G.R. No.

110120 March 16, 1994 health of the residents and the possibility of pollution of the water content of the
surrounding area.
LAGUNA LAKE DEVELOPMENT AUTHORITY, petitioner,
vs. On November 15, 1991, the LLDA conducted an on-site investigation, monitoring and test
COURT OF APPEALS, HON. MANUEL JN. SERAPIO, Presiding Judge RTC, sampling of the leachate3that seeps from said dumpsite to the nearby creek which is a
Branch 127, Caloocan City, HON. MACARIO A. ASISTIO, JR., City Mayor of tributary of the Marilao River. The LLDA Legal and Technical personnel found that the
Caloocan and/or THE CITY GOVERNMENT OF CALOOCAN, respondents. City Government of Caloocan was maintaining an open dumpsite at the Camarin area
without first securing an Environmental Compliance Certificate (ECC) from the
Alberto N. Hidalgo and Ma. Teresa T. Oledan for petitioner. 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
The City Legal Officer & Chief, Law Department for Mayor Macario A. Asistio, Jr. and the Executive Order No. 927, series of 1983.6
City Government of Caloocan.
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
ROMERO, J.: 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
The clash between the responsibility of the City Government of Caloocan to dispose off the issued a Cease and Desist Order 8 ordering the City Government of Caloocan, Metropolitan
350 tons of garbage it collects daily and the growing concern and sensitivity to a pollution- Manila Authority, their contractors, and other entities, to completely halt, stop and desist
free environment of the residents of Barangay Camarin, Tala Estate, Caloocan City where from dumping any form or kind of garbage and other waste matter at the Camarin
these tons of garbage are dumped everyday is the hub of this controversy elevated by the dumpsite.
protagonists to the Laguna Lake Development Authority (LLDA) for adjudication.
The dumping operation was forthwith stopped by the City Government of Caloocan.
The instant case stemmed from an earlier petition filed with this Court by Laguna Lake However, sometime in August 1992 the dumping operation was resumed after a meeting
Development Authority (LLDA for short) docketed as G.R. held in July 1992 among the City Government of Caloocan, the representatives of Task
No. 107542 against the City Government of Caloocan, et al. In the Resolution of November Force Camarin Dumpsite and LLDA at the Office of Environmental Management Bureau
10, 1992, this Court referred G.R. No. 107542 to the Court of Appeals for appropriate Director Rodrigo U. Fuentes failed to settle the problem.
disposition. Docketed therein as CA-G.R. SP
No. 29449, the Court of Appeals, in a decision 1 promulgated on January 29, 1993 ruled that After an investigation by its team of legal and technical personnel on August 14, 1992, the
the LLDA has no power and authority to issue a cease and desist order enjoining the LLDA issued another order reiterating the December 5, 1991, order and issued an Alias
dumping of garbage in Barangay Camarin, Tala Estate, Caloocan City. The LLDA now Cease and Desist Order enjoining the City Government of Caloocan from continuing its
seeks, in this petition, a review of the decision of the Court of Appeals. dumping operations at the Camarin area.

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
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

1
Caloocan City an action for the declaration of nullity of the cease and desist order with
prayer for the issuance of writ of injunction, docketed as Civil Case No. C-15598. In its
complaint, the City Government of Caloocan sought to be declared as the sole authority
empowered to promote the health and safety and enhance the right of the people in
Caloocan City to a balanced ecology within its territorial jurisdiction. 9
On September 25, 1992, the Executive Judge of the Regional Trial Court of Caloocan City
issued a temporary restraining order enjoining the LLDA from enforcing its cease and
desist order. Subsequently, the case was raffled to the Regional Trial Court, Branch 126 of
Caloocan which, at the time, was presided over by Judge Manuel Jn. Serapio of the
Regional Trial Court, Branch 127, the pairing judge of the recently-retired presiding judge.
The LLDA, for its part, filed on October 2, 1992 a motion to dismiss on the ground, among
others, that under Republic Act No. 3931, as amended by Presidential Decree No. 984,
otherwise known as the Pollution Control Law, the cease and desist order issued by it
which is the subject matter of the complaint is reviewable both upon the law and the facts
of the case by the Court of Appeals and not by the Regional Trial Court. 10
On October 12, 1992 Judge Manuel Jn. Serapio issued an order consolidating Civil Case
No. C-15598 with Civil Case No. 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 order11 denying LLDA's motion to dismiss and granting the
issuance of a writ of preliminary injunction enjoining the LLDA, its agent and all persons
acting for and on its behalf, from enforcing or implementing its cease and desist order
which prevents plaintiff City of Caloocan from dumping garbage at the Camarin dumpsite
during the pendency of this case and/or until further orders of the court.
On November 5, 1992, the LLDA filed a petition for certiorari, prohibition and injunction
with prayer for restraining order with the Supreme Court, docketed as G.R. No. 107542,
seeking to nullify the aforesaid order dated October 16, 1992 issued by the Regional Trial
Court, Branch 127 of Caloocan City denying its motion to dismiss.
The Court, acting on the petition, issued a Resolution 12 on November 10, 1992 referring the
case to the Court of Appeals for proper disposition and at the same time, without giving due
course to the petition, required the respondents to comment on the petition and file the
same with the Court of Appeals within ten (10) days from notice. In the meantime, the
Court issued a temporary restraining order, effective immediately and continuing until
further orders from it, ordering the respondents: (1) Judge Manuel Jn. Serapio, Presiding
Judge, Regional Trial Court, Branch 127, Caloocan City to cease and desist from exercising
jurisdiction over the case for declaration of nullity of the cease and desist order issued by
the Laguna Lake Development Authority (LLDA); and (2) City Mayor of Caloocan and/or
the City Government of Caloocan to cease and desist from dumping its garbage at the Tala
Estate, Barangay Camarin, Caloocan City.
Respondents City Government of Caloocan and Mayor Macario A. Asistio, Jr. filed on
November 12, 1992 a motion for reconsideration and/or to quash/recall the temporary
restraining order and an urgent motion for reconsideration alleging that ". . . in view of the
calamitous situation that would arise if the respondent city government fails to collect 350
tons of garbage daily for lack of dumpsite (i)t is therefore, imperative that the issue be
resolved with dispatch or with sufficient leeway to allow the respondents to find alternative
solutions to this garbage problem."
On November 17, 1992, the Court issued a Resolution 13 directing the Court of Appeals to
immediately set the case for hearing for the purpose of determining whether or not the
temporary restraining order issued by the Court should be lifted and what conditions, if any,
may be required if it is to be so lifted or whether the restraining order should be maintained
or converted into a preliminary injunction.
The Court of Appeals set the case for hearing on November 27, 1992, at 10:00 in the
morning at the Hearing Room, 3rd Floor, New Building, Court of Appeals. 14 After the oral
argument, a conference was set on December 8, 1992 at 10:00 o'clock in the morning
where the Mayor of Caloocan City, the General Manager of LLDA, the Secretary of DENR
or his duly authorized representative and the Secretary of DILG or his duly authorized
representative were required to appear.
It was agreed at the conference that the LLDA had until December 15, 1992 to finish its
study and review of respondent's technical plan with respect to the dumping of its garbage
and in the event of a rejection of respondent's technical plan or a failure of settlement, the
parties will submit within 10 days from notice their respective memoranda on the merits of
the case, after which the petition shall be deemed submitted for
resolution.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
2
power and authority to issue a cease and desist order under its enabling law, Republic Act
No. 4850, as amended by P.D. No. 813 and Executive Order
No. 927, series of 1983.
The Court of Appeals thus dismissed Civil Case No. 15598 and the preliminary injunction
issued in the said case was set aside; the cease and desist order of LLDA was likewise set
aside and the temporary restraining order enjoining the City Mayor of Caloocan and/or the
City Government of Caloocan to cease and desist from dumping its garbage at the Tala
Estate, Barangay Camarin, Caloocan City was lifted, subject, however, to the condition that
any future dumping of garbage in said area, shall be in conformity with the procedure and
protective works contained in the proposal attached to the records of this case and found on
pages 152-160 of the Rollo, which was thereby adopted by reference and made an integral
part of the decision, until the corresponding restraining and/or injunctive relief is granted
by the proper Court upon LLDA's institution of the necessary legal proceedings.
Hence, the Laguna Lake Development Authority filed the instant petition for review
on certiorari, now docketed as G.R. No. 110120, with prayer that the temporary restraining
order lifted by the Court of Appeals be re-issued until after final determination by this
Court of the issue on the proper interpretation of the powers and authority of the LLDA
under its enabling law.
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 ex-parte cease
and desist order was not incorporated in Presidential Decree No. 813 nor in Executive
Order No. 927, series of
1983. The Court of Appeals ruled that under Section 4, par. (d), of Republic Act No. 4850,
as amended, the LLDA is instead required "to institute the necessary legal proceeding
against any person who shall commence to implement or continue implementation of any
project, plan or program within the Laguna de Bay region without previous clearance from
the Authority."
The LLDA now assails, in this partition for review, the abovementioned ruling of the Court
of Appeals, contending that, as an administrative agency which was granted regulatory and
adjudicatory powers and functions by Republic Act No. 4850 and its amendatory laws,
Presidential Decree No. 813 and Executive Order No. 927, series of 1983, it is invested
with the power and authority to issue a cease and desist order pursuant to Section 4 par. (c),
(d), (e), (f) and (g) of Executive Order No. 927 series of 1983 which provides, thus:
Sec. 4. Additional Powers and Functions. The authority shall have the
following powers and functions:
xxx xxx xxx
(c) Issue orders or decisions to compel compliance with the provisions
of this Executive Order and its implementing rules and regulations only
after proper notice and hearing.
(d) Make, alter or modify orders requiring the discontinuance of
pollution specifying the conditions and the time within which such
discontinuance must be accomplished.
(e) Issue, renew, or deny permits, under such conditions as it may
determine to be reasonable, for the prevention and abatement of
pollution, for the discharge of sewage, industrial waste, or for the
installation or operation of sewage works and industrial disposal
system or parts thereof.
(f) After due notice and hearing, the Authority may also revoke,
suspend or modify any permit issued under this Order whenever the
same is necessary to prevent or abate pollution.
3
 (g) Deputize in writing or request assistance of appropriate government
agencies or instrumentalities for the purpose of enforcing this
Executive Order and its implementing rules and regulations and the
orders and decisions of the Authority.
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 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
Caloocan21 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.
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 ex-parte cease
and desist order" in a language, as suggested by the City Government of Caloocan, similar
4
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 isprima facie evidence of an
establishment exceeding the allowable standards set by the anti-pollution laws of the
country. The ponente, Associate Justice Florentino P. Feliciano, declared:
Ex parte cease and desist orders are permitted by law and regulations in
situations like that here presented precisely because stopping the
continuous discharge of pollutive and untreated effluents into the rivers
and other inland waters of the Philippines cannot be made to wait until
protracted litigation over the ultimate correctness or propriety of such
orders has run its full course, including multiple and sequential appeals
such as those which Solar has taken, which of course may take several
years. The relevant pollution control statute and implementing
regulations were enacted and promulgated in the exercise of that
pervasive, sovereign power to protect the safety, health, and general
welfare and comfort of the public, as well as the protection of plant and
animal life, commonly designated as the police power. It is a
constitutional commonplace that the ordinary requirements of
procedural due process yield to the necessities of protecting vital public
interests like those here involved, through the exercise of police
power. . . .
The immediate response to the demands of "the necessities of protecting vital public interests" gives
vitality to the statement on ecology embodied in the Declaration of Principles and State Policies or the
1987 Constitution. Article II, Section 16 which provides:
The State shall protect and advance the right of the people to a balanced and
healthful ecology in accord with the rhythm and harmony of nature.
As a constitutionally guaranteed right of every person, it carries the correlative duty of non-
impairment. This is but in consonance with the declared policy of the state "to protect and promote the
right to health of the people and instill health consciousness among them." 28 It is to be borne in mind
that the Philippines is party to the Universal Declaration of Human Rights and the Alma Conference
Declaration of 1978 which recognize health as a fundamental human right. 29
The issuance, therefore, of the cease and desist order by the LLDA, as a practical matter of procedure
under the circumstances of the case, is a proper exercise of its power and authority under its charter
and its amendatory laws. Had the cease and desist order issued by the LLDA been complied with by
the City Government of Caloocan as it did in the first instance, no further legal steps would have been
necessary.
The charter of LLDA, Republic Act No. 4850, as amended, instead of conferring upon the LLDA the
means of directly enforcing such orders, has provided under its Section 4 (d) the power to institute
"necessary legal proceeding against any person who shall commence to implement or continue
implementation of any project, plan or program within the Laguna de Bay region without previous
clearance from the LLDA."
Clearly, said provision was designed to invest the LLDA with sufficiently broad powers in the
regulation of all projects initiated in the Laguna Lake region, whether by the government or the private
sector, insofar as the implementation of these projects is concerned. It was meant to deal with cases
which might possibly arise where decisions or orders issued pursuant to the exercise of such broad
powers may not be obeyed, resulting in the thwarting of its laudabe objective. To meet such
contingencies, then the writs of mandamus and injunction which are beyond the power of the LLDA to
issue, may be sought from the proper courts.
Insofar as the implementation of relevant anti-pollution laws in the Laguna Lake region and its
surrounding provinces, cities and towns are concerned, the Court will not dwell further on the related
issues raised which are more appropriately addressed to an administrative agency with the special
knowledge and expertise of the LLDA.
WHEREFORE, the petition is GRANTED. The temporary restraining order issued by the Court on
July 19, 1993 enjoining the City Mayor of Caloocan and/or the City Government of Caloocan from
dumping their garbage at the Tala Estate, Barangay Camarin, Caloocan City is hereby made
permanent.
SO ORDERED.
5
 In August, 1977, herein private respondent Rogelio R. Coria was hired by herein petitioner
Rizal Empire Insurance Group as a casual employee with a salary of P10.00 a day. On
January 1, 1978, he was made a regular employee, having been appointed as clerk-typist,
with a monthly salary of P300.00. Being a permanent employee, he was furnished a copy of
petitioner company’s "General Information, Office Behavior and Other Rules and
Regulations." In the same year, without change in his position-designation, he was
[G.R. No. 73140. May 29, 1987.] transferred to the Claims Department and his salary was increased to P450.00 a month. In
1980, he was transferred to the Underwriting Department and his salary was increased to
RIZAL EMPIRE INSURANCE GROUP and/or SERGIO CORPUS, Petitioners, v. P580.00 a month plus cost of living allowance, until he was transferred to the Fire
NATIONAL LABOR RELATIONS COMMISSION, TEODORICO L. RUIZ, as Department as filing clerk. In July, 1983, he was made an inspector of the Fire Division
Labor Arbiter and ROGELIO R. CORIA, Respondents. with a monthly salary of P685.00 plus allowances and other benefits.

Ambrosio Padilla, Mempin & Reyes Law Offices, for Petitioners. On October 15, 1983, private respondent Rogelio R. Coria was dismissed from work,
allegedly, on the grounds of tardiness and unexcused absences. Accordingly, he filed a
Guillermo H. Pulia for Private Respondent. complaint with the Ministry of Labor and Employment (MOLE), and in a Decision dated
March 14, 1985 (Record, pp. 80-87), Labor Arbiter Teodorico L. Ruiz reinstated him to his
position with back wages. Petitioner filed an appeal with the National Labor Relations
SYLLABUS Commission (NLRC) but, in a Resolution dated November 15, 1985 (Ibid., pp. 31-32), the
appeal was dismissed on the ground that the same had been filed out of time. Hence, the
instant petition (Ibid., pp. 2-22).
1. LABOR AND SOCIAL LEGISLATION; NATIONAL LABOR RELATIONS In compliance with the resolution of the Second Division of this Court dated April 30, 1986
COMMISSION; ITS ADMINISTRATIVE REGULATIONS AND POLICIES (Ibid., p. 94), private respondent filed his Comment on May 23, 1986 (Ibid., pp. 97-101)
INTERPRETING THE LABOR CODE; HAVE THE FORCE OF LAW AND ENTITLED and public respondent on July 2, 1986 (Ibid., pp. 120-124).
TO GREAT RESPECT. — The Revised Rules of the National Labor Relations Commission
are clear and explicit and leave no room for interpretation. It is an elementary rule in On June 6, 1986, petitioners filed their Reply to private respondent’s Comment (Ibid., pp.
administrative law that administrative regulations and policies enacted by administrative 102-105) and on July 25, 1986, their Reply to public respondent’s Comment (Ibid., pp.
bodies to interpret the law which they are entrusted to enforce, have the force of law, and 126-131).chanroblesvirtualawlibrary
are entitled to great respect (Espanol v. Philippine Veterans Administration, 137 SCRA 314
[1985]). In a Resolution dated August 18, 1986, the Second Division of this Court resolved to give
due course to the petition and to require the parties to submit their respective memoranda
(Ibid., p. 132).
DECISION
In compliance with the above mentioned Resolution, petitioners filed their memorandum
on November 10, 1986; while private respondent filed his Memorandum on October 17,
PARAS, J.: 1986 (Ibid., pp. 139-144), and public respondent on November 16, 1986 (Ibid., pp. 160-
166).

