. It is understandable why it should be so, the Constitution
being supreme and paramount. Any legislative or executive act contrary to its terms
cannot survive.
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 unconstitutionality], is an operative fact
and may have consequences which cannot justly be ignored. The past cannot
always be erased by a new judicial declaration. The effect of the subsequent ruling
as to invalidity may have to be considered in various aspects, with respect to particular
relations, individual and corporate, and particular conduct, private and official. This
language has been quoted with approval in a resolution in Araneta v. Hill and the
decision in Manila Motor Co., Inc. v. Flores. An even more recent instance is the opinion
of Justice Zaldivar speaking for the Court in Fernandez v. Cuerva and Co.[91] (Emphasis
supplied.)
This doctrine was reiterated in the more recent case of City of Makati v. Civil Service
Commission, wherein we ruled that:

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Moreover, we certainly cannot nullify the City Governments order of suspension, as we

have no reason to do so, much less retroactively apply such nullification to deprive
private respondent of a compelling and valid reason for not filing the leave
application. For as we have held, a void act though in law a mere scrap of paper
nonetheless confers legitimacy upon past acts or omissions done in reliance
thereof. Consequently, the existence of a statute or executive order prior to its
being adjudged void is an operative fact to which legal consequences are
attached. It would indeed be ghastly unfair to prevent private respondent from relying
upon the order of suspension in lieu of a formal leave application. [92] (Emphasis
supplied.)
The principle was further explicated in the case of Rieta v. People of the Philippines,
thus:
In similar situations in the past this Court had taken the pragmatic and realistic course
set forth in Chicot County Drainage District vs. Baxter Bank to wit:
The courts below have proceeded on the theory that the Act of Congress, having been
found to be unconstitutional, was not a law; that it was inoperative, conferring no rights
and imposing no duties, and hence affording no basis for the challenged decree. x x x It
is quite clear, however, that such broad statements as to the effect of a determination of
unconstitutionality must be taken with qualifications. The actual existence of a statute,
prior to [the determination of its invalidity], is an operative fact and may have
consequences which cannot justly be ignored. The past cannot always be erased by a
new judicial declaration. The effect of the subsequent ruling as to invalidity may have to
be considered in various aspects with respect to particular conduct, private and
official. Questions of rights claimed to have become vested, of status, of prior
determinations deemed to have finality and acted upon accordingly, of public policy in
the light of the nature both of the statute and of its previous application, demand
examination. These questions are among the most difficult of those which have
engaged the attention of courts, state and federal, and it is manifest from numerous
decisions that an all-inclusive statement of a principle of absolute retroactive invalidity
cannot be justified.
In the May 6, 2003 Resolution in Chavez v. PEA,[93] we ruled that De Agbayani[94] is not
applicable to the case considering that the prevailing law did not authorize private
corporations from owning land. The prevailing law at the time was the 1935 Constitution
as no statute dealt with the same issue.

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In the instant case, RA 6957 was the prevailing law at the time that the joint venture
agreement was signed. RA 6957, entitled An Act Authorizing The Financing,
Construction, Operation And Maintenance Of Infrastructure Projects By The Private
Sector And For Other Purposes, which was passed by Congress onJuly 24, 1989,
allows repayment to the private contractor of reclaimed lands. [95] Such law was relied
upon by respondents, along with the above-mentioned executive issuances in pushing
through with the Project. The existence of such law and issuances is an operative fact
to which legal consequences have attached. This Court is constrained to give legal
effect to the acts done in consonance with such executive and legislative acts; to do
otherwise would work patent injustice on respondents.
Further, in the May 6, 2003 Resolution in Chavez v. PEA, we ruled that in certain cases,
the transfer of land, although illegal or unconstitutional, will not be invalidated on
considerations of equity and social justice. However, in that case, we did not apply the
same considering that PEA, respondent in said case, was not entitled to equity
principles there being bad faith on its part, thus:
There are, moreover, special circumstances that disqualify Amari from invoking equity
principles. Amari cannot claim good faith because even before Amari signed the
Amended JVA on March 30, 1999, petitioner had already filed the instant case on April
27, 1998 questioning precisely the qualification of Amari to acquire
the Freedom Islands. Even before the filing of this petition, two Senate Committees had
already approved on September 16, 1997 Senate Committee Report No. 560. This
Report concluded, after a well-publicized investigation into PEAs sale of
the Freedom Islands to Amari, that the Freedom Islands are inalienable lands of the
public domain. Thus, Amari signed the Amended JVA knowing and assuming all the
attendant risks, including the annulment of the Amended JVA. [96]
Such indicia of bad faith are not present in the instant case. When the ruling in PEA was
rendered by this Court on July 9, 2002, the JVAs were all executed.Furthermore, when
petitioner filed the instant case against respondents on August 5, 2004, the JVAs were
already terminated by virtue of the MOA between the NHA and RBI. The respondents
had no reason to think that their agreements were unconstitutional or even
questionable, as in fact, the concurrent acts of the executive department lent validity to
the implementation of the Project. The SMDRP agreements have produced vested
rights in favor of the slum dwellers, the buyers of reclaimed land who were issued titles
over said land, and the agencies and investors who made investments in the project or
who bought SMPPCs. These properties and rights cannot be disturbed or questioned
after the passage of around ten (10) years from the start of the SMDRP implementation.
Evidently, the operative fact principle has set in. The titles to the lands in the hands of
the buyers can no longer be invalidated.

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The Courts Dispositions

Based on the issues raised in this petition, we find that the March 19, 1993 JVA
between NHA and RBI and the SMDRP embodied in the JVA, the subsequent
amendments to the JVA and all other agreements signed and executed in relation to it,
including, but not limited to, the September 26, 1994 Smokey Mountain Asset Pool
Agreement and the agreement on Phase I of the Project as well as all other transactions
which emanated from the Project, have been shown to be valid, legal, and
constitutional. Phase II has been struck down by the Clean Air Act.
With regard to the prayer for prohibition, enjoining respondents particularly respondent
NHA from further implementing and/or enforcing the said Project and other agreements
related to it, and from further deriving and/or enjoying any rights, privileges and interest
from the Project, we find the same prayer meritless.
Sec. 2 of Rule 65 of the 1997 Rules of Civil Procedure provides:
Sec. 2. Petition for prohibition.When the proceedings of any tribunal, corporation, board,
officer or person, whether exercising judicial, quasi-judicial or ministerial functions, are
without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting
to lack or excess of jurisdiction, and there is no appeal or any other plain, speedy, and
adequate remedy in the ordinary course of law, a person aggrieved thereby may file a
verified petition in the proper court, alleging the facts with certainty and praying that
judgment be rendered commanding the respondent to desist from further proceedings in
the action or matter specified therein, or otherwise granting such incidental reliefs as
law and justice may require.
It has not been shown that the NHA exercised judicial or quasi-judicial functions in
relation to the SMDRP and the agreements relative to it. Likewise, it has not been
shown what ministerial functions the NHA has with regard to the SMDRP.
A ministerial duty is one which is so clear and specific as to leave no room for the
exercise of discretion in its performance. It is a duty which an officer performs in a given
state of facts in a prescribed manner in obedience to the mandate of legal authority,
without regard to the exercise of his/her own judgment upon the propriety of the act
done.[97]
Whatever is left to be done in relation to the August 27, 2003 MOA, terminating the JVA
and other related agreements, certainly does not involve ministerial functions of the
NHA but instead requires exercise of judgment. In fact, Item No. 4 of the MOA
terminating the JVAs provides for validation of the developers (RBIs) claims arising from

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the termination of the SMDRP through the various government agencies. [98] Such
validation requires the exercise of discretion.
In addition, prohibition does not lie against the NHA in view of petitioners failure to avail
and exhaust all administrative remedies. Clear is the rule that prohibition is only
available when there is no adequate remedy in the ordinary course of law.
More importantly, prohibition does not lie to restrain an act which is already a fait
accompli. The operative fact doctrine protecting vested rights bars the grant of the writ
of prohibition to the case at bar. It should be remembered that petitioner was the
Solicitor General at the time SMDRP was formulated and implemented. He had the
opportunity to question the SMDRP and the agreements on it, but he did not. The
moment to challenge the Project had passed.
On the prayer for a writ of mandamus, petitioner asks the Court to compel respondents
to disclose all documents and information relating to the project, including, but not
limited to, any subsequent agreements with respect to the different phases of the
Project, the revisions of the original plan, the additional works incurred on the Project,
the current financial condition of respondent RBI, and the transactions made with
respect to the project. We earlier ruled that petitioner will be allowed access to official
records relative to the SMDRP. That would be adequate relief to satisfy petitioners right
to the information gateway.
WHEREFORE, the petition is PARTIALLY GRANTED.
The prayer for a writ of prohibition is DENIED for lack of merit.
The prayer for a writ of mandamus is GRANTED. Respondent NHA is ordered to allow
access to petitioner to all public documents and official records relative to the
SMDRPincluding, but not limited to, the March 19, 1993 JVA between the NHA and
RBI and subsequent agreements related to the JVA, the revisions over the original plan,
and the additional works incurred on and the transactions made with respect to the
Project.
No costs. SO ORDERED.

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June 30, 1965

G.R. No. L-23004
MAKATI STOCK EXCHANGE, INC., petitioner,
vs.
SECURITIES AND EXCHANGE COMMISSION and MANILA STOCK
EXCHANGE, respondents.
BENGZON, C.J.:
This is a review of the resolution of the Securities and Exchange Commission which
would deny the Makati Stock Exchange, Inc., permission to operate a stock exchange
unless it agreed not to list for trading on its board, securities already listed in the Manila
Stock Exchange.
Objecting to the requirement, Makati Stock Exchange, Inc. contends that the
Commission has no power to impose it and that, anyway, it is illegal, discriminatory and
unjust.
Under the law, no stock exchange may do business in the Philippines unless it is
previously registered with the Commission by filing a statement containing the
information described in Sec. 17 of the Securities Act (Commonwealth Act 83, as
amended).
It is assumed that the Commission may permit registration if the section is complied
with; if not, it may refuse. And there is now no question that the section has been
complied with, or would be complied with, except that the Makati Stock Exchange, upon
challenging this particular requirement of the Commission (rule against double listing)
may be deemed to have shown inability or refusal to abide by its rules, and thereby to
have given ground for denying registration. [Sec. 17 (a) (1) and (d)].
Such rule provides: "... nor shall a security already listed in any securities exchange be
listed anew in any other securities exchange ... ."
The objection of Makati Stock Exchange, Inc., to this rule is understandable. There is
actually only one securities exchange The Manila Stock Exchange that has been
operating alone for the past 25 years; and all or presumably all available or
worthwhile securities for trading in the market are now listed there. In effect, the
Commission permits the Makati Stock Exchange, Inc., to deal only with other securities.
Which is tantamount to permitting a store to open provided it sells only those goods not
sold in other stores. And if there's only one existing store, 1 the result is a monopoly.
It is not farfetched to assert as petitioner does 2 that for all practical purposes, the
Commission's order or resolution would make it impossible for the Makati Stock
Exchange to operate. So, its "permission" amounted to a "prohibition."

Admin. Law | 213

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

Admin. Law | 214

the Securities Act), which is entitled "Powers (of the Commission) with Respect to
Exchanges and Securities." 6
According to many court precedents, the general power to "regulate" which the
Commission has (Sec. 33) does not imply authority to prohibit." 7
The Manila Stock Exchange, obviously the beneficiary of the disputed rule, contends
that the power may be inferred from the express power of the Commission to suspend
trading in a security, under said sec. 28 which reads partly:
And if in its opinion, the public interest so requires, summarily to suspend trading in any
registered security on any securities exchange ... . (Sec. 28[3], Securities Act.)
However, the Commission has not acted nor claimed to have acted in pursuance
of such authority, for the simple reason that suspension under it may only be for ten
days. Indeed, this section, if applicable, precisely argues against the position of the
Commission because the "suspension," if it is, and as applied to Makati Stock
Exchange, continues for an indefinite period, if not forever; whereas this Section 28
authorizes suspension for ten days only. Besides, the suspension of trading in the
security should not be on one exchange only, but on all exchanges; bearing in mind that
suspension should be ordered "for the protection of investors" (first par., sec. 28) in all
exchanges, naturally, and if "the public interest so requires" [sec. 28(3)].
This brings up the Commission's principal conclusions underlying its determination viz.:
(a) that the establishment of another exchange in the environs of Manila would be
inimical to the public interest; and (b) that double or multiple listing of securities should
be prohibited for the "protection of the investors."
(a) Public Interest Having already adverted to this aspect of the matter, and the
emerging monopoly of the Manila Stock Exchange, we may, at this juncture, emphasize
that by restricting free competition in the marketing of stocks, and depriving the public of
the advantages thereof the Commission all but permits what the law punishes as
monopolies as "crimes against public interest." 8
"A stock exchange is essentially monopolistic," the Commission states in its resolution
(p. 14-a, Appendix, Brief for Petitioner). This reveals the basic foundation of the
Commission's process of reasoning. And yet, a few pages afterwards, it recalls the
benefits to be derived "from the existence of two or more exchanges," and the
desirability of "a healthy and fair competition in the securities market," even as it
expresses the belief that "a fair field of competition among stock exchanges should be
encouraged only to resolve, paradoxically enough, that Manila Stock Exchange shall, in
effect, continue to be the only stock exchange in Manila or in the Philippines.

Admin. Law | 215

"Double listing of a security," explains the Commission, "divides the sellers and the
buyers, thus destroying the essence of a stock exchange as a two-way auction market
for the securities, where all the buyers and sellers in one geographical area converge in
one defined place, and the bidders compete with each other to purchase the security at
the lowest possible price and those seeking to sell it compete with each other to get the
highest price therefor. In this sense, a stock exchange is essentially monopolistic."
Inconclusive premises, for sure. For it is debatable whether the buyer of stock may get
the lowest price where all the sellers assemble in only one place. The price there, in one
sale, will tend to fix the price for the succeeding, sales, and he has no chance to get a
lower price except at another stock exchange. Therefore, the arrangement desired by
the Commission may, at most, be beneficial to sellers of stock not to buyers
although what applies to buyers should obtain equally as to sellers (looking for higher
prices). Besides, there is the brokerage fee which must be considered. Not to mention
the personality of the broker.
(b) Protection of investors. At any rate, supposing the arrangement contemplated
is beneficial to investors (as the Commission says), it is to be doubted whether it is
"necessary" for their "protection" within the purview of the Securities Act. As the purpose
of the Act is to give adequate and effective protection to the investing public against
fraudulent representations, or false promises and the imposition of worthless
ventures, 9 it is hard to see how the proposed concentration of the market has a
necessary bearing to the prevention of deceptive devices or unlawful practices. For it is
not mere semantics to declare that acts for the protection of investors are necessarily
beneficial to them; but not everything beneficial to them is necessary for their protection.
And yet, the Commission realizes that if there were two or more exchanges "the same
security may sell for more in one exchange and sell for less in the other. Variance in
price of the same security would be the rule ... ." Needless to add, the brokerage rates
will also differ.
This, precisely, strengthens the objection to the Commission's ruling. Such difference in
prices and rates gives the buyer of shares alternative options, with the opportunity to
invest at lower expense; and the seller, to dispose at higher prices. Consequently, for
the investors' benefit (protection is not the word), quality of listing 10 should be permitted,
nay, encouraged, and other exchanges allowed to operate. The circumstance that some
people "made a lot of money due to the difference in prices of securities traded in the
stock exchanges of Manila before the war" as the Commission noted, furnishes no
sufficient reason to let one exchange corner the market. If there was undue
manipulation or unfair advantage in exchange trading the Commission should have
other means to correct the specific abuses.

Admin. Law | 216

Granted that, as the Commission observes, "what the country needs is not another"
market for securities already listed on the Manila Stock Exchange, but "one that would
focus its attention and energies on the listing of new securities and thus effectively help
in raising capital sorely needed by our ... unlisted industries and enterprises."
Nonetheless, we discover no legal authority for it to shore up (and stifle) free enterprise
and individual liberty along channels leading to that economic desideratum. 11
The Legislature has specified the conditions under which a stock exchange may legally
obtain a permit (sec. 17, Securities Act); it is not for the Commission to impose others. If
the existence of two competing exchanges jeopardizes public interest which is
doubtful let the Congress speak. 12 Undoubtedly, the opinion and recommendation of
the Commission will be given weight by the Legislature, in judging whether or not to
restrict individual enterprise and business opportunities. But until otherwise directed by
law, the operation of exchanges should not be so regulated as practically to create a
monopoly by preventing the establishment of other stock exchanges and thereby
contravening:
(a) the organizers' (Makati's) Constitutional right to equality before the law;
(b) their guaranteed civil liberty to pursue any lawful employment or trade; and
(c) the investor's right to choose where to buy or to sell, and his privilege to
select the brokers in his employment. 13
And no extended elucidation is needed to conclude that for a licensing officer to deny
license solely on the basis of what he believes is best for the economy of the country
may amount to regimentation or, in this instance, the exercise of undelegated legislative
powers and discretion.
Thus, it has been held that where the licensing statute does not expressly or impliedly
authorize the officer in charge, he may not refuse to grant a license simply on the
ground that a sufficient number of licenses to serve the needs of the public have already
been issued. (53 C.J.S. p. 636.)
Concerning res judicata. Calling attention to the Commission's order of May 27,
1963, which Makati Stock did not appeal, the Manila Stock Exchange pleads the
doctrine of res judicata. 14 (The order now reviewed is dated May 7, 1964.)
It appears that when Makati Stock Exchange, Inc. presented its articles of incorporation
to the Commission, the latter, after making some inquiries, issued on May 27, 1963, an
order reading as follows.
Let the certificate of incorporation of the MAKATI STOCK EXCHANGE be issued, and if
the organizers thereof are willing to abide by the foregoing conditions, they may file the
proper application for the registration and licensing of the said Exchange.

Admin. Law | 217

In that order, the Commission advanced the opinion that "it would permit the
establishment and operation of the proposed Makati Stock Exchange, provided ... it
shall not list for trading on its board, securities already listed in the Manila Stock
Exchange ... ."
Admittedly, Makati Stock Exchange, Inc. has not appealed from that order of May 27,
1963. Now, Manila Stock insists on res judicata.
Why should Makati have appealed? It got the certificate of incorporation which it
wanted. The condition or proviso mentioned would only apply if and when
it subsequently filed the application for registration as stock exchange. It had not yet
applied. It was not the time to question the condition; 15 Makati was still exploring the
convenience of soliciting the permit to operate subject to that condition. And it could
have logically thought that, since the condition did not affect its articles of incorporation,
it should not appeal the order (of May 27, 1963) which after all, granted the certificate of
incorporation (corporate existence) it wanted at that time.
And when the Makati Stock Exchange finally found that it could not successfully operate
with the condition attached, it took the issue by the horns, and expressing its desire for
registration and license, it requested that the condition (against double listing) be
dispensed with. The order of the Commission denying, such request is dated May 7,
1964, and is now under, review.
Indeed, there can be no valid objection to the discussion of this issue of double listing
now, 16 because even if the Makati Stock Exchange, Inc. may be held to have accepted
the permission to operate with the condition against double listing (for having failed to
appeal the order of May 27, 1963), still it was not precluded from afterwards
contesting 17 the validity of such condition or rule:
(1) An agreement (which shall not be construed as a waiver of any constitutional right or any
right to contest the validity of any rule or regulation) to comply and to enforce so far as is within
its powers, compliance by its members, with the provisions of this Act, and any amendment
thereto, and any rule or regulation made or to be made thereunder. (See. 17-a-1, Securities Act
[Emphasis Ours].)

Surely, this petition for review has suitably been coursed. And making reasonable
allowances for the presumption of regularity and validity of administrative action, we feel
constrained to reach the conclusion that the respondent Commission possesses no
power to impose the condition of the rule, which, additionally, results in discrimination
and violation of constitutional rights.
ACCORDINGLY, the license of the petition to operate a stock exchange is approved
without such condition. Costs shall be paid by the Manila Stock Exchange. So ordered.

Admin. Law | 218

August 12, 1991 G.R. No. 90336

RUPERTO TAULE, petitioner,
vs.
SECRETARY LUIS T. SANTOS and GOVERNOR LEANDRO
VERCELES, respondents.

GANCAYCO, J.:p
The extent of authority of the Secretary of Local Government over the katipunan ng
mga barangay or the barangay councils is brought to the fore in this case.
On June 18,1989, the Federation of Associations of Barangay Councils (FABC) of
Catanduanes, composed of eleven (11) members, in their capacities as Presidents of
the Association of Barangay Councils in their respective municipalities, convened in
Virac, Catanduanes with six members in attendance for the purpose of holding the
election of its officers.
Present were petitioner Ruperto Taule of San Miguel, Allan Aquino of Viga, Vicente Avila
of Virac, Fidel Jacob of Panganiban, Leo Sales of Caramoran and Manuel Torres of
Baras. The Board of Election Supervisors/Consultants was composed of Provincial
Government Operation Officer (PGOO) Alberto P. Molina, Jr. as Chairman with
Provincial Treasurer Luis A. Manlapaz, Jr. and Provincial Election Supervisor Arnold
Soquerata as members.
When the group decided to hold the election despite the absence of five (5) of its
members, the Provincial Treasurer and the Provincial Election Supervisor walked out.
The election nevertheless proceeded with PGOO Alberto P. Molina, Jr. as presiding
officer. Chosen as members of the Board of Directors were Taule, Aquino, Avila, Jacob
and Sales.
Thereafter, the following were elected officers of the FABC:
President Ruperto Taule
Vice-President Allan Aquino
Secretary Vicente Avila
Treasurer Fidel Jacob
Auditor Leo Sales 1
On June 19, 1989, respondent Leandro I. Verceles, Governor of Catanduanes, sent a
letter to respondent Luis T. Santos, the Secretary of Local Government,* protesting the
election of the officers of the FABC and seeking its nullification in view of several
flagrant irregularities in the manner it was conducted. 2

Admin. Law | 219

In compliance with the order of respondent Secretary, petitioner Ruperto Taule as

President of the FABC, filed his comment on the letter-protest of respondent Governor
denying the alleged irregularities and denouncing said respondent Governor for
meddling or intervening in the election of FABC officers which is a purely non-partisan
affair and at the same time requesting for his appointment as a member of the
Sangguniang Panlalawigan of the province being the duly elected President of the
FABC in Catanduanes. 3
On August 4, 1989, respondent Secretary issued a resolution nullifying the election of
the officers of the FABC in Catanduanes held on June 18, 1989 and ordering a new one
to be conducted as early as possible to be presided by the Regional Director of Region
V of the Department of Local Government. 4
Petitioner filed a motion for reconsideration of the resolution of August 4, 1989 but it was
denied by respondent Secretary in his resolution of September 5, 1989. 5
In the petition for certiorari before Us, petitioner seeks the reversal of the resolutions of
respondent Secretary dated August 4, 1989 and September 5, 1989 for being null and
void.
Petitioner raises the following issues:
(1) Whether or not the respondent Secretary has jurisdiction to entertain an election
protest involving the election of the officers of the Federation of Association of
Barangay Councils;
(2) Whether or not the respondent Governor has the legal personality to file an election
protest;
(3) Assuming that the respondent Secretary has jurisdiction over the election protest,
whether or not he committed grave abuse of discretion amounting to lack of
jurisdiction in nullifying the election;
The Katipunan ng mga Barangay is the organization of all sangguniang barangays in
the following levels: in municipalities to be known as katipunang bayan; in
cities, katipunang
panlungsod;
in
provinces, katipunang
panlalawigan;
in
6
regions, katipunang pampook; and on the national level, katipunan ng mga barangay.
The Local Government Code provides for the manner in which the katipunan ng mga
barangay at all levels shall be organized:
Sec. 110. Organization. (1) The katipunan at all levels shall be organized in the following
manner:
(a) The katipunan in each level shall elect a board of directors and a set of officers. The
president of each level shall represent the katipunan concerned in the next higher level of
organization.