Before going however, into the merits of the case, an important point to consider is whether
This is a petition for review on certiorari of the March 14, 1985 Decision of Labor Arbiter
or not it is still within the jurisdiction of this Court to review.
Teodorico L. Ruiz which held that herein private respondent Rogelio R. Coria was illegally
dismissed; and of the Resolution of the National Labor Relations Commission which
Rule VIII of the Revised Rules of the National Labor Relations Commission on appeal,
dismissed petitioner’s appeal on the ground that the same was filed out of time.

6
provides:chanrobles law library : red
SO ORDERED.
"SECTION 1. (a) Appeal. — Decision or orders of a Labor Arbiter shall be final and
executory unless appealed to the Commission by any or both of the parties within ten (10)
calendar days from receipt of notice thereof.

x x x"

"SECTION 6. No extension of period. No motion or request for extension of the period

within which to perfect an appeal shall be entertained."cralaw virtua1aw library

The record shows that the employer (petitioner herein) received a copy of the decision of
the Labor Arbiter on April 1, 1985. It filed a Motion for Extension of Time to File
Memorandum of Appeal on April 11, 1985 and filed the Memorandum of Appeal on April
22, 1985. Pursuant to the "no extension policy" of the National Labor Relations
Commission, aforesaid motion for extension of time was denied in its resolution dated
November 15, 1985 and the appeal was dismissed for having been filed out of time (Rollo,
pp. 31-32).

Petitioners claim, among other things, that respondent Commission committed a grave
abuse of discretion amounting to lack of jurisdiction in arbitrarily dismissing petitioners’
appeal on a technicality (Rollo, p. 9). It invokes the Rules of Court provision on liberal
construction of the Rules in the interest of substantial justice.

It will be noted however, that the foregoing provision refers to the Rules of Court. On the
other hand, the Revised Rules of the National Labor Relations Commission are clear and
explicit and leave no room for interpretation.

Moreover, it is an elementary rule in administrative law that administrative regulations and

policies enacted by administrative bodies to interpret the law which they are entrusted to
enforce, have the force of law, and are entitled to great respect (Espanol v. Philippine
Veterans Administration, 137 SCRA 314 [1985]).

Under the above-quoted provisions of the Revised NLRC Rules, the decision appealed
from in this case has become final and executory and can no longer be subject to appeal.

Even on the merits, the ruling of the Labor Arbiter appears to be correct; the consistent
promotions in rank and salary of the private respondent indicate he must have been a highly
efficient worker, who should be retained despite occasional lapses in punctuality and
attendance. Perfection cannot after all be demanded.

WHEREFORE, this petition is DISMISSED.

7
 sensored with a somewhat webbed copper wire on the tip or other end of a bamboo pole
with electric wire attachment which was attached to the dynamo direct and with the use of
these devices or equipments catches fish thru electric current, which destroy any aquatic
animals within its cuffed reach, to the detriment and prejudice of the populace" (Criminal
Case No. 5429).

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

G.R. No. L-32166 October 18, 1977 The lower court held that electro fishing cannot be penalize because electric current is not
an obnoxious or poisonous substance as contemplated in section I I of the Fisheries Law
THE PEOPLE OF THE PHILIPPINES, plaintiff-appellant, and that it is not a substance at all but a form of energy conducted or transmitted by
vs. substances. The lower court further held that, since the law does not clearly prohibit electro
HON. MAXIMO A. MACEREN CFI, Sta. Cruz, Laguna, JOSE BUENAVENTURA, fishing, the executive and judicial departments cannot consider it unlawful.
GODOFREDO REYES, BENJAMIN REYES, NAZARIO AQUINO and CARLO
DEL ROSARIO, accused-appellees. As legal background, it should be stated that section 11 of the Fisheries Law prohibits "the
use of any obnoxious or poisonous substance" in fishing.
Office of the Solicitor General for appellant.
Section 76 of the same law punishes any person who uses an obnoxious or poisonous
Rustics F. de los Reyes, Jr. for appellees. substance in fishing with a fine of not more than five hundred pesos nor more than five
thousand, and by imprisonment for not less than six months nor more than five years.

It is noteworthy that the Fisheries Law does not expressly punish .electro fishing."
Notwithstanding the silence of the law, the Secretary of Agriculture and Natural Resources,
AQUINO, J.:têñ.£îhqw⣠upon the recommendation of the Commissioner of Fisheries, promulgated Fisheries
Administrative Order No. 84 (62 O.G. 1224), prohibiting electro fishing in all Philippine
This is a case involving the validity of a 1967 regulation, penalizing electro fishing in fresh waters. The order is quoted below: ñé+.£ªwph!1
water fisheries, promulgated by the Secretary of Agriculture and Natural Resources and the
Commissioner of Fisheries under the old Fisheries Law and the law creating the Fisheries SUBJECT: PROHIBITING ELECTRO FISHING IN ALL
Commission. WATERS ñé+.£ªwph!1

On March 7, 1969 Jose Buenaventura, Godofredo Reyes, Benjamin Reyes, Nazario Aquino OF THE PHILIPPINES.
and Carlito del Rosario were charged by a Constabulary investigator in the municipal court
of Sta. Cruz, Laguna with having violated Fisheries Administrative Order No. 84-1.
Pursuant to Section 4 of Act No. 4003, as amended, and Section 4 of R.A. No. 3512, the
following rules and regulations regarding the prohibition of electro fishing in all waters of
It was alleged in the complaint that the five accused in the morning of March 1, 1969 the Philippines are promulgated for the information and guidance of all concerned.ñé+.
resorted to electro fishing in the waters of Barrio San Pablo Norte, Sta. Cruz by "using their £ªwph!1
own motor banca, equipped with motor; with a generator colored green with attached
dynamo colored gray or somewhat white; and electrocuting device locally known as

8
 SECTION 1. — Definition. — Words and terms used in this Order 11
construed as follows:
(a) Philippine waters or territorial waters of the Philippines' includes all
waters of the Philippine Archipelago, as defined in the t between the
United States and Spain, dated respectively the tenth of December,
eighteen hundred ninety eight and the seventh of November, nineteen
hundred. For the purpose of this order, rivers, lakes and other bodies of
fresh waters are included.
(b) Electro Fishing. — Electro fishing is the catching of fish with the
use of electric current. The equipment used are of many electrical
devices which may be battery or generator-operated and from and
available source of electric current.
(c) 'Persons' includes firm, corporation, association, agent or employee.
(d) 'Fish' includes other aquatic products.
SEC. 2. — Prohibition. — It shall be unlawful for any person to
engage in electro fishing or to catch fish by the use of electric current in
any portion of the Philippine waters except for research, educational
and scientific purposes which must be covered by a permit issued by
the Secretary of Agriculture and Natural Resources which shall be
carried at all times.
SEC. 3. — Penalty. — Any violation of the provisions of this
Administrative Order shall subject the offender to a fine of not
exceeding five hundred pesos (P500.00) or imprisonment of not
extending six (6) months or both at the discretion of the Court.
SEC. 4. — Repealing Provisions. — All administrative orders or parts
thereof inconsistent with the provisions of this Administrative Order
are hereby revoked.
SEC. 5. — Effectivity. — This Administrative Order shall take effect
six (60) days after its publication in the Office Gazette.
On June 28, 1967 the Secretary of Agriculture and Natural Resources, upon the
recommendation of the Fisheries Commission, issued Fisheries Administrative Order No.
84-1, amending section 2 of Administrative Order No. 84, by restricting the ban against
electro fishing to fresh water fisheries (63 O.G. 9963).
Thus, the phrase "in any portion of the Philippine waters" found in section 2, was changed
by the amendatory order to read as follows: "in fresh water fisheries in the Philippines,
such as rivers, lakes, swamps, dams, irrigation canals and other bodies of fresh water."
The Court of First Instance and the prosecution (p. 11 of brief) assumed that electro fishing
is punishable under section 83 of the Fisheries Law (not under section 76 thereof), which
provides that any other violation of that law "or of any rules and regulations promulgated
thereunder shall subject the offender to a fine of not more than two hundred pesos (P200),
or in t for not more than six months, or both, in the discretion of the court."
That assumption is incorrect because 3 of the aforequoted Administrative Order No. 84
imposes a fm of not exceeding P500 on a person engaged in electro fishing, which amount
the 83. It seems that the Department of Fisheries prescribed their own penalty for swift
fishing which penalty is less than the severe penalty imposed in section 76 and which is not
Identified to the at penalty imposed in section 83.
Had Administrative Order No. 84 adopted the fighter penalty prescribed in on 83, then the
crime of electro fishing would be within the exclusive original jurisdiction of the inferior
court (Sec. 44 [f], Judiciary Law; People vs. Ragasi, L-28663, September 22,
We have discussed this pre point, not raised in the briefs, because it is obvious that the
crime of electro fishing which is punishable with a sum up to P500, falls within
the concurrent original jurisdiction of the inferior courts and the Court of First instance
(People vs. Nazareno, L-40037, April 30, 1976, 70 SCRA 531 and the cases cited therein).
And since the instant case was filed in the municipal court of Sta. Cruz, Laguna, a
provincial capital, the order of d rendered by that municipal court was directly appealable
to the Court, not to the Court of First Instance of Laguna (Sec. 45 and last par. of section 87
of the Judiciary Law; Esperat vs. Avila, L-25992, June 30, 1967, 20 SCRA 596).
It results that the Court of First Instance of Laguna had no appellate jurisdiction over the
case. Its order affirming the municipal court's order of dismissal is void for lack of motion.
This appeal shall be treated as a direct appeal from the municipal court to this Court. (See
People vs. Del Rosario, 97 Phil. 67).
In this appeal, the prosecution argues that Administrative Orders Nos. 84 and 84-1 were not
issued under section 11 of the Fisheries Law which, as indicated above, punishes fishing by
9
means of an obnoxious or poisonous substance. This contention is not well-taken because,
as already stated, the Penal provision of Administrative Order No. 84 implies that electro
fishing is penalized as a form of fishing by means of an obnoxious or poisonous substance
under section 11.
The prosecution cites as the legal sanctions for the prohibition against electro fishing in
fresh water fisheries (1) the rule-making power of the Department Secretary under section
4 of the Fisheries Law; (2) the function of the Commissioner of Fisheries to enforce the
provisions of the Fisheries Law and the regulations Promulgated thereunder and to execute
the rules and regulations consistent with the purpose for the creation of the Fisheries
Commission and for the development of fisheries (Sec. 4[c] and [h] Republic Act No. 3512;
(3) the declared national policy to encourage, Promote and conserve our fishing resources
(Sec. 1, Republic Act No. 3512), and (4) section 83 of the Fisheries Law which provides
that "any other violation of" the Fisheries Law or of any rules and regulations promulgated
thereunder "shall subject the offender to a fine of not more than two hundred pesos, or
imprisonment for not more than six months, or both, in the discretion of the court."
As already pointed out above, the prosecution's reference to section 83 is out of place
because the penalty for electro fishing under Administrative order No. 84 is not the same as
the penalty fixed in section 83.
We are of the opinion that the Secretary of Agriculture and Natural Resources and the
Commissioner of Fisheries exceeded their authority in issuing Fisheries Administrative
Orders Nos. 84 and 84-1 and that those orders are not warranted under the Fisheries
Commission, Republic Act No. 3512.
The reason is that the Fisheries Law does not expressly prohibit electro fishing. As electro
fishing is not banned under that law, the Secretary of Agriculture and Natural Resources
and the Commissioner of Fisheries are powerless to penalize it. In other words,
Administrative Orders Nos. 84 and 84-1, in penalizing electro fishing, are devoid of any
legal basis.
Had the lawmaking body intended to punish electro fishing, a penal provision to that effect
could have been easily embodied in the old Fisheries Law.
That law punishes (1) the use of obnoxious or poisonous substance, or explosive in fishing;
(2) unlawful fishing in deepsea fisheries; (3) unlawful taking of marine molusca, (4) illegal
taking of sponges; (5) failure of licensed fishermen to report the kind and quantity of fish
caught, and (6) other violations.
Nowhere in that law is electro fishing specifically punished. Administrative Order No. 84,
in punishing electro fishing, does not contemplate that such an offense fails within the
category of "other violations" because, as already shown, the penalty for electro fishing is
the penalty next lower to the penalty for fishing with the use of obnoxious or poisonous
substances, fixed in section 76, and is not the same as the penalty for "other violations" of
the law and regulations fixed in section 83 of the Fisheries Law.
The lawmaking body cannot delegate to an executive official the power to declare what
acts should constitute an offense. It can authorize the issuance of regulations and the
imposition of the penalty provided for in the law itself. (People vs. Exconde 101 Phil. 11
25, citing 11 Am. Jur. 965 on p. 11 32).
Originally, Administrative Order No. 84 punished electro fishing in all waters. Later, the
ban against electro fishing was confined to fresh water fisheries. The amendment created
the impression that electro fishing is not condemnable per se. It could be tolerated in
marine waters. That circumstances strengthens the view that the old law does not eschew
all forms of electro fishing.
However, at present, there is no more doubt that electro fishing is punishable under the
Fisheries Law and that it cannot be penalized merely by executive revolution because
Presidential Decree No. 704, which is a revision and consolidation of all laws and decrees
affecting fishing and fisheries and which was promulgated on May 16, 1975 (71 O.G.
4269), expressly punishes electro fishing in fresh water and salt water areas.
That decree provides: ñé+.£ªwph!1
SEC. 33. — Illegal fishing, dealing in illegally caught fish or
fishery/aquatic products. — It shall he unlawful for any person to
catch, take or gather or cause to be caught, taken or gathered fish or
fishery/aquatic products in Philippine waters with the use of explosives,
obnoxious or poisonous substance, or by the use of electricity as
defined in paragraphs (1), (m) and (d), respectively, of Section 3
hereof: ...
The decree Act No. 4003, as amended, Republic Acts Nos. 428, 3048, 3512 and 3586,
Presidential Decrees Nos. 43, 534 and 553, and all , Acts, Executive Orders, rules and
regulations or parts thereof inconsistent with it (Sec. 49, P. D. No. 704).
The inclusion in that decree of provisions defining and penalizing electro fishing is a clear
recognition of the deficiency or silence on that point of the old Fisheries Law. It is an
10
admission that a mere executive regulation is not legally adequate to penalize electro
fishing.
Note that the definition of electro fishing, which is found in section 1 (c) of Fisheries
Administrative Order No. 84 and which is not provided for the old Fisheries Law, is now
found in section 3(d) of the decree. Note further that the decree penalty electro fishing by
"imprisonment from two (2) to four (4) years", a punishment which is more severe than the
penalty of a time of not excluding P500 or imprisonment of not more than six months or
both fixed in section 3 of Fisheries Administrative Order No. 84.
An examination of the rule-making power of executive officials and administrative
agencies and, in particular, of the Secretary of Agriculture and Natural Resources (now
Secretary of Natural Resources) under the Fisheries Law sustains the view that he ex his
authority in penalizing electro fishing by means of an administrative order.
Administrative agent are clothed with rule-making powers because the lawmaking body
finds it impracticable, if not impossible, to anticipate and provide for the multifarious and
complex situations that may be encountered in enforcing the law. All that is required is that
the regulation should be germane to the defects and purposes of the law and that it should
conform to the standards that the law prescribes (People vs. Exconde 101 Phil. 1125;
Director of Forestry vs. Muñ;oz, L-24796, June 28, 1968, 23 SCRA 1183, 1198; Geukeko
vs. Araneta, 102 Phil. 706, 712).
The lawmaking body cannot possibly provide for all the details in the enforcement of a
particular statute (U.S. vs. Tupasi Molina, 29 Phil. 119, 125, citing U.S. vs. Grimaud 220
U.S. 506; Interprovincial Autobus Co., Inc. vs. Coll. of Internal Revenue, 98 Phil. 290, 295-
6).
The grant of the rule-making power to administrative agencies is a relaxation of the
principle of separation of powers and is an exception to the nondeleption of legislative,
powers. Administrative regulations or "subordinate legislation calculated to promote the
public interest are necessary because of "the growing complexity of modem life, the
multiplication of the subjects of governmental regulations, and the increased difficulty of
administering the law" Calalang vs. Williams, 70 Phil. 726; People vs. Rosenthal and
Osmeñ;a, 68 Phil. 328).
Administrative regulations adopted under legislative authority by a particular department
must be in harmony with the provisions of the law, and should be for the sole purpose of
carrying into effect its general provisions. By such regulations, of course, the law itself
cannot be extended. (U.S. vs. Tupasi Molina, supra). An administrative agency cannot
amend an act of Congress (Santos vs. Estenzo, 109 Phil. 419, 422; Teoxon vs. Members of
the d of Administrators, L-25619, June 30, 1970, 33 SCRA 585; Manuel vs. General
Auditing Office, L-28952, December 29, 1971, 42 SCRA 660; Deluao vs. Casteel, L-
21906, August 29, 1969, 29 SCRA 350).
The rule-making power must be confined to details for regulating the mode or proceeding
to carry into effect the law as it his been enacted. The power cannot be extended to
amending or expanding the statutory requirements or to embrace matters not covered by the
statute. Rules that subvert the statute cannot be sanctioned. (University of Santo Tomas vs.
Board of Tax A 93 Phil. 376, 382, citing 12 C.J. 845-46. As to invalid regulations, see of
Internal Revenue vs. Villaflor 69 Phil. 319, Wise & Co. vs. Meer, 78 Phil. 655, 676; Del
March vs. Phil. Veterans Administrative, L-27299, June 27, 1973, 51 SCRA 340, 349).
There is no question that the Secretary of Agriculture and Natural Resources has rule-
making powers. Section 4 of the Fisheries law provides that the Secretary "shall from time
to time issue instructions, orders, and regulations consistent" with that law, "as may be and
proper to carry into effect the provisions thereof." That power is now vested in the
Secretary of Natural Resources by on 7 of the Revised Fisheries law, Presidential
December No. 704.
Section 4(h) of Republic Act No. 3512 empower the Co of Fisheries "to prepare and
execute upon the approval of the Secretary of Agriculture and Natural Resources, forms
instructions, rules and regulations consistent with the purpose" of that enactment "and for
the development of fisheries."
Section 79(B) of the Revised Administrative Code provides that "the Department Head
shall have the power to promulgate, whenever he may see fit do so, all rules, regulates,
orders, memorandums, and other instructions, not contrary to law, to regulate the proper
working and harmonious and efficient administration of each and all of the offices and
dependencies of his Department, and for the strict enforcement and proper execution of the
laws relative to matters under the jurisdiction of said Department; but none of said rules or
orders shall prescribe penalties for the violation thereof, except as expressly authorized by
law."
Administrative regulations issued by a Department Head in conformity with law have the
force of law (Valerie vs. Secretary of culture and Natural Resources, 117 Phil. 729, 733;
Antique Sawmills, Inc. vs. Zayco, L- 20051, May 30, 1966, 17 SCRA 316). As he exercises
the rule-making power by delegation of the lawmaking body, it is a requisite that he should
not transcend the bound demarcated by the statute for the exercise of that power; otherwise,
he would be improperly exercising legislative power in his own right and not as a surrogate
of the lawmaking body.
11
Article 7 of the Civil Code embodies the basic principle that administrative or executive
acts, orders and regulations shall be valid only when they are not contrary to the laws or the
Constitution."
As noted by Justice Fernando, "except for constitutional officials who can trace their
competence to act to the fundamental law itself, a public office must be in the statute relied
upon a grant of power before he can exercise it." "department zeal may not be permitted to
outrun the authority conferred by statute." (Radio Communications of the Philippines, Inc.
vs. Santiago, L-29236, August 21, 1974, 58 SCRA 493, 496-8).
"Rules and regulations when promulgated in pursuance of the procedure or authority
conferred upon the administrative agency by law, partake of the nature of a statute, and
compliance therewith may be enforced by a penal sanction provided in the law. This is so
because statutes are usually couched in general terms, after expressing the policy, purposes,
objectives, remedies and sanctions intended by the legislature. The details and the manner
of carrying out the law are oftentimes left to the administrative agency entrusted with its
enforcement. In this sense, it has been said that rules and regulations are the product of a
delegated power to create new or additional legal provisions that have the effect of law."
The rule or regulation should be within the scope of the statutory authority granted by the
legislature to the administrative agency. (Davis, Administrative Law, p. 194, 197, cited in
Victories Milling Co., Inc. vs. Social Security Commission, 114 Phil. 555, 558).
In case of discrepancy between the basic law and a rule or regulation issued to implement
said law, the basic law prevails because said rule or regulation cannot go beyond the terms
and provisions of the basic law (People vs. Lim, 108 Phil. 1091).
This Court in its decision in the Lim case, supra, promulgated on July 26, 1960, called the
attention of technical men in the executive departments, who draft rules and regulations, to
the importance and necessity of closely following the legal provisions which they intend to
implement so as to avoid any possible misunderstanding or confusion.
The rule is that the violation of a regulation prescribed by an executive officer of the
government in conformity with and based upon a statute authorizing such regulation
constitutes an offense and renders the offender liable to punishment in accordance with the
provisions of the law (U.S. vs. Tupasi Molina, 29 Phil. 119, 124).
In other words, a violation or infringement of a rule or regulation validly issued can
constitute a crime punishable as provided in the authorizing statute and by virtue of the
latter (People vs. Exconde 101 Phil. 1125, 1132).
It has been held that "to declare what shall constitute a crime and how it shall be punished
is a power vested exclusively in the legislature, and it may not be delegated to any other
body or agency" (1 Am. Jur. 2nd, sec. 127, p. 938; Texas Co. vs. Montgomery, 73 F. Supp.
527).
In the instant case the regulation penalizing electro fishing is not strictly in accordance with
the Fisheries Law, under which the regulation was issued, because the law itself does not
expressly punish electro fishing.
The instant case is similar to People vs. Santos, 63 Phil. 300. The Santos case involves
section 28 of Fish and Game Administrative Order No. 2 issued by the Secretary of
Agriculture and Natural Resources pursuant to the aforementioned section 4 of the
Fisheries Law.
Section 28 contains the proviso that a fishing boat not licensed under the Fisheries Law and
under the said administrative order may fish within three kilometers of the shoreline of
islands and reservations over which jurisdiction is exercised by naval and military
reservations authorities of the United States only upon receiving written permission
therefor, which permission may be granted by the Secretary upon recommendation of the
military or naval authorities concerned. A violation of the proviso may be proceeded
against under section 45 of the Federal Penal Code.
Augusto A. Santos was prosecuted under that provision in the Court of First Instance of
Cavite for having caused his two fishing boats to fish, loiter and anchor without permission
from the Secretary within three kilometers from the shoreline of Corrigidor Island.
This Court held that the Fisheries Law does not prohibit boats not subject to license from
fishing within three kilometers of the shoreline of islands and reservations over which
jurisdiction is exercised by naval and military authorities of the United States, without
permission from the Secretary of Agriculture and Natural Resources upon recommendation
of the military and naval authorities concerned.
As the said law does not penalize the act mentioned in section 28 of the administrative
order, the promulgation of that provision by the Secretary "is equivalent to legislating on
the matter, a power which has not been and cannot be delegated to him, it being expressly
reserved" to the lawmaking body. "Such an act constitutes not only an excess of the
regulatory power conferred upon the Secretary but also an exercise of a legislative power
which he does not have, and therefore" the said provision "is null and void and without
effect". Hence, the charge against Santos was dismiss.
12
A penal statute is strictly construed. While an administrative agency has the right to make SO ORDERED.
ranks and regulations to carry into effect a law already enacted, that power should not be
confused with the power to enact a criminal statute. An administrative agency can have
only the administrative or policing powers expressly or by necessary implication conferred
upon it. (Glustrom vs. State, 206 Ga. 734, 58 Second 2d 534; See 2 Am. Jr. 2nd 129-130).