Admin. Law | 220

(b) The katipunan ng mga barangay shall be composed of the katipunang pampook, which shall
in turn be composed of the presidents of the katipunang panlalawigan and the katipunang
panlungsod. The presidents of the katipunang bayan in each province shall constitute the
katipunang panlalawigan. The katipunang panlungsod and the katipunang bayan shall be
composed of the punong barangays of cities and municipalities, respectively. xxx xxx xxx

The respondent Secretary, acting in accordance with the provision of the Local
Government Code empowering him to "promulgate in detail the implementing circulars
and the rules and regulations to carry out the various administrative actions required for
the initial implementation of this Code in such a manner as will ensure the least
disruption of on-going programs and projects 7 issued Department of Local Government
Circular No. 89-09 on April 7, 1989, 8 to provide the guidelines for the conduct of the
elections of officers of the Katipunan ng mga Barangay at the municipal, city, provincial,
regional and national levels.
It is now the contention of petitioner that neither the constitution nor the law grants
jurisdiction upon the respondent Secretary over election contests involving the election
of officers of the FABC, the katipunan ng mga barangay at the provincial level. It is
petitioner's theory that under Article IX, C, Section 2 of the 1987 Constitution, it is the
Commission on Elections which has jurisdiction over all contests involving elective
barangay officials.
On the other hand, it is the opinion of the respondent Secretary that any violation of the
guidelines as set forth in said circular would be a ground for filing a protest and would
vest upon the Department jurisdiction to resolve any protest that may be filed in relation
thereto.
Under Article IX, C, Section 2(2) of the 1987 Constitution, the Commission on Elections
shall exercise "exclusive original jurisdiction over all contests relating to the elections,
returns, and qualifications of all elective regional, provincial, and city officials, and
appellate jurisdiction over all contests involving elective municipal officials decided by
trial courts of general jurisdiction, or involving elective barangay officials decided by trial
courts of limited jurisdiction." The 1987 Constitution expanded the jurisdiction of the
COMELEC by granting it appellate jurisdiction over all contests involving elective
municipal officials decided by trial courts of general jurisdiction or elective barangay
officials decided by trial courts of limited jurisdiction. 9
The jurisdiction of the COMELEC over contests involving elective barangay officials is
limited to appellate jurisdiction from decisions of the trial courts. Under the law, 10 the
sworn petition contesting the election of a barangay officer shall be filed with the proper
Municipal or Metropolitan Trial Court by any candidate who has duly filed a certificate of
candidacy and has been voted for the same office within 10 days after the proclamation
of the results. A voter may also contest the election of any barangay officer on the

Admin. Law | 221

ground of ineligibility or of disloyalty to the Republic of the Philippines by filing a sworn

petition for quo warranto with the Metropolitan or Municipal Trial Court within 10 days
after the proclamation of the results of the election. 11 Only appeals from decisions of
inferior courts on election matters as aforestated may be decided by the COMELEC.
The Court agrees with the Solicitor General that the jurisdiction of the COMELEC is
over popular elections, the elected officials of which are determined through the will of
the electorate. An election is the embodiment of the popular will, the expression of the
sovereign power of the people. 12 It involves the choice or selection of candidates to
public office by popular vote. 13 Specifically, the term "election," in the context of the
Constitution, may refer to the conduct of the polls, including the listing of voters, the
holding of the electoral campaign, and the casting and counting of the votes 14which do
not characterize the election of officers in the Katipunan ng mga barangay. "Election
contests" would refer to adversary proceedings by which matters involving the title or
claim of title to an elective office, made before or after proclamation of the winner, is
settled whether or not the contestant is claiming the office in dispute 15 and in the case
of elections of barangay officials, it is restricted to proceedings after the proclamation of
the winners as no pre-proclamation controversies are allowed. 16
The jurisdiction of the COMELEC does not cover protests over the organizational set-up
of the katipunan ng mga barangay composed of popularly elected punong barangays as
prescribed by law whose officers are voted upon by their respective members. The
COMELEC exercises only appellate jurisdiction over election contests involving elective
barangay officials decided by the Metropolitan or Municipal Trial Courts which likewise
have limited jurisdiction. The authority of the COMELEC over the katipunan ng mga
barangay is limited by law to supervision of the election of the representative of
the katipunan concerned to the sanggunian in a particular level conducted by their own
respective organization. 17
However, the Secretary of Local Government is not vested with jurisdiction to entertain
any protest involving the election of officers of the FABC.
There is no question that he is vested with the power to promulgate rules and
regulations as set forth in Section 222 of the Local Government Code.
Likewise, under Book IV, Title XII, Chapter 1, See. 3(2) of the Administrative Code of
1987, ** the respondent Secretary has the power to "establish and prescribe rules,
regulations and other issuances and implementing laws on the general supervision of
local government units and on the promotion of local autonomy and monitor compliance
thereof by said units."

Admin. Law | 222

Also, the respondent Secretary's rule making power is provided in See. 7, Chapter II,
Book IV of the Administrative Code, to wit:
(3) Promulgate rules and regulations necessary to carry out department objectives,
policies, functions, plans, programs and projects;
Thus, DLG Circular No. 89-09 was issued by respondent Secretary in pursuance of his
rule-making power conferred by law and which now has the force and effect of law. 18
Now the question that arises is whether or not a violation of said circular vests
jurisdiction upon the respondent Secretary, as claimed by him, to hear a protest filed in
relation thereto and consequently declare an election null and void.
It is a well-settled principle of administrative law that unless expressly empowered,
administrative agencies are bereft of quasi- judicial powers. 19 The jurisdiction of
administrative authorities is dependent entirely upon the provisions of the statutes
reposing power in them; they cannot confer it upon themselves. 20 Such jurisdiction is
essential to give validity to their determinations. 21
There is neither a statutory nor constitutional provision expressly or even by necessary
implication conferring upon the Secretary of Local Government the power to assume
jurisdiction over an election protect involving officers of the katipunan ng mga barangay.
An understanding of the extent of authority of the Secretary over local governments is
therefore necessary if We are to resolve the issue at hand.
Presidential power over local governments is limited by the Constitution to the exercise
of general supervision 22 "to ensure that local affairs are administered according to
law." 23 The general supervision is exercised by the President through the Secretary of
Local Government. 24
In administrative law, supervision means overseeing or the power or authority of an
officer to see that the subordinate officers perform their duties. If the latter fails or
neglects to fulfill them the former may take such action or step as prescribed by law to
make them perform their duties. Control, on the other hand, means the power of an
officer to alter or modify or nullify or set aside what a subordinate officer had done in the
performance of his duties and to substitute the judgment of the former for that of the
latter. The fundamental law permits the Chief Executive to wield no more authority than
that of checking whether said local government or the officers thereof perform their
duties as provided by statutory enactments. Hence, the President cannot interfere with
local governments so long as the same or its officers act within the scope of their
authority. 25 Supervisory power, when contrasted with control, is the power of mere

Admin. Law | 223

oversight over an inferior body; it does not include any restraining authority over such
body. 26
Construing the constitutional limitation on the power of general supervision of the
President over local governments, We hold that respondent Secretary has no authority
to pass upon the validity or regularity of the election of the officers of the katipunan. To
allow respondent Secretary to do so will give him more power than the law or the
Constitution grants. It will in effect give him control over local government officials for it
will permit him to interfere in a purely democratic and non-partisan activity aimed at
strengthening the barangay as the basic component of local governments so that the
ultimate goal of fullest autonomy may be achieved. In fact, his order that the new
elections to be conducted be presided by the Regional Director is a clear and direct
interference by the Department with the political affairs of the barangays which is not
permitted by the limitation of presidential power to general supervision over local
governments. 27
Indeed, it is the policy of the state to ensure the autonomy of local governments. 28 This
state policy is echoed in the Local Government Code wherein it is declared that "the
State shall guarantee and promote the autonomy of local government units to ensure
their fullest development as self-reliant communities and make them more effective
partners in the pursuit of national development and social progress." 29 To deny the
Secretary of Local Government the power to review the regularity of the elections of
officers of the katipunan would be to enhance the avowed state policy of promoting the
autonomy of local governments.
Moreover, although the Department is given the power to prescribe rules, regulations
and other issuances, the Administrative Code limits its authority to merely "monitoring
compliance" by local government units of such issuances. 30 To monitor means "to
watch, observe or check. 31 This is compatible with the power of supervision of the
Secretary over local governments which as earlier discussed is limited to checking
whether the local government unit concerned or the officers thereof perform their duties
as provided by statutory enactments. Even the Local Government Code which grants
the Secretary power to issue implementing circulars, rules and regulations is silent as to
how these issuances should be enforced. Since the respondent Secretary exercises
only supervision and not control over local governments, it is truly doubtful if he could
enforce compliance with the DLG Circular. 32 Any doubt therefore as to the power of the
Secretary to interfere with local affairs should be resolved in favor of the greater
autonomy of the local government.
Thus, the Court holds that in assuming jurisdiction over the election protest filed by
respondent Governor and declaring the election of the officers of the FABC on June 18,

Admin. Law | 224

1989 as null and void, the respondent Secretary acted in excess of his jurisdiction. The
respondent Secretary not having the jurisdiction to hear an election protest involving
officers of the FABC, the recourse of the parties is to the ordinary courts. The Regional
Trial Courts have the exclusive original jurisdiction to hear the protest. 33
The provision in DLG Circular No. 89-15 amending DLG Circular No. 89-09 which states
that "whenever the guidelines are not substantially complied with, the election shall be
declared null and void by the Department of Local Government and an election shall
conduct and being invoked by the Solicitor General cannot be applied. DLG Circular No.
89-15 was issued on July 3, 1989 after the June 18, 1989 elections of the FABC officers
and it is the rule in statutory construction that laws, including circulars and
regulations 34 cannot be applied retrospectively. 35Moreover, such provision is null and
void for having been issued in excess of the respondent Secretary's jurisdiction,
inasmuch as an administrative authority cannot confer jurisdiction upon itself.
As regards the second issue raised by petitioner, the Court finds that respondent
Governor has the personality to file the protest. Under Section 205 of the Local
Government Code, the membership of the sangguniang panlalawiganconsists of the
governor, the vice-governor, elective members of the said sanggunian and the
presidents of the katipunang panlalawigan and the kabataang barangay provincial
federation. The governor acts as the presiding officer of the sangguniang
panlalawigan. 36
As presiding officer of the sagguniang panlalawigan, the respondent governor has an
interest in the election of the officers of the FABC since its elected president becomes a
member of the assembly. If the president of the FABC assumes his presidency under
questionable circumstances and is allowed to sit in the sangguniang panlalawiganthe
official actions of the sanggunian may be vulnerable to attacks as to their validity or
legality. Hence, respondent governor is a proper party to question the regularity of the
elections of the officers of the FABC.
As to the third issue raised by petitioner, the Court has already ruled that the respondent
Secretary has no jurisdiction to hear the protest and nullify the elections.
Nevertheless, the Court holds that the issue of the validity of the elections should now
be resolved in order to prevent any unnecessary delay that may result from the
commencement of an appropriate action by the parties.
The elections were declared null and void primarily for failure to comply with Section 2.4
of DLG Circular No. 89-09 which provides that "the incumbent FABC President or the
Vice-President shall preside over the reorganizational meeting, there being a quorum."
The rule specifically provides that it is the incumbent FABC President or Vice-President

Admin. Law | 225

who shall preside over the meeting. The word "shall" should be taken in its ordinary
signification, i.e., it must be imperative or mandatory and not merely
permissive, 37 as the rule is explicit and requires no other interpretation. If it had been
intended that any other official should preside, the rules would have provided so, as it
did in the elections at the town and city levels 38 as well as the regional level.. 39
It is admitted that neither the incumbent FABC President nor the Vice-President
presided over the meeting and elections but Alberto P. Molina, Jr., the Chairman of the
Board of Election Supervisors/Consultants. Thus, there was a clear violation of the
aforesaid mandatory provision. On this ground, the elections should be nullified.
Under Sec. 2.3.2.7 of the same circular it is provided that a Board of Election
Supervisors/Consultants shall be constituted to oversee and/or witness the canvassing
of votes and proclamation of winners. The rules confine the role of the Board of Election
Supervisors/Consultants to merely overseeing and witnessing the conduct of elections.
This is consistent with the provision in the Local Government Code limiting the authority
of the COMELEC to the supervision of the election. 40
In case at bar, PGOO Molina, the Chairman of the Board, presided over the elections.
There was direct participation by the Chairman of the Board in the elections contrary to
what is dictated by the rules. Worse, there was no Board of Election Supervisors to
oversee the elections in view of the walk out staged by its two other members, the
Provincial COMELEC Supervisor and the Provincial Treasurer. The objective of keeping
the election free and honest was therefore compromised.
The Court therefore finds that the election of officers of the FABC held on June 18, 1989
is null and void for failure to comply with the provisions of DLG Circular No. 89-09.
Meanwhile, pending resolution of this petition, petitioner filed a supplemental petition
alleging that public respondent Local Government Secretary, in his memorandum dated
June 7, 1990, designated Augusto Antonio as temporary representative of the
Federation to the sangguniang panlalawigan of Catanduanes. 41 By virtue of this
memorandum, respondent governor swore into said office Augusto Antonio on June 14,
1990. 42
The Solicitor General filed his comment on the supplemental petition
the resolution of the Court dated September 13,1990.

43

as required by

In his comment, the Solicitor General dismissed the supervening event alleged by
petitioner as something immaterial to the petition. He argues that Antonio's appointment
was merely temporary "until such time that the provincial FABC president in that
province has been elected, appointed and qualified." 44 He stresses that Antonio's

Admin. Law | 226

appointment was only a remedial measure designed to cope with the problems brought
about by the absence of a representative of the FABC to the "sanggunian ang
panlalawigan."
Sec. 205 (2) of the Local Government Code (B.P. Blg. 337) provides(2) The sangguniang panlalawigan shall be composed of the governor, the vicegovernor, elective members of the said sanggunian and the presidents of the
katipunang panlalawigan and the kabataang barangay provincial federation who shall
be appointed by the President of the Philippines. (Emphasis supplied.)
Batas Pambansa Blg. 51, under Sec. 2 likewise states:
xxx xxx xxx
The sangguniang panlalawigan of each province shall be composed of the governor as
chairman and presiding officer, the vice-governor as presiding officer pro tempore, the
elective sangguniang panlalawigan members, and the appointive members consisting of
the president of the provincial association of barangay councils, and the president of the
provincial federation of the kabataang barangay. (Emphasis supplied.)
In Ignacio vs. Banate Jr. 45 the Court, interpreting similarly worded provisions of Batas
Pambansa Blg. 337 and Batas Pambansa Blg. 51 on the composition of
the sangguniang panlungsod, 46 declared as null and void the appointment of private
respondent Leoncio Banate Jr. as member of the Sangguniang Panlungsod of the City
of Roxas representing the katipunang panlungsod ng mga barangay for he lacked the
elegibility and qualification required by law, not being a barangay captain and for not
having been elected president of the association of barangay councils. The Court held
that an unqualified person cannot be appointed a member of the sanggunian, even in
an acting capacity. In Reyes vs. Ferrer, 47 the appointment of Nemesio L. Rasgo Jr. as
representative of the youth sector to the sangguniang panlungsod of Davao City was
declared invalid since he was never the president of the kabataang barangay city
federation as required by Sec. 173, Batas Pambansa Blg. 337.
In the present controversy involving the sangguniang panlalawigan, the law is likewise
explicit. To be appointed by the President of the Philippines to sit in the sangguniang
panlalawigan is the president of the katipunang panlalawigan. The appointee must meet
the qualifications set by law. 48 The appointing power is bound by law to comply with the
requirements as to the basic qualifications of the appointee to the sangguniang
panlalawigan. The President of the Philippines or his alter ego, the Secretary of Local
Government, has no authority to appoint anyone who does not meet the minimum
qualification to be the president of the federation of barangay councils.

Admin. Law | 227

Augusto Antonio is not the president of the federation. He is a member of the federation
but he was not even present during the elections despite notice. The argument that
Antonio was appointed as a remedial measure in the exigency of the service cannot be
sustained. Since Antonio does not meet the basic qualification of being president of the
federation, his appointment to the sangguniang panlalawigan is not justified
notwithstanding that such appointment is merely in a temporary capacity. If the intention
of the respondent Secretary was to protect the interest of the federation in
the sanggunian, he should have appointed the incumbent FABC President in a holdover capacity. For even under the guidelines, the term of office of officers of
the katipunan at all levels shall be from the date of their election until their successors
shall have been duly elected and qualified, without prejudice to the terms of their
appointments as members of the sanggunian to which they may be correspondingly
appointed. 49 Since the election is still under protest such that no successor of the
incumbent has as yet qualified, the respondent Secretary has no choice but to have the
incumbent FABC President sit as member of the sanggunian. He could even have
appointed petitioner since he was elected the president of the federation but not
Antonio. The appointment of Antonio, allegedly the protege of respondent Governor,
gives credence to petitioner's charge of political interference by respondent Governor in
the organization. This should not be allowed. The barangays should be insulated from
any partisan activity or political intervention if only to give true meaning to local
autonomy.
WHEREFORE, the petition is GRANTED in that the resolution of respondent Secretary
dated August 4, 1989 is hereby SET ASIDE for having been issued in excess of
jurisdiction.
The election of the officials of the ABC Federation held on June 18, 1989 is hereby
annulled. A new election of officers of the federation is hereby ordered to be conducted
immediately in accordance with the governing rules and regulations.
The Supplemental petition is hereby GRANTED. The appointment of Augusto Antonio
as representative to the Sangguniang Panlalawigan in a temporary capacity is declared
null and void.
No costs.
SO ORDERED.

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August 29, 1989

G.R. No. 84811

SOLID HOMES, INC., petitioner,

vs.
TERESITA PAYAWAL and COURT OF APPEALS, respondents.
CRUZ, J.:
We are asked to reverse a decision of the Court of Appeals sustaining the jurisdiction of
the Regional Trial Court of Quezon City over a complaint filed by a buyer, the herein
private respondent, against the petitioner, for delivery of title to a subdivision lot. The
position of the petitioner, the defendant in that action, is that the decision of the trial
court is null and void ab initio because the case should have been heard and decided
by what is now called the Housing and Land Use Regulatory Board.
The complaint was filed on August 31, 1982, by Teresita Payawal against Solid Homes,
Inc. before the Regional Trial Court of Quezon City and docketed as Civil Case No. Q36119. The plaintiff alleged that the defendant contracted to sell to her a subdivision lot
in Marikina on June 9, 1975, for the agreed price of P 28,080.00, and that by September
10, 1981, she had already paid the defendant the total amount of P 38,949.87 in
monthly installments and interests. Solid Homes subsequently executed a deed of sale
over the land but failed to deliver the corresponding certificate of title despite her
repeated demands because, as it appeared later, the defendant had mortgaged the
property in bad faith to a financing company. The plaintiff asked for delivery of the title to
the lot or, alternatively, the return of all the amounts paid by her plus interest. She also
claimed moral and exemplary damages, attorney's fees and the costs of the suit.
Solid Homes moved to dismiss the complaint on the ground that the court had no
jurisdiction, this being vested in the National Housing Authority under PD No. 957. The
motion was denied. The defendant repleaded the objection in its answer, citing Section
3 of the said decree providing that "the National Housing Authority shall have exclusive
jurisdiction to regulate the real estate trade and business in accordance with the
provisions of this Decree." After trial, judgment was rendered in favor of the plaintiff and
the defendant was ordered to deliver to her the title to the land or, failing this, to refund
to her the sum of P 38,949.87 plus interest from 1975 and until the full amount was
paid. She was also awarded P 5,000.00 moral damages, P 5,000.00 exemplary
damages, P 10,000.00 attorney's fees, and the costs of the suit. 1
Solid Homes appealed but the decision was affirmed by the respondent court, 2 which
also berated the appellant for its obvious efforts to evade a legitimate obligation,
including its dilatory tactics during the trial. The petitioner was also reproved for its "gall"

Admin. Law | 229

in collecting the further amount of P 1,238.47 from the plaintiff purportedly for realty
taxes and registration expenses despite its inability to deliver the title to the land.
In holding that the trial court had jurisdiction, the respondent court referred to Section 41
of PD No. 957 itself providing that:
SEC. 41. Other remedies.-The rights and remedies provided in this Decree shall be in
addition to any and all other rights and remedies that may be available under existing
laws and declared that "its clear and unambiguous tenor undermine(d) the (petitioner's)
pretension that the court a quowas bereft of jurisdiction." The decision also dismissed
the contrary opinion of the Secretary of Justice as impinging on the authority of the
courts of justice. While we are disturbed by the findings of fact of the trial court and the
respondent court on the dubious conduct of the petitioner, we nevertheless must sustain
it on the jurisdictional issue.
The applicable law is PD No. 957, as amended by PD No. 1344, entitled "Empowering
the National Housing Authority to Issue Writs of Execution in the Enforcement of Its
Decisions Under Presidential Decree No. 957." Section 1 of the latter decree provides
as follows:
SECTION 1. In the exercise of its function to regulate the real estate trade and business
and in addition to its powers provided for in Presidential Decree No. 957, the National
Housing Authority shall haveexclusive jurisdiction to hear and decide cases of the
following nature:
A. Unsound real estate business practices;
B. Claims involving refund and any other claims filed by subdivision lot or condominium
unit buyer against the project owner, developer, dealer, broker or salesman; and
C. Cases involving specific performance of contractuala statutory obligations filed by
buyers of subdivision lot or condominium unit against the owner, developer, dealer,
broker or salesman. (Emphasis supplied.)
The language of this section, especially the italicized portions, leaves no room for doubt
that "exclusive jurisdiction" over the case between the petitioner and the private
respondent is vested not in the Regional Trial Court but in the National Housing
Authority. 3
The private respondent contends that the applicable law is BP No. 129, which confers
on regional trial courts jurisdiction to hear and decide cases mentioned in its Section 19,
reading in part as follows:

Admin. Law | 230

SEC. 19. Jurisdiction in civil cases.-Regional Trial Courts shall exercise exclusive
original jurisdiction:
(1) In all civil actions in which the subject of the litigation is incapable of pecuniary
estimation;
(2) In all civil actions which involve the title to, or possession of, real property, or any
interest therein, except actions for forcible entry into and unlawful detainer of lands or
buildings, original jurisdiction over which is conferred upon Metropolitan Trial Courts,
Municipal Trial Courts, and Municipal Circuit Trial Courts; xxx xxx xxx
(8) In all other cases in which the demand, exclusive of interest and cost or the value of
the property in controversy, amounts to more than twenty thousand pesos (P
20,000.00).
It stresses, additionally, that BP No. 129 should control as the later enactment, having
been promulgated in 1981, after PD No. 957 was issued in 1975 and PD No. 1344 in
1978.
This construction must yield to the familiar canon that in case of conflict between a
general law and a special law, the latter must prevail regardless of the dates of their
enactment. Thus, it has been held thatThe fact that one law is special and the other general creates a presumption that the
special act is to be considered as remaining an exception of the general act, one as a
general law of the land and the other as the law of the particular case. 4
xxx xxx xxx
The circumstance that the special law is passed before or after the general act does not
change the principle. Where the special law is later, it will be regarded as an exception
to, or a qualification of, the prior general act; and where the general act is later, the
special statute will be construed as remaining an exception to its terms, unless repealed
expressly or by necessary implication. 5
It is obvious that the general law in this case is BP No. 129 and PD No. 1344 the special
law.
The argument that the trial court could also assume jurisdiction because of Section 41
of PD No. 957, earlier quoted, is also unacceptable. We do not read that provision as
vesting concurrent jurisdiction on the Regional Trial Court and the Board over the
complaint mentioned in PD No. 1344 if only because grants of power are not to be
lightly inferred or merely implied. The only purpose of this section, as we see it, is to

Admin. Law | 231

reserve. to the aggrieved party such other remedies as may be provided by existing law,
like a prosecution for the act complained of under the Revised Penal Code. 6
On the competence of the Board to award damages, we find that this is part of the
exclusive power conferred upon it by PD No. 1344 to hear and decide "claims involving
refund and any other claims filed by subdivision lot or condominium unit buyers against
the project owner, developer, dealer, broker or salesman." It was therefore erroneous for
the respondent to brush aside the well-taken opinion of the Secretary of Justice thatSuch claim for damages which the subdivision/condominium buyer may have against
the owner, developer, dealer or salesman, being a necessary consequence of an
adjudication of liability for non-performance of contractual or statutory obligation, may
be deemed necessarily included in the phrase "claims involving refund and any other
claims" used in the aforequoted subparagraph C of Section 1 of PD No. 1344. The
phrase "any other claims" is, we believe, sufficiently broad to include any and all claims
which are incidental to or a necessary consequence of the claims/cases specifically
included in the grant of jurisdiction to the National Housing Authority under the subject
provisions.
The same may be said with respect to claims for attorney's fees which are recoverable
either by agreement of the parties or pursuant to Art. 2208 of the Civil Code (1) when
exemplary damages are awarded and (2) where the defendant acted in gross and
evident bad faith in refusing to satisfy the plaintiff 's plainly valid, just and demandable
claim.
xxx xxx xxx
Besides, a strict construction of the subject provisions of PD No. 1344 which would
deny the HSRC the authority to adjudicate claims for damages and for damages and for
attorney's fees would result in multiplicity of suits in that the subdivision condominium
buyer who wins a case in the HSRC and who is thereby deemed entitled to claim
damages and attorney's fees would be forced to litigate in the regular courts for the
purpose, a situation which is obviously not in the contemplation of the law. (Emphasis
supplied.) 7
As a result of the growing complexity of the modern society, it has become necessary to
create more and more administrative bodies to help in the regulation of its ramified
activities. Specialized in the particular fields assigned to them, they can deal with the
problems thereof with more expertise and dispatch than can be expected from the
legislature or the courts of justice. This is the reason for the increasing vesture of quasilegislative and quasi-judicial powers in what is now not unreasonably called the fourth
department of the government.

Admin. Law | 232

Statutes conferring powers on their administrative agencies must be liberally construed

to enable them to discharge their assigned duties in accordance with the legislative
purpose. 8 Following this policy in Antipolo Realty Corporation v. National Housing
Authority, 9 the Court sustained the competence of the respondent administrative body,
in the exercise of the exclusive jurisdiction vested in it by PD No. 957 and PD No. 1344,
to determine the rights of the parties under a contract to sell a subdivision lot.
It remains to state that, contrary to the contention of the petitioner, the case of Tropical
Homes v. National Housing Authority 10 is not in point. We upheld in that case the
constitutionality of the procedure for appeal provided for in PD No. 1344, but we did not
rule there that the National Housing Authority and not the Regional Trial Court had
exclusive jurisdiction over the cases enumerated in Section I of the said decree. That is
what we are doing now.
It is settled that any decision rendered without jurisdiction is a total nullity and may be
struck down at any time, even on appeal before this Court. 11 The only exception is
where the party raising the issue is barred by estoppel, 12 which does not appear in the
case before us. On the contrary, the issue was raised as early as in the motion to
dismiss filed in the trial court by the petitioner, which continued to plead it in its answer
and, later, on appeal to the respondent court. We have no choice, therefore,
notwithstanding the delay this decision will entail, to nullify the proceedings in the trial
court for lack of jurisdiction.
WHEREFORE, the challenged decision of the respondent court is REVERSED and the
decision of the Regional Trial Court of Quezon City in Civil Case No. Q-36119 is SET
ASIDE, without prejudice to the filing of the appropriate complaint before the Housing
and Land Use Regulatory Board. No costs.
SO ORDERED.

Admin. Law | 233

August 31, 1987

G.R. No. L-50444

ANTIPOLO REALTY CORPORATION, petitioner,

vs.
THE NATIONAL HOUSING AUTHORITY, HON. G.V. TOBIAS, in his capacity as
General Manager of the National Housing Authority, THE HON. JACOBO C.
CLAVE, in his capacity as Presidential Executive Assistant and VIRGILIO A.
YUSON, respondents.
FELICIANO, J.:
By virtue of a Contract to Sell dated 18 August 1970, Jose Hernando acquired
prospective and beneficial ownership over Lot. No. 15, Block IV of the Ponderosa
Heights Subdivision in Antipolo, Rizal, from the petitioner Antipolo Realty Corporation.
On 28 August 1974, Mr. Hernando transferred his rights over Lot No. 15 to private
respondent Virgilio Yuson. The transfer was embodied in a Deed of Assignment and
Substitution of Obligor (Delegacion), executed with the consent of Antipolo Realty, in
which Mr. Yuson assumed the performance of the vendee's obligations under the
original contract, including payment of his predecessor's installments in arrears.
However, for failure of Antipolo Realty to develop the subdivision project in accordance
with its undertaking under Clause 17 of the Contract to Sell, Mr. Yuson paid only the
arrearages pertaining to the period up to, and including, the month of August 1972 and
stopped all monthly installment payments falling due thereafter Clause 17 reads:
Clause 17. SUBDIVISION BEAUTIFICATION. To insure the beauty of the subdivision in line
with the modern trend of urban development, the SELLER hereby obligates itself to provide the
subdivision with:
a) Concrete curbs and gutters
b) Underground drainage system
c) Asphalt paved roads
d) Independent water system
e) Electrical installation with concrete posts.
f) Landscaping and concrete sidewall
g) Developed park or amphi-theatre
h) 24-hour security guard service.

These improvements shall be complete within a period of two (2) years from date of this
contract. Failure by the SELLER shall permit the BUYER to suspend his monthly
installments without any penalties or interest charges until such time that such
improvements shall have been completed. 1
On 14 October 1976, the president of Antipolo Realty sent a notice to private
respondent Yuson advising that the required improvements in the subdivision had

Admin. Law | 234

already been completed, and requesting resumption of payment of the monthly

installments on Lot No. 15. For his part, Mr. Yuson replied that he would conform with
the request as soon as he was able to verify the truth of the representation in the notice.
In a second letter dated 27 November 1976, Antipolo Realty reiterated its request that
Mr. Yuson resume payment of his monthly installments, citing the decision rendered by
the National Housing Authority (NHA) on 25 October 1976 in Case No. 252 (entitled
"Jose B. Viado Jr., complainant vs. Conrado S. Reyes, respondent") declaring Antipolo
Realty to have "substantially complied with its commitment to the lot buyers pursuant to
the Contract to Sell executed by and between the lot buyers and the respondent." In
addition, a formal demand was made for full and immediate payment of the amount of
P16,994.73, representing installments which, Antipolo Realty alleged, had accrued
during the period while the improvements were being completed i.e., between
September 1972 and October 1976.
Mr. Yuson refused to pay the September 1972-October 1976 monthly installments but
agreed to pay the post October 1976 installments. Antipolo Realty responded by
rescinding the Contract to Sell, and claiming the forfeiture of all installment payments
previously made by Mr. Yuson.
Aggrieved by the rescission of the Contract to Sell, Mr. Yuson brought his dispute with
Antipolo Realty before public respondent NHA through a letter-complaint dated 10 May
1977 which complaint was docketed in NHA as Case No. 2123.
Antipolo Realty filed a Motion to Dismiss which was heard on 2 September 1977.
Antipolo Realty, without presenting any evidence, moved for the consolidation of Case
No. 2123 with several other cases filed against it by other subdivision lot buyers, then
pending before the NHA. In an Order issued on 7 February 1978, the NHA denied the
motion to dismiss and scheduled Case No. 2123 for hearing.
After hearing, the NHA rendered a decision on 9 March 1978 ordering the reinstatement
of the Contract to Sell under the following conditions:
l) Antipolo Realty Corporation shall sent [sic] to Virgilio Yuzon a statement of account for
the monthly amortizations from November 1976 to the present;
m) No penalty interest shall be charged for the period from November 1976 to the date
of the statement of account; and
n) Virgilio Yuzon shall be given sixty (60) days to pay the arrears shown in the

statement of account. 2
Antipolo Realty filed a Motion for Reconsideration asserting: (a) that it had been denied
due process of law since it had not been served with notice of the scheduled hearing;
and (b) that the jurisdiction to hear and decide Mr. Yuson's complaint was lodged in the

Admin. Law | 235

regular courts, not in the NHA, since that complaint involved the interpretation and
application of the Contract to Sell.
The motion for reconsideration was denied on 28 June 1978 by respondent NHA
General Manager G.V. Tobias, who sustained the jurisdiction of the NHA to hear and
decide the Yuson complaint. He also found that Antipolo Realty had in fact been served
with notice of the date of the hearing, but that its counsel had failed to attend the
hearing. 3 The case was submitted for decision, and eventually decided, solely on the
evidence presented by the complainant.
On 2 October 1978, Antipolo Realty came to this Court with a Petition for certiorari and
Prohibition with Writ of Preliminary Injunction, which was docketed as G.R. No. L49051. Once more, the jurisdiction of the NHA was assailed. Petitioner further asserted
that, under Clause 7 of the Contract to Sell, it could validly terminate its agreement with
Mr. Yuson and, as a consequence thereof, retain all the prior installment payments
made by the latter. 4
This Court denied certiorari in a minute resolution issued on 11 December 1978,
"without prejudice to petitioner's pursuing the administrative remedy." 5 A motion for
reconsideration was denied on 29 January 1979.
Thereafter, petitioner interposed an appeal from the NHA decision with the Office of the
President which, on 9 March 1979, dismissed the same through public respondent
Presidential Executive Assistant Jacobo C. Clave. 6
In the present petition, Antipolo Realty again asserts that, in hearing the complaint of
private respondent Yuson and in ordering the reinstatement of the Contract to Sell
between the parties, the NHA had not only acted on a matter beyond its competence,
but had also, in effect, assumed the performance of judicial or quasi-judicial functions
which the NHA was not authorized to perform.
We find the petitioner's arguments lacking in merit.
It is by now commonplace learning that many administrative agencies exercise and
perform adjudicatory powers and functions, though to a limited extent only. Limited
delegation of judicial or quasi-judicial authority to administrative agencies (e.g., the
Securities and Exchange Commission and the National Labor Relations Commission) is
well recognized in our jurisdiction, 7 basically because the need for special competence
and experience has been recognized as essential in the resolution of questions of
complex or specialized character and because of a companion recognition that the
dockets of our regular courts have remained crowded and clogged. In Spouses Jose

Admin. Law | 236

Abejo and Aurora Abejo, et al. vs. Hon. Rafael dela Cruz, etc., et al., 8 the Court,
through Mr. Chief Justice Teehankee, said:
In the fifties, the Court taking cognizance of the move to vest jurisdiction in
administrative commissions and boards the power to resolve specialized disputes in the
field of labor (as in corporations, public transportation and public utilities) ruled that
Congress in requiring the Industrial Court's intervention in the resolution of labor
management controversies likely to cause strikes or lockouts meant such jurisdiction to
be exclusive, although it did not so expressly state in the law. The Court held that under
the "sense-making and expeditious doctrine of primary jurisdiction . . . the courts cannot
or will not determine a controversy involving a question which is within the jurisdiction of
an administrative tribunal where the question demands the exercise of sound
administrative discretion requiring the special knowledge, experience, and services of
the administrative tribunal to determine technical and intricate matters of fact, and a
uniformity of ruling is essential to comply with the purposes of the regulatory statute
administered" (Pambujan Sur United Mine Workers v. Samar Mining Co., Inc., 94 Phil,
932, 941 [1954]).
In this era of clogged court dockets, the need for specialized administrative boards or
commissions with the special knowledge, experience and capability to hear and
determine promptly disputes on technical matters or essentially factual matters, subject
to judicial review in case of grave abuse of discretion has become well nigh
indispensable. Thus, in 1984, the Court noted that 'between the power lodged in an
administrative body and a court, the unmistakeable trend has been to refer it to the
former, "Increasingly, this Court has been committed to the view that unless the law
speaks clearly and unequivocably, the choice should fall on fan administrative agency]" '
(NFL v. Eisma, 127 SCRA 419, 428, citing precedents). The Court in the earlier case of
Ebon vs. De Guzman (113 SCRA 52, 56 [1982]), noted that the lawmaking authority, in
restoring to the labor arbiters and the NLRC their jurisdiction to award all kinds of
damages in labor cases, as against the previous P.D. amendment splitting their
jurisdiction with the regular courts, "evidently, . . . had second thoughts about depriving
the Labor Arbiters and the NLRC of the jurisdiction to award damages in labor cases
because that setup would mean duplicity of suits, splitting the cause of action and
possible conflicting findings and conclusions by two tribunals on one and the same
claim."
In an even more recent case, Tropical Homes, Inc. vs. National Housing Authority, et
al., 9 Mr. Justice Gutierrez, speaking for the Court, observed that:
There is no question that a statute may vest exclusive original jurisdiction in an
administrative agency over certain disputes and controversies falling within the

Admin. Law | 237

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

Admin. Law | 238

Presidential Decree No. 1344 12 clarified and spelled out the quasi-judicial dimensions
of the grant of regulatory authority to the NHA in the following quite specific terms:
SECTION 1. In the exercise of its functions to regulate the real estate trade and
business and in addition to its powers provided for in Presidential Decree No. 957, the
National Housing Authority shall have exclusive jurisdiction to hear and decide cases of
the following nature:
A. Unsound real estate business practices:
B. Claims involving refund and any other claims filed by sub- division lot or
condominium unit buyer against the project owner, developer, dealer, broker or
salesman; and
C. Cases involving specific performance of contractual and statutory obligations filed by
buyers of subdivision lots or condominium units against the owner, developer, dealer,
broker or salesman.(emphasis supplied.)
The substantive provisions being applied and enforced by the NHA in the instant case
are found in Section 23 of Presidential Decree No. 957 which reads:
Sec. 23. Non-Forfeiture of Payments. No installment payment made by a buyer in a
subdivision or condominium project for the lot or unit he contracted to buy shall be
forfeited in favor of the owner or developer when the buyer, after due notice to the
owner or developer, desists from further payment due to the failure of the owner or
developer to develop the subdivision or condominium project according to the approved
plans and within the time limit for complying with the same. Such buyer may, at his
option, be reimbursed the total amount paid including amortization and interests but
excluding delinquency interests, with interest thereon at the legal rate. (emphasis
supplied.)
Having failed to comply with its contractual obligation to complete certain specified
improvements in the subdivision within the specified period of two years from the date of
the execution of the Contract to Sell, petitioner was not entitled to exercise its options
under Clause 7 of the Contract. Hence, petitioner could neither rescind the Contract to
Sell nor treat the installment payments made by the private respondent as forfeited in its
favor. Indeed, under the general Civil Law, 13 in view of petitioner's breach of its
contract with private respondent, it is the latter who is vested with the option either to
rescind the contract and receive reimbursement of an installment payments (with legal
interest) made for the purchase of the subdivision lot in question, or to suspend
payment of further purchase installments until such time as the petitioner had fulfilled its

Admin. Law | 239

obligations to the buyer. The NHA was therefore correct in holding that private
respondent's prior installment payments could not be forfeited in favor of petitioner.
Neither did the NHA commit any abuse, let alone a grave abuse of discretion or act in
excess of its jurisdiction when it ordered the reinstatement of the Contract to Sell
between the parties. Such reinstatement is no more than a logical consequence of the
NHA's correct ruling, just noted, that the petitioner was not entitled to rescind the
Contract to Sell. There is, in any case, no question that under Presidential Decree No.
957, the NHA was legally empowered to determine and protect the rights of contracting
parties under the law administered by it and under the respective agreements, as well
as to ensure that their obligations thereunder are faithfully performed.
We turn to petitioner's assertion that it had been denied the right to due process. This
assertion lacks substance. The record shows that a copy of the order denying the
Motion to Dismiss and scheduling the hearing of the complaint for the morning of 6
March 1978, was duly served on counsel for petitioner, as evidenced by the annotation
appearing at the bottom of said copy indicating that such service had been
effected. 14 But even if it be assumed, arguendo, that such notice had not been served
on the petitioner, nevertheless the latter was not deprived of due process, for what the
fundamental law abhors is not the absence of previous notice but rather the absolute
lack of opportunity to be heard. 15 In the instant case, petitioner was given ample
opportunity to present its side and to be heard on a motion for reconsideration as well,
and not just on a motion to dismiss; the claim of denial of due process must hence
sound even more hollow. 16
We turn finally to the question of the amount of P16,994.73 which petitioner insists had
accrued during the period from September 1972 to October 1976, when private
respondent had suspended payment of his monthly installments on his chosen
subdivision lot. The NHA in its 9 March 1978 resolution ruled that the regular monthly
installments under the Contract to Sell did not accrue during the September 1972
October 1976 period:
[R]espondent allowed the complainant to suspend payment of his monthly installments
until the improvements in the subdivision shall have been completed. Respondent
informed complainant on November 1976 that the improvements have been
completed. Monthly installments during the period of suspension of payment did not
become due and demandable Neither did they accrue Such must be the case,
otherwise, there is no sense in suspending payments. If the suspension is lifted the
debtor shall resume payments but never did he incur any arrears.
Such being the case, the demand of respondent for complainant to pay the arrears due
during the period of suspension of payment is null and void. Consequently, the notice of

Admin. Law | 240

cancellation based on the refusal to pay the s that were not due and demandable is also
null and void. 17
The NHA resolution is probably too terse and in need of certification and amplification.
The NHA correctly held that no installment payments should be considered as having
accrued during the period of suspension of payments. Clearly, the critical issue is what
happens to the installment payments which would have accrued and fallen due during
the period of suspension had no default on the part of the petitioner intervened. To our
mind, the NHA resolution is most appropriately read as directing that the original period
of payment in the Contract to Sell must be deemed extended by a period of time equal
to the period of suspension (i.e., by four (4) years and two (2) months) during which
extended time (tacked on to the original contract period) private respondent buyer must
continue to pay the monthly installment payments until the entire original contract price
shall have been paid. We think that such is the intent of the NHA resolution which
directed that "[i]f the suspension is lifted, the debtor shall resume payments" and that
such is the most equitable and just reading that may be given to the NHA resolution. To
permit Antipolo Realty to collect the disputed amount in a lump sum after it had
defaulted on its obligations to its lot buyers, would tend to defeat the purpose of the
authorization (under Sec. 23 of Presidential Decree No. 957, supra) to lot buyers to
suspend installment payments. As the NHA resolution pointed out, [s]uch must be the
case, otherwise, there is no sense in suspending payments." Upon the other hand, to
condone the entire amount that would have become due would be an expressively
harsh penalty upon the petitioner and would result in the unjust enrichment of the
private respondent at the expense of the petitioner. It should be recalled that the latter
had already fulfilled, albeit tardily, its obligations to its lot buyers under their Contracts to
Sell. At the same time, the lot buyer should not be regarded as delinquent and as such
charged penalty interest. The suspension of installment payments was attributable to
the petitioner, not the private respondent. The tacking on of the period of suspension to
the end of the original period precisely prevents default on the part of the lot buyer. In
the words of the NHA resolution, "never would [the buyer] incur any arrears."
WHEREFORE, the Petition for certiorari is DISMISSED. The NHA decision appealed
from is hereby AFFIRMED and clarified as providing for the lengthening of the original
contract period for payment of installments under the Contract to Sell by four (4) years
and two (2) months, during which extended time private respondent shall continue to
pay the regular monthly installment payments until the entire original contract price shall
have been paid. No pronouncement as to costs.
SO ORDERED.

Admin. Law | 241

Admin. Law | 242

March 16, 1994

G.R. No. 110120

LAGUNA LAKE DEVELOPMENT AUTHORITY, petitioner,

vs.
COURT OF APPEALS, HON. MANUEL JN. SERAPIO, Presiding Judge RTC,
Branch 127, Caloocan City, HON. MACARIO A. ASISTIO, JR., City Mayor of
Caloocan and/or THE CITY GOVERNMENT OF CALOOCAN,respondents..