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

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

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

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

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

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

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

13
 Herrera, Laurel, De los Reyes, Roxas & Teehankee for Boie-Takeda Chemicals, Inc. and
Phil Xerox Corp.

The Solicitor General for public respondents.

NARVASA, C.J.:

What items or items of employee remuneration should go into the computation of thirteenth
month pay is the basic issue presented in these consolidated petitions. Otherwise stated, the
question is whether or not the respondent labor officials in computing said benefit,
committed "grave abuse of discretion amounting to lack of jurisdiction," by giving effect to
Section 5 of the Revised Guidelines on the implementation of the Thirteenth Month Pay
(Presidential Decree No. 851) promulgated by then Secretary of Labor and Employment,
Hon. Franklin Drilon, and overruling petitioner's contention that said provision constituted
a usurpation of legislative power because not justified by or within the authority of the law
sought to be implemented besides being violative of the equal protection of the law clause
of the Constitution.

Resolution of the issue entails, first, a review of the pertinent provisions of the laws and
implementing regulations.

Sections 1 and 2 of Presidential Decree No. 851, the Thirteenth Month Pay Law, read as
G.R. No. 92174 December 10, 1993 follows:

BOIE-TAKEDA CHEMICALS, INC., petitioner, Sec 1. All employees are hereby required to pay all their employees
vs. receiving basic salary of not more than P1,000.00 a month, regardless
of the nature of the employment, a 13th month pay not later than
HON. DIONISIO DE LA SERNA, Acting Secretary of the Department of Labor and December 24 of every year.
Employment, respondent.
Sec. 2. Employers already paying their employees a 13th month pay or
G.R. No. L-102552 December 10, 1993 its equivalent are not covered by this Decree.

PHILIPPINE FUJI XEROX CORP., petitioner, The Rules and Regulations Implementing P.D. 851 promulgated by then Labor Minister
vs. Blas Ople on December 22, 1975 contained the following relevant provisions relative to the
concept of "thirteenth month pay" and the employers exempted from giving it, to wit:
CRESENCIANO B. TRAJANO, Undersecretary of the Department of Labor and
Employment, and PHILIPPINE FUJI XEROX EMPLOYEES UNION, respondents. Sec. 2. Definition of certain terms. — . . .

a) "Thirteenth month pay" shall mean one twelfth (1/12) of the basic
salary of an employee within a calendar year;