ROMERO, J.:
The clash between the responsibility of the City Government of Caloocan to dispose off
the 350 tons of garbage it collects daily and the growing concern and sensitivity to a
pollution-free environment of the residents of Barangay Camarin, Tala Estate, Caloocan
City where these tons of garbage are dumped everyday is the hub of this controversy
elevated by the protagonists to the Laguna Lake Development Authority (LLDA) for
adjudication.
The instant case stemmed from an earlier petition filed with this Court by Laguna Lake
Development
Authority
(LLDA
for
short)
docketed
as
G.R.
No. 107542 against the City Government of Caloocan, et al. In the Resolution of
November 10, 1992, this Court referred G.R. No. 107542 to the Court of Appeals for
appropriate
disposition.
Docketed
therein
as
CA-G.R.
SP
1
No. 29449, the Court of Appeals, in a decision promulgated on January 29, 1993 ruled
that the LLDA has no power and authority to issue a cease and desist order enjoining
the dumping of garbage in Barangay Camarin, Tala Estate, Caloocan City. The LLDA
now seeks, in this petition, a review of the decision of the Court of Appeals.
The facts, as disclosed in the records, are undisputed.
On March 8, 1991, the Task Force Camarin Dumpsite of Our Lady of Lourdes Parish,
Barangay Camarin, Caloocan City, filed a letter-complaint 2 with the Laguna Lake
Development Authority seeking to stop the operation of the 8.6-hectare open garbage
dumpsite in Tala Estate, Barangay Camarin, Caloocan City due to its harmful effects on
the health of the residents and the possibility of pollution of the water content of the
surrounding area.
On November 15, 1991, the LLDA conducted an on-site investigation, monitoring and
test sampling of the leachate 3that seeps from said dumpsite to the nearby creek which
is a tributary of the Marilao River. The LLDA Legal and Technical personnel found that
the City Government of Caloocan was maintaining an open dumpsite at the Camarin

Admin. Law | 243

area without first securing an Environmental Compliance Certificate (ECC) from the
Environmental Management Bureau (EMB) of the Department of Environment and
Natural Resources, as required under Presidential Decree No. 1586, 4 and clearance
from LLDA as required under Republic Act No. 4850, 5 as amended by Presidential
Decree No. 813 and Executive Order No. 927, series of 1983. 6
After a public hearing conducted on December 4, 1991, the LLDA, acting on the
complaint of Task Force Camarin Dumpsite, found that the water collected from the
leachate and the receiving streams could considerably affect the quality, in turn, of the
receiving waters since it indicates the presence of bacteria, other than coliform, which
may have contaminated the sample during collection or handling. 7 On December 5,
1991, the LLDA issued a Cease and Desist Order 8 ordering the City Government of
Caloocan, Metropolitan Manila Authority, their contractors, and other entities, to
completely halt, stop and desist from dumping any form or kind of garbage and other
waste matter at the Camarin dumpsite.
The dumping operation was forthwith stopped by the City Government of Caloocan.
However, sometime in August 1992 the dumping operation was resumed after a
meeting held in July 1992 among the City Government of Caloocan, the representatives
of Task Force Camarin Dumpsite and LLDA at the Office of Environmental Management
Bureau Director Rodrigo U. Fuentes failed to settle the problem.
After an investigation by its team of legal and technical personnel on August 14, 1992,
the LLDA issued another order reiterating the December 5, 1991, order and issued an
Alias Cease and Desist Order enjoining the City Government of Caloocan from
continuing its dumping operations at the Camarin area.
On September 25, 1992, the LLDA, with the assistance of the Philippine National
Police, enforced its Alias Cease and Desist Order by prohibiting the entry of all garbage
dump trucks into the Tala Estate, Camarin area being utilized as a dumpsite.
Pending resolution of its motion for reconsideration earlier filed on September 17, 1992
with the LLDA, the City Government of Caloocan filed with the Regional Trial Court of
Caloocan City an action for the declaration of nullity of the cease and desist order with
prayer for the issuance of writ of injunction, docketed as Civil Case No. C-15598. In its
complaint, the City Government of Caloocan sought to be declared as the sole authority
empowered to promote the health and safety and enhance the right of the people in
Caloocan City to a balanced ecology within its territorial jurisdiction. 9
On September 25, 1992, the Executive Judge of the Regional Trial Court of Caloocan
City issued a temporary restraining order enjoining the LLDA from enforcing its cease
and desist order. Subsequently, the case was raffled to the Regional Trial Court, Branch

Admin. Law | 244

126 of Caloocan which, at the time, was presided over by Judge Manuel Jn. Serapio of
the Regional Trial Court, Branch 127, the pairing judge of the recently-retired presiding
judge.
The LLDA, for its part, filed on October 2, 1992 a motion to dismiss on the ground,
among others, that under Republic Act No. 3931, as amended by Presidential Decree
No. 984, otherwise known as the Pollution Control Law, the cease and desist order
issued by it which is the subject matter of the complaint is reviewable both upon the law
and the facts of the case by the Court of Appeals and not by the Regional Trial Court. 10
On October 12, 1992 Judge Manuel Jn. Serapio issued an order consolidating Civil
Case No. C-15598 with Civil Case No. C-15580, an earlier case filed by the Task Force
Camarin Dumpsite entitled "Fr. John Moran, et al. vs. Hon. Macario Asistio." The LLDA,
however, maintained during the trial that the foregoing cases, being independent of
each other, should have been treated separately.
On October 16, 1992, Judge Manuel Jn. Serapio, after hearing the motion to dismiss,
issued in the consolidated cases an order 11 denying LLDA's motion to dismiss and
granting the issuance of a writ of preliminary injunction enjoining the LLDA, its agent
and all persons acting for and on its behalf, from enforcing or implementing its cease
and desist order which prevents plaintiff City of Caloocan from dumping garbage at the
Camarin dumpsite during the pendency of this case and/or until further orders of the
court.
On November 5, 1992, the LLDA filed a petition for certiorari, prohibition and injunction
with prayer for restraining order with the Supreme Court, docketed as G.R. No. 107542,
seeking to nullify the aforesaid order dated October 16, 1992 issued by the Regional
Trial Court, Branch 127 of Caloocan City denying its motion to dismiss.
The Court, acting on the petition, issued a Resolution 12 on November 10, 1992 referring
the case to the Court of Appeals for proper disposition and at the same time, without
giving due course to the petition, required the respondents to comment on the petition
and file the same with the Court of Appeals within ten (10) days from notice. In the
meantime, the Court issued a temporary restraining order, effective immediately and
continuing until further orders from it, ordering the respondents: (1) Judge Manuel Jn.
Serapio, Presiding Judge, Regional Trial Court, Branch 127, Caloocan City to cease
and desist from exercising jurisdiction over the case for declaration of nullity of the
cease and desist order issued by the Laguna Lake Development Authority (LLDA); and
(2) City Mayor of Caloocan and/or the City Government of Caloocan to cease and desist
from dumping its garbage at the Tala Estate, Barangay Camarin, Caloocan City.

Admin. Law | 245

Respondents City Government of Caloocan and Mayor Macario A. Asistio, Jr. filed on
November 12, 1992 a motion for reconsideration and/or to quash/recall the temporary
restraining order and an urgent motion for reconsideration alleging that ". . . in view of
the calamitous situation that would arise if the respondent city government fails to
collect 350 tons of garbage daily for lack of dumpsite (i)t is therefore, imperative that the
issue be resolved with dispatch or with sufficient leeway to allow the respondents to find
alternative solutions to this garbage problem."
On November 17, 1992, the Court issued a Resolution 13 directing the Court of Appeals
to immediately set the case for hearing for the purpose of determining whether or not
the temporary restraining order issued by the Court should be lifted and what
conditions, if any, may be required if it is to be so lifted or whether the restraining order
should be maintained or converted into a preliminary injunction.
The Court of Appeals set the case for hearing on November 27, 1992, at 10:00 in the
morning at the Hearing Room, 3rd Floor, New Building, Court of Appeals. 14 After the
oral argument, a conference was set on December 8, 1992 at 10:00 o'clock in the
morning where the Mayor of Caloocan City, the General Manager of LLDA, the
Secretary of DENR or his duly authorized representative and the Secretary of DILG or
his duly authorized representative were required to appear.
It was agreed at the conference that the LLDA had until December 15, 1992 to finish its
study and review of respondent's technical plan with respect to the dumping of its
garbage and in the event of a rejection of respondent's technical plan or a failure of
settlement, the parties will submit within 10 days from notice their respective
memoranda on the merits of the case, after which the petition shall be deemed
submitted for resolution. 15Notwithstanding such efforts, the parties failed to settle the
dispute.
On April 30, 1993, the Court of Appeals promulgated its decision holding that: (1) the
Regional Trial Court has no jurisdiction on appeal to try, hear and decide the action for
annulment of LLDA's cease and desist order, including the issuance of a temporary
restraining order and preliminary injunction in relation thereto, since appeal therefrom is
within the exclusive and appellate jurisdiction of the Court of Appeals under Section 9,
par. (3), of Batas Pambansa Blg. 129; and (2) the Laguna Lake Development Authority
has no power and authority to issue a cease and desist order under its enabling law,
Republic Act No. 4850, as amended by P.D. No. 813 and Executive Order
No. 927, series of 1983.
The Court of Appeals thus dismissed Civil Case No. 15598 and the preliminary
injunction issued in the said case was set aside; the cease and desist order of LLDA
was likewise set aside and the temporary restraining order enjoining the City Mayor of

Admin. Law | 246

Caloocan and/or the City Government of Caloocan to cease and desist from dumping its
garbage at the Tala Estate, Barangay Camarin, Caloocan City was lifted, subject,
however, to the condition that any future dumping of garbage in said area, shall be in
conformity with the procedure and protective works contained in the proposal attached
to the records of this case and found on pages 152-160 of the Rollo, which was thereby
adopted by reference and made an integral part of the decision, until the corresponding
restraining and/or injunctive relief is granted by the proper Court upon LLDA's institution
of the necessary legal proceedings.
Hence, the Laguna Lake Development Authority filed the instant petition for review
on certiorari, now docketed as G.R. No. 110120, with prayer that the temporary
restraining order lifted by the Court of Appeals be re-issued until after final determination
by this Court of the issue on the proper interpretation of the powers and authority of the
LLDA under its enabling law.
On July, 19, 1993, the Court issued a temporary restraining order 16 enjoining the City
Mayor of Caloocan and/or the City Government of Caloocan to cease and desist from
dumping its garbage at the Tala Estate, Barangay Camarin, Caloocan City, effective as
of this date and containing until otherwise ordered by the Court.
It is significant to note that while both parties in this case agree on the need to protect
the environment and to maintain the ecological balance of the surrounding areas of the
Camarin open dumpsite, the question as to which agency can lawfully exercise
jurisdiction over the matter remains highly open to question.
The City Government of Caloocan claims that it is within its power, as a local
government unit, pursuant to the general welfare provision of the Local Government
Code, 17 to determine the effects of the operation of the dumpsite on the ecological
balance and to see that such balance is maintained. On the basis of said contention, it
questioned, from the inception of the dispute before the Regional Trial Court of
Caloocan City, the power and authority of the LLDA to issue a cease and desist order
enjoining the dumping of garbage in the Barangay Camarin over which the City
Government of Caloocan has territorial jurisdiction.
The Court of Appeals sustained the position of the City of Caloocan on the theory that
Section 7 of Presidential Decree No. 984, otherwise known as the Pollution Control law,
authorizing the defunct National Pollution Control Commission to issue an exparte cease and desist order was not incorporated in Presidential Decree No. 813 nor in
Executive
Order
No.
927,
series
of
1983. The Court of Appeals ruled that under Section 4, par. (d), of Republic Act No.
4850, as amended, the LLDA is instead required "to institute the necessary legal
proceeding against any person who shall commence to implement or continue

Admin. Law | 247

implementation of any project, plan or program within the Laguna de Bay region without
previous clearance from the Authority."
The LLDA now assails, in this partition for review, the abovementioned ruling of the
Court of Appeals, contending that, as an administrative agency which was granted
regulatory and adjudicatory powers and functions by Republic Act No. 4850 and its
amendatory laws, Presidential Decree No. 813 and Executive Order No. 927, series of
1983, it is invested with the power and authority to issue a cease and desist order
pursuant to Section 4 par. (c), (d), (e), (f) and (g) of Executive Order No. 927 series of
1983 which provides, thus:

The LLDA claims that the appellate court deliberately suppressed and totally
disregarded the above provisions of Executive Order No. 927, series of 1983, which
granted administrative quasi-judicial functions to LLDA on pollution abatement cases.
In light of the relevant environmental protection laws cited which are applicable in this
case, and the corresponding overlapping jurisdiction of government agencies
implementing these laws, the resolution of the issue of whether or not the LLDA has the
authority and power to issue an order which, in its nature and effect was injunctive,
necessarily requires a determination of the threshold question: Does the Laguna Lake
Development Authority, under its Charter and its amendatory laws, have the authority to
entertain the complaint against the dumping of garbage in the open dumpsite in
Barangay Camarin authorized by the City Government of Caloocan which is allegedly
endangering the health, safety, and welfare of the residents therein and the sanitation
and quality of the water in the area brought about by exposure to pollution caused by
such open garbage dumpsite?
The matter of determining whether there is such pollution of the environment that
requires control, if not prohibition, of the operation of a business establishment is
essentially addressed to the Environmental Management Bureau (EMB) of the DENR
which, by virtue of Section 16 of Executive Order No. 192, series of 1987, 18 has
assumed the powers and functions of the defunct National Pollution Control
Commission created under Republic Act No. 3931. Under said Executive Order, a
Pollution Adjudication Board (PAB) under the Office of the DENR Secretary now
assumes the powers and functions of the National Pollution Control Commission with
respect to adjudication of pollution cases. 19
As a general rule, the adjudication of pollution cases generally pertains to the Pollution
Adjudication Board (PAB), except in cases where the special law provides for another
forum. It must be recognized in this regard that the LLDA, as a specialized

Admin. Law | 248

administrative agency, is specifically mandated under Republic Act No. 4850 and its
amendatory laws to carry out and make effective the declared national policy 20 of
promoting and accelerating the development and balanced growth of the Laguna Lake
area and the surrounding provinces of Rizal and Laguna and the cities of San Pablo,
Manila, Pasay, Quezon and Caloocan 21 with due regard and adequate provisions for
environmental management and control, preservation of the quality of human life and
ecological systems, and the prevention of undue ecological disturbances, deterioration
and pollution. Under such a broad grant and power and authority, the LLDA, by virtue of
its special charter, obviously has the responsibility to protect the inhabitants of the
Laguna Lake region from the deleterious effects of pollutants emanating from the
discharge of wastes from the surrounding areas. In carrying out the aforementioned
declared policy, the LLDA is mandated, among others, to pass upon and approve or
disapprove all plans, programs, and projects proposed by local government
offices/agencies within the region, public corporations, and private persons or
enterprises where such plans, programs and/or projects are related to those of the
LLDA for the development of the region. 22
In the instant case, when the complainant Task Force Camarin Dumpsite of Our Lady of
Lourdes Parish, Barangay Camarin, Caloocan City, filed its letter-complaint before the
LLDA, the latter's jurisdiction under its charter was validly invoked by complainant on
the basis of its allegation that the open dumpsite project of the City Government of
Caloocan in Barangay Camarin was undertaken without a clearance from the LLDA, as
required under Section 4, par. (d), of Republic Act. No. 4850, as amended by P.D. No.
813 and Executive Order No. 927. While there is also an allegation that the said project
was without an Environmental Compliance Certificate from the Environmental
Management Bureau (EMB) of the DENR, the primary jurisdiction of the LLDA over this
case was recognized by the Environmental Management Bureau of the DENR when the
latter acted as intermediary at the meeting among the representatives of the City
Government of Caloocan, Task Force Camarin Dumpsite and LLDA sometime in July
1992
to
discuss
the
possibility
of
re-opening the open dumpsite.
Having thus resolved the threshold question, the inquiry then narrows down to the
following issue: Does the LLDA have the power and authority to issue a "cease and
desist" order under Republic Act No. 4850 and its amendatory laws, on the basis of the
facts presented in this case, enjoining the dumping of garbage in Tala Estate, Barangay
Camarin, Caloocan City.
The irresistible answer is in the affirmative.

Admin. Law | 249

The cease and desist order issued by the LLDA requiring the City Government of
Caloocan to stop dumping its garbage in the Camarin open dumpsite found by the
LLDA to have been done in violation of Republic Act No. 4850, as amended, and other
relevant environment laws, 23 cannot be stamped as an unauthorized exercise by the
LLDA of injunctive powers. By its express terms, Republic Act No. 4850, as amended by
P.D. No. 813 and Executive Order No. 927, series of 1983, authorizes the LLDA to
"make, alter or modify order requiring the discontinuance or pollution." 24 (Emphasis
supplied) Section 4, par. (d) explicitly authorizes the LLDA to make whatever order may
be necessary in the exercise of its jurisdiction.
To be sure, the LLDA was not expressly conferred the power "to issue and exparte cease and desist order" in a language, as suggested by the City Government of
Caloocan, similar to the express grant to the defunct National Pollution Control
Commission under Section 7 of P.D. No. 984 which, admittedly was not reproduced in
P.D. No. 813 and E.O. No. 927, series of 1983. However, it would be a mistake to draw
therefrom the conclusion that there is a denial of the power to issue the order in
question when the power "to make, alter or modify orders requiring the discontinuance
of pollution" is expressly and clearly bestowed upon the LLDA by Executive Order No.
927, series of 1983.
Assuming arguendo that the authority to issue a "cease and desist order" were not
expressly conferred by law, there is jurisprudence enough to the effect that the rule
granting such authority need not necessarily be express. 25 While it is a fundamental rule
that an administrative agency has only such powers as are expressly granted to it by
law, it is likewise a settled rule that an administrative agency has also such powers as
are necessarily implied in the exercise of its express powers. 26 In the exercise,
therefore, of its express powers under its charter as a regulatory and quasi-judicial body
with respect to pollution cases in the Laguna Lake region, the authority of the LLDA to
issue a "cease and desist order" is, perforce, implied. Otherwise, it may well be reduced
to a "toothless" paper agency.
In this connection, it must be noted that in Pollution Adjudication Board v. Court of
Appeals, et al., 27 the Court ruled that the Pollution Adjudication Board (PAB) has the
power to issue an ex-parte cease and desist order when there is prima facie evidence of
an establishment exceeding the allowable standards set by the anti-pollution laws of the
country. Theponente, Associate Justice Florentino P. Feliciano, declared:
Ex parte cease and desist orders are permitted by law and regulations in situations like
that here presented precisely because stopping the continuous discharge of pollutive
and untreated effluents into the rivers and other inland waters of the Philippines cannot
be made to wait until protracted litigation over the ultimate correctness or propriety of

Admin. Law | 250

such orders has run its full course, including multiple and sequential appeals such as
those which Solar has taken, which of course may take several years. The relevant
pollution control statute and implementing regulations were enacted and promulgated in
the exercise of that pervasive, sovereign power to protect the safety, health, and
general welfare and comfort of the public, as well as the protection of plant and animal
life, commonly designated as the police power. It is a constitutional commonplace that
the ordinary requirements of procedural due process yield to the necessities of
protecting vital public interests like those here involved, through the exercise of police
power. . . .
The immediate response to the demands of "the necessities of protecting vital public
interests" gives vitality to the statement on ecology embodied in the Declaration of
Principles and State Policies or the 1987 Constitution. Article II, Section 16 which
provides:
The State shall protect and advance the right of the people to a balanced and healthful
ecology in accord with the rhythm and harmony of nature.
As a constitutionally guaranteed right of every person, it carries the correlative duty of
non-impairment. This is but in consonance with the declared policy of the state "to
protect and promote the right to health of the people and instill health consciousness
among them." 28 It is to be borne in mind that the Philippines is party to the Universal
Declaration of Human Rights and the Alma Conference Declaration of 1978 which
recognize health as a fundamental human right. 29
The issuance, therefore, of the cease and desist order by the LLDA, as a practical
matter of procedure under the circumstances of the case, is a proper exercise of its
power and authority under its charter and its amendatory laws. Had the cease and
desist order issued by the LLDA been complied with by the City Government of
Caloocan as it did in the first instance, no further legal steps would have been
necessary.
The charter of LLDA, Republic Act No. 4850, as amended, instead of conferring upon
the LLDA the means of directly enforcing such orders, has provided under its Section 4
(d) the power to institute "necessary legal proceeding against any person who shall
commence to implement or continue implementation of any project, plan or program
within the Laguna de Bay region without previous clearance from the LLDA."
Clearly, said provision was designed to invest the LLDA with sufficiently broad powers in
the regulation of all projects initiated in the Laguna Lake region, whether by the
government or the private sector, insofar as the implementation of these projects is
concerned. It was meant to deal with cases which might possibly arise where decisions

Admin. Law | 251

or orders issued pursuant to the exercise of such broad powers may not be obeyed,
resulting in the thwarting of its laudabe objective. To meet such contingencies, then the
writs of mandamus and injunction which are beyond the power of the LLDA to issue,
may be sought from the proper courts.
Insofar as the implementation of relevant anti-pollution laws in the Laguna Lake region
and its surrounding provinces, cities and towns are concerned, the Court will not dwell
further on the related issues raised which are more appropriately addressed to an
administrative agency with the special knowledge and expertise of the LLDA.
WHEREFORE, the petition is GRANTED. The temporary restraining order issued by the
Court on July 19, 1993 enjoining the City Mayor of Caloocan and/or the City
Government of Caloocan from dumping their garbage at the Tala Estate, Barangay
Camarin, Caloocan City is hereby made permanent.
SO ORDERED.

Admin. Law | 252

September 21, 1993

G.R. No. 106719

DRA. BRIGIDA S. BUENASEDA, Lt. Col. ISABELO BANEZ, JR., ENGR. CONRADO
REY MATIAS, Ms. CORA S. SOLIS and Ms. ENYA N. LOPEZ, petitioners,
vs.
SECRETARY JUAN FLAVIER, Ombudsman CONRADO M. VASQUEZ, and NCMH
NURSES ASSOCIATION, represented by RAOULITO GAYUTIN, respondents.

QUIASON, J.:
This is a Petition for Certiorari, Prohibition and Mandamus, with Prayer for Preliminary
Injunction or Temporary Restraining Order, under Rule 65 of the Revised Rules of
Court.
Principally, the petition seeks to nullify the Order of the Ombudsman dated January 7,
1992,
directing
the
preventive
suspension
of
petitioners,
Dr. Brigida S. Buenaseda, Chief of Hospital III; Isabelo C. Banez, Jr., Administrative
Officer III; Conrado Rey Matias, Technical Assistant to the Chief of Hospital; Cora C.
Solis, Accountant III; and Enya N. Lopez, Supply Officer III, all of the National Center for
Mental Health. The petition also asks for an order directing the Ombudsman to
disqualify Director Raul Arnaw and Investigator Amy de Villa-Rosero, of the Office of the
Ombudsman, from participation in the preliminary investigation of the charges against
petitioner (Rollo, pp. 2-17; Annexes to Petition, Rollo, pp. 19-21).
The questioned order was issued in connection with the administrative complaint filed
with the Ombudsman (OBM-ADM-0-91-0151) by the private respondents against the
petitioners for violation of the Anti-Graft and Corrupt Practices Act.
According to the petition, the said order was issued upon the recommendation of
Director Raul Arnaw and Investigator Amy de Villa-Rosero, without affording petitioners
the opportunity to controvert the charges filed against them. Petitioners had sought to
disqualify Director Arnaw and Investigator Villa-Rosero for manifest partiality and bias
(Rollo, pp. 4-15).
On September 10, 1992, this Court required respondents' Comment on the petition.
On September 14 and September 22, 1992, petitioners filed a "Supplemental Petition
(Rollo, pp. 124-130); Annexes to Supplemental Petition; Rollo pp. 140-163) and an
"Urgent
Supplemental
Manifestation"
(Rollo,
pp. 164-172; Annexes to Urgent Supplemental Manifestation; Rollo, pp. 173-176),
respectively, averring developments that transpired after the filing of the petition and

Admin. Law | 253

stressing the urgency for the issuance of the writ of preliminary injunction or temporary
restraining order.
On September 22, 1992, this Court ". . . Resolved to REQUIRE the respondents to
MAINTAIN in the meantime, the STATUS QUO pending filing of comments by said
respondents on the original supplemental manifestation" (Rollo, p. 177).
On September 29, 1992, petitioners filed a motion to direct respondent Secretary of
Health to comply with the Resolution dated September 22, 1992 (Rollo, pp. 182-192,
Annexes, pp. 192-203). In a Resolution dated October 1, 1992, this Court required
respondent Secretary of Health to comment on the said motion.
On September 29, 1992, in a pleading entitled "Omnibus Submission," respondent
NCMH Nurses Association submitted its Comment to the Petition, Supplemental Petition
and Urgent Supplemental Manifestation. Included in said pleadings were the motions to
hold the lawyers of petitioners in contempt and to disbar them (Rollo, pp. 210-267).
Attached to the "Omnibus Submission" as annexes were the orders and pleadings filed
in Administrative Case No. OBM-ADM-0-91-1051 against petitioners (Rollo, pp. 268480).
The Motion for Disbarment charges the lawyers of petitioners with:
(1) unlawfully advising or otherwise causing or inducing their clients petitioners
Buenaseda, et al., to openly defy, ignore, disregard, disobey or otherwise violate,
maliciously evade their preventive suspension by Order of July 7, 1992 of the
Ombudsman . . ."; (2) "unlawfully interfering with and obstructing the implementation of
the said order (Omnibus Submission, pp. 50-52; Rollo, pp. 259-260); and (3) violation of
the Canons of the Code of Professional Responsibility and of unprofessional and
unethical conduct "by foisting blatant lies, malicious falsehood and outrageous
deception" and by committing subornation of perjury, falsification and fabrication in their
pleadings (Omnibus Submission, pp. 52-54; Rollo, pp. 261-263).
On November 11, 1992, petitioners filed a "Manifestation and Supplement to 'Motion to
Direct Respondent Secretary of Health to Comply with 22 September 1992 Resolution'"
(Manifestation attached to Rollo without pagination between pp. 613 and 614 thereof).
On November 13, 1992, the Solicitor General submitted its Comment dated November
10, 1992, alleging that: (a) "despite the issuance of the September 22, 1992 Resolution
directing respondents to maintain the status quo, respondent Secretary refuses to hold
in abeyance the implementation of petitioners' preventive suspension; (b) the clear
intent and spirit of the Resolution dated September 22, 1992 is to hold in abeyance the
implementation of petitioners' preventive suspension, the status quo obtaining the time
of the filing of the instant petition; (c) respondent Secretary's acts in refusing to hold in

Admin. Law | 254

abeyance implementation of petitioners' preventive suspension and in tolerating and

approving the acts of Dr. Abueva, the OIC appointed to replace petitioner Buenaseda,
are in violation of the Resolution dated September 22, 1992; and
(d) therefore, respondent Secretary should be directed to comply with the Resolution
dated September 22, 1992 immediately, by restoring the status quo ante contemplated
by the aforesaid resolution" (Comment attached to Rollowithout paginations between
pp. 613-614 thereof).
In the Resolution dated November 25, 1992, this Court required respondent Secretary
to comply with the aforestated status quo order, stating inter alia, that:
It appearing that the status quo ante litem motam, or the last peaceable uncontested
status which preceded the present controversy was the situation obtaining at the time of
the filing of the petition at bar on September 7, 1992 wherein petitioners were then
actually occupying their respective positions, the Court hereby ORDERS that petitioners
be allowed to perform the duties of their respective positions and to receive such
salaries and benefits as they may be lawfully entitled to, and that respondents and/or
any and all persons acting under their authority desist and refrain from performing any
act in violation of the aforementioned Resolution of September 22, 1992 until further
orders from the Court (Attached to Rollo after p. 615 thereof).
On December 9, 1992, the Solicitor General, commenting on the Petition, Supplemental
Petition and Supplemental Manifestation, stated that (a) "The authority of the
Ombudsman is only to recommend suspension and he has no direct power to suspend;"
and (b) "Assuming the Ombudsman has the power to directly suspend a government
official or employee, there are conditions required by law for the exercise of such
powers; [and] said conditions have not been met in the instant case" (Attached
to Rollo without pagination).
In the pleading filed on January 25, 1993, petitioners adopted the position of the
Solicitor General that the Ombudsman can only suspend government officials or
employees connected with his office. Petitioners also refuted private respondents'
motion to disbar petitioners' counsel and to cite them for contempt (Attached
to Rollo without pagination).
The crucial issue to resolve is whether the Ombudsman has the power to suspend
government officials and employees working in offices other than the Office of the
Ombudsman, pending the investigation of the administrative complaints filed against
said officials and employees.

Admin. Law | 255

In upholding the power of the Ombudsman to preventively suspend petitioners,

respondents (Urgent Motion to Lift Status Quo, etc, dated January 11, 1993, pp. 10-11),
invoke Section 24 of R.A. No. 6770, which provides:
Sec. 24. Preventive Suspension. The Ombudsman or his Deputy may preventively
suspend any officer or employee under his authority pending an investigation, if in his
judgment the evidence of guilt is strong, and (a) the charge against such officer or
employee involves dishonesty, oppression or grave misconduct or neglect in the
performance of duty; (b) the charge would warrant removal from the service; or (c) the
respondent's continued stay in office may prejudice the case filed against him.
The preventive suspension shall continue until the case is terminated by the Office of
Ombudsman but not more than six months, without pay, except when the delay in the
disposition of the case by the Office of the Ombudsman is due to the fault, negligence
or petition of the respondent, in which case the period of such delay shall not be
counted in computing the period of suspension herein provided.
Respondents argue that the power of preventive suspension given the Ombudsman
under Section 24 of R.A. No. 6770 was contemplated by Section 13 (8) of Article XI of
the 1987 Constitution, which provides that the Ombudsman shall exercise such other
power or perform such functions or duties as may be provided by law."
On the other hand, the Solicitor General and the petitioners claim that under the 1987
Constitution, the Ombudsman can only recommend to the heads of the departments
and other agencies the preventive suspension of officials and employees facing
administrative investigation conducted by his office. Hence, he cannot order the
preventive suspension himself.
They invoke Section 13(3) of the 1987 Constitution which provides that the Office of the
Ombudsman shall have inter alia the power, function, and duty to:
Direct the officer concerned to take appropriate action against a public official or
employee at fault, and recommend his removal, suspension, demotion, fine, censure or
prosecution, and ensure compliance therewith.
The Solicitor General argues that under said provision of the Constitutions, the
Ombudsman has three distinct powers, namely: (1) direct the officer concerned to take
appropriate action against public officials or employees at fault; (2) recommend their
removal, suspension, demotion fine, censure, or prosecution; and (3) compel
compliance with the recommendation (Comment dated December 3, 1992, pp. 9-10).

Admin. Law | 256

The line of argument of the Solicitor General is a siren call that can easily mislead,
unless one bears in mind that what the Ombudsman imposed on petitioners was not a
punitive but only a preventive suspension.
When the constitution vested on the Ombudsman the power "to recommend the
suspension" of a public official or employees (Sec. 13 [3]), it referred to "suspension," as
a punitive measure. All the words associated with the word "suspension" in said
provision referred to penalties in administrative cases, e.g. removal, demotion, fine,
censure. Under the rule of Noscitor a sociis, the word "suspension" should be given the
same sense as the other words with which it is associated. Where a particular word is
equally susceptible of various meanings, its correct construction may be made specific
by considering the company of terms in which it is found or with which it is associated
(Co Kim Chan v. Valdez Tan Keh, 75 Phil. 371 [1945]; Caltex (Phils.) Inc. v. Palomar, 18
SCRA 247 [1966]).
Section 24 of R.A. No. 6770, which grants the Ombudsman the power to preventively
suspend public officials and employees facing administrative charges before him, is a
procedural, not a penal statute. The preventive suspension is imposed after compliance
with the requisites therein set forth, as an aid in the investigation of the administrative
charges.
Under the Constitution, the Ombudsman is expressly authorized to recommend to the
appropriate official the discipline or prosecution of erring public officials or employees. In
order to make an intelligent determination whether to recommend such actions, the
Ombudsman has to conduct an investigation. In turn, in order for him to conduct such
investigation in an expeditious and efficient manner, he may need to suspend the
respondent.
The need for the preventive suspension may arise from several causes, among them,
the danger of tampering or destruction of evidence in the possession of respondent; the
intimidation of witnesses, etc. The Ombudsman should be given the discretion to decide
when the persons facing administrative charges should be preventively suspended.
Penal statutes are strictly construed while procedural statutes are liberally construed
(Crawford, Statutory Construction, Interpretation of Laws, pp. 460-461; Lacson v.
Romero, 92 Phil. 456 [1953]). The test in determining if a statute is penal is whether a
penalty is imposed for the punishment of a wrong to the public or for the redress of an
injury to an individual (59 Corpuz Juris, Sec. 658; Crawford, Statutory Construction, pp.
496-497). A Code prescribing the procedure in criminal cases is not a penal statute and
is to be interpreted liberally (People v. Adler, 140 N.Y. 331; 35 N.E. 644).

Admin. Law | 257

The purpose of R.A. No. 6770 is to give the Ombudsman such powers as he may need
to perform efficiently the task committed to him by the Constitution. Such being the
case, said statute, particularly its provisions dealing with procedure, should be given
such interpretation that will effectuate the purposes and objectives of the Constitution.
Any interpretation that will hamper the work of the Ombudsman should be avoided.
A statute granting powers to an agency created by the Constitution should be liberally
construed for the advancement of the purposes and objectives for which it was created
(Cf. Department of Public Utilities v. Arkansas Louisiana Gas. Co., 200 Ark. 983, 142
S.W. (2d) 213 [1940]; Wallace v. Feehan, 206 Ind. 522, 190 N.E., 438 [1934]).
In Nera v. Garcia, 106 Phil. 1031 [1960], this Court, holding that a preventive
suspension is not a penalty, said:
Suspension is a preliminary step in an administrative investigation. If after such
investigation, the charges are established and the person investigated is found guilty of
acts warranting his removal, then he is removed or dismissed. This is the penalty.
To support his theory that the Ombudsman can only preventively suspend respondents
in administrative cases who are employed in his office, the Solicitor General leans
heavily on the phrase "suspend any officer or employee under his authority" in Section
24 of R.A. No. 6770.
The origin of the phrase can be traced to Section 694 of the Revised Administrative
Code, which dealt with preventive suspension and which authorized the chief of a
bureau or office to "suspend any subordinate or employee in his bureau or under his
authority pending an investigation . . . ."
Section 34 of the Civil Service Act of 1959 (R.A. No. 2266), which superseded Section
694 of the Revised Administrative Code also authorized the chief of a bureau or office to
"suspend any subordinate officer or employees, in his bureau or under his authority."
However, when the power to discipline government officials and employees was
extended to the Civil Service Commission by the Civil Service Law of 1975 (P.D. No.
805), concurrently with the President, the Department Secretaries and the heads of
bureaus and offices, the phrase "subordinate officer and employee in his bureau" was
deleted, appropriately leaving the phrase "under his authority." Therefore, Section 41 of
said law only mentions that the proper disciplining authority may preventively suspend
"any subordinate officer or employee under his authority pending an investigation . . ."
(Sec. 41).

Admin. Law | 258

The Administrative Code of 1987 also empowered the proper disciplining authority to
"preventively suspend any subordinate officer or employee under his authority pending
an investigation" (Sec. 51).
The Ombudsman Law advisedly deleted the words "subordinate" and "in his bureau,"
leaving the phrase to read "suspend any officer or employee under his authority pending
an investigation . . . ." The conclusion that can be deduced from the deletion of the word
"subordinate" before and the words "in his bureau" after "officer or employee" is that the
Congress intended to empower the Ombudsman to preventively suspend all officials
and employees under investigation by his office, irrespective of whether they are
employed "in his office" or in other offices of the government. The moment a criminal or
administrative complaint is filed with the Ombudsman, the respondent therein is
deemed to be "in his authority" and he can proceed to determine whether said
respondent should be placed under preventive suspension.
In their petition, petitioners also claim that the Ombudsman committed grave abuse of
discretion amounting to lack of jurisdiction when he issued the suspension order without
affording petitioners the opportunity to confront the charges against them during the
preliminary conference and even after petitioners had asked for the disqualification of
Director Arnaw and Atty. Villa-Rosero (Rollo, pp. 6-13). Joining petitioners, the Solicitor
General contends that assuming arguendo that the Ombudsman has the power to
preventively suspend erring public officials and employees who are working in other
departments and offices, the questioned order remains null and void for his failure to
comply with the requisites in Section 24 of the Ombudsman Law (Comment dated
December 3, 1992, pp. 11-19).
Being a mere order for preventive suspension, the questioned order of the Ombudsman
was validly issued even without a full-blown hearing and the formal presentation of
evidence by the parties. In Nera, supra, petitioner therein also claimed that the
Secretary of Health could not preventively suspend him before he could file his answer
to the administrative complaint. The contention of petitioners herein can be dismissed
perfunctorily by holding that the suspension meted out was merely preventive and
therefore, as held in Nera, there was "nothing improper in suspending an officer pending
his investigation and before tho charges against him are heard . . . (Nera v.
Garcia., supra).
There is no question that under Section 24 of R.A. No. 6770, the Ombudsman cannot
order the preventive suspension of a respondent unless the evidence of guilt is strong
and (1) the charts against such officer or employee involves dishonesty, oppression or
grave misconduct or neglect in the performance of duty; (2) the charge would warrant

Admin. Law | 259

removal from the service; or (3) the respondent's continued stay in office may prejudice
the case filed against him.
The same conditions for the exercise of the power to preventively suspend officials or
employees under investigation were found in Section 34 of R.A. No. 2260.
The import of the Nera decision is that the disciplining authority is given the discretion to
decide when the evidence of guilt is strong. This fact is bolstered by Section 24 of R.A.
No. 6770, which expressly left such determination of guilt to the "judgment" of the
Ombudsman on the basis of the administrative complaint. In the case at bench, the
Ombudsman issued the order of preventive suspension only after: (a) petitioners had
filed their answer to the administrative complaint and the "Motion for the Preventive
Suspension" of petitioners, which incorporated the charges in the criminal complaint
against them (Annex 3, Omnibus Submission, Rollo, pp. 288-289; Annex 4, Rollo,
pp. 290-296); (b) private respondent had filed a reply to the answer of petitioners,
specifying 23 cases of harassment by petitioners of the members of the private
respondent (Annex 6, Omnibus Submission, Rollo, pp. 309-333); and (c) a preliminary
conference wherein the complainant and the respondents in the administrative case
agreed to submit their list of witnesses and documentary evidence.
Petitioners herein submitted on November 7, 1991 their list of exhibits (Annex 8 of
Omnibus Submission, Rollo, pp. 336-337) while private respondents submitted their list
of exhibits (Annex 9 of Omnibus Submission, Rollo, pp. 338-348).
Under these circumstances, it can not be said that Director Raul Arnaw and Investigator
Amy de Villa-Rosero acted with manifest partiality and bias in recommending the
suspension of petitioners. Neither can it be said that the Ombudsman had acted with
grave abuse of discretion in acting favorably on their recommendation.
The Motion for Contempt, which charges the lawyers of petitioners with unlawfully
causing or otherwise inducing their clients to openly defy and disobey the preventive
suspension as ordered by the Ombudsman and the Secretary of Health can not prosper
(Rollo, pp. 259-261). The Motion should be filed, as in fact such a motion was filed, with
the Ombudsman. At any rate, we find that the acts alleged to constitute indirect
contempt were legitimate measures taken by said lawyers to question the validity and
propriety of the preventive suspension of their clients.
On the other hand, we take cognizance of the intemperate language used by counsel
for private respondents hurled against petitioners and their counsel (Consolidated: (1)
Comment
on
Private
Respondent"
"Urgent
Motions,
etc.;
(2) Adoption of OSG's Comment; and (3) Reply to Private Respondent's Comment and
Supplemental Comment, pp. 4-5).

Admin. Law | 260

A lawyer should not be carried away in espousing his client's cause. The language of a
lawyer, both oral or written, must be respectful and restrained in keeping with the dignity
of the legal profession and with his behavioral attitude toward his brethren in the
profession (Lubiano v. Gordolla, 115 SCRA 459 [1982]). The use of abusive language
by counsel against the opposing counsel constitutes at the same time a disrespect to
the dignity of the court of justice. Besides, the use of impassioned language in
pleadings, more often than not, creates more heat than light.
The Motion for Disbarment (Rollo, p. 261) has no place in the instant special civil action,
which is confined to questions of jurisdiction or abuse of discretion for the purpose of
relieving persons from the arbitrary acts of judges and quasi-judicial officers. There is a
set of procedure for the discipline of members of the bar separate and apart from the
present special civil action.
WHEREFORE, the petition is DISMISSED and the Status quo ordered to be maintained
in the Resolution dated September 22, 1992 is LIFTED and SET ASIDE.
SO ORDERED.

Admin. Law | 261

February 26, 1997 G.R. No. 116033.

ALFREDO L. AZARCON, petitioner,
vs.
SANDIGANBAYAN, PEOPLE OF THE PHILIPPINES and JOSE C.
BATAUSA, respondents.
PANGANIBAN, J.:
Does the Sandiganbayan have jurisdiction over a private individual who is charged with
malversation of public funds as a principal after the said individual had been designated
by the Bureau of Internal Revenue as a custodian of distrained property? Did such
accused become a public officer and therefore subject to the graft courts jurisdiction as
a consequence of such designation by the BIR?
These are the main questions in the instant petition for review of respondent
Sandiganbayans Decision[1] in Criminal Case No. 14260 promulgated on March 8, 1994,
convicting petitioner of malversation of public funds and property, and
Resolution[2] dated June 20, 1994, denying his motion for new trial or reconsideration
thereof.
The Facts
Petitioner Alfredo Azarcon owned and operated an earth-moving business, hauling dirt
and ore.[3] His services were contracted by the Paper Industries Corporation of the
Philippines (PICOP) at its concession in Mangagoy, Surigao del Sur. Occasionally, he
engaged the services of sub-contractors like Jaime Ancla whose trucks were left at the
formers premises.[4] From this set of circumstances arose the present controversy.
x x x It appears that on May 25, 1983, a Warrant of Distraint of Personal Property was
issued by the Main Office of the Bureau of Internal Revenue (BIR) addressed to the
Regional Director (Jose Batausa) or his authorized representative of Revenue Region
10, Butuan City commanding the latter to distraint the goods, chattels or effects and
other personal property of Jaime Ancla, a sub-contractor of accused Azarcon and, a
delinquent taxpayer. The Warrant of Garnishment was issued to accused Alfredo
Azarcon ordering him to transfer, surrender, transmit and/or remit to BIR the property in
his possession owned by taxpayer Ancla. The Warrant of Garnishment was received by
accused Azarcon on June 17, 1985.[5]

Admin. Law | 262

Petitioner Azarcon, in signing the Receipt for Goods, Articles, and Things Seized Under
Authority of the National Internal Revenue, assumed the undertakings specified in the
receipt the contents of which are reproduced as follows:
(I), the undersigned, hereby acknowledge to have received from Amadeo V. San Diego,
an Internal Revenue Officer, Bureau of Internal Revenue of the Philippines, the following
described goods, articles, and things:
Kind of property

---

Isuzu dump truck

Motor number

---

E120-229598

Chassis No.