14
 b) "Basic Salary" shall include all remunerations or earnings paid by an
employer to an employee for services rendered but may not include
cost of living allowances granted pursuant to Presidential Decree No.
525 or Letter of Instructions No. 174, profit sharing payments, and all
allowances and monetary benefits which are not considered or
integrated as part of the regular or basic salary of the employee at the
time of the promulgation of the Decree on December 16, 1975.
Sec. 3. Employers covered. — . . . (The law applies) to all employers
except to:
xxx xxx xxx
c) Employers already paying their employers a 13-month pay or more
in calendar year or is equivalent at the time of this issuance;
xxx xxx xxx
e) Employers of those who are paid on purely commission, boundary,
or task basis, and those who are paid a fixed amount for performing a
specific work, irrespective of the time consumed in the performance
thereof, except where the workers are paid on piece-rate basis in which
case the employer shall be covered by this issuance insofar as such
workers are concerned.
xxx xxx xxx
The term "its equivalent" as used in paragraph (c) shall include
Christmas bonus, mid-year bonus, profit-sharing payments and other
cash bonuses amounting to not less than 1/12th of the basic salary but
shall not include cash and stock dividends, cost of living allowances
and all other allowances regularly enjoyed by the employee, as well as
non-monetary benefits. Where an employer pays less than 1/12th of the
employee's basic salary, the employer shall pay the difference.
Supplementary Rules and Regulations implementing P.D. 851 were subsequently issued by
Minister Ople which inter alia set out items of compensation not included in the
computation of the 13th month pay, viz.:
Sec. 4. Overtime pay, earnings and other remunerations which are not
part of the basic salary shall not be included in the computation of the
13th month pay.
On August 13, 1986, President Corazon C. Aquino promulgated Memorandum Order No.
28, which contained a single provision modifying Presidential Decree No. 851 by removing
the salary ceiling of P1,000.00 a month set by the latter, as follows:
Section 1 of Presidential Decree No. 851 is hereby modified to the
extent that all employers are hereby required to pay all their rank-and-
file employees a 13th month pay not later than December 24, of every
year.
Slightly more than a year later, on November 16, 1987, Revised Guidelines on the
Implementation of the 13th Month Pay Law were promulgated by then Labor Secretary
Franklin Drilon which, among other things, defined with particularity what remunerative
items were and were not embraced in the concept of 13th month pay, and specifically dealt
with employees who are paid a fixed or guaranteed wage plus commission. The relevant
provisions read:
4. Amount and payment of 13th Month Pay.
xxx xxx xxx
The basic salary of an employee for the purpose of computing the 13th
month pay shall include all remunerations or earnings paid by the
employer for services rendered but does not include allowances and
monetary benefits which are not considered or integrated as part of the
regular or basic salary, such as the cash equivalent of unused vacation
and sick leave credits, overtime, premium, night differential and
holiday pay, and cost-of-living allowances. However, these salary-
related benefits should be included as part of the basic salary in the
computation of the 13th month pay if by individual or collective
agreement, company practice or policy, the same are treated as part of
the basic salary of the employees.
xxx xxx xxx
5. 13th Month Pay for Certain Types of Employees.
15
 (a) Employees Paid by Results. — Employees who are paid on piece
work basis are by law entitled to the 13th month pay.
Employees who are paid a fixed or guaranteed wage plus commission
are also entitled to the mandated 13th month pay based on their total
earnings during the calendar year, i.e., on both their fixed or guaranteed
wage and commission.
This was the state of the law when the controversies at bar arose out of the following
antecedents:
(RE G.R. No. 92174) A routine inspection was conducted on May 2, 1989 in the premises
of petitioner Boie-Takeda Chemicals, Inc. by Labor
and Development Officer Reynaldo B. Ramos under Inspection Authority
No. 4-209-89. Finding that Boie-Takeda had not been including the commissions earned by
its medical representatives in the computation of their 13th month pay, Ramos served a
Notice of Inspection Results 1 on Boie-Takeda through its president, Mr. Benito Araneta,
requiring Boie-Takeda within ten (10) calendar days from notice to effect restitution or
correction of "the underpayment of 13th month pay for the year(s) 1986, 1987 and 1988 of
Med Rep (Revised Guidelines on the Implementation of 13th month pay # 5) in the total
amount of P558,810.89."
Boie-Takeda wrote the Labor Department contesting the Notice of Inspection Results, and
expressing the view "that the commission paid to our medical representatives are not to be
included in the computation of the 13th month pay . . . (since the) law and its implementing
rules speak of REGULAR or BASIC salary and therefore exclude all other remunerations
which are not part of the REGULAR salary." It pointed out that, "if no sales is (sic) made
under the effort of a particular representative, there is no commission during the period
when no sale was transacted, so that commissions are not and cannot be legally defined as
regular in nature. 2
Regional Director Luna C. Piezas directed Boie-Takeda to appear before his Office on June
9 and 16, 1989. On the appointed dates, however, and despite due notice, no one appeared
for Boie-Takeda, and the matter had perforce to be resolved on the basis of the evidence at
hand. On July 24, 1989, Director Piezas issued an Order 3 directing Boie-Takeda:
. . . to pay . . . (its) medical representatives and its managers the total
amount of FIVE HUNDRED SIXTY FIVE THOUSAND SEVEN
HUNDRED FORTY SIX AND FORTY SEVEN CENTAVOS
(P565,746.47) representing underpayment of thirteenth (13th) month
pay for the years 1986, 1987, 1988, inclusive, pursuant to the . . .
revised guidelines within ten (10) days from receipt of this Order.
A motion for reconsideration 4 was seasonably filed by Boie-Takeda under date of August
3, 1989. Treated as an appeal, it was resolved on
January 17, 1990 by then Acting Labor Secretary Dionisio de la Serna, who affirmed the
July 24, 1989 Order with modification that the sales commissions earned by Boie-Takeda's
medical representatives before August 13, 1989, the effectivity date of Memorandum Order
No. 28 and its Implementing Guidelines, shall be excluded in the computation of their 13th
month pay. 5
Hence the petition docketed as G.R. No. 92174.
(RE G.R. No. 102552) A similar Routine Inspection was conducted in the premises of
Philippine Fuji Xerox Corp. on September 7, 1989 pursuant to Routine Inspection
Authority No. NCR-LSED-RI-494-89. In his Notice of Inspection Results, 6 addressed to
the Manager, Mr. Nicolas O. Katigbak, Senior Labor and Employment Officer Nicanor M.
Torres noted the following violation committed by Philippine Fuji Xerox Corp., to wit:
Underpayment of 13th month pay of 62 employees, more or less —
pursuant to Revised Guidelines on the Implementation of the 13th
month pay law for the period covering 1986, 1987 and 1988.
Philippine Fuji Xerox was requested to effect rectification and/or restitution of the noted
violation within five (5) working days from notice.
No action having been taken thereon by Philippine Fuji Xerox,
Mr. Eduardo G. Gonzales, President of the Philxerox Employee Union, wrote then Labor
Secretary Franklin Drilon requesting a follow-up of the inspection findings. Messrs.
Nicolas and Gonzales were summoned to appear before Labor Employment and
Development Officer Mario F. Santos, NCR Office, Department of Labor for a conciliation
conference. When no amicable settlement was reached, the parties were required to file
their position papers.
Subsequently, Regional Director Luna C. Piezas issued an Order dated August 23,
1990, 7 disposing as follows:
WHEREFORE, premises considered, Respondent PHILIPPINE FUJI
XEROX is hereby ordered to restitute to its salesmen the portion of the
13th month pay which arose out of the non-implementation of the said
16
 revised guidelines, ten (10) days from receipt hereof, otherwise,
MR. NICANOR TORRES, the SR. LABOR EMPLOYMENT
OFFICER is hereby Ordered to proceed to the premises of the
Respondent for the purpose of computing the said deficiency (sic)
should respondent fail to heed his Order.
Philippine Fuji Xerox appealed the aforequoted Order to the Office of the Secretary of
Labor. In an Order dated October 120, 1991, Undersecretary Cresenciano B. Trajano denied
the appeal for lack of merit. Hence, the petition in G.R. No. 102552, which was ordered
consolidated with G.R. No. 92174 as involving the same issue.
In their almost identically-worded petitioner, petitioners, through common counsel,
attribute grave abuse of discretion to respondent labor officials
Hon. Dionisio dela Serna and Undersecretary Cresenciano B. Trajano in issuing the
questioned Orders of January 17, 1990 and October 10, 1991, respectively. They maintain
that under P.D. 851, the 13th month pay is based solely on basic salary. As defined by the
law itself and clarified by the implementing and Supplementary Rules as well as by the
Supreme Court in a long line of decisions, remunerations which do not form part of the
basic or regular salary of an employee, such as commissions, should not be considered in
the computation of the 13th month pay. This being the case, the Revised Guidelines on the
Implementation of the 13th Month Pay Law issued by then Secretary Drilon providing for
the inclusion of commissions in the 13th month pay, were issued in excess of the statutory
authority conferred by P.D. 851. According to petitioners, this conclusion becomes even
more evident when considered in light of the opinion rendered by Labor Secretary Drilon
himself in "In Re: Labor Dispute at the Philippine Long Distance Telephone Company"
which affirmed the contemporaneous interpretation by then Secretary Ople that
commissions are excluded from the basic salary. Petitioners further contend that assuming
that Secretary Drilon did not exceed the statutory authority conferred by P.D. 851, still the
Revised Guidelines are null and void as they violate the equal protection of the law clause.
Respondents through the Office of the Solicitor General question the propriety of
petitioners' attack on the constitutionality of the Revised Guidelines in a petition
for certiorari which, they contend, should be confined purely to the correction of errors
and/or defects of jurisdiction, including matters of grave abuse of discretion amounting to
lack or excess of jurisdiction and not extend to a collateral attack on the validity and/or
constitutionality of a law or statute. They aver that the petitions do not advance any cogent
reason or state any valid ground to sustain the allegation of grave abuse of discretion, and
that at any rate, P.D. No. 851, otherwise known as the 13th Month Pay Law has already
been amended by Memorandum Order No. 28 issued by President Corazon C. Aquino on
August 13, 1986 so that commissions are now imputed into the computation of the 13th
Month Pay. They add that the Revised Guidelines issued by then Labor Secretary Drilon
merely clarified a gray area occasioned by the silence of the law as to the nature of
commissions; and worked no violation of the equal protection clause of the Constitution,
said Guidelines being based on reasonable classification. Respondents point to the case
of Songco vs. National Labor Relations Commission, 183 SCRA 610, wherein the Court
declared that Article 97(f) of the Labor Code is explicit that commission is included in the
definition of the term "wage".
We rule for the petitioners.
Contrary to respondents' contention, Memorandum Order No. 28 did not repeal, supersede
or abrogate P.D. 851. As may be gleaned from the language of the Memorandum Order No.
28, it merely "modified" Section 1 of the decree by removing the P1,000.00 salary ceiling.
The concept of 13th Month Pay as envisioned, defined and implemented under P.D. 851
remained unaltered, and while entitlement to said benefit was no longer limited to
employees receiving a monthly basic salary of not more than P1,000.00, said benefit was,
and still is, to be computed on the basic salary of the employee-recipient as provided under
P.D. 851. Thus, the interpretation given to the term "basic salary" as defined in P.D. 851
applies equally to "basic salary" under Memorandum Order No. 28.
In the case of San Miguel Corp. vs. Inciong, 103 SCRA 139, this Court delineated the
coverage of the term "basic salary" as used in P.D. 851. We said at some length:
Under Presidential Decree 851 and its implementing rules, the basic
salary of an employee is used as the basis in the determination of his
13th month pay. Any compensations or remunerations which are
deemed not part of the basic pay is excluded as basis in the
computation of the mandatory bonus.
Under the Rules and Regulations implementing Presidential Decree
851, the following compensations are deemed not part of the basic
salary:
a) Cost-of-living allowances granted pursuant to
Presidential Decree 525 and Letter of Instructions
No. 174;
b) Profit-sharing payments;
c) All allowances and monetary benefits which are
not considered or integrated as part of the regular
17
 basic salary of the employee at the time of the
promulgation of the Decree on December 16, 1975.
Under a later set of Supplementary Rules and Regulations
Implementing Presidential Decree 851 Presidential Decree 851 issued
by then Labor Secretary Blas Ople, overtime pay, earnings and other
remunerations are excluded as part of the basic salary and in the
computation of the 13th month pay.
The exclusion of the cost-of-living allowances under Presidential
Decree 525 and Letter of Instructions No. 174, and profit-sharing
payments indicate the intention to strip basic salary of other payments
which are properly considered as "fringe" benefits. Likewise, the catch-
all exclusionary phrase "all allowances and monetary benefits which
are not considered or integrated as part of the basic salary" shows also
the intention to strip basic salary of any and all additions which may be
in the form of allowances or "fringe" benefits.
Moreover, the Supplementary Rules and Regulations Implementing
Presidential Decree 851 is even more emphatic in declaring that
earnings and other remunerations which are not part of the basic salary
shall not be included in the computation of the 13th-month pay.
While doubt may have been created by the prior Rules and Regulations
Implementing Presidential Decree 851 which defines basic salary to
include all remunerations or earnings paid by an employer to an
employee, this cloud is dissipated in the later and more controlling
Supplementary Rules and Regulations which categorically exclude
from the definitions of basic salary earnings and other remunerations
paid by an employer to an employee. A cursory perusal of the two sets
of Rules indicates that what has hitherto been the subject of a broad
inclusion is now a subject of broad exclusion. The Supplementary
Rules and Regulations cure the seeming tendency of the former rules to
include all remunerations and earnings within the definition of basic
salary.
The all embracing phrase "earnings and other remunerations" which are
deemed not part of the basic salary includes within its meaning
payments for sick, vacation, or maternity leaves, premium for works
performed on rest days and special holidays, pays for regular holidays
and night differentials. As such they are deemed not part of the basic
salary and shall not be considered in the computation of the 13th-month
pay. If they were not excluded, it is hard to find any "earnings and other
remunerations" expressly excluded in the computation of the 13th
month pay. Then the exclusionary provision would prove to be idle and
with no purpose.
This conclusion finds strong support under the Labor Code of the
Philippines. To cite a few provisions:
Art. 87. Overtime Work. Work may be performed beyond eight (8)
hours a day provided that the employee is paid for the overtime work,
additional compensation equivalent to his regular wage plus at least
twenty-five (25%) percent thereof.
It is clear that overtime pay is an additional compensation other than
and added to the regular wage or basic salary, for reason of which such
is categorically excluded from the definition of basic salary under the
Supplementary Rules and Regulations Implementing Presidential
Decree 851.
In Article 93 of the same Code, paragraph
c) work performed on any special holiday shall be paid an additional
compensation of at least thirty percent (30%) of the regular wage of the
employee.
It is likewise clear the premiums for special holiday which is at least
30% of the regular wage is an additional pay other than and added to
the regular wage or basic salary. For similar reason, it shall not be
considered in the computation of the 13th month pay.
Quite obvious from the foregoing is that the term "basic salary" is to be understood in its
common, generally-accepted meaning, i.e., as a rate of pay for a standard work period
exclusive of such additional payments as bonuses and overtime. 8 This is how the term was
also understood in the case of Pless v. Franks, 308 S.W. 2nd. 402, 403, 202 Tenn. 630,
which held that in statutes providing that pension should not less than 50 percent of "basic
salary" at the time of retirement, the quoted words meant the salary that an employee (e.g.,
a policeman) was receiving at the time he retired without taking into consideration any
extra compensation to which he might be entitled for extra work. 9
18
In remunerative schemes consisting of a fixed or guaranteed wage plus commission, the
fixed or guaranteed wage is patently the "basic salary" for this is what the employee
receives for a standard work period. Commissions are given for extra efforts exerted in
consummating sales or other related transactions. They are, as such, additional pay, which
this Court has made clear do not form part of the "basic salary."
Respondents would do well to distinguish this case from Songco vs. National Labor Relations
Commission, supra, upon which they rely so heavily. What was involved therein was the term "salary"
without the restrictive adjective "basic". Thus, in said case, we construed the term in its generic sense
to refer to all types of "direct remunerations for services rendered," including commissions. In the
same case, we also took judicial notice of the fact "that some salesmen do not receive any basic salary
but depend on commissions and allowances or commissions alone, although an employer-employee
relationship exists," which statement is quite significant in that it speaks of a "basic salary" apart and
distinct from "commissions" and "allowances". Instead of supporting respondents' stand, it would
appear that Songco itself recognizes that commissions are not part of "basic salary."
In including commissions in the computation of the 13th month pay, the second paragraph of Section
5(a) of the Revised Guidelines on the Implementation of the 13th Month Pay Law unduly expanded
the concept of "basic salary" as defined in P.D. 851. It is a fundamental rule that implementing rules
cannot add to or detract from the provisions of the law it is designed to implement. Administrative
regulations adopted under legislative authority by a particular department must be in harmony with the
provisions of the law they are intended to carry into effect. They cannot widen its scope. An
administrative agency cannot amend an act of Congress. 10
Having reached this conclusion, we deem it unnecessary to discuss the other issues raised in these
petitions.
WHEREFORE, the consolidated petitions are hereby GRANTED. The second paragraph of Section 5
(a) of the Revised Guidelines on the Implementation of the 13th Month Pay Law issued on November
126, 1987 by then Labor Secretary Franklin M. Drilon is declared null and void as being violative of
the law said Guidelines were issued to implement, hence issued with grave abuse of discretion
correctible by the writ of prohibition and certiorari. The assailed Orders of January 17, 1990 and
October 10, 1991 based thereon are SET ASIDE.
SO ORDERED.
CIR V CA 261 SCRA 262
G.R. No. 119761 August 29, 1996
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
HON. COURT OF APPEALS, HON. COURT OF TAX APPEALS and FORTUNE
TOBACCO CORPORATION, respondents.
VITUG, J.:p
The Commissioner of Internal Revenue ("CIR") disputes the decision, dated 31 March
1995, of respondent Court of Appeals 1 affirming the 10th August 1994 decision and the
11th October 1994 resolution of the Court of Tax Appeals 2 ("CTA") in C.T.A. Case No.
5015, entitled "Fortune Tobacco Corporation vs. Liwayway Vinzons-Chato in her capacity
as Commissioner of Internal Revenue."
The facts, by and large, are not in dispute.
Fortune Tobacco Corporation ("Fortune Tobacco") is engaged in the manufacture of
different brands of cigarettes.
On various dates, the Philippine Patent Office issued to the corporation separate certificates
of trademark registration over "Champion," "Hope," and "More" cigarettes. In a letter,
dated 06 January 1987, of then Commissioner of Internal Revenue Bienvenido A. Tan, Jr.,
to Deputy Minister Ramon Diaz of the Presidential Commission on Good Government,
"the initial position of the Commission was to classify 'Champion,' 'Hope,' and 'More' as
foreign brands since they were listed in the World Tobacco Directory as belonging to
foreign companies. However, Fortune Tobacco changed the names of 'Hope' to 'Hope
Luxury' and 'More' to 'Premium More,' thereby removing the said brands from the foreign
brand category. Proof was also submitted to the Bureau (of Internal Revenue ['BIR']) that
'Champion' was an original Fortune Tobacco Corporation register and therefore a local
brand." 3 Ad Valorem taxes were imposed on these brands, 4 at the following rates:
BRAND AD VALOREM TAX RATE
E.O. 22 and E.O. 273 RA 6956
06-23-86 07-25-87 06-18-90
07-01-86 01-01-88 07-05-90
19
Hope Luxury M. 100's Sec. 142. Cigars and Cigarettes. —

Sec. 142, (c), (2) 40% 45% xxx xxx xxx

Hope Luxury M. King
Sec. 142, (c), (2) 40%
More Premium M. 100's
Sec. 142, (c), (2) 40%
More Premium International
Sec. 142, (c), (2) 40%
(c) Cigarettes packed by machine. — There shall be levied, assessed and collected
on cigarettes packed by machine a tax at the rates prescribed below based on the
45% constructive manufacturer's wholesale price or the actual manufacturer's wholesale price,
whichever is higher:
(1) On locally manufactured cigarettes which are currently classified and taxed at
fifty-five percent (55%) or the exportation of which is not authorized by contract or
45% otherwise, fifty-five (55%) provided that the minimum tax shall not be less than Five Pesos
(P5.00) per pack.
(2) On other locally manufactured cigarettes, forty-five percent (45%) provided that
45% the minimum tax shall not be less than Three Pesos (P3.00) per pack.

Champion Int'l. M. 100's xxx xxx xxx

Sec. 142, (c), (2) 40% 45% When the registered manufacturer's wholesale price or the actual manufacturer's wholesale
price whichever is higher of existing brands of cigarettes, including the amounts intended
Champion M. 100's to cover the taxes, of cigarettes packed in twenties does not exceed Four Pesos and eighty
centavos (P4.80) per pack, the rate shall be twenty percent (20%). 7 (Emphasis supplied)

Sec. 142, (c), (2) 40% 45%

About a month after the enactment and two (2) days before the effectivity of RA 7654,
Revenue Memorandum Circular No. 37-93 ("RMC 37-93"), was issued by the BIR the full
Champion M. King text of which expressed:

Sec. 142, (c), last par. 15% 20% REPUBLIKA NG PILIPINAS

Champion Lights KAGAWARAN NG PANANALAPI

Sec. 142, (c), last par. 15% 20% 5 KAWANIHAN NG RENTAS INTERNAS

A bill, which later became Republic Act ("RA") No. 7654, 6 was enacted, on 10 June 1993, July 1, 1993
by the legislature and signed into law, on 14 June 1993, by the President of the Philippines.
The new law became effective on 03 July 1993. It amended Section 142(c)(1) of the
National Internal Revenue Code ("NIRC") to read; as follows: REVENUE MEMORANDUM CIRCULAR NO. 37-93