---

SPZU50-1772440

Number of CXL

---

Color

---

Blue

Owned By

---

Mr. Jaime Ancla

the same having been this day seized and left in (my) possession pending investigation
by the Commissioner of Internal Revenue or his duly authorized representative. (I)
further promise that (I) will faithfully keep, preserve, and, to the best of (my) ability,
protect said goods, articles, and things seized from defacement, demarcation, leakage,
loss, or destruction in any manner; that (I) will neither alter nor remove, nor permit
others to alter or remove or dispose of the same in any manner without the express
authority of the Commissioner of Internal Revenue; and that (I) will produce and deliver
all of said goods, articles, and things upon the order of any court of the Philippines, or
upon demand of the Commissioner of Internal Revenue or any authorized officer or
agent of the Bureau of Internal Revenue. [6]
Subsequently, Alfredo Azarcon wrote a letter dated November 21, 1985 to the BIRs
Regional Director for Revenue Region 10 B, Butuan City stating that
x x x while I have made representations to retain possession of the property and signed
a receipt of the same, it appears now that Mr. Jaime Ancla intends to cease his
operations with us. This is evidenced by the fact that sometime in August, 1985 he
surreptitiously withdrew his equipment from my custody. x x x In this connection, may I
therefore formally inform you that it is my desire to immediately relinquish whatever
responsibilities I have over the above-mentioned property by virtue of the receipt I have
signed. This cancellation shall take effect immediately. x x x .[7]

Admin. Law | 263

Incidentally, the petitioner reported the taking of the truck to the security manager of
PICOP, Mr. Delfin Panelo, and requested him to prevent this truck from being taken out
of the PICOP concession. By the time the order to bar the trucks exit was given,
however, it was too late.[8]
Regional Director Batausa responded in a letter dated May 27, 1986, to wit:
An analysis of the documents executed by you reveals that while you are (sic) in
possession of the dump truck owned by JAIME ANCLA, you voluntarily assumed the
liabilities of safekeeping and preserving the unit in behalf of the Bureau of Internal
Revenue. This is clearly indicated in the provisions of the Warrant of Garnishment which
you have signed, obliged and committed to surrender and transfer to this office. Your
failure therefore, to observe said provisions does not relieve you of your responsibility.[9]
Thereafter, the Sandiganbayan found that
On 11 June 1986, Mrs. Marilyn T. Calo, Revenue Document Processor of Revenue
Region 10 B, Butuan City, sent a progress report to the Chief of the Collection Branch of
the surreptitious taking of the dump truck and that Ancla was renting out the truck to a
certain contractor by the name of Oscar Cueva at PICOP (Paper Industries Corporation
of the Philippines, the same company which engaged petitioners earth moving
services), Mangagoy, Surigao del Sur. She also suggested that if the report were true, a
warrant of garnishment be reissued against Mr. Cueva for whatever amount of rental is
due from Ancla until such time as the latters tax liabilities shall be deemed satisfied. x x
x However, instead of doing so, Director Batausa filed a letter-complaint against the
(herein Petitioner) and Ancla on 22 January 1988, or after more than one year had
elapsed from the time of Mrs. Calos report.[10]
Provincial Fiscal Pretextato Montenegro forwarded the records of the complaint x x x to
the Office of the Tanodbayan on May 18, 1988. He was deputized Tanodbayan
prosecutor and granted authority to conduct preliminary investigation on August 22,
1988, in a letter by Special Prosecutor Raul Gonzales approved by Ombudsman
(Tanodbayan) Conrado Vasquez.[11]
Along with his co-accused Jaime Ancla, petitioner Azarcon was charged before the
Sandiganbayan with the crime of malversation of public funds or property under Article
217 in relation to Article 222 of the Revised Penal Code (RPC) in the following
Information[12]filed on January 12, 1990, by Special Prosecution Officer Victor Pascual:
That on or about June 17, 1985, in the Municipality of Bislig, Province of Surigao del
Sur, Philippines, and within the jurisdiction of this Honorable Court, accused Alfredo L.
Azarcon, a private individual but who, in his capacity as depository/administrator of

Admin. Law | 264

property seized or deposited by the Bureau of Internal Revenue, having voluntarily

offered himself to act as custodian of one Isuzu Dumptruck (sic) with Motor No. E12022958, Chasis No. SPZU 50-1772440, and number CXL-6 and was authorized to be
such under the authority of the Bureau of Internal Revenue, has become a responsible
and accountable officer and said motor vehicle having been seized from Jaime C. Ancla
in satisfaction of his tax liability in the total sum of EIGHTY THOUSAND EIGHT
HUNDRED THIRTY ONE PESOS and 59/100 (P80,831.59) became a public property
and the value thereof as public fund, with grave abuse of confidence and conspiring and
confederating with said Jaime C. Ancla, likewise, a private individual, did then and there
wilfully, (sic) unlawfully and feloniously misappropriate, misapply and convert to his
personal use and benefit the aforementioned motor vehicle or the value thereof in the
aforestated amount, by then and there allowing accused Jaime C. Ancla to remove,
retrieve, withdraw and tow away the said Isuzu Dumptruck (sic) with the authority,
consent and knowledge of the Bureau of Internal Revenue, Butuan City, to the damage
and prejudice of the government in the amount of P80,831.59 in a form of unsatisfied
tax liability.
CONTRARY TO LAW.
The petitioner filed a motion for reinvestigation before the Sandiganbayan on May 14,
1991, alleging that: (1) the petitioner never appeared in the preliminary
investigation;and (2) the petitioner was not a public officer, hence a doubt exists as to
why he was being charged with malversation under Article 217 of the Revised Penal
Code.[13] The Sandiganbayan granted the motion for reinvestigation on May 22, 1991.
[14]
After the reinvestigation, Special Prosecution Officer Roger Berbano, Sr.,
recommended the withdrawal of the information [15] but was overruled by the
Ombudsman.[16]
A motion to dismiss was filed by petitioner on March 25, 1992 on the ground that the
Sandiganbayan did not have jurisdiction over the person of the petitioner since he was
not a public officer.[17] On May 18, 1992, the Sandiganbayan denied the motion. [18]
When the prosecution finished presenting its evidence, the petitioner then filed a motion
for leave to file demurrer to evidence which was denied on November 16, 1992, for
being without merit.[19] The petitioner then commenced and finished presenting his
evidence on February 15, 1993.
The Respondent Courts Decision
On March 8, 1994, respondent Sandiganbayan [20] rendered a Decision,[21] the dispositive
portion of which reads:

Admin. Law | 265

WHEREFORE, the Court finds accused Alfredo Azarcon y Leva GUILTY beyond
reasonable doubt as principal of Malversation of Public Funds defined and penalized
under Article 217 in relation to Article 222 of the Revised Penal Code and, applying the
Indeterminate Sentence Law, and in view of the mitigating circumstance of voluntary
surrender, the Court hereby sentences the accused to suffer the penalty of
imprisonment ranging from TEN (10) YEARS and ONE (1) DAY of prision mayor in its
maximum period to SEVENTEEN (17) YEARS, FOUR (4) MONTHS and ONE (1) DAY
of Reclusion Temporal. To indemnify the Bureau of Internal Revenue the amount
of P80,831.59; to pay a fine in the same amount without subsidiary imprisonment in
case of insolvency; to suffer special perpetual disqualification; and, to pay the costs.
Considering that accused Jaime Ancla has not yet been brought within the jurisdiction of
this Court up to this date, let this case be archived as against him without prejudice to
its revival in the event of his arrest or voluntary submission to the jurisdiction of this
Court.
SO ORDERED.
Petitioner, through new counsel,[22] filed a motion for new trial or reconsideration on
March 23, 1994, which was denied by the Sandiganbayan in its Resolution [23] dated
December 2, 1994.
Hence, this petition.

The Issues
The petitioner submits the following reasons for the reversal of the Sandiganbayans
assailed Decision and Resolution:
I. The Sandiganbayan does not have jurisdiction over crimes committed solely by
private individuals.
II. In any event, even assuming arguendo that the appointment of a private individual as
a custodian or a depositary of distrained property is sufficient to convert such individual
into a public officer, the petitioner cannot still be considered a public officer because:
[A]
There is no provision in the National Internal Revenue Code which authorizes the
Bureau of Internal Revenue to constitute private individuals as depositaries of distrained
properties.
[B]
His appointment as a depositary was not by virtue of a direct provision of law, or by
election or by appointment by a competent authority.

Admin. Law | 266

III. No proof was presented during trial to prove that the distrained vehicle was actually
owned by the accused Jaime Ancla; consequently, the governments right to the subject
property has not been established.
IV. The procedure provided for in the National Internal Revenue Code concerning the
disposition of distrained property was not followed by the B.I.R., hence the distraint of
personal property belonging to Jaime C. Ancla and found allegedly to be in the
possession of the petitioner is therefore invalid.
V. The B.I.R. has only itself to blame for not promptly selling the distrained property of
accused Jaime C. Ancla in order to realize the amount of back taxes owed by Jaime C.
Ancla to the Bureau.[24]
In fine, the fundamental issue is whether the Sandiganbayan had jurisdiction over the
subject matter of the controversy. Corollary to this is the question of whether petitioner
can be considered a public officer by reason of his being designated by the Bureau of
Internal Revenue as a depositary of distrained property.

The Courts Ruling

The petition is meritorious.
Jurisdiction of the Sandiganbayan
It is hornbook doctrine that in order (to) ascertain whether a court has jurisdiction or not,
the provisions of the law should be inquired into. [25] Furthermore, the jurisdiction of the
court must appear clearly from the statute law or it will not be held to exist. It cannot be
presumed or implied.[26] And for this purpose in criminal cases, the jurisdiction of a court
is determined by the law at the time of commencement of the action. [27]
In this case, the action was instituted with the filing of this information on January 12,
1990; hence, the applicable statutory provisions are those of P.D. No. 1606, as
amended by P.D. No. 1861 on March 23, 1983, but prior to their amendment by R.A.
No. 7975 on May 16, 1995. At that time, Section 4 of P.D. No. 1606 provided that:
SEC. 4. Jurisdiction. -- The Sandiganbayan shall exercise:
(a) Exclusive original jurisdiction in all cases involving:
(1) Violations of Republic Act No. 3019, as amended, otherwise known as the Anti-Graft and
Corrupt Practices Act, Republic Act No. 1379, and Chapter II, Section 2, Title VII of the
Revised Penal Code;
(2) Other offenses or felonies committed by public officers and employees in relation to their
office, including those employed in government-owned or controlled corporations,
whether simple or complexed with other crimes, where the penalty prescribed by law is
higher than prision correccional or imprisonment for six (6) years, or a fine of P6,000.00:

Admin. Law | 267

PROVIDED, HOWEVER, that offenses or felonies mentioned in this paragraph where

the penalty prescribed by law does not exceed prision correccional or imprisonment for
six (6) years or a fine of P6,000.00 shall be tried by the proper Regional Trial Court,
Metropolitan Trial Court, Municipal Trial Court and Municipal Circuit Trial Court.

xxxxxxxxx
In case private individuals are charged as co-principals, accomplices or accessories
with the public officers or employees, including those employed in government-owned
or controlled corporations, they shall be tried jointly with said public officers and
employees.
x x x x x x x x x.
The foregoing provisions unequivocally specify the only instances when the
Sandiganbayan will have jurisdiction over a private individual, i.e. when the complaint
charges the private individual either as a co-principal, accomplice or accessory of a
public officer or employee who has been charged with a crime within its jurisdiction.
Azarcon: A Public Officer or A Private Individual?
The Information does not charge petitioner Azarcon of being a co-principal, accomplice
or accessory to a public officer committing an offense under the Sandiganbayans
jurisdiction. Thus, unless petitioner be proven a public officer, the Sandiganbayan will
have no jurisdiction over the crime charged. Article 203 of the RPC determines who are
public officers:
Who are public officers. -- For the purpose of applying the provisions of this and the
preceding titles of the book, any person who, by direct provision of the law, popular
election, popular election or appointment by competent authority, shall take part in the
performance of public functions in the Government of the Philippine Islands, or shall
perform in said Government or in any of its branches public duties as an employee,
agent, or subordinate official, of any rank or classes, shall be deemed to be a public
officer.
Thus,
(to) be a public officer, one must be -(1) Taking part in the performance of public functions in the government, or
Performing in said Government or any of its branches public duties as an employee,
agent, or subordinate official, of any rank or class; and
(2) That his authority to take part in the performance of public functions or to perform
public duties must be -a. by direct provision of the law, or
b. by popular election, or

Admin. Law | 268

c. by appointment by competent authority.[28]

Granting arguendo that the petitioner, in signing the receipt for the truck constructively
distrained by the BIR, commenced to take part in an activity constituting public
functions, he obviously may not be deemed authorized by popular election. The next
logical query is whether petitioners designation by the BIR as a custodian of distrained
property qualifies as appointment by direct provision of law, or by competent authority.
[29]
We answer in the negative.
The Solicitor General contends that the BIR, in effecting constructive distraint over the
truck allegedly owned by Jaime Ancla, and in requiring the petitioner Alfredo Azarcon
who was in possession thereof to sign a pro forma receipt for it, effectively designated
petitioner a depositary and, hence, citing U.S. vs. Rastrollo,[30] a public officer.[31] This is
based on the theory that
(t)he power to designate a private person who has actual possession of a distrained
property as a depository of distrained property is necessarily implied in the BIRs power
to place the property of a delinquent tax payer (sic) in distraint as provided for under
Sections 206, 207 and 208 (formerly Sections 303, 304 and 305) of the National Internal
Revenue Code, (NIRC) x x x.[32]
We disagree. The case of U.S. vs. Rastrollo is not applicable to the case before us
simply because the facts therein are not identical, similar or analogous to those
obtaining here. While the cited case involved a judicial deposit of the proceeds of the
sale of attached property in the hands of the debtor, the case at bench dealt with the
BIRs administrative act of effecting constructive distraint over alleged property of
taxpayer Ancla in relation to his back taxes, property which was received by petitioner
Azarcon. In the cited case, it was clearly within the scope of that courts jurisdiction and
judicial power to constitute the judicial deposit and give the depositary a character
equivalent to that of a public official. [33] However, in the instant case, while the BIR had
authority to require petitioner Azarcon to sign a receipt for the distrained truck, the NIRC
did not grant it power to appoint Azarcon a public officer.
It is axiomatic in our constitutional framework, which mandates a limited government,
that its branches and administrative agencies exercise only that power delegated to
them as defined either in the Constitution or in legislation or in both. [34] Thus, although
the appointing power is the exclusive prerogative of the President, x x x [35] the quantum
of powers possessed by an administrative agency forming part of the executive branch
will still be limited to that conferred expressly or by necessary or fair implication in its
enabling act. Hence, (a)n administrative officer, it has been held, has only such powers
as are expressly granted to him and those necessarily implied in the exercise thereof.
[36]
Corollarily, implied powers are those which are necessarily included in, and are

Admin. Law | 269

therefore of lesser degree than the power granted. It cannot extend to other matters not
embraced therein, nor are not incidental thereto. [37] For to so extend the statutory grant
of power would be an encroachment on powers expressly lodged in Congress by our
Constitution.[38] It is true that Sec. 206 of the NIRC, as pointed out by the prosecution,
authorizes the BIR to effect a constructive distraint by requiring any person to preserve
a distrained property, thus:
xxxxxxxxx
The constructive distraint of personal property shall be effected by requiring the
taxpayer or any person having possession or control of such property to sign a receipt
covering the property distrained and obligate himself to preserve the same intact and
unaltered and not to dispose of the same in any manner whatever without the express
authority of the Commissioner.
xxxxxxxxx
However, we find no provision in the NIRC constituting such person a public officer by
reason of such requirement. The BIRs power authorizing a private individual to act as a
depositary cannot be stretched to include the power to appoint him as a public
officer. The prosecution argues that Article 222 of the Revised Penal Code x x x defines
the individuals covered by the term officers under Article 217 [39] x x x of the same Code.
[40]
And accordingly, since Azarcon became a depository of the truck seized by the BIR
he also became a public officer who can be prosecuted under Article 217 x x x. [41]
The Court is not persuaded. Article 222 of the RPC reads:
Officers included in the preceding provisions. -- The provisions of this chapter shall
apply to private individuals who, in any capacity whatever, have charge of any insular,
provincial or municipal funds, revenues, or property and to any administrator or
depository of funds or property attached, seized or deposited by public authority, even if
such property belongs to a private individual.
Legislative intent is determined principally from the language of a statute. Where the
language of a statute is clear and unambiguous, the law is applied according to its
express terms, and interpretation would be resorted to only where a literal interpretation
would be either impossible or absurd or would lead to an injustice. [42] This is particularly
observed in the interpretation of penal statutes which must be construed with such
strictness as to carefully safeguard the rights of the defendant x x x. [43] The language of
the foregoing provision is clear. A private individual who has in his charge any of the
public funds or property enumerated therein and commits any of the acts defined in any
of the provisions of Chapter Four, Title Seven of the RPC, should likewise be penalized

Admin. Law | 270

with the same penalty meted to erring public officers. Nowhere in this provision is it
expressed or implied that a private individual falling under said Article 222 is to be
deemed a public officer.
After a thorough review of the case at bench, the Court thus finds petitioner Alfredo
Azarcon and his co-accused Jaime Ancla to be both private individuals erroneously
charged before and convicted by Respondent Sandiganbayan which had no jurisdiction
over them. The Sandiganbayans taking cognizance of this case is of no moment since
(j)urisdiction cannot be conferred by x x x erroneous belief of the court that it had
jurisdiction.[44] As aptly and correctly stated by the petitioner in his memorandum:
From the foregoing discussion, it is evident that the petitioner did not cease to be a
private individual when he agreed to act as depositary of the garnished dump
truck. Therefore, when the information charged him and Jaime Ancla before the
Sandiganbayan for malversation of public funds or property, the prosecution was in fact
charging two private individuals without any public officer being similarly charged as a
co-conspirator. Consequently, the Sandiganbayan had no jurisdiction over the
controversy and therefore all the proceedings taken below as well as the Decision
rendered by Respondent Sandiganbayan, are null and void for lack of jurisdiction. [45]
WHEREFORE, the questioned Resolution and Decision of the Sandiganbayan are
hereby SET ASIDE and declared NULL and VOID for lack of jurisdiction. No costs.
SO ORDERED.

Admin. Law | 271

September 28, 1962

G.R. No. L-13827

BENJAMIN MASANGCAY, petitioner,

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

Admin. Law | 272

of our constitutional form of government. In other words, it is contended that, even if

petitioner can be held guilty of the act of contempt charged, the decision is null and void
for lack of valid power on the part of the Commission to impose such disciplinary
penalty under the principle of separation of powers. There is merit in the contention that
the Commission on Elections lacks power to impose the disciplinary penalty meted out
to petitioner in the decision subject of review. We had occasion to stress in the case
of Guevara v. The Commission on Elections 1 that under the law and the constitution, the
Commission on Elections has only the duty to enforce and administer all laws to the
conduct of elections, but also the power to try, hear and decide any controversy that
may be submitted to it in connection with the elections. In this sense, said, the
Commission, although it cannot be classified a court of justice within the meaning of the
Constitution (Section 30, Article VIII), for it is merely an administrative body, may
however exercise quasi-judicial functions insofar as controversies that by express
provision law come under its jurisdiction. The difficulty lies in drawing the demarcation
line between the duty which inherently is administrative in character and a function
which calls for the exercise of the quasi-judicial function of the Commission. In the same
case, we also expressed the view that when the Commission exercises a ministerial
function it cannot exercise the power to punish contempt because such power is
inherently judicial in nature, as can be clearly gleaned from the following doctrine we
laid down therein:
. . . In proceeding on this matter, it only discharged a ministerial duty; it did not exercise
any judicial function. Such being the case, it could not exercise the power to punish for
contempt as postulated in the law, for such power is inherently judicial in nature. As this
Court has aptly said: 'The power to punish for contempt is inherent in all courts; its
existence is essential to the preservation of order in judicial proceedings, and to the
enforcement of judgments, orders and mandates courts, and, consequently, in the
administration of justice (Slade Perkins v. Director of Prisons, 58 Phil., 271; U.S. v. Lee
Hoc, 36 Phil., 867; In Re Sotto, 46 O.G., 2570; In Re Kelly, Phil., 944). The exercise of
this power has always been regarded as a necessary incident and attribute of courts
(Slade Perkins v. Director of Prisons, Ibid.). Its exercise by administrative bodies has
been invariably limited to making effective the power to elicit testimony (People v.
Swena, 296 P., 271). And the exercise of that power by an administrative body in
furtherance of its administrative function has been held invalid (Langenberg v. Lecker,
31 N.E., 190; In Re Sims, 37 P., 135; Roberts v. Hacney, 58 SW., 810).1awphl.nt
In the instant case, the resolutions which the Commission tried to enforce and for whose
violation the charge for contempt was filed against petitioner Masangcay merely call for
the exercise of an administrative or ministerial function for they merely concern the
procedure to be followed in the distribution of ballots and other election paraphernalia
among the different municipalities. In fact, Masangcay, who as provincial treasurer of

Admin. Law | 273

Aklan was the one designated to take charge of the receipt, custody and distribution of
election supplies in that province, was charged with having opened three boxes
containing official ballots for distribution among several municipalities in violation of the
instructions of the Commission which enjoin that the same cannot be opened except in
the presence of the division superintendent of schools, the provincial auditor, and the
authorized representatives of the Nacionalista Party, the Liberal Party, and the Citizens'
Party, for he ordered their opening and distribution not in accordance with the manner
and procedure laid down in said resolutions. And because of such violation he was dealt
as for contempt of the Commission and was sentenced accordingly. In this sense, the
Commission has exceeded its jurisdiction in punishing him for contempt, and so its
decision is null and void.
Having reached the foregoing conclusion, we deem it unnecessary to pass on the
question of constitutionality raised by petitioner with regard to the portion of Section 5 of
the Revised Election Code which confers upon the Commission on Elections the power
to punish for contempt for acts provided for in Rule 64 of our rules of court.
WHEREFORE, the decision appealed from insofar as petitioner Benjamin Masangcay is
concerned, as well as the resolution denying petitioner's motion for reconsideration,
insofar as it concerns him, are hereby reversed, without pronouncement as to costs.

Admin. Law | 274

July 7, 1994 G.R. No. 110265

FREEMAN, INC., FREEMAN MANAGEMENT & DEVELOPMENT CORP., CHIAO
LIAN, LECHU S. LIM, PERLITA S. DYOGI, OLIVIA S. SANTOS, CARMEN S. SAW
and RUBEN CHUA, petitioners,
vs.
THE SECURITIES AND EXCHANGE COMMISSION, SAW MUI, RUBEN SAW,
DIONISIO SAW, LINA S. CHUA, LUCILA S. RUSTE and EVELYN SAW, respondents.

BELLOSILLO, J.:
This petition for certiorari filed under Rule 65 of the Rules of Court seeks to annul and
set aside the order of respondent Securities and Exchange Commission dated 7
January 1993 in SEC-EB No. 308 denying the action of petitioners to nullify the 7
January 1992 order of the Securities and Exchange Commission in SEC Case No.
3577.
Sometime in 1986 and 1987, Freeman, Inc. (FREEMAN), was granted a loan by
Equitable Banking Corporation (EQUITABLE) as evidenced by two (2) promissory
notes, P.N. No. 125957 dated 8 December 1986 for P1,700,000.00 payable 8
December 1987, and P.N. No. TL-369 dated 24 April 1987 for P6,000,000.00 payable 24
April 1988. Saw Chiao Lian, President of Freeman, Inc., signed as co-maker in both
promissory notes.
When FREEMAN failed to pay its obligations, EQUITABLE instituted collection suit
against FREEMAN and Saw Chiao Lian. 1 EQUITABLE also prayed for preliminary
attachment.
On 27 May 1988, private respondents Saw Mui, Ruben Saw, Dionisio Saw, Lina S.
Chua, Lucila S. Ruste and Evelyn Saw filed an answer in intervention claiming that they
owned the minority interest in FREEMAN.
On 12 October 1988, the trial court denied the intervention of private respondents. The
denial was affirmed by the Court of Appeals and thereafter by this Court. 2
The collection case was terminated when the parties entered into a compromise
agreement duly approved by the court and a decision rendered thereon on 5 December
1988. However, Freeman, Inc. (FREEMAN) and Saw Chiao Lian, defendants in the trial
court, failed to comply with the judgment.