SUBJECT: Reclassification of Cigarettes Subject to Excise Tax

20
TO: All Internal Revenue Officers and Others Concerned.
In view of the issues raised on whether "HOPE," "MORE" and "CHAMPION" cigarettes
which are locally manufactured are appropriately considered as locally manufactured
cigarettes bearing a foreign brand, this Office is compelled to review the previous rulings
on the matter.
Section 142 (c)(1) National Internal Revenue Code, as amended by R.A. No. 6956,
provides:
On locally manufactured cigarettes bearing a foreign brand, fifty-five percent (55%)
Provided, That this rate shall apply regardless of whether or not the right to use or title to
the foreign brand was sold or transferred by its owner to the local manufacturer. Whenever
it has to be determined whether or not a cigarette bears a foreign brand, the listing of brands
manufactured in foreign countries appearing in the current World Tobacco Directory shall
govern.
Under the foregoing, the test for imposition of the 55% ad valorem tax on cigarettes is that
the locally manufactured cigarettes bear a foreign brand regardless of whether or not the
right to use or title to the foreign brand was sold or transferred by its owner to the local
manufacturer. The brand must be originally owned by a foreign manufacturer or producer.
If ownership of the cigarette brand is, however, not definitely determinable, ". . . the listing
of brands manufactured in foreign countries appearing in the current World Tobacco
Directory shall govern. . . ."
"HOPE" is listed in the World Tobacco Directory as being manufactured by (a) Japan
Tobacco, Japan and (b) Fortune Tobacco, Philippines. "MORE" is listed in the said
directory as being manufactured by: (a) Fills de Julia Reig, Andorra; (b) Rothmans,
Australia; (c) RJR-Macdonald Canada; (d) Rettig-Strenberg, Finland; (e) Karellas, Greece;
(f) R.J. Reynolds, Malaysia; (g) Rothmans, New Zealand; (h) Fortune Tobacco,
Philippines; (i) R.J. Reynolds, Puerto Rico; (j) R.J. Reynolds, Spain; (k) Tabacalera, Spain;
(l) R.J. Reynolds, Switzerland; and (m) R.J. Reynolds, USA. "Champion" is registered in
the said directory as being manufactured by (a) Commonwealth Bangladesh; (b) Sudan,
Brazil; (c) Japan Tobacco, Japan; (d) Fortune Tobacco, Philippines; (e) Haggar, Sudan; and
(f) Tabac Reunies, Switzerland.
Since there is no showing who among the above-listed manufacturers of the cigarettes
bearing the said brands are the real owner/s thereof, then it follows that the same shall be
considered foreign brand for purposes of determining the ad valorem tax pursuant to
Section 142 of the National Internal Revenue Code. As held in BIR Ruling No. 410-88,
dated August 24, 1988, "in cases where it cannot be established or there is dearth of
evidence as to whether a brand is foreign or not, resort to the World Tobacco Directory
should be made."
In view of the foregoing, the aforesaid brands of cigarettes, viz: "HOPE," "MORE" and
"CHAMPION" being manufactured by Fortune Tobacco Corporation are hereby considered
locally manufactured cigarettes bearing a foreign brand subject to the 55% ad valorem tax
on cigarettes.
Any ruling inconsistent herewith is revoked or modified accordingly.
(SGD) LIWAYWAY VINZONS-CHATO
Commissioner
On 02 July 1993, at about 17:50 hours, BIR Deputy Commissioner Victor A. Deoferio, Jr.,
sent via telefax a copy of RMC 37-93 to Fortune Tobacco but it was addressed to no one in
particular. On 15 July 1993, Fortune Tobacco received, by ordinary mail, a certified xerox
copy of RMC 37-93.
In a letter, dated 19 July 1993, addressed to the appellate division of the BIR, Fortune
Tobacco requested for a review, reconsideration and recall of RMC 37-93. The request was
denied on 29 July 1993. The following day, or on 30 July 1993, the CIR assessed Fortune
Tobacco for ad valorem tax deficiency amounting to P9,598,334.00.
On 03 August 1993, Fortune Tobacco filed a petition for review with the CTA. 8
On 10 August 1994, the CTA upheld the position of Fortune Tobacco and adjudged:
WHEREFORE, Revenue Memorandum Circular No. 37-93 reclassifying the brands of
cigarettes, viz: "HOPE," "MORE" and "CHAMPION" being manufactured by Fortune
Tobacco Corporation as locally manufactured cigarettes bearing a foreign brand subject to
the 55% ad valorem tax on cigarettes is found to be defective, invalid and unenforceable,
such that when R.A. No. 7654 took effect on July 3, 1993, the brands in question were not
CURRENTLY CLASSIFIED AND TAXED at 55% pursuant to Section 1142(c)(1) of the
Tax Code, as amended by R.A. No. 7654 and were therefore still classified as other locally
manufactured cigarettes and taxed at 45% or 20% as the case may be.
Accordingly, the deficiency ad valorem tax assessment issued on petitioner Fortune
Tobacco Corporation in the amount of P9,598,334.00, exclusive of surcharge and interest,
is hereby canceled for lack of legal basis.
21
Respondent Commissioner of Internal Revenue is hereby enjoined from collecting the
deficiency tax assessment made and issued on petitioner in relation to the implementation
of RMC No. 37-93.
SO ORDERED.
In its resolution, dated 11 October 1994, the CTA dismissed for lack of merit the motion for
reconsideration.
The CIR forthwith filed a petition for review with the Court of Appeals, questioning the
CTA's 10th August 1994 decision and 11th October 1994 resolution. On 31 March 1993,
the appellate court's Special Thirteenth Division affirmed in all respects the assailed
decision and resolution.
In the instant petition, the Solicitor General argues: That —
I. RMC 37-93 IS A RULING OR OPINION OF THE COMMISSIONER OF
INTERNAL REVENUE INTERPRETING THE PROVISIONS OF THE TAX CODE.
II. BEING AN INTERPRETATIVE RULING OR OPINION, THE PUBLICATION
OF RMC 37-93, FILING OF COPIES THEREOF WITH THE UP LAW CENTER AND
PRIOR HEARING ARE NOT NECESSARY TO ITS VALIDITY, EFFECTIVITY AND
ENFORCEABILITY.
III. PRIVATE RESPONDENT IS DEEMED TO HAVE BEEN NOTIFIED OR RMC
37-93 ON JULY 2, 1993.
IV. RMC 37-93 IS NOT DISCRIMINATORY SINCE IT APPLIES TO ALL
LOCALLY MANUFACTURED CIGARETTES SIMILARLY SITUATED AS "HOPE,"
"MORE" AND "CHAMPION" CIGARETTES.
V. PETITIONER WAS NOT LEGALLY PROSCRIBED FROM RECLASSIFYING
"HOPE," "MORE" AND "CHAMPION" CIGARETTES BEFORE THE EFFECTIVITY
OF R.A. NO. 7654.
VI. SINCE RMC 37-93 IS AN INTERPRETATIVE RULE, THE INQUIRY IS NOT
INTO ITS VALIDITY, EFFECTIVITY OR ENFORCEABILITY BUT INTO ITS
CORRECTNESS OR PROPRIETY; RMC 37-93 IS CORRECT. 10
In fine, petitioner opines that RMC 37-93 is merely an interpretative ruling of the BIR
which can thus become effective without any prior need for notice and hearing, nor
publication, and that its issuance is not discriminatory since it would apply under similar
circumstances to all locally manufactured cigarettes.
The Court must sustain both the appellate court and the tax court.
Petitioner stresses on the wide and ample authority of the BIR in the issuance of rulings for
the effective implementation of the provisions of the National Internal Revenue Code. Let
it be made clear that such authority of the Commissioner is not here doubted. Like any
other government agency, however, the CIR may not disregard legal requirements or
applicable principles in the exercise of its quasi-legislative powers.
Let us first distinguish between two kinds of administrative issuances — a legislative rule
and an interpretative rule.
In Misamis Oriental Association of Coco Traders, Inc., vs. Department of Finance
Secretary, 11 the Court expressed:
. . . a legislative rule is in the nature of subordinate legislation, designed to implement a
primary legislation by providing the details thereof . In the same way that laws must have
the benefit of public hearing, it is generally required that before a legislative rule is adopted
there must be hearing. In this connection, the Administrative Code of 1987 provides:
Public Participation. — If not otherwise required by law, an agency shall, as far as
practicable, publish or circulate notices of proposed rules and afford interested parties the
opportunity to submit their views prior to the adoption of any rule.
(2) In the fixing of rates, no rule or final order shall be valid unless the proposed
rates shall have been published in a newspaper of general circulation at least two (2) weeks
before the first hearing thereon.
(3) In case of opposition, the rules on contested cases shall be observed.
In addition such rule must be published. On the other hand, interpretative rules are designed
to provide guidelines to the law which the administrative agency is in charge of enforcing.
22
It should be understandable that when an administrative rule is merely interpretative in
nature, its applicability needs nothing further than its bare issuance for it gives no real
consequence more than what the law itself has already prescribed. When, upon the other
hand, the administrative rule goes beyond merely providing for the means that can facilitate
or render least cumbersome the implementation of the law but substantially adds to or
increases the burden of those governed, it behooves the agency to accord at least to those
directly affected a chance to be heard, and thereafter to be duly informed, before that new
issuance is given the force and effect of law.
A reading of RMC 37-93, particularly considering the circumstances under which it has
been issued, convinces us that the circular cannot be viewed simply as a corrective measure
(revoking in the process the previous holdings of past Commissioners) or merely as
construing Section 142(c)(1) of the NIRC, as amended, but has, in fact and most
importantly, been made in order to place "Hope Luxury," "Premium More" and
"Champion" within the classification of locally manufactured cigarettes bearing foreign
brands and to thereby have them covered by RA 7654. Specifically, the new law would
have its amendatory provisions applied to locally manufactured cigarettes which at the time
of its effectivity were not so classified as bearing foreign brands. Prior to the issuance of
the questioned circular, "Hope Luxury," "Premium More," and "Champion" cigarettes were
in the category of locally manufactured cigarettes not bearing foreign brand subject to 45%
ad valorem tax. Hence, without RMC 37-93, the enactment of RA 7654, would have had no
new tax rate consequence on private respondent's products. Evidently, in order to place
"Hope Luxury," "Premium More," and "Champion" cigarettes within the scope of the
amendatory law and subject them to an increased tax rate, the now disputed RMC 37-93
had to be issued. In so doing, the BIR not simply intrepreted the law; verily, it legislated
under its quasi-legislative authority. The due observance of the requirements of notice, of
hearing, and of publication should not have been then ignored.
Indeed, the BIR itself, in its RMC 10-86, has observed and provided:
RMC NO. 10-86
Effectivity of Internal Revenue Rules and Regulations
It has been observed that one of the problem areas bearing on compliance with Internal
Revenue Tax rules and regulations is lack or insufficiency of due notice to the tax paying
public. Unless there is due notice, due compliance therewith may not be reasonably
expected. And most importantly, their strict enforcement could possibly suffer from legal
infirmity in the light of the constitutional provision on "due process of law" and the essence
of the Civil Code provision concerning effectivity of laws, whereby due notice is a basic
requirement (Sec. 1, Art. IV, Constitution; Art. 2, New Civil Code).
In order that there shall be a just enforcement of rules and regulations, in conformity with
the basic element of due process, the following procedures are hereby prescribed for the
drafting, issuance and implementation of the said Revenue Tax Issuances:
(1) This Circular shall apply only to (a) Revenue Regulations; (b) Revenue Audit
Memorandum Orders; and (c) Revenue Memorandum Circulars and Revenue
Memorandum Orders bearing on internal revenue tax rules and regulations.
(2) Except when the law otherwise expressly provides, the aforesaid internal revenue
tax issuances shall not begin to be operative until after due notice thereof may be fairly
presumed.
Due notice of the said issuances may be fairly presumed only after the following
procedures have been taken;
xxx xxx xxx
(5) Strict compliance with the foregoing procedures is enjoined. 13
Nothing on record could tell us that it was either impossible or impracticable for the BIR to
observe and comply with the above requirements before giving effect to its questioned
circular.
Not insignificantly, RMC 37-93 might have likewise infringed on uniformity of taxation.
Article VI, Section 28, paragraph 1, of the 1987 Constitution mandates taxation to be
uniform and equitable. Uniformity requires that all subjects or objects of taxation, similarly
situated, are to be treated alike or put on equal footing both in privileges and liabilities. 14
Thus, all taxable articles or kinds of property of the same class must be taxed at the same
rate 15 and the tax must operate with the same force and effect in every place where the
subject may be found.
Apparently, RMC 37-93 would only apply to "Hope Luxury," "Premium More" and
"Champion" cigarettes and, unless petitioner would be willing to concede to the submission
of private respondent that the circular should, as in fact my esteemed colleague Mr. Justice
Bellosillo so expresses in his separate opinion, be considered adjudicatory in nature and
thus violative of due process following the Ang Tibay 16 doctrine, the measure suffers from
23
lack of uniformity of taxation. In its decision, the CTA has keenly noted that other (b) "WINNER" is listed as being manufactured by Alpha Tobacco, Bangladesh;
cigarettes bearing foreign brands have not been similarly included within the scope of the Nangyang, Hongkong; Joo Lan, Malaysia; Pakistan Tobacco Co., Pakistan; Premier
circular, such as — Tobacco, Pakistan and Haggar, Sudan (Exhibit "U-4"). 17

1. Locally manufactured by ALHAMBRA INDUSTRIES, INC. The court quoted at length from the transcript of the hearing conducted on 10 August 1993
by the Committee on Ways and Means of the House of Representatives; viz:
(a) "PALM TREE" is listed as manufactured by office of Monopoly, Korea (Exhibit
"R") THE CHAIRMAN. So you have specific information on Fortune Tobacco alone. You don't
have specific information on other tobacco manufacturers. Now, there are other brands
2. Locally manufactured by LA SUERTE CIGAR and CIGARETTE COMPANY which are similarly situated. They are locally manufactured bearing foreign brands. And
may I enumerate to you all these brands, which are also listed in the World Tobacco
Directory . . . Why were these brand not reclassified at 55 if your want to give a level
(a) "GOLDEN KEY" is listed being manufactured by United Tobacco, Pakistan playing filed to foreign manufacturers?
(Exhibit "S")
MS. CHATO. Mr. Chairman, in fact, we have already prepared a Revenue
(b) "CANNON" is listed as being manufactured by Alpha Tobacco, Bangladesh Memorandum Circular that was supposed to come after RMC No. 37-93 which have really
(Exhibit "T") named specifically the list of locally manufactured cigarettes bearing a foreign brand for
excise tax purposes and includes all these brands that you mentioned at 55 percent except
3. Locally manufactured by LA PERLA INDUSTRIES, INC. that at that time, when we had to come up with this, we were forced to study the brands of
Hope, More and Champion because we were given documents that would indicate the that
(a) "WHITE HORSE" is listed as being manufactured by Rothman's, Malaysia these brands were actually being claimed or patented in other countries because we went by
(Exhibit "U") Revenue Memorandum Circular 1488 and we wanted to give some rationality to how it
came about but we couldn't find the rationale there. And we really found based on our own
interpretation that the only test that is given by that existing law would be registration in the
(b) "RIGHT" is listed as being manufactured by SVENSKA, Tobaks, Sweden World Tobacco Directory. So we came out with this proposed revenue memorandum
(Exhibit "V-1") circular which we forwarded to the Secretary of Finance except that at that point in time,
we went by the Republic Act 7654 in Section 1 which amended Section 142, C-1, it said,
4. Locally manufactured by MIGHTY CORPORATION that on locally manufactured cigarettes which are currently classified and taxed at 55
percent. So we were saying that when this law took effect in July 3 and if we are going to
come up with this revenue circular thereafter, then I think our action would really be
subject to question but we feel that . . . Memorandum Circular Number 37-93 would really
cover even similarly situated brands. And in fact, it was really because of the study, the
(a) "WHITE HORSE" is listed as being manufactured by Rothman's, Malaysia short time that we were given to study the matter that we could not include all the rest of
(Exhibit "U-1") the other brands that would have been really classified as foreign brand if we went by the
law itself. I am sure that by the reading of the law, you would without that ruling by
5. Locally manufactured by STERLING TOBACCO CORPORATION Commissioner Tan they would really have been included in the definition or in the
classification of foregoing brands. These brands that you referred to or just read to us and in
fact just for your information, we really came out with a proposed revenue memorandum
(a) "UNION" is listed as being manufactured by Sumatra Tobacco, Indonesia and
circular for those brands. (Emphasis supplied)
Brown and Williamson, USA (Exhibit "U-3")

(Exhibit "FF-2-C," pp. V-5 TO V-6, VI-1 to VI-3).