Admin. Law | 275

On 30 January 1989, a writ of execution was issued. Two (2) parcels of land belonging
to FREEMAN covered by TCT Nos. 34219 and 34220 were levied upon and sold at
public auction on 31 March 1989. The highest bidder was one of the petitioners,
Freeman Management and Development Corporation (FREEMAN MANAGEMENT),
which thereafter registered its certificate of sale with the Register of Deeds.
On 23 May 1989, before FREEMAN MANAGEMENT could consolidate its title over the
properties purchased at the auction sale, private respondents, representing the minority
shareholdings of FREEMAN, filed a petition with the Securities and Exchange
Commission (SEC) seeking the dissolution of FREEMAN, accounting and
reconveyance of the properties covered by TCT Nos. 34219 and 34220. 3
On 5 April 1990, private respondent filed a similar complaint against petitioners with the
Regional Trial Court of Kalookan City. 4 The complaint sought to annul the compromise
agreement between EQUITABLE on one hand and defendants FREEMAN and Saw
Chiao Lian on the other, as well as the promissory notes executed by Saw Chiao Lian,
the auction sale, and the sheriff's certificate of sale of the lots covered by TCT Nos.
34219 and 34220.
Petitioners moved for the dismissal of the complaint on the ground that the same was a
duplication of the case pending in the SEC. But the motion was denied. Petitioners went
up on certiorari to the Court of Appeals which reversed the trial court and directed the
dismissal of the complaint by reason of the pendency of the case. 5
On 7 January 1992, on motion on private respondents in SEC Case
No. 3577, and despite the opposition thereto by petitioners, SEC Hearing Officer
Juanito B. Almosa, Jr., issued a writ of preliminary injunction to prevent the
consolidation of ownership of petitioner FREEMAN MANAGEMENT over the properties
it acquired in the auction sale of 31 March 1989, the redemption period having expired
on 7 April 1990. 6
Petitioners assailed the order of the SEC Hearing Officer by filing a petition
for certiorari with the SEC en banc which on 7 January 1993 however denied the
petition. 7 On 15 March 1993, petitioners' motion for reconsideration was likewise
denied. 8
On 22 April 1993, petitioners filed with this Court a petition for certiorari questioning the
15 March 1993 order of the SEC. 9 In a Resolution dated 10 May 1993, this Court
dismissed the petition for its failure to state the date when the questioned SEC Order
was received as well as the date when the order denying the Motion for
Reconsideration was received. 10

Admin. Law | 276

On 4 June 1993, petitioners filed the present petition containing the matters omitted in
the petition earlier dismissed. Petitioners allege that the SEC committed grave abuse of
discretion and acted in excess of jurisdiction in sustaining the order of its Hearing
Officer granting the writ of injunction enjoining consolidation of ownership in FREEMAN
MANAGEMENT and that the SEC miscontrued the decisions of the Court of Appeals
in Equitable Banking Corp. v. Hon. Mangay 11 and of this Court in Saw v. Court
of Appeals, 12 which in effect ruled the SEC has jurisdiction to take cognizance of and
determine the rights of petitioners and private respondents as against each other.
Petitioners also argue that the assailed order of the SEC violated the basic principle that
the SEC, being a coordinate body with the Regional Trial Court, could not interfere in
the proceedings held therein, and neither could it review the issues passed upon by the
said court. They likewise maintain that although SEC Case No. 3577 could still proceed
as to the dissolution of FREEMAN, the two (2) properties of the latter which were levied
upon and sold to FREEMAN MANAGEMENT are already excluded from the corporate
assets of FREEMAN; and, that these properties could no longer be the subject of the
action for reconveyance in the SEC because they had been the subject of execution to
enforce the decision of the trial court in Civil Case No. 88-44404 which had already
attained finality.
In their comment, private respondents contend that the present petition was filed
beyond the reglementary period of thirty (30) days within which to appeal to this Court,
citing Sec. 1, Rule 17, of the New Rules of Procedure of the SEC. Private respondents
also allege that the jurisdiction of the SEC has been resolved by this Court in Saw v.
Court of Appeals 13 when it held that "even with the denial of petitioners' motion to
intervene, nothing is really lost to them. The denial did not necessarily prejudice them
as their rights are being litigated in the case (SEC Case No. 3577) now before the
Securities and Exchange Commission and may be fully asserted and protected in that
separate proceeding."
In its comment, the Office of the Solicitor General expresses conformity with the
allegations in the petition and prays that the petition be given due course. It also avers
that since the present petition, which is one under Rule 65 of the Rules of Court, was
filed thirty-five (35) days after receipt of the assailed resolution of the SEC, the instant
petition was filed within a reasonable time. The Solicitor General also agrees with
petitioners' contention that the SEC, as a co-equal body with the Regional Trial Court,
cannot modify, reverse or pass upon the decision of said court. Moreover, private
respondents had the opportunity to submit a bid for the foreclosed properties during the
public auction and their failure to exercise their right should not prejudice petitioners.
We sustain petitioners. The present petition seeks to annul and set aside the order of
the SEC for want of jurisdiction to issue the writ of injunction, a provisional remedy to

Admin. Law | 277

the principal action pending in the SEC for the dissolution of petitioner FREEMAN.
Hence, the petition is not an appeal from a final order of the SEC but a special civil
action questioning the legal competence of the latter to issue such interlocutory order. It
is covered by Sec. 1, Rule 65, of the Rules of Court which allow a person aggrieved to
file a verified petition in the proper court praying that judgment be rendered annulling or
modifying the proceedings, as the law requires, of the tribunal, board or officer when the
latter, exercising judicial functions, has acted without or in excess of its or his jurisdiction
or with grave abuse of discretion and there is no appeal, nor any plain, speedy and
adequate remedy in the ordinary course of law.
We have consistently ruled that petitions for certiorari must be filed within a reasonable
time. In the instant case, the records show that the petition at bench was filed on 4 June
1993, or two (2) months and nineteen (19) days from 17 March 1993, which was the
date when petitioners received copy of the order of the SEC denying their motion for
reconsideration. There is no doubt that this petition was seasonably filed.
SEC Case No. 3577 arose from the action filed by private respondents as minority
shareholders of petitioner FREEMAN for the dissolution of the corporation and
reconveyance of the properties conveyed to another petitioner FREEMAN
MANAGEMENT in a public auction. The SEC maintained that it had jurisdiction to issue
the writ of injunction preventing the consolidation of ownership in FREEMAN
MANAGEMENT on the basis of our ruling in Saw v. Court of Appeals. We denied the
intervention of private respondents in the trial court in Civil Case No. 88-44404 which
had already been terminated. As we stated therein, even with the denial of herein
private respondents' motion to intervene nothing could really be lost to them as their
rights were being litigated before the SEC and would be fully asserted and protected in
that separate proceeding.
Our ruling in Saw v. Court of Appeals should be understood in the light of two(2) basic
legal principles. First, that administrative agencies like the SEC are tribunals of limited
jurisdiction and as such can exercise only those powers which are specifically granted
to them by their enabling statutes. 14 Section 5 of P.D. No. 902-A, as amended, provides
the cases over which the SEC has original and exclusive jurisdiction to hear and decide.
These include controversies arising out of intra-corporate or partnership relations
between and among stockholders, members or associates; between any or all of them
and the corporation, partnership or association of which they are stockholders,
members or associates, respectively; and, between such corporation, partnership or
association and the state insofar as it concerns their individual franchise or right to exist
as such entity. Section 6 of the same decree empowers the SEC to issue preliminary or
permanent injunction, whether prohibitory or mandatory, in all cases in which it has
jurisdiction.

Admin. Law | 278

The action for dissolution of FREEMAN filed by its minority stockholders is well within
the jurisdiction of the SEC to resolve in accordance with P.D. No. 902-A. However, the
inclusion in the SEC case of FREEMAN MANAGEMENT of which private respondents
are not stockholders for the purpose of compelling it to reconvey to FREEMAN the
properties originally owned by the latter but were levied upon and sold to FREEMAN
MANAGEMENT in a public auction is a matter outside of the limited jurisdiction of the
SEC. The petition for reconveyance of properties against FREEMAN MANAGEMENT is
not an intra-corporate controversy since private respondents have no shares or
interests whatsoever in FREEMAN MANAGEMENT, a corporation separate and distinct
from FREEMAN, which is undergoing dissolution proceedings in the SEC.
The second basic principle is the doctrine of non-interference which should be regarded
as highly important in judicial stability and in the administration of justice whereby the
judgment of a court of competent jurisdiction may not be opened, modified or vacated
by any court or tribunal of concurrent jurisdiction. 15 The SEC is at the very least coequal with the Regional Trial Court. As such, one would have no power to control the
other. 16 Moreover, in the instant case, judgment was rendered by the trial court in Civil
Case No. 88-44404 approving the compromise agreement between EQUITABLE on
one hand, and FREEMAN and Saw Chiao Lian on the other. A writ of execution was
issued against the defendants to enforce the judgment and two (2) properties of
FREEMAN were levied upon and sold to FREEMAN MANAGEMENT as highest bidder
in the public auction.
Finally, the judgment was fully satisfied and a certificate of sale was issued to
FREEMAN MANAGEMENT. It is axiomatic that after a judgment has been fully satisfied,
the case is deemed terminated once and for all. 17 It cannot be modified or altered.
Hence, the properties sold to FREEMAN MANAGEMENT are now considered excluded
from the corporate assets of FREEMAN and can no longer be the subject of the
proceedings in the SEC for the dissolution of the latter. Therefore SEC exceeded its
jurisdiction when it issued a writ of injunction enjoining FREEMAN MANAGEMENT from
consolidating its ownership over the two (2) parcels of land it acquired as highest bidder
in the execution sale.
WHEREFORE, the petition is GRANTED and the assailed orders of the Securities and
Exchange Commission dated 7 January 1993 and 15 March 1993 are REVERSED and
SET ASIDE.
SO ORDERED.

Admin. Law | 279

April 12, 2006

G.R. No. 161811

THE
CITY
OF
BAGUIO,
MAURICIO
DOMOGAN,
and
ORLANDO
GENOVE, Petitioners,
vs.
FRANCISCO NIO, JOSEFINA NIO, EMMANUEL NIO, and EURLIE
OCAMPO, Respondents.

CARPIO MORALES, J.:

The Bureau of Lands awarded on May 13, 1966 to Narcisa A. Placino (Narcisa) a parcel
of land identified as Lot No. 10 (the lot) located at Saint Anthony Road, DominicanMirador Barangay, Baguio City.
Francisco Nio (Nio), one of the herein respondents, who has been occupying the lot,
contested the award by filing a Petition Protest on December 23, 1975 before the
Bureau of Lands.
The Director of Lands dismissed the Petition Protest by Order of November 11, 1976.
Nio appealed the dismissal all the way to the Supreme Court but he did not succeed.
The decision of the Director of Lands dated November 11, 1976 having become final
and executory,1 the then-Executive Director of the Department of Environment and
Natural Resources-Cordillera Autonomous Region (DENR-CAR), on petition of Narcisa,
issued an Order of Execution dated February 1, 1993 directing the Community
Environment and Natural Resources Office (CENRO) Officer to enforce the decision "by
ordering Petitioner Nio and those acting in his behalf to refrain from continuously
occupying the area and remove whatever improvements they may have introduced
thereto."2
Attempts to enforce the Order of Execution failed, prompting Narcisa to file a complaint
for ejectment before the Baguio City Municipal Trial Court in Cities (MTCC). The MTCC
dismissed Narcisas complaint, however, by Order3of August 7, 1996.
Narcisas counsel, Atty. Edilberto Claravall (Atty. Claravall), later petitioned the DENRCAR for the issuance of a Special Order authorizing the City Sheriff of Baguio, the City
Police Station, and the Demolition Team of the City Government to demolish or remove
the improvements on the lot introduced by Nio. The DENR-CAR denied the petition,
citing lack of jurisdiction over the City Sheriff of Baguio, the City Police Station, and the
Demolition Team of the City Government. The DENR-CAR also invoked Section 14
(now Section 10 (d)) of Rule 39 of the Rules of Court. 4

Admin. Law | 280

Atty. Claravall thereupon moved to have the Order of Execution previously issued by the
DENR-CAR amended, which was granted. As amended, the Order of Execution
addressed to the CENRO Officer read:
WHEREFORE, pursuant to the provisions of Section 1844 of the Revised Administrative
Code as amended by Act No. 3077, you are hereby enjoined to enforce the
aforementioned order, with the assistance upon request of the City Sheriff of Baguio
City, the Demolition Team of Baguio City and the Baguio City Police Station, by Ordering
Petitioner Nio and those acting in his behalf to refrain from continuously occupying the
area and remove whatever improvements they may have introduced thereto. x x x
x
SO ORDERED.5 (Emphasis and underscoring supplied)
The DENR-CENRO, together with the Demolition Team of Baguio City and the Baguio
City police, desisted, however, in their earlier attempt to enforce the Amended Order of
Execution.6
On July 16, 1997, the Demolition Team of Baguio City headed by Engineer Orlando
Genove and the Baguio City Police, on orders of then Baguio City Police Officer-InCharge (OIC) Donato Bacquian, started demolishing the houses of Nio and his herein
co-respondents.7
The demolition was, however, temporarily stopped upon the instructions of DENRCENR Officer Guillermo Fianza, who later advised Nio that the DENR-CENRO would
implement the Amended Order of Execution on August 4, 1997. 8
Nio and his wife Josefina Nio thereupon filed a Petition 9 for Certiorari and Prohibition
with Prayer for Temporary Restraining Order before the Regional Trial Court (RTC) of
Baguio City against Guillermo Fianza, Teofilo Olimpo of the DENR-CENRO, Mayor
Mauricio Domogan (hereafter petitioner), Atty. Claravall, Engr. Orlando Genove
(hereafter petitioner), Rolando Angara, and Police Officer Donato Bacquian challenging
the Amended Order of Execution issued by the DENR-CENRO.1avvphil.net
The Nio spouses later filed an Amended Petition 10 by impleading Emmanuel Nio and
Eurlie Ocampo as therein co-petitioners and the City of Baguio (hereafter petitioner) and
Narcisa as therein additional respondents, and further praying for damages.
Branch 6 of the Baguio RTC dismissed the petition of Nio et al. (hereafter
respondents) for lack of merit. 11Respondents Motion for Reconsideration 12 having been
denied, they filed a Petition for Review 13 under Rule 42 of the Rules before the Court of
Appeals.

Admin. Law | 281

By Decision14 of December 11, 2002, the Court of Appeals granted the Petition for
Review, holding that Sec. 10(d) of Rule 39 of the Rules reading:
SEC. 10. Execution of judgments for specific act. x x x x
(d) Removal of improvements on property subject of execution. When the property
subject of the execution contains improvements constructed or planted by the judgment
obligor or his agent, the officer shall not destroy, demolish or remove said improvements
except upon special order of the court, issued upon motion of the judgment obligee after
due hearing and after the former has failed to remove the same within a reasonable
time fixed by the court. (Underscoring supplied) applies.
Thus disposed the appellate court:
WHEREFORE, the instant appeal is hereby GRANTED and the Orders dated
September 24, 1997 and November 23, 1998 are hereby SET ASIDE. Public
respondent City Mayor Mauricio Domogan thru the Demolition Team and City
Engineers Office are hereby ordered to cease and desist from enforcing the amended
order of executionissued by Oscar N. Hamada, Regional Executive Director of the
Department of Environmental and Natural Resources, concerning the demolition or
removal of the structures made by petitioners until private respondent applied for a
special order abovementioned with the proper court.1avvphil.net
SO ORDERED.15 (Underscoring supplied)
Respondents filed before the appellate court an Ex-Parte Motion for
Reconsideration16 on January 9, 2003, alleging that some of the reliefs they prayed for
in their petition were left unacted upon. 17 Petitioners too filed a Motion for
Reconsideration18 on January 28, 2003, raising the following grounds:
1. THE HONORABLE COURT FAILED TO CONSIDER THAT THE CITY MAYOR HAS
THE POWER TO ORDER THE DEMOLITION OF ILLEGALLY-BUILT
STRUCTURES;
2. THE HONORABLE COURT GRAVELY ERRED IN GIVING DUE COURSE TO THE
PETITION FOR REVIEW;
3. THE HONORABLE COURT MISAPPLIED SEC. 10 (d), RULE 39 of the RULES OF
COURT.19(Underscoring supplied)
In support of the first ground, petitioners raised before the appellate court, in their
Motion for Reconsideration, for the first time, the power of the City Mayor to validly order
the demolition of a structure constructed without a building permit pursuant to Sec.
455(b) 3(vi) of the Local Government Code of 1991 in relation to the National Building
Code of the Philippines.

Admin. Law | 282

Alleging that respondents built their house without the required entry and building
permits, petitioners argued that the City Mayor may order the demolition of a house
without a special court order.20
The Court of Appeals denied both parties motions for reconsideration by Resolution 21 of
December 17, 2003.
Hence, the present petition of the City of Baguio, Mayor Domogan (now a
Congressman), and Orlando Genove, faulting the appellate court:
1. . . . IN RULING THAT A SPECIAL COURT ORDER IS NEEDED FOR THE
DEMOLITION OF RESPONDENTS STRUCTURES;
2. . . . IN APPLYING SEC. 10(d) RULE 39 OF THE RULES OF COURT IN THIS CASE;
3. . . . IN ENTERTAINING RESPONDENTS PETITION FOR REVIEW.22
The petition fails.
While it is noted that respondents appeal to the Court of Appeals was erroneously
brought under Rule 42 of the Rules of Court, instead of under Rule 41, the RTC having
rendered the questioned decision in the exercise of its original, not appellate,
jurisdiction, this Court overlooks the error in view of the merits of respondents case. 23
Petitioners contention that the enforcement of the Amended Order of Execution does
not need a hearing and court order which Sec. 10(d) of Rule 39 of the Rules of Court
requires does not lie. That an administrative agency which is clothed with quasi-judicial
functions issued the Amended Order of Execution is of no moment, since the
requirement in Sec. 10 (d) of Rule 39 of the Rules of Court echoes the constitutional
provision that "no person shall be deprived of life, liberty or property without due
process of law, nor shall any person be denied the equal protection of the laws." 24
Antipolo Realty Corporation v. National Housing Authority teaches:
In general, the quantum of judicial or quasi-judicial powers which an administrative
agency may exercise is defined in the enabling act of such agency. In other words, the
extent to which an administrative entity may exercise such powers depends largely, if
not wholly, on the provisions of the statute creating or empowering such
agency.25(Underscoring supplied)
There is, however, no explicit provision granting the Bureau of Lands (now the Land
Management Bureau) or the DENR (which exercises control over the Land
Management Bureau) the authority to issue an order of demolition 26 which the
Amended Order of Execution, in substance, is. Indeed,
[w]hile the jurisdiction of the Bureau of Lands is confined to the determination of the
respective rights of rival claimants to public lands or to cases which involve the

Admin. Law | 283

disposition of public lands, the power to determine who has the actual, physical
possession or occupation or the better right of possession over public lands
remains with the courts.
The rationale is evident. The Bureau of Lands does not have the wherewithal to police
public lands. Neither does it have the means to prevent disorders or breaches of peace
among the occupants. Its power is clearly limited to disposition and alienation and while
it may decide disputes over possession, this is but in aid of making the proper
awards. The ultimate power to resolve conflicts of possession is recognized to be
within the legal competence of the civil courts and its purpose is to extend
protection to the actual possessors and occupants with a view to quell social
unrest.27 (Emphasis added)
Consequently, this Court held:28
x x x the power to order the sheriff to remove improvements and turn over the
possession of the land to the party adjudged entitled thereto, belongs only to
the courts of justice and not to the Bureau of Lands. 29(Emphasis and underscoring
supplied)
In fine, it is the court sheriff which is empowered to remove improvements introduced by
respondents on, and turn over possession of, the lot to Narcisa.
Petitioners invocation of the City Mayors authority under Sec. 455(b) 3(vi) of the Local
Government Code to order the demolition or removal of an illegally constructed house,
building, or structure within the period prescribed by law or ordinance and their
allegation that respondents structures were constructed without building permits 30 were
not raised before the trial court. Petitioners having, for the first time, invoked said
section of the Local Government Code and respondents lack of building entry permits in
their Motion for Reconsideration of the Court of Appeals decision, it was correctly
denied of merit,31 it being settled that matters, theories or arguments not brought out in
the proceedings below will ordinarily not be considered by a reviewing court as they
cannot be raised for the first time on appeal.32
WHEREFORE, the petition is DISMISSED. The questioned Decision and Resolution of
the Court of Appeals are AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
September 1, 1994 G.R. No. 108310

Admin. Law | 284

RUFINO O. ESLAO, in his capacity as President of Pangasinan State

University, petitioner,
vs.
COMMISSION ON AUDIT, respondent.

FELICIANO, J.:
In this Petition for Certiorari, Rufino O. Eslao in his capacity as President of the
Pangasinan State University ("PSU") asks us to set aside Commission on Audit ("COA")
Decisions Nos. 1547 (1990) and 2571 (1992) which denied honoraria and per
diems claimed under National Compensation Circular No. 53 by certain PSU personnel
including petitioner.
On 9 December 1988, PSU entered into a Memorandum of Agreement ("MOA") 1 with
the Department of Environment and Natural Resources ("DENR") for the evaluation of
eleven (11) government reforestation operations in Pangasinan. 2 The evaluation project
was part of the commitment of the Asian Development Bank ("ADB") under the
ADB/OECF Forestry Sector Program Loan to the Republic of the Philippines and was
one among identical project agreements entered into by the DENR with sixteen (16)
other state universities.
On 9 December 1988, a notice to proceed 3 with the review and evaluation of the eleven
(11) reforestation operations was issued by the DENR to PSU. The latter complied with
this notice and did proceed.
On 16 January 1989, per advice of the PSU Auditor-in-Charge with respect to the
payment of honoraria and per diems of PSU personnel engaged in the review and
evaluation project, PSU Vice President for Research and Extension and Assistant
Project Director Victorino P. Espero requested the Office of the President, PSU, to have
the University's Board of Regents ("BOR") confirm the appointments or designations of
involved PSU personnel including the rates of honoraria and per diems corresponding
to their specific roles and functions. 4
The BOR approved the MOA on 30 January 1989 5 and on 1 February 1989, PSU
issued Voucher No. 8902007 6representing the amount of P70,375.00 for payment
of honoraria to PSU personnel engaged in the project. Later, however, the
approved honoraria rates were found to be somewhat higher than the rates provided for
in the guidelines of National Compensation Circular ("NCC") No. 53. Accordingly, the
amounts were adjusted downwards to conform to NCC No. 53. Adjustments were made
by deducting amounts from subsequent disbursements of honoraria. By June 1989,
NCC No. 53 was being complied with. 7
On 6 July 1989, Bonifacio Icu, COA resident auditor at PSU, alleging that there were
excess payments of honoraria, issued a "Notice of Disallowance" 8 disallowing

Admin. Law | 285

P64,925.00 from the amount of P70,375.00 stated in Voucher No. 8902007, mentioned
earlier. The resident auditor based his action on the premise that Compensation Policy
Guidelines ("CPG") No. 80-4, dated 7 August 1980, issued by the Department of Budget
and Management which provided for lower rates than NCC No. 53 dated 21 June 1988,
also issued by the Department of Budget and Management, was the schedule
for honoraria and per diems applicable to work done under the MOA of 9 December
1988 between the PSU and the DENR.
On 18 October 1989, a letter 9 was sent by PSU Vice President and Assistant Project
Director Espero to the Chairman of the COA requesting reconsideration of the action of
its resident auditor. In the meantime, the Department of Budget and Management
("DBM"), upon request by PSU, issued a letter 10 clarifying that the basis for the
project's honoraria should notbe CPG No. 80-4 which pertains to locally funded projects
but rather NCC No. 53 which pertains to foreign-assisted projects. A copy of this
clarification was sent to the COA upon request by PSU.
On 18 September 1990, COA Decision No. 1547 11 was issued denying reconsideration
of the decision of its resident auditor. The COA ruled that CPG. No. 80-4 is the
applicable guideline in respect of the honoraria as CPG No. 80-4 does not distinguish
between projects locally funded and projects funded or assisted with monies of foreignorigin.
PSU President Eslao sent a letter 12 dated 20 March 1991 requesting reconsideration of
COA Decision No. 1547 (1990) alleging that (a) COA had erred in applying CPG No. 804 and not NCC No. 53 as the project was foreign-assisted and (b) the decision was
discriminatory honoraria based on NCC No. 53 having been approved and granted
by COA resident auditors in two (2) other state universities engaged in the same
reforestation project. PSU then submitted to the COA (a) a certification 13 from the
DENR to the effect that the DENR evaluation project was foreign- assisted and (b) the
letter of the DBM quoted in the margin supra.
On 16 November 1992, COA Decision No. 2571 (1992)
reconsideration.