24
xxx xxx xxx
MS. CHATO. . . . But I do agree with you now that it cannot and in fact that is why I felt
that we . . . I wanted to come up with a more extensive coverage and precisely why I asked
that revenue memorandum circular that would cover all those similarly situated would be
prepared but because of the lack of time and I came out with a study of RA 7654, it would
not have been possible to really come up with the reclassification or the proper
classification of all brands that are listed there. . . (emphasis supplied) (Exhibit "FF-2d,"
page IX-1)
xxx xxx xxx
HON. DIAZ. But did you not consider that there are similarly situated?
MS. CHATO. That is precisely why, Sir, after we have come up with this Revenue
Memorandum Circular No. 37-93, the other brands came about the would have also
clarified RMC 37-93 by I was saying really because of the fact that I was just recently
appointed and the lack of time, the period that was allotted to us to come up with the right
actions on the matter, we were really caught by the July 3 deadline. But in fact, We have
already prepared a revenue memorandum circular clarifying with the other . . . does not yet,
would have been a list of locally manufactured cigarettes bearing a foreign brand for excise
tax purposes which would include all the other brands that were mentioned by the
Honorable Chairman. (Emphasis supplied) (Exhibit "FF-2-d," par. IX-4). 18
All taken, the Court is convinced that the hastily promulgated RMC 37-93 has fallen short
of a valid and effective administrative issuance.
WHEREFORE, the decision of the Court of Appeals, sustaining that of the Court of Tax
Appeals, is AFFIRMED. No costs.
SO ORDERED.
G.R. No. 95832 August 10, 1992
MAYNARD R. PERALTA, petitioner,
vs.
CIVIL SERVICE COMMISSION, respondent.
Tranquilino F. Meris Law Office for petitioner.
PADILLA, J.:
Petitioner was appointed Trade-Specialist II on 25 September 1989 in the Department of
Trade and Industry (DTI). His appointment was classified as "Reinstatement/Permanent".
Before said appointment, he was working at the Philippine Cotton Corporation, a
government-owned and controlled corporation under the Department of Agriculture.
On 8 December 1989, petitioner received his initial salary, covering the period from 25
September to 31 October 1989. Since he had no accumulated leave credits, DTI deducted
from his salary the amount corresponding to his absences during the covered period,
namely, 29 September 1989 and 20 October 1989, inclusive of Saturdays and
Sundays. More specifically, the dates of said absences for which salary deductions were
made, are as follows:
1. 29 September 1989 — Friday
2. 30 September 1989 — Saturday
3. 01 October 1989 — Sunday
4. 20 October 1989 — Friday
5. 21 October 1989 — Saturday
6. 22 October 1989 — Sunday
Petitioner sent a memorandum to Amando T. Alvis (Chief, General Administrative Service)
on 15 December 1989 inquiring as to the law on salary deductions, if the employee has no
leave credits.
Amando T. Alvis answered petitioner's query in a memorandum dated 30 January 1990
citing Chapter 5.49 of the Handbook of Information on the Philippine Civil Service which
states that "when an employee is on leave without pay on a day before or on a day
immediately preceding a Saturday, Sunday or Holiday, such Saturday, Sunday, or Holiday
shall also be without pay (CSC, 2nd Ind., February 12, 1965)."
25
Petitioner then sent a latter dated 20 February 1990 addressed to Civil Service Commission
(CSC) Chairman Patricia A. Sto. Tomas raising the following question:
Is an employee who was on leave of absence without pay on a day
before or on a day time immediately preceding a Saturday, Sunday or
Holiday, also considered on leave of absence without pay on such
Saturday, Sunday or Holiday?1
Petitioner in his said letter to the CSC Chairman argued that a reading of the General Leave
Law as contained in the Revised Administrative Code, as well as the old Civil Service Law
(Republic Act No. 2260), the Civil Service Decree (Presidential Decree No. 807), and the
Civil Service Rules and Regulation fails to disclose a specific provision which supports the
CSC rule at issue. That being the case, the petitioner contented that he cannot be deprived
of his pay or salary corresponding to the intervening Saturdays, Sundays or Holidays (in
the factual situation posed), and that the withholding (or deduction) of the same is
tantamount to a deprivation of property without due process of law.
On 25 May 1990, respondent Commission promulgated Resolution No. 90-497, ruling that
the action of the DTI in deducting from the salary of petitioner, a part thereof
corresponding to six (6) days (September 29, 30, October 1, 20, 21, 22, 1989) is in
order. 2 The CSC stated that:
In a 2nd Indorsement dated February 12, 1965 of this Commission,
which embodies the policy on leave of absence without pay incurred on
a Friday and Monday, reads:
Mrs. Rosalinda Gonzales is not entitled to payment
of salary corresponding to January 23 and 24, 1965,
Saturday and Sunday, respectively, it appearing that
she was present on Friday, January 22, 1965 but
was on leave without pay beginning January 25, the
succeeding Monday. It is the view of this Office
that an employee who has no more leave credit in
his favor is not entitled to the payment of salary on
Saturdays, Sundays or holidays unless such non-
working days occur within the period of service
actually rendered. (Emphasis supplied)
The rationale for the above ruling which applies only to those
employees who are being paid on monthly basis, rests on the
assumption that having been absent on either Monday or Friday, one
who has no leave credits, could not be favorably credited with
intervening days had the same been working days. Hence, the above
policy that for an employee on leave without pay to be entitled to salary
on Saturdays, Sundays or holidays, the same must occur between the
dates where the said employee actually renders service. To rule
otherwise would allow an employee who is on leave of absent (sic)
without pay for a long period of time to be entitled to payment of his
salary corresponding to Saturdays, Sundays or holidays. It also
discourages the employees who have exhausted their leave credits from
absenting themselves on a Friday or Monday in order to have a
prolonged weekend, resulting in the prejudice of the government and
the public in general. 3
Petitioner filed a motion for reconsideration and in Resolution No. 90-797, the respondent
Commission denied said motion for lack of merit. The respondent Commission in
explaining its action held:
The Primer on the Civil Service dated February 21, 1978, embodies
the Civil Service Commission rulings to be observed whenever an
employee of the government who has no more leave credits, is absent
on a Friday and/or a Monday is enough basis for the deduction of his
salaries corresponding to the intervening Saturdays and Sundays. What
the Commission perceived to be without basis is the demand of Peralta
for the payment of his salaries corresponding to Saturdays and Sundays
when he was in fact on leave of absence without pay on a
Friday prior to the said days. A reading of Republic Act No. 2260 (sic)
does not show that a government employee who is on leave of absence
without pay on a day before or immediately preceding Saturdays,
Sunday or legal holiday is entitled to payment of his salary for said
days. Further, a reading of Senate Journal No. 67 dated May 4, 1960 of
House Bill No. 41 (Republic Act No. 2625) reveals that while the law
excludes Saturdays, Sundays and holidays in the computation of leave
credits, it does not, however, include a case where the leave of absence
is without pay. Hence, applying the principle of inclusio unius est
exclusio alterius, the claim of Peralta has no merit. Moreover, to take a
different posture would be in effect giving more premium to employees
who are frequently on leave of absence without pay, instead of
discouraging them from incurring further absence without
pay. 4
Petitioner's motion for reconsideration having been denied, petitioner filed the present
petition.
26
What is primarily questioned by the petitioner is the validity of the respondent
Commission's policy mandating salary deductions corresponding to the intervening
Saturdays, Sundays or Holidays where an employee without leave credits was absent on the
immediately preceding working day.
During the pendency of this petition, the respondent Commission promulgated Resolution
No. 91-540 dated 23 April 1991 amending the questioned policy, considering that
employees paid on a monthly basis are not required to work on Saturdays, Sunday or
Holidays. In said amendatory Resolution, the respondent Commission resolved "to adopt
the policy that when an employee, regardless of whether he has leave credits or not, is
absent without pay on day immediately preceding or succeeding Saturday, Sunday or
holiday, he shall not be considered absent on those days." Memorandum Circular No. 16
Series of 1991 dated 26 April 1991, was also issued by CSC Chairman Sto. Tomas adopting
and promulgating the new policy and directing the Heads of Departments, Bureaus and
Agencies in the national and local governments, including government-owned or controlled
corporations with original charters, to oversee the strict implementation of the circular.
Because of these developments, it would seem at first blush that this petition has become
moot and academic since the very CSC policy being questioned has already been amended
and, in effect, Resolutions No. 90-497 and 90-797, subject of this petition for certiorari,
have already been set aside and superseded. But the issue of whether or not the policy that
had been adopted and in force since 1965 is valid or not, remains unresolved . Thus, for
reasons of public interest and public policy, it is the duty of the Court to make a formal
ruling on the validity or invalidity of such questioned policy.
The Civil Service Act of 1959 (R.A. No. 2260) conferred upon the Commissioner of Civil
Service the following powers and duties:
Sec. 16 (e) with the approval by the President to prescribe, amend and
enforce suitable rules and regulations for carrying into effect the
provisions of this Civil Service Law, and the rules prescribed pursuant
to the provisions of this law shall become effective thirty days after
publication in the Official Gazette;
xxx xxx xxx
(k) To perform other functions that properly belong to a central
personnel agency. 5
Pursuant to the foregoing provisions, the Commission promulgated the herein challenged
policy. Said policy was embodied in a 2nd Indorsement dated 12 February 1965 of the
respondent Commission involving the case of a Mrs. Rosalinda Gonzales. The respondent
Commission ruled that an employee who has no leave credits in his favor is not entitled to
the payment of salary on Saturdays, Sundays or Holidays unless such non-working days
occur within the period of service actually rendered. The same policy is reiterated in the
Handbook of Information on the Philippine Civil Service. 6 Chapter Five on leave of
absence provides that:
5.51. When intervening Saturday, Sunday or holiday considered as
leave without pay — when an employee is on leave without pay on a
day before or on a day immediately preceding a Saturday, Sunday or
holiday, such Saturday, Sunday or holiday shall also be without pay.
(CSC, 2nd Ind., Feb. 12, 1965).
It is likewise illustrated in the Primer on the Civil Service 7 in the section referring to
Questions and Answers on Leave of Absences, which states the following:
27. How is leave of an employee who has no more leave credits
computed if:
(1) he is absent on a Friday and the following Monday?
(2) if he is absent on Friday but reports to work the following Monday?
(3) if he is absent on a Monday but present the preceding Friday?
- (1) He is considered on leave without pay for 4 days covering Friday to Monday;
- (2) He is considered on leave without pay for 3 days from Friday to Sunday;
- (3) He is considered on leave without pay for 3 days from Saturday to Monday.
When an administrative or executive agency renders an opinion or issues a statement of
policy, it merely interprets a pre-existing law; and the administrative interpretation of the
law is at best advisory, for it is the courts that finally determine what the law means. 8 It
has also been held that interpretative regulations need not be published. 9
In promulgating as early as 12 February 1965 the questioned policy, the Civil Service
Commission interpreted the provisions of Republic Act No. 2625 (which took effect on 17
June 1960) amending the Revised Administrative Code, and which stated as follows:
27
 Sec. 1. Sections two hundred eighty-four and two hundred eighty-five-
A of the Administrative Code, as amended, are further amended to read
as follows:
Sec. 284. After at least six months' continues (sic)
faithful, and satisfactory service, the President or
proper head of department, or the chief of office in
the case of municipal employees may, in his
discretion, grant to an employee or laborer, whether
permanent or temporary, of the national
government, the provincial government, the
government of a chartered city, of a municipality,
of a municipal district or of government-owned or
controlled corporations other than those mentioned
in Section two hundred sixty-eight, two hundred
seventy-one and two hundred seventy-four hereof,
fifteen days vacation leave of absence with full pay,
exclusive of Saturdays, Sundays and holidays, for
each calendar year of service.
Sec. 285-A. In addition to the vacation leave
provided in the two preceding sections each
employee or laborer, whether permanent or
temporary, of the national government, the
provincial government, the government of a
chartered city, of a municipality or municipal
district in any regularly and specially organized
province, other than those mentioned in Section
two hundred sixty-eight, two hundred seventy-one
and two hundred seventy-four hereof, shall be
entitled to fifteen days of sick leave for each year
of service with full pay, exclusive of Saturdays,
Sundays and holidays: Provided, That such sick
leave will be granted by the President, Head of
Department or independent office concerned, or the
chief of office in case of municipal employees,
only on account of sickness on the part of the
employee or laborer concerned or of any member
of his immediate family.
The Civil Service Commission in its here questioned Resolution No. 90-797 construed
R.A. 2625 as referring only to government employees who have earned leave credits
against which their absences may be charged with pay, as its letters speak only of leaves of
absence with full pay. The respondent Commission ruled that a reading of R.A. 2625 does
not show that a government employee who is on leave of absence without pay on a day
before or immediately preceding a Saturday, Sunday or legal holiday is entitled to payment
of his salary for said days.
Administrative construction, if we may repeat, is not necessarily binding upon the courts.
Action of an administrative agency may be disturbed or set aside by the judicial department
if there is an error of law, or abuse of power or lack of jurisdiction or grave abuse of
discretion clearly conflicting with either the letter or the spirit of a legislative enactment. 10
We find this petition to be impressed with merit.
As held in Hidalgo vs. Hidalgo: 11
. . . . where the true intent of the law is clear that calls for the
application of the cardinal rule of statutory construction that such intent
or spirit must prevail over the letter thereof, for whatever is within the
spirit of a statute is within the statute, since adherence to the letter
would result in absurdity, injustice and contradictions and would defeat
the plain and vital purpose of the statute.
The intention of the legislature in the enactment of R.A. 2625 may be gleaned from, among
others, the sponsorship speech of Senator Arturo M. Tolentino during the second reading of
House Bill No. 41 (which became R.A. 2625). He said:
The law actually provides for sick leave and vacation leave of 15 days
each year of service to be with full pay. But under the present law, in
computing these periods of leaves, Saturday, Sunday and holidays are
included in the computation so that if an employee should become sick
and absent himself on a Friday and then he reports for work on a
Tuesday, in the computation of the leave the Saturday and Sunday will
be included, so that he will be considered as having had a leave of
Friday, Saturday, Sunday and Monday, or four days.
The purpose of the present bill is to exclude from the computation of
the leave those days, Saturdays and Sundays, as well as holidays,
because actually the employee is entitled not to go to office during
those days. And it is unfair and unjust to him that those days should be
counted in the computation of leaves. 12
28
With this in mind, the construction by the respondent Commission of R.A. 2625 is not in
accordance with the legislative intent. R.A. 2625 specifically provides that government
employees are entitled to fifteen (15) days vacation leave of absence with full pay and
fifteen (15) days sick leave with full pay, exclusive of Saturdays, Sundays and Holidays in
both cases. Thus, the law speaks of the granting of a right and the law does not provide for
a distinction between those who have accumulated leave credits and those who have
exhausted their leave credits in order to enjoy such right. Ubi lex non distinguit nec nos
distinguere debemus. The fact remains that government employees, whether or not they
have accumulated leave credits, are not required by law to work on Saturdays, Sundays and
Holidays and thus they can not be declared absent on such non-working days. They cannot
be or are not considered absent on non-working days; they cannot and should not be
deprived of their salary corresponding to said non-working days just because they were
absent without pay on the day immediately prior to, or after said non-working days. A
different rule would constitute a deprivation of property without due process.
Furthermore, before their amendment by R.A. 2625, Sections 284 and 285-A of the
Revised Administrative Code applied to all government employee without any distinction.
It follows that the effect of the amendment similarly applies to all employees enumerated in
Sections 284 and 285-A, whether or not they have accumulated leave credits.
As the questioned CSC policy is here declared invalid, we are next confronted with the
question of what effect such invalidity will have. Will all government employees on a
monthly salary basis, deprived of their salaries corresponding to Saturdays, Sundays or
legal holidays (as herein petitioner was so deprived) since 12 February 1965, be entitled to
recover the amounts corresponding to such non-working days?
particular relations, individual and corporate; and particular conduct,
private and official.
To allow all the affected government employees, similarly situated as petitioner herein, to
claim their deducted salaries resulting from the past enforcement of the herein invalidated
CSC policy, would cause quite a heavy financial burden on the national and local
governments considering the length of time that such policy has been effective. Also,
administrative and practical considerations must be taken into account if this ruling will
have a strict restrospective application. The Court, in this connection, calls upon the
respondent Commission and the Congress of the Philippines, if necessary, to handle this
problem with justice and equity to all affected government employees.
It must be pointed out, however, that after CSC Memorandum Circular No. 16 Series of
1991 — amending the herein invalidated policy — was promulgated on 26 April 1991,
deductions from salaries made after said date in contravention of the new CSC policy must
be restored to the government employees concerned.
WHEREFORE, the petition is GRANTED, CSC Resolutions No. 90-497 and 90-797 are
declared NULL and VOID. The respondent Commission is directed to take the appropriate
action so that petitioner shall be paid the amounts previously but unlawfully deducted from
his monthly salary as above indicated. No costs.
SO ORDERED.

The general rule vis-a-vis legislation is that an unconstitutional act is not a law; it confers
no rights; it imposes no duties; it affords no protection; it creates no office; it is in legal
contemplation as inoperative as though it had never been passed. 13

But, as held in Chicot County Drainage District vs. Baxter State

Bank:14

. . . . 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 such
determination is an operative fact and may have consequences which
cannot always be ignored. The past cannot always be erased by a new
judicial declaration. The effect of the subsequent ruling as to invalidity
may have to be considered in various aspects — with respect to

29
 PHILIPPINE AIRLINES, INC., petitioner, vs. CIVIL AERONAUTICS BOARD and
GRAND INTERNATIONAL AIRWAYS, INC., respondents.

DECISION
TORRES, JR., J.:

This Special Civil Action for Certiorari and Prohibition under Rule 65 of the Rules
of Court seeks to prohibit respondent Civil Aeronautics Board from exercising jurisdiction
over private respondent's Application for the issuance of a Certificate of Public
Convenience and Necessity, and to annul and set aside a temporary operating permit issued
by the Civil Aeronautics Board in favor of Grand International Airways (GrandAir, for
brevity) allowing the same to engage in scheduled domestic air transportation services,
particularly the Manila-Cebu, Manila-Davao, and converse routes.
The main reason submitted by petitioner Philippine Airlines, Inc. (PAL) to support its
petition is the fact that GrandAir does not possess a legislative franchise authorizing it to
engage in air transportation service within the Philippines or elsewhere. Such franchise is,
allegedly, a requisite for the issuance of a Certificate of Public Convenience or Necessity
by the respondent Board, as mandated under Section 11, Article XII of the Constitution.
Respondent GrandAir, on the other hand, posits that a legislative franchise is no
longer a requirement for the issuance of a Certificate of Public Convenience and Necessity
or a Temporary Operating Permit, following the Court's pronouncements in the case of
Albano vs. Reyes,[1] as restated by the Court of Appeals in Avia Filipinas International vs.
Civil Aeronautics Board[2] and Silangan Airways, Inc. vs. Grand International Airways,
Inc., and the Hon. Civil Aeronautics Board.[3]
On November 24, 1994, private respondent GrandAir applied for a Certificate of
Public Convenience and Necessity with the Board, which application was docketed as CAB
Case No. EP-12711.[4]Accordingly, the Chief Hearing Officer of the CAB issued a Notice
of Hearing setting the application for initial hearing on December 16, 1994, and directing
GrandAir to serve a copy of the application and corresponding notice to all scheduled
Philippine Domestic operators. On December 14, 1994, GrandAir filed its Compliance, and
requested for the issuance of a Temporary Operating Permit. Petitioner, itself the holder of
a legislative franchise to operate air transport services, filed an Opposition to the
application for a Certificate of Public Convenience and Necessity on December 16, 1995
on the following grounds:

"A. The CAB has no jurisdiction to hear the petitioner's application until the latter has first
[G.R. No. 119528. March 26, 1997] obtained a franchise to operate from Congress.

B. The petitioner's application is deficient in form and substance in that:

30
1. The application does not indicate a route structure including a computation of trunkline,
secondary and rural available seat kilometers (ASK) which shall always be maintained at a
monthly level at least 5% and 20% of the ASK offered into and out of the proposed base of
operations for rural and secondary, respectively.
2. It does not contain a project/feasibility study, projected profit and loss statements,
projected balance sheet, insurance coverage, list of personnel, list of spare parts inventory,
tariff structure, documents supportive of financial capacity, route flight schedule, contracts
on facilities (hangars, maintenance, lot) etc.
C. Approval of petitioner's application would violate the equal protection clause of the
constitution.
D. There is no urgent need and demand for the services applied for.
E. To grant petitioner's application would only result in ruinous competition contrary to
Section 4(d) of R.A. 776."[5]
At the initial hearing for the application, petitioner raised the issue of lack of
jurisdiction of the Board to hear the application because GrandAir did not possess a
legislative franchise.
On December 20, 1994, the Chief Hearing Officer of CAB issued an Order denying
petitioner's Opposition. Pertinent portions of the Order read:
"PAL alleges that the CAB has no jurisdiction to hear the petitioner's application until the
latter has first obtained a franchise to operate from Congress.
The Civil Aeronautics Board has jurisdiction to hear and resolve the application. In Avia
Filipina vs. CAB, CA G.R. No. 23365, it has been ruled that under Section 10 (c) (I) of
R.A. 776, the Board possesses this specific power and duty.
In view thereof, the opposition of PAL on this ground is hereby denied.
SO ORDERED."
Meantime, on December 22, 1994, petitioner this time, opposed private respondent's
application for a temporary permit maintaining that:
"1. The applicant does not possess the required fitness and capability of operating the
services applied for under RA 776; and,
2. Applicant has failed to prove that there is clear and urgent public need for the services
applied for."[6]
On December 23, 1994, the Board promulgated Resolution No. 119(92) approving
the issuance of a Temporary Operating Permit in favor of Grand Air [7] for a period of three
months, i.e., from December 22, 1994 to March 22, 1994. Petitioner moved for the
reconsideration of the issuance of the Temporary Operating Permit on January 11, 1995,
but the same was denied in CAB Resolution No. 02 (95) on February 2, 1995. [8] In the said
Resolution, the Board justified its assumption of jurisdiction over GrandAir's application.
"WHEREAS, the CAB is specifically authorized under Section 10-C (1) of Republic Act
No. 776 as follows:
'(c) The Board shall have the following specific powers and duties:
(1) In accordance with the provision of Chapter IV of this Act, to issue, deny, amend revise,
alter, modify, cancel, suspend or revoke, in whole or in part, upon petitioner-complaint, or
upon its own initiative, any temporary operating permit or Certificate of Public
Convenience and Necessity; Provided, however; that in the case of foreign air carriers, the
permit shall be issued with the approval of the President of the Republic of the
Philippines."
WHEREAS, such authority was affirmed in PAL vs. CAB, (23 SCRA 992), wherein the
Supreme Court held that the CAB can even on its own initiative, grant a TOP even before
the presentation of evidence;
WHEREAS, more recently, Avia Filipinas vs. CAB, (CA-GR No. 23365), promulgated on
October 30, 1991, held that in accordance with its mandate, the CAB can issue not only a
TOP but also a Certificate of Public Convenience and Necessity (CPCN) to a qualified
applicant therefor in the absence of a legislative franchise, citing therein as basis the
decision of Albano vs. Reyes (175 SCRA 264) which provides (inter alia) that:
a) Franchises by Congress are not required before each and every public utility may operate
when the law has granted certain administrative agencies the power to grant licenses for or
to authorize the operation of certain public utilities;
31
b) The Constitutional provision in Article XII, Section 11 that the issuance of a franchise,
certificate or other form of authorization for the operation of a public utility does not
necessarily imply that only Congress has the power to grant such authorization since our
statute books are replete with laws granting specified agencies in the Executive Branch the
power to issue such authorization for certain classes of public utilities.
WHEREAS, Executive Order No. 219 which took effect on 22 January 1995, provides in
Section 2.1 that a minimum of two (2) operators in each route/link shall be encouraged and
that routes/links presently serviced by only one (1) operator shall be open for entry to
additional operators.
RESOLVED, (T)HEREFORE, that the Motion for Reconsideration filed by Philippine
Airlines on January 05, 1995 on the Grant by this Board of a Temporary Operating Permit
(TOP) to Grand International Airways, Inc. alleging among others that the CAB has no
such jurisdiction, is hereby DENIED, as it hereby denied, in view of the foregoing and
considering that the grounds relied upon by the movant are not indubitable."
On March 21, 1995, upon motion by private respondent, the temporary permit was
extended for a period of six (6) months or up to September 22, 1995.
Hence this petition, filed on April 3, 1995.
Petitioners argue that the respondent Board acted beyond its powers and jurisdiction
in taking cognizance of GrandAirs application for the issuance of a Certificate of Public
Convenience and Necessity, and in issuing a temporary operating permit in the meantime,
since GrandAir has not been granted and does not possess a legislative franchise to engage
in scheduled domestic air transportation. A legislative franchise is necessary before anyone
may engage in air transport services, and a franchise may only be granted by Congress.
This is the meaning given by the petitioner upon a reading of Section 11, Article XII,[9] and
Section 1, Article VI,[10] of the Constitution.
To support its theory, PAL submits Opinion No. 163, S. 1989 of the Department of
Justice, which reads:
Dr. Arturo C. Corona
Executive Director
Civil Aeronautics Board
PPL Building, 1000 U.N. Avenue
Ermita, Manila
Sir:
This has reference to your request for opinion on the necessity of a legislative franchise
before the Civil Aeronautics Board (CAB) may issue a Certificate of Public Convenience
and Necessity and/or permit to engage in air commerce or air transportation to an
individual or entity.
You state that during the hearing on the application of Cebu Air for a congressional
franchise, the House Committee on Corporations and Franchises contended that under the
present Constitution, the CAB may not issue the abovestated certificate or permit, unless
the individual or entity concerned possesses a legislative franchise. You believe otherwise,
however, for the reason that under R.A. No. 776, as amended, the CAB is explicitly
empowered to issue operating permits or certificates of public convenience and necessity
and that this statutory provision is not inconsistent with the current charter.
We concur with the view expressed by the House Committee on Corporations and
Franchises. In an opinion rendered in favor of your predecessor-in-office, this
Department observed that,-
xxx it is useful to note the distinction between the franchise to
operate and a permit to commence operation. The former is
sovereign and legislative in nature; it can be conferred only by the
lawmaking authority(17 W and P, pp. 691-697). The latter is
administrative and regulatory in character (In re Application of
Fort Crook-Bellevue Boulevard Line, 283 NW 223); it is granted
by an administrative agency, such as the Public Service
Commission [now Board of Transportation], in the case of land
transportation, and the Civil Aeronautics Board, in case of air
services. While a legislative franchise is a pre-requisite to a grant
of a certificate of public convenience and necessity to an airline
company, such franchise alone cannot constitute the authority to
commence operations, inasmuch as there are still matters relevant
to such operations which are not determined in the franchise, like
rates, schedules and routes, and which matters are resolved in the
process of issuance of permit by the administrative. (Secretary of
Justice opn No. 45, s. 1981)
Indeed, authorities are agreed that a certificate of public convenience and necessity is an
authorization issued by the appropriate governmental agency for the operation of public
services for which a franchise is required by law (Almario, Transportation and Public
Service Law, 1977 Ed., p. 293; Agbayani, Commercial Law of the Phil., Vol. 4, 1979 Ed.,
pp. 380-381).
Based on the foregoing, it is clear that a franchise is the legislative authorization to engage
in a business activity or enterprise of a public nature, whereas a certificate of public
32
convenience and necessity is a regulatory measure which constitutes the franchises
authority to commence operations. It is thus logical that the grant of the former should
precede the latter.
Please be guided accordingly.
(SGD.) SEDFREY A. ORDOEZ
Secretary of Justice"
Respondent GrandAir, on the other hand, relies on its interpretation of the provisions
of Republic Act 776, which follows the pronouncements of the Court of Appeals in the
cases of Avia Filipinas vs. Civil Aeronautics Board, and Silangan Airways, Inc. vs. Grand
International Airways (supra).
In both cases, the issue resolved was whether or not the Civil Aeronautics Board can
issue the Certificate of Public Convenience and Necessity or Temporary Operating Permit
to a prospective domestic air transport operator who does not possess a legislative franchise
to operate as such. Relying on the Court's pronouncement in Albano vs. Reyes (supra), the
Court of Appeals upheld the authority of the Board to issue such authority, even in the
absence of a legislative franchise, which authority is derived from Section 10 of Republic
Act 776, as amended by P.D. 1462.[11]
The Civil Aeronautics Board has jurisdiction over GrandAir's Application for a
Temporary Operating Permit. This rule has been established in the case of Philippine Air
Lines Inc., vs. Civil Aeronautics Board, promulgated on June 13, 1968. [12] The Board is
expressly authorized by Republic Act 776 to issue a temporary operating permit or
Certificate of Public Convenience and Necessity, and nothing contained in the said law
negates the power to issue said permit before the completion of the applicant's evidence and
that of the oppositor thereto on the main petition. Indeed, the CAB's authority to grant a
temporary permit "upon its own initiative" strongly suggests the power to exercise said
authority, even before the presentation of said evidence has begun. Assuming arguendo that
a legislative franchise is prerequisite to the issuance of a permit, the absence of the same
does not affect the jurisdiction of the Board to hear the application, but tolls only upon the
ultimate issuance of the requested permit.
The power to authorize and control the operation of a public utility is admittedly a
prerogative of the legislature, since Congress is that branch of government vested with
plenary powers of legislation.
"The franchise is a legislative grant, whether made directly by the legislature itself, or by
any one of its properly constituted instrumentalities. The grant, when made, binds the
public, and is, directly or indirectly, the act of the state." [13]
The issue in this petition is whether or not Congress, in enacting Republic Act 776,
has delegated the authority to authorize the operation of domestic air transport services to
the respondent Board, such that Congressional mandate for the approval of such authority
is no longer necessary.
Congress has granted certain administrative agencies the power to grant licenses for,
or to authorize the operation of certain public utilities. With the growing complexity of
modern life, the multiplication of the subjects of governmental regulation, and the
increased difficulty of administering the laws, there is a constantly growing tendency
towards the delegation of greater powers by the legislature, and towards the approval of the
practice by the courts.[14] It is generally recognized that a franchise may be derived
indirectly from the state through a duly designated agency, and to this extent, the power to
grant franchises has frequently been delegated, even to agencies other than those of a
legislative nature.[15] In pursuance of this, it has been held that privileges conferred by grant
by local authorities as agents for the state constitute as much a legislative franchise as
though the grant had been made by an act of the Legislature. [16]
The trend of modern legislation is to vest the Public Service Commissioner with the
power to regulate and control the operation of public services under reasonable rules and
regulations, and as a general rule, courts will not interfere with the exercise of that
discretion when it is just and reasonable and founded upon a legal right. [17]
It is this policy which was pursued by the Court in Albano vs. Reyes. Thus, a reading
of the pertinent issuances governing the Philippine Ports Authority, [18] proves that the PPA
is empowered to undertake by itself the operation and management of the Manila
International Container Terminal, or to authorize its operation and management by another
by contract or other means, at its option. The latter power having been delegated to the
PPA, a franchise from Congress to authorize an entity other than the PPA to operate and
manage the MICP becomes unnecessary.
Given the foregoing postulates, we find that the Civil Aeronautics Board has the
authority to issue a Certificate of Public Convenience and Necessity, or Temporary
Operating Permit to a domestic air transport operator, who, though not possessing a
legislative franchise, meets all the other requirements prescribed by the law. Such
requirements were enumerated in Section 21 of R.A. 776.
There is nothing in the law nor in the Constitution, which indicates that a legislative
franchise is an indispensable requirement for an entity to operate as a domestic air transport
operator. Although Section 11 of Article XII recognizes Congress' control over any
franchise, certificate or authority to operate a public utility, it does not mean Congress has
33
exclusive authority to issue the same. Franchises issued by Congress are not required
before each and every public utility may operate. [19] In many instances, Congress has seen it
fit to delegate this function to government agencies, specialized particularly in their
respective areas of public service.
A reading of Section 10 of the same reveals the clear intent of Congress to delegate
the authority to regulate the issuance of a license to operate domestic air transport services:
SECTION 10. Powers and Duties of the Board. (A) Except as otherwise provided herein,
the Board shall have the power to regulate the economic aspect of air transportation, and
shall have general supervision and regulation of, the jurisdiction and control over air
carriers, general sales agents, cargo sales agents, and air freight forwarders as well as their
property rights, equipment, facilities and franchise, insofar as may be necessary for the
purpose of carrying out the provision of this Act.
In support of the Board's authority as stated above, it is given the following specific
powers and duties:
(C) The Board shall have the following specific powers and duties:
(1) In accordance with the provisions of Chapter IV of this Act, to issue, deny, amend,
revise, alter, modify, cancel, suspend or revoke in whole or in part upon petition or
complaint or upon its own initiative any Temporary Operating Permit or Certificate of
Public Convenience and Necessity: Provided however, That in the case of foreign air
carriers, the permit shall be issued with the approval of the President of the Republic of the
Philippines.
Petitioner argues that since R.A. 776 gives the Board the authority to issue
"Certificates of Public Convenience and Necessity", this, according to petitioner, means
that a legislative franchise is an absolute requirement. It cites a number of authorities
supporting the view that a Certificate of Public Convenience and Necessity is issued to a
public service for which a franchise is required by law, as distinguished from a "Certificate
of Public Convenience" which is an authorization issued for the operation of public
services for which no franchise, either municipal or legislative, is required by law. [20]
This submission relies on the premise that the authority to issue a certificate of public
convenience and necessity is a regulatory measure separate and distinct from the authority
to grant a franchise for the operation of the public utility subject of this particular case,
which is exclusively lodged by petitioner in Congress.
We do not agree with the petitioner.
Many and varied are the definitions of certificates of public convenience which
courts and legal writers have drafted. Some statutes use the terms "convenience and
necessity" while others use only the words "public convenience." The terms "convenience
and necessity", if used together in a statute, are usually held not to be separable, but are
construed together. Both words modify each other and must be construed together. The
word 'necessity' is so connected, not as an additional requirement but to modify and qualify
what might otherwise be taken as the strict significance of the word necessity. Public
convenience and necessity exists when the proposed facility will meet a reasonable want of
the public and supply a need which the existing facilities do not adequately afford. It does
not mean or require an actual physical necessity or an indispensable thing. [21]
"The terms 'convenience' and 'necessity' are to be construed together, although they are not
synonymous, and effect must be given both. The convenience of the public must not be
circumscribed by according to the word 'necessity' its strict meaning or an essential
requisites."[22]
The use of the word "necessity", in conjunction with "public convenience" in a
certificate of authorization to a public service entity to operate, does not in any way modify
the nature of such certification, or the requirements for the issuance of the same. It is the
law which determines the requisites for the issuance of such certification, and not the title
indicating the certificate.
Congress, by giving the respondent Board the power to issue permits for the
operation of domestic transport services, has delegated to the said body the authority to
determine the capability and competence of a prospective domestic air transport operator to
engage in such venture. This is not an instance of transforming the respondent Board into a
mini-legislative body, with unbridled authority to choose who should be given authority to
operate domestic air transport services.
"To be valid, the delegation itself must be circumscribed by legislative restrictions, not a
"roving commission" that will give the delegate unlimited legislative authority. It must not
be a delegation "running riot" and "not canalized with banks that keep it from
overflowing." Otherwise, the delegation is in legal effect an abdication of legislative
authority, a total surrender by the legislature of its prerogatives in favor of the delegate." [23]
Congress, in this instance, has set specific limitations on how such authority should
be exercised.
Firstly, Section 4 of R.A. No. 776, as amended, sets out the following guidelines or
policies:
34
"SECTION 4. Declaration of policies. In the exercise and performance of its powers and
duties under this Act, the Civil Aeronautics Board and the Civil Aeronautics Administrator
shall consider the following, among other things, as being in the public interest, and in
accordance with the public convenience and necessity:
(a) The development and utilization of the air potential of the Philippines;
(b) The encouragement and development of an air transportation system properly adapted
to the present and future of foreign and domestic commerce of the Philippines, of the Postal
Service and of the National Defense;
(c) The regulation of air transportation in such manner as to recognize and preserve the
inherent advantages of, assure the highest degree of safety in, and foster sound economic
condition in, such transportation, and to improve the relations between, and coordinate
transportation by, air carriers;
(d) The promotion of adequate, economical and efficient service by air carriers at
reasonable charges, without unjust discriminations, undue preferences or advantages, or
unfair or destructive competitive practices;
is required by the public convenience and necessity; otherwise the application shall be
denied.
Furthermore, the procedure for the processing of the application of a Certificate of
Public Convenience and Necessity had been established to ensure the weeding out of those
entities that are not deserving of public service. [25]
In sum, respondent Board should now be allowed to continue hearing the application
of GrandAir for the issuance of a Certificate of Public Convenience and Necessity, there
being no legal obstacle to the exercise of its jurisdiction.
ACCORDINGLY, in view of the foregoing considerations, the Court RESOLVED
to DISMISS the instant petition for lack of merit. The respondent Civil Aeronautics Board
is hereby DIRECTED to CONTINUE hearing the application of respondent Grand
International Airways, Inc. for the issuance of a Certificate of Public Convenience and
Necessity.
SO ORDERED.

(e) Competition between air carriers to the extent necessary to assure the sound
development of an air transportation system properly adapted to the need of the foreign and
domestic commerce of the Philippines, of the Postal Service, and of the National Defense;

(f) To promote safety of flight in air commerce in the Philippines; and,

(g) The encouragement and development of civil aeronautics.

More importantly, the said law has enumerated the requirements to determine the
competency of a prospective operator to engage in the public service of air transportation.