14

was issued denying

In the meantime, in December 1990, the DENR informed petitioner of its acceptance of
the PSU final reports on the review and evaluation of the government reforestation
projects. 15 Subsequently, honoraria for the period from January 1989 to January 1990
were disbursed in accordance with NCC No. 53. A Certificate of Settlement and
Balances (CSB No. 92-0005-184 [DENR]) 16 was then issued by the COA resident
auditor of PSU showing disallowance of alleged excess payment of honoraria which
petitioner was being required to return.
The instant Petition prays that (a) COA Decision Nos. 1547 (1990) and 2571 (1992) be
set aside; (b) the COA be ordered to pass in audit the grant of honoraria for the entire
duration of the project based on the provisions and rates contained in NCC No. 53; and

Admin. Law | 286

(c) the COA be held liable for actual damages as well as petitioner's legal expenses and
attorney's fees.
The resolution of the dispute lies in the determination of the circular or set of provisions
applicable in respect of the honoraria to be paid to PSU personnel who took part in the
evaluation project, i.e., NCC No. 53 or CPG No. 80-4.
In asserting that NCC No. 53 supplies the applicable guideline and that the COA erred
in applying CPG No. 80-4 as the pertinent standard, petitioner contends that:
(a) CPG No. 80-4 applies to "special projects" the definition and scope of which do not
embrace the evaluation project undertaken by petitioner for the DENR;
(b) NCC No. 53 applies to foreign-assisted projects ("FAPs") while CPG No. 80-4
applies to locally-funded projects as no reference to any foreign component
characterizing the projects under its coverage is made;
(c) the DENR evaluation project is a foreign-assisted project per certification and
clarification of the DENR and DBM respectively as well as the implied admission of the
COA in its Comment; and
(d) the DBM's position on the matter should be respected since the DBM is vested with
authority to (i) classify positions and determine appropriate salaries for specific position
classes, (ii) review the compensation benefits programs of agencies and (iii) design job
evaluation programs.
The Office of the Solicitor General, in lieu of a Comment on the Petition, filed a
Manifestation 17 stating that (a) since, per certification of the DENR and Letter/Opinion
of the DBM that the project undertaken by PSU is foreign-assisted, NCC No. 53 should
apply; and (b) respondent COA's contention that CPG No. 80-4 does not distinguish
between projects which are foreign-funded from locally-funded projects deserves no
merit, since NCC No. 53, a special guideline, must be construed as an exception to
CPG No. 80-4, a general guideline. The Solicitor General, in other words, agreed with
the position of petitioner.
Upon the other hand, respondent COA filed its own comment, asserting that:
(a) while the DBM is vested with the authority to issue rules and regulations pertaining
to compensation, this authority is regulated by Sec. 2 (2) of Art. IX-D of the 1987
Constitution which vests respondent COA with the power to "promulgate accounting and
auditing rules and regulations, including those for the prevention and disallowance of
irregular, unnecessary, excessive, extravagant or unconscionable expenditures, or uses
of government funds and properties;

Admin. Law | 287

(b) the Organizational Arrangement and Obligations of the Parties sections of the MOA
clearly show that the evaluation project is an "inter-agency activity" between the DENR
and PSU and therefore a "special project";
(c) the issue as to whether the evaluation project is in fact a "special project" has
become moot in view of the DBM's clarification/ruling that the evaluation project is
foreign-assisted and therefore NCC No. 53, not CPG No. 80-4 which applies only to
locally-funded projects, should apply;
(d) the DBM issuance notwithstanding, respondent COA applied CPG No. 80-4 to
effectively rationalize the rates of additional compensation assigned to or detailed in
"special projects" as its application is without distinction as to the source of funding and
any payment therefore in excess of that provided by CPG No. 80-4 is unnecessary,
excessive and disadvantageous to the government;
(e) respondent COA's previous allowance of payment of honoraria based on NCC No.
53 or the fact that a full five years had already elapsed since NCC No. 53's issuance
does not preclude COA from assailing the circular's validity as "it is the responsibility of
any public official to rectify every error he encounters in the performance of his function"
and "he is not duty- bound to pursue the same mistake for the simple reason that such
mistake had been continuously committed in the past";
(f) the DBM ruling classifying the evaluation project as foreign-assisted does not rest on
solid ground since loan proceeds, regardless of source, eventually become public funds
for which the government is accountable, hence, any project under the loan agreement
is to be considered locally-funded;
(g) the DBM ruling constitutes an unreasonable classification, highly discriminatory and
violative of the equal protection clause of the Constitution; and
(h) granting arguendo NCC No. 53 is the applicable criterion, petitioner
received honoraria in excess of what was provided in the MOA.
We consider the Petition meritorious.
Sec. 2.1 of CPG No. 80-4 defines "special project" as an inter-agency or intercommittee activity or an undertaking by a composite group of officials/employees from
various agencies which [activity or undertaking] is not among the regular and primary
functions of the agencies involved. (Emphasis and brackets supplied)
Respondent COA maintains that the sections of the MOA detailing the "Organizational
Arrangement and Obligations of the Parties" clearly show that the evaluation project is
an "inter-agency activity." The pertinent sections of the MOA are as follows:

Admin. Law | 288

ORGANIZATIONAL ARRANGEMENTS
A Coordinating Committee shall be created which shall be responsible for the overall
administration and coordination of the evaluation, to be chaired by a senior officer of the
DENR. The Committee shall [be] composed [of] the following:
Chairman : Undersecretary for Planning,
Policy and Project Management
[DENR]
Co-Chairman : Vice-President for Research
and Development [PSU]
Members : Director of FMB
Dean, PSU Infanta Campus
Associate Dean, PSU Infanta
Campus
Chief, Reforestation
Division
Project Director of the ADB
Program Loan for Forestry
Sector
OBLIGATIONS OF THE PARTIES
Obligations of DENR:
The DENR shall have the following obligations:
1. Provide the funds necessary for the review and reevaluation of eleven (11)
reforestation projects. xxx xxx xxx
2. Undertake the monitoring of the study to ascertain its progress and the proper
utilization of funds in conformity with the agreed work and financial plan.
3. Reserve the right to accept or reject the final report and in the latter case, DENR may
request PSU to make some revisions/modifications on the same.
Obligations of the PSU:
The PSU shall have the following obligations:
1. Undertake the review and evaluation of the eleven (11) DENR-funded reforestation
projects in accordance with the attached TOR;
2. Submit regularly to DENR financial status reports apart from the progress report
required to effect the second release of funds;
3. Submit the final report to DENR fifteen (15) days after the completion of the work.
The report should at least contain the information which appears in Annex D;
4. Return to DENR whatever balance is left of the funds after the completion of work.

Admin. Law | 289

Simply stated, respondent COA argues that since the Coordinating Committee is
composed of personnel from the DENR and PSU, the evaluation project is an "interagency activity" within the purview of the definition of a "special project".
We are unable to agree with respondent COA.
Examination of the definition in CPG No. 80-4 of a "special project" reveals that
definition has two (2) components: firstly, there should be an inter-agency or intercommittee activity or undertaking by a group of officials or employees who are drawn
from various agencies; and secondly, the activity or undertaking involved is not part of
the "regular or primary" functions of the participating agencies. Examination of the MOA
and its annexes reveals that two (2) groups were actually created. The first group
consisted of the coordinating committee, the membership of which was drawn from
officials of the DENR and of the PSU; and the second, the evaluation project team itself
which was, in contrast, composed exclusively of PSU personnel. 18 We believe that the
first component of the CPU No. 80-4's definition of "special project" is applicable in
respect of the group which is charged with the actual carrying out of the project itself,
rather than to the body or group which coordinates the task of the operating or
implementing group. To construe the administrative definition of "special project"
otherwise would create a situation, which we deem to be impractical and possibly even
absurd, under which any undertaking entered into between the senior officials of
government agencies would have to be considered an "inter-agency or inter-committee
activity," even though the actual undertaking or operation would be carried out not by
the coordinating body but rather by an separate group which might not (as in the
present case) be drawn from the agencies represented in the coordinating group. In
other words, an "inter-agency or inter-committee activity or . . . undertaking" must be
one which is actually carried out by a composite group of officials and employees from
the two (2) or more participating agencies.
As already noted, in the case at hand, the project team actually tasked with carrying out
the evaluation of the DENR reforestation activity is composed exclusively of personnel
from PSU; the project team's responsibility and undertaking are quite distinct from the
responsibilities of the coordinating [DENR and PSU] committee. Thus, the project team
is not a "composite group" as required by the definition of CPG No. 80-4 of "special
projects." It follows that the evaluation projects here involved do not fall within the ambit
of a "special project" as defined and regulated by CPG No. 80-4.
We do not consider it necessary to rule on whether the project at hand involved an
undertaking "which is not among the regular and primary functions of the agencies
involved" since the reforestation activity evaluation group is not, as pointed out above, a
"special project" within the meaning of CPG No. 80-4. In any case, this particular issue
was not raised by any of the parties here involved.
It is true, as respondent COA points out, that the provisions of CPG No. 80-4 do not
distinguish between "a special project" which is funded by monies of local or Philippine
origin and "a special project" which is funded or assisted by monies originating from

Admin. Law | 290

international or foreign agencies. As earlier noted, CPG No. 80-4 was issued by the
Department of Budget and Management back in 7 August 1980. Upon the other hand,
NCC No. 53 was issued also by the Department of Budget and Management more than
eight (8) years later, i.e., 9 December 1988. Examination of the provisions of NCC No.
53 makes it crystal clear that the circular is applicable to foreign-assisted projects only.
The explicit text of NCC No. 53 states that it was issued to
prescribe/authorize the classification and compensation rates of positions in foreignassisted projects(FAPs) including honoraria rates for personnel detailed to FAPs and
guidelines in the implementation thereof pursuant to Memorandum No. 173 dated 16
May 1988 19 (Emphasis supplied)
and which apply to all positions in foreign-assisted projects only. Clearly, NCC No. 53
amended the earlier CPG No. 80-4 by carving out from the subject matter originally
covered by CPG No. 80-4 all "foreign-assisted [special] projects." CPG No. 80-4 was,
accordingly, modified so far as "foreign-assisted [special] projects (FAPs)" are
concerned. It is this fact or consequence of NCC No. 53 that respondent COA
apparently failed to grasp. Thus, CPG No. 80-4 does not control, nor even relate to, the
DENR evaluation project for at least two (2) reasons: firstly, the evaluation project was
not a "special project" within the meaning of CPG No. 80-4; secondly, that same
evaluation project was a Foreign-Assisted Project to which NCC No. 53 is specifically
applicable.
That the instant evaluation project is a Foreign-Assisted Project is borne out by the
records: (a) the MOA states that the project is "part of the commitment with the Asian
Development Bank (ADB) under the Forestry Sector Program Loan"; (b) the certification
issued by the DENR certifies that
. . . the review and evaluation of DENR reforestation projects undertaken by State
Universities and Colleges, one of which is Pangasinan State University, is one of the
components of the ADB/OECF Forestry Sector Program Loan which is funded by the
loan. It is therefore a
foreign-assisted project (Underscoring supplied); and
(c) the clarification issued by the DBM stating that
The honoraria rates of the detailed personnel should not be based on Compensation
Policy Guidelines No. 80-4, which pertains to locally funded projects. Since the funding
source for this activity come from loan proceeds, National Compensation Circular No.
53 should apply.
Even in its Comment respondent COA submits that
. . . the issue as to whether or not the project was special already became moot in the
face of the opinion/ruling of the DBM that since it (the project) is "foreign-assisted" NCC
53 should apply, for CPG No. 80-4 applies only to "locally-funded projects. 20
Under the Administration Code of 1987, the Compensation and Position Classification
Bureau of the DBM "shall classify positions and determine appropriate salaries for
specific position classes and review appropriate salaries for specific position classes
and review the compensation benefits programs of agencies and shall design job
evaluation programs." 21 In Warren Manufacturing Workers Union (WMWU) v. Bureau of

Admin. Law | 291

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

Admin. Law | 292

1. Provide the funds necessary for the review and reevaluation of the eleven (11)
reforestation projects . . . in the amount not more than FIVE HUNDRED SIX
THOUSAND TWO HUNDRED TWENTY FOUR PESOS (P506,224.00) which shall be
spent in accordance with the work and financial plan which attached as Annex C. Fund
remittances shall be made on a staggered basis with the following schedule:
a. FIRST RELEASE
Twenty percent (20%) of the total cost to be remitted within fifteen (15) working
days upon submission of work plan;
b. SECOND RELEASE
Forty percent of the total cost upon submission of a progress report of the
activities that were so far undertaken;
c. THIRD RELEASE
Thirty percent (30%) of the total amount upon submission of the draft final report;
d. FOURTH RELEASE
Ten percent of the total amount [upon submission] of the final report.
(Underscoring supplied)
Annex "C" referred to in the MOA is the Project Proposal. Per the Proposal's "Budget
Estimate," P175,000.00 and P92,500.00 were allotted for "Expert Services" and
"Support Services" respectively itemized as follows:
PERSONAL SERVICES
EXPERT SERVICES
Duration
Expert of Service Rate/ Total
(mo.) mo.
1. Ecologist 4 P5,000 P20,000
2. Silviculturist 3 -do- 15,000
3. Forestry Economist 4 -do- 20,000
4. Soils Expert 2 -do- 10,000
5. Social Forestry Expert 4 -do- 20,000
6. Management Expert 2 -do- 10,000
7. Horticulturist 2 -do- 10,000
8. Agricultural Engineer 2 -do- 10,000
9. Systems Analysts/Programer 2 -do- 10,000
10. Statistician 2 -do- 10,000
11. Shoreline Resources Expert 2 -do- 10,000
12. Animal Science Specialist 2 -do- 10,000
13. Policy/Administrative 4 -do- 20,000
Expert
T O T A L P175,000

Support Services
Research Associates (2) P8,000
Honorarium P1,000/mo. for 4 months
Special Disbursing Officer (1) 4,000
Honorarium P1,000/mo. for 4 months
Enumerators/Data Gatheres 36,000
360 mandays at P100/manday
including COLA
Coders/Encoders 30,000
300 mandays at P100/manday
including COLA
Cartographer/Illustrator 5,000
50 mandays at P100/manday
including COLA
Documentalist 4,500
45 mandays at P100/manday
including COLA
Typist 5,000
50 mandays at P100/manday
including COLA
T O T A L P92,500

In addition, the Proposal already provided a list of identified experts:

EXPERTS
1. Dr. Victorino P. Espero Enviromental Science
2. Dean Antonio Q. Repollo Silviculture
3. Prof. Artemio M. Rebugio Forestry Economics
4. Ms. Naomenida Olermo Soils
5. Dr. Elvira R. Castillo Social Forestry
6. Dr. Alfredo F. Aquino Management
7. Dr. Lydio Calonge Horticulture

Admin. Law | 293

8. Engr. Manolito Bernabe Engineering

9. Dr. Elmer C. Vingua Animal Science
10. Prof. Rolando J. Andico Systems Analysts
Programming
11. Dr. Eusebio Miclat, Jr. Statistics/
Instrumentation
12. Dr. Porferio Basilio Shoreline Resources
13. Dr. Rufino O. Eslao Policy Administration

who, together with six (6) staff members namely Henedina M. Tantoco, Alicia Angelo
Yolanda Z. Sotelo, Gregoria Q. Calela, Nora A. Caburnay and Marlene S. Bernebe
composed the evaluation project team. At this point, it should be pointed out that the "
Budget Estimate even provides a duration for the participation of each and every person
whether rendering expert or support services.
On the other hand, NCC No. 53 provides:
3.3.1 The approved 0rganization and staffing shall be valid up to project completion
except for modifications deemed necessary by the Project Manager. The Project
Manager shall be given the flexibility to determine the timing of hiring
personnel provided the approved man-years for a given position for the duration of the
project is not exceeded. xxx xxx xxx
3.6 A regular employee who may detailed to any FAPs on a part-time basis shall be
entitled to receive honoraria in accordance with the schedule shown in Attachment II
hereof. xxx xxx xxx
3.7 Payment of honoraria shall be made out of project funds and in no case shall
payment thereof be made out of regular agency fund. xxx xxx xxx
3.10 The total amount of compensation to be paid shall not exceed the original amount
allocated for personal services of the individual foreign-assisted projects. Any
disbursement in excess of the original amount allotted for personal services of the
individual projects shall be the personal liability and responsibility of the officials and
employees authorizing or making such payment. (Underscoring supplied)
Attachment II of NCC No. 53 prescribes the monthly rates allowed for officials/employees on
assignment to foreign- assisted special projects:
A. Position Level Project Manager/Project
Director
Responsibility . . .
Parttime P2,000.00
B. Position Level Assistant Project
Director
Responsibility . . .
Parttime P1,500.00
C. Position Level Project Consultant
Responsibility . . .
Parttime P1,000.00
D. Position Level Supervisor/Senior Staff
Member

Responsibility . . .
Parttime P1,000.00
E. Position Level Staff Member
Responsibility . . .
Parttime P700.00
Administrative and Clerical Support
A. Position Level Administrative Assistant
Responsibility . . .
Parttime P500.00
B. Position Level Administrative Support
Staff
Responsibility . . .
Parttime P400.00

Admin. Law | 294

From the clear and detailed

provisions of the MOA and Project Proposal in relation to NCC No. 53, consent to any
extension of the evaluation project, in this instance, must be more concrete than the
alleged silence or lack of protest on the part of the DENR. Although tacit acceptance is
recognized in our jurisdiction, 24 as a rule, silence is not equivalent to consent since its
ambiguity lends itself to error. And although under the Civil Code there are instances
when silence amounts to consent, 25 these circumstances are wanting in the case at
bar. Furthermore, as correctly pointed out by the respondent COA, the date when the
DENR accepted the final project report is by no means conclusive as to the terminal
date of the evaluation project. Examination of the MOA (quoted earlier on pages 19-20)
reveals that the submission of reports merely served to trigger the phased releases of
funds. There being no explicit agreement between PSU and the DENR to extend the
duration of the evaluation project, the MOA's "Budget Estimate" which, among others,
provides in detail the duration of service for each member of the evaluation project as
amended by the rates provided by NCC No. 53 must be the basis of the honoraria due
to the evaluation team.
The other arguments of respondent COA appear to us to be insubstantial and as,
essentially, afterthoughts. The COA apparently does not agree with the policy
basis of NCC No. 53 in relation to CPG No. 80-4 since COA argues that loan
proceeds regardless of source eventually become public funds for which the
government is accountable. The result would be that any provisions under any
[foreign] loan agreement should be considered locally-funded. We do not
consider that the COA is, under its constitutional mandate, authorized to
substitute its own judgment for any applicable law or administrative regulation
with the wisdom or propriety of which, however, it does not agree, at least not
before such law or regulation is set aside by the authorized agency of
government i.e., the courts as unconstitutional or illegal and void. The
COA, like all other government agencies, must respect the presumption of
legality and constitutionality to which statutes and administrative regulations are
entitled 26 until such statute or regulation is repealed or amended, or until set
aside in an appropriate case by a competent court (and ultimately this Court).
Finally, we turn to petitioner's claim for moral damages and reimbursement of
legal expenses. We consider that this claim cannot be granted as petitioner has
failed to present evidence of bad faith or tortious intent warranting an award
thereof. The presumption of regularity in the performance of duty must be
accorded to respondent COA; its action should be seen as its effort to exercise
(albeit erroneously, in the case at bar) its constitutional power and duty in respect
of uses of government funds and properties.
WHEREFORE, for all the foregoing, the Petition for Certiorari is hereby
GRANTED. COA Decisions Nos. 1547 and 2571, respectively dated 18

Admin. Law | 295

September 1990 and 16 November 1992, are hereby SET ASIDE. The instant
evaluation project being a Foreign-Assisted Project, the following PSU personnel
involved in the project shall be paid according to the Budget Estimate schedule of
the MOA as aligned with NCC No. 53:
A. A. For Experts
Duration Rate/
Expert of month Total
Service (NCC
(mo.) No. 53)
1. Dr. Rufino O. Eslao Policy/Admi- 4 P2,000
P8,000 nistrative
expert*2. Dr. Victorino P. Espero Ecologist** 4 1,500
6,000
3. Dean Antonio Q. Repollo Silvicul- 3 1,000
3,000
turist***
4. Prof. Artemio M. Rebugio Forestry 4 1,000
4,000
Economist
5. Ms. Naomenida Olermo Soils Expert 2 1,000
2,000
6. Dr. Elvira R. Castillo Social 4 1,000 4,000
Forestry
Expert
7. Dr. Alfredo F. Aquino Management 2 1,000
2,000
Expert
8. Dr. Lydio Calonge Horticul 2 1,000 2,000
turist
9. Engr. Manolito Bernabe Agricultural 2 1,000
2,000
Engineer
10. Prof. Rolando J. Andico Systems 2 1,000
2,000
Analysts/
Programmer
11. Dr. Eusebio Miclat, Jr. Statistician 2 1,000

2,000
12. Dr. Porferio Basilio Shoreline 2 1,000 2,000
Resources
Expert
13. Dr. Elmer C. Vingua Animal 2 1,000 2,000
Science
Specialist
41,000

* Project Manager/ Project Director

** Assistant Project Director
*** Project Consultants
B. For Support Staff
Duration Rate/
Expert of month Total
Service (NCC
(mo.) No. 53)
1 Henedina M. Tantoco Research 4 700 2,800
Associate**
2 Alicia Angelo Research 4 700 2,800
3 Yolanda Z. Sotelo Documentalist 2.04 700
1,428
4 Gregoria Q. Calela Special 4 700 2,800
Disbursing
Officer
5 Nora A. Caburnay Typist 2.27 500 1,135
6 Marlene S. Bernebe Cashier 2.27 500 1,135

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

Admin. Law | 296

No pronouncement as to costs.
SO ORDERED.