SECTION 12. Citizenship requirement. Except as otherwise provided in the Constitution

and existing treaty or treaties, a permit authorizing a person to engage in domestic air
commerce and/or air transportation shall be issued only to citizens of the Philippines. [24]

SECTION 21. Issuance of permit. The Board shall issue a permit authorizing the whole or
any part of the service covered by the application, if it finds: (1) that the applicant is fit,
willing and able to perform such service properly in conformity with the provisions of this
Act and the rules, regulations, and requirements issued thereunder; and (2) that such service

35
G.R. No. 101279 August 6, 1992

PHILIPPINE ASSOCIATION OF SERVICE EXPORTERS, INC., petitioner,

vs.
HON. RUBEN D. TORRES, as Secretary of the Department of Labor & Employment,
and JOSE N. SARMIENTO, as Administrator of the PHILIPPINE OVERSEAS
EMPLOYMENT ADMINISTRATION, respondents.

De Guzman, Meneses & Associates for petitioner.

GRIÑO-AQUINO, J.:

This petition for prohibition with temporary restraining order was filed by the Philippine
Association of Service Exporters (PASEI, for short), to prohibit and enjoin the Secretary of
the Department of Labor and Employment (DOLE) and the Administrator of the Philippine
Overseas Employment Administration (or POEA) from enforcing and implementing DOLE
Department Order No. 16, Series of 1991 and POEA Memorandum Circulars Nos. 30 and
37, Series of 1991, temporarily suspending the recruitment by private employment agencies
of Filipino domestic helpers for Hong Kong and vesting in the DOLE, through the facilities
of the POEA, the task of processing and deploying such workers.

PASEI is the largest national organization of private employment and recruitment agencies
duly licensed and authorized by the POEA, to engaged in the business of obtaining
overseas employment for Filipino landbased workers, including domestic helpers.

On June 1, 1991, as a result of published stories regarding the abuses suffered by Filipino
housemaids employed in Hong Kong, DOLE Secretary Ruben D. Torres issued Department
Order No. 16, Series of 1991, temporarily suspending the recruitment by private
employment agencies of "Filipino domestic helpers going to Hong Kong" (p. 30, Rollo).
The DOLE itself, through the POEA took over the business of deploying such Hong Kong-
bound workers.

In view of the need to establish mechanisms that will enhance the

protection for Filipino domestic helpers going to Hong Kong, the
recruitment of the same by private employment agencies is hereby
temporarily suspended effective 1 July 1991. As such, the DOLE

36
 through the facilities of the Philippine Overseas Employment
Administration shall take over the processing and deployment of
household workers bound for Hong Kong, subject to guidelines to be
issued for said purpose.
In support of this policy, all DOLE Regional Directors and the Bureau
of Local Employment's regional offices are likewise directed to
coordinate with the POEA in maintaining a manpower pool of
prospective domestic helpers to Hong Kong on a regional basis.
For compliance. (Emphasis ours; p. 30, Rollo.)
Pursuant to the above DOLE circular, the POEA issued Memorandum Circular No. 30,
Series of 1991, dated July 10, 1991, providing GUIDELINES on the Government
processing and deployment of Filipino domestic helpers to Hong Kong and the
accreditation of Hong Kong recruitment agencies intending to hire Filipino domestic
helpers.
Subject: Guidelines on the Temporary Government Processing and
Deployment of Domestic Helpers to Hong Kong.
Pursuant to Department Order No. 16, series of 1991 and in order to
operationalize the temporary government processing and deployment
of domestic helpers (DHs) to Hong Kong resulting from the temporary
suspension of recruitment by private employment agencies for said
skill and host market, the following guidelines and mechanisms shall
govern the implementation of said policy.
I. Creation of a joint POEA-OWWA Household Workers Placement
Unit (HWPU)
An ad hoc, one stop Household Workers Placement Unit [or HWPU]
under the supervision of the POEA shall take charge of the various
operations involved in the Hong Kong-DH industry segment:
The HWPU shall have the following functions in coordination with
appropriate units and other entities concerned:
1. Negotiations with and Accreditation of Hong Kong Recruitment
Agencies
2. Manpower Pooling
3. Worker Training and Briefing
4. Processing and Deployment
5. Welfare Programs
II. Documentary Requirements and Other Conditions for Accreditation
of Hong Kong Recruitment Agencies or Principals
Recruitment agencies in Hong Kong intending to hire Filipino DHs for
their employers may negotiate with the HWPU in Manila directly or
through the Philippine Labor Attache's Office in Hong Kong.
xxx xxx xxx
X. Interim Arrangement
All contracts stamped in Hong Kong as of June 30 shall continue to be
processed by POEA until 31 July 1991 under the name of the
Philippine agencies concerned. Thereafter, all contracts shall be
processed with the HWPU.
Recruitment agencies in Hong Kong shall submit to the Philippine
Consulate General in Hong kong a list of their accepted applicants in
their pool within the last week of July. The last day of acceptance shall
be July 31 which shall then be the basis of HWPU in accepting
contracts for processing. After the exhaustion of their respective pools
the only source of applicants will be the POEA manpower pool.
For strict compliance of all concerned. (pp. 31-35, Rollo.)
On August 1, 1991, the POEA Administrator also issued Memorandum Circular No. 37,
Series of 1991, on the processing of employment contracts of domestic workers for Hong
Kong.
TO: All Philippine and Hong Kong Agencies engaged in the
recruitment of Domestic helpers for Hong Kong
37
 Further to Memorandum Circular No. 30, series of 1991 pertaining to
the government processing and deployment of domestic helpers (DHs)
to Hong Kong, processing of employment contracts which have been
attested by the Hong Kong Commissioner of Labor up to 30 June 1991
shall be processed by the POEA Employment Contracts Processing
Branch up to 15 August 1991 only.
Effective 16 August 1991, all Hong Kong recruitment agent/s hiring
DHs from the Philippines shall recruit under the new scheme which
requires prior accreditation which the POEA.
Recruitment agencies in Hong Kong may apply for accreditation at the
Office of the Labor Attache, Philippine Consulate General where a
POEA team is posted until 31 August 1991. Thereafter, those who
failed to have themselves accredited in Hong Kong may proceed to the
POEA-OWWA Household Workers Placement Unit in Manila for
accreditation before their recruitment and processing of DHs shall be
allowed.
Recruitment agencies in Hong Kong who have some accepted
applicants in their pool after the cut-off period shall submit this list of
workers upon accreditation. Only those DHs in said list will be allowed
processing outside of the HWPU manpower pool.
For strict compliance of all concerned. (Emphasis supplied, p.
36, Rollo.)
On September 2, 1991, the petitioner, PASEI, filed this petition for prohibition to annul the
aforementioned DOLE and POEA circulars and to prohibit their implementation for the
following reasons:
1. that the respondents acted with grave abuse of discretion and/or in
excess of their rule-making authority in issuing said circulars;
2. that the assailed DOLE and POEA circulars are contrary to the
Constitution, are unreasonable, unfair and oppressive; and
3. that the requirements of publication and filing with the Office of the
National Administrative Register were not complied with.
There is no merit in the first and second grounds of the petition.
Article 36 of the Labor Code grants the Labor Secretary the power to restrict and regulate
recruitment and placement activities.
Art. 36. Regulatory Power. — The Secretary of Labor shall have the
power to restrict and regulate the recruitment and placement activities
of all agencies within the coverage of this title [Regulation of
Recruitment and Placement Activities] and is hereby authorized to
issue orders and promulgate rules and regulations to carry out the
objectives and implement the provisions of this title. (Emphasis ours.)
On the other hand, the scope of the regulatory authority of the POEA, which was created by
Executive Order No. 797 on May 1, 1982 to take over the functions of the Overseas
Employment Development Board, the National Seamen Board, and the overseas
employment functions of the Bureau of Employment Services, is broad and far-ranging for:
1. Among the functions inherited by the POEA from the defunct Bureau
of Employment Services was the power and duty:
"2. To establish and maintain a registration and/or
licensing system to regulate private sector
participation in the recruitment and placement of
workers, locally and overseas, . . ." (Art. 15, Labor
Code, Emphasis supplied). (p. 13, Rollo.)
2. It assumed from the defunct Overseas Employment Development
Board the power and duty:
3. To recruit and place workers for overseas
employment of Filipino contract workers on a
government to government arrangement and in
such other sectors as policy may dictate . . . (Art.
17, Labor Code.) (p. 13, Rollo.)
3. From the National Seamen Board, the POEA took over:
2. To regulate and supervise the activities of agents
or representatives of shipping companies in the
hiring of seamen for overseas employment; and
38
 secure the best possible terms of employment for
contract seamen workers and secure compliance
therewith. (Art. 20, Labor Code.)
The vesture of quasi-legislative and quasi-judicial powers in administrative bodies is not
unconstitutional, unreasonable and oppressive. It has been necessitated by "the growing
complexity of the modern society" (Solid Homes, Inc. vs. Payawal, 177 SCRA 72, 79).
More and more administrative bodies are necessary to help in the regulation of society's
ramified activities. "Specialized in the particular field assigned to them, they can deal with
the problems thereof with more expertise and dispatch than can be expected from the
legislature or the courts of justice" (Ibid.).
It is noteworthy that the assailed circulars do not prohibit the petitioner from engaging in
the recruitment and deployment of Filipino landbased workers for overseas employment. A
careful reading of the challenged administrative issuances discloses that the same fall
within the "administrative and policing powers expressly or by necessary implication
conferred" upon the respondents (People vs. Maceren, 79 SCRA 450). The power to
"restrict and regulate conferred by Article 36 of the Labor Code involves a grant of police
power (City of Naga vs. Court of Appeals, 24 SCRA 898). To "restrict" means "to confine,
limit or stop" (p. 62, Rollo) and whereas the power to "regulate" means "the power to
protect, foster, promote, preserve, and control with due regard for the interests, first and
foremost, of the public, then of the utility and of its patrons" (Philippine Communications
Satellite Corporation vs. Alcuaz, 180 SCRA 218).
The Solicitor General, in his Comment, aptly observed:
. . . Said Administrative Order [i.e., DOLE Administrative Order No.
16] merely restricted the scope or area of petitioner's business
operations by excluding therefrom recruitment and deployment of
domestic helpers for Hong Kong till after the establishment of the
"mechanisms" that will enhance the protection of Filipino domestic
helpers going to Hong Kong. In fine, other than the recruitment and
deployment of Filipino domestic helpers for Hongkong, petitioner may
still deploy other class of Filipino workers either for Hongkong and
other countries and all other classes of Filipino workers for other
countries.
Said administrative issuances, intended to curtail, if not to end, rampant
violations of the rule against excessive collections of placement and
documentation fees, travel fees and other charges committed by private
employment agencies recruiting and deploying domestic helpers to
Hongkong. [They are reasonable, valid and justified under the general
welfare clause of the Constitution, since the recruitment and
deployment business, as it is conducted today, is affected with public
interest.
xxx xxx xxx
The alleged takeover [of the business of recruiting and placing Filipino
domestic helpers in Hongkong] is merely a remedial measure, and
expires after its purpose shall have been attained. This is evident from
the tenor of Administrative Order No. 16 that recruitment of Filipino
domestic helpers going to Hongkong by private employment agencies
are hereby "temporarily suspended effective July 1, 1991."
The alleged takeover is limited in scope, being confined to recruitment
of domestic helpers going to Hongkong only.
xxx xxx xxx
. . . the justification for the takeover of the processing and deploying of
domestic helpers for Hongkong resulting from the restriction of the
scope of petitioner's business is confined solely to the unscrupulous
practice of private employment agencies victimizing applicants for
employment as domestic helpers for Hongkong and not the whole
recruitment business in the Philippines. (pp. 62-65, Rollo.)
The questioned circulars are therefore a valid exercise of the police power as delegated to
the executive branch of Government.
Nevertheless, they are legally invalid, defective and unenforceable for lack of power
publication and filing in the Office of the National Administrative Register as required in
Article 2 of the Civil Code, Article 5 of the Labor Code and Sections 3(1) and 4, Chapter 2,
Book VII of the Administrative Code of 1987 which provide:
Art. 2. Laws shall take effect after fifteen (15) days following the
completion of their publication in the Official Gazatte, unless it is
otherwise provided. . . . (Civil Code.)
Art. 5. Rules and Regulations. — The Department of Labor and other
government agencies charged with the administration and enforcement
39
 of this Code or any of its parts shall promulgate the necessary
implementing rules and regulations. Such rules and regulations shall
become effective fifteen (15) days after announcement of their adoption in
newspapers of general circulation. (Emphasis supplied, Labor Code, as
amended.)
Sec. 3. Filing. — (1) Every agency shall file with the University of the
Philippines Law Center, three (3) certified copies of every rule adopted by it.
Rules in force on the date of effectivity of this Code which are not filed within
three (3) months shall not thereafter be the basis of any sanction against any
party or persons. (Emphasis supplied, Chapter 2, Book VII of the Administrative
Code of 1987.)
Sec. 4. Effectivity. — In addition to other rule-making requirements provided by
law not inconsistent with this Book, each rule shall become effective fifteen (15)
days from the date of filing as above provided unless a different date is fixed by
law, or specified in the rule in cases of imminent danger to public health, safety
and welfare, the existence of which must be expressed in a statement
accompanying the rule. The agency shall take appropriate measures to make
emergency rules known to persons who may be affected by them. (Emphasis
supplied, Chapter 2, Book VII of the Administrative Code of 1987).
Once, more we advert to our ruling in Tañada vs. Tuvera, 146 SCRA 446 that:
. . . Administrative rules and regulations must also be published if their purpose
is to enforce or implement existing law pursuant also to a valid delegation. (p.
447.)
Interpretative regulations and those merely internal in nature, that is, regulating
only the personnel of the administrative agency and not the public, need not be
published. Neither is publication required of the so-called letters of instructions
issued by administrative superiors concerning the rules or guidelines to be
followed by their subordinates in the performance of their duties. (p. 448.)
We agree that publication must be in full or it is no publication at all since its
purpose is to inform the public of the content of the laws. (p. 448.)
For lack of proper publication, the administrative circulars in question may not be enforced and
implemented.
WHEREFORE, the writ of prohibition is GRANTED. The implementation of DOLE Department
Order No. 16, Series of 1991, and POEA Memorandum Circulars Nos. 30 and 37, Series of 1991, by
the public respondents is hereby SUSPENDED pending compliance with the statutory requirements of
publication and filing under the aforementioned laws of the land.
SO ORDERED
G.R. No. 78385 August 31, 1987
PHILIPPINE CONSUMERS FOUNDATION, INC., petitioner,
vs.
THE SECRETARY OF EDUCATION, CULTURE AND SPORTS, respondent.
GANCAYCO, J.:
This is an original Petition for prohibition with a prayer for the issuance of a writ of
preliminary injunction.
The record of the case discloses that the herein petitioner Philippine Consumers
Foundation, Inc. is a non-stock, non-profit corporate entity duly organized and existing
under the laws of the Philippines. The herein respondent Secretary of Education, Culture
and Sports is a ranking cabinet member who heads the Department of Education, Culture
and Sports of the Office of the President of the Philippines.
On February 21, 1987, the Task Force on Private Higher Education created by the
Department of Education, Culture and Sports (hereinafter referred to as the DECS)
submitted a report entitled "Report and Recommendations on a Policy for Tuition and
Other School Fees." The report favorably recommended to the DECS the following courses
of action with respect to the Government's policy on increases in school fees for the
schoolyear 1987 to 1988 —
(1) Private schools may be allowed to increase its total school fees by
not more than 15 per cent to 20 per cent without the need for the prior
approval of the DECS. Schools that wish to increase school fees
beyond the ceiling would be subject to the discretion of the DECS;
(2) Any private school may increase its total school fees in excess of
the ceiling, provided that the total schools fees will not exceed
P1,000.00 for the schoolyear in the elementary and secondary levels,
and P50.00 per academic unit on a semestral basis for the collegiate
level. 1
40
The DECS took note of the report of the Task Force and on the basis of the same, the
DECS, through the respondent Secretary of Education, Culture and Sports (hereinafter
referred to as the respondent Secretary), issued an Order authorizing, inter alia, the 15% to
20% increase in school fees as recommended by the Task Force. The petitioner sought a
reconsideration of the said Order, apparently on the ground that the increases were too
high. 2 Thereafter, the DECS issued Department Order No. 37 dated April 10, 1987
modifying its previous Order and reducing the increases to a lower ceiling of 10% to 15%,
accordingly. 3 Despite this reduction, the petitioner still opposed the increases. On April 23,
1987, the petitioner, through counsel, sent a telegram to the President of the Philippines
urging the suspension of the implementation of Department Order No. 37. 4 No response
appears to have been obtained from the Office of the President.
Thus, on May 20, 1987, the petitioner, allegedly on the basis of the public interest, went to
this Court and filed the instant Petition for prohibition, seeking that judgment be rendered
declaring the questioned Department Order unconstitutional. The thrust of the Petition is
that the said Department Order was issued without any legal basis. The petitioner also
maintains that the questioned Department Order was issued in violation of the due process
clause of the Constitution in asmuch as the petitioner was not given due notice and hearing
before the said Department Order was issued.
In support of the first argument, the petitioner argues that while the DECS is authorized by
law to regulate school fees in educational institutions, the power to regulate does not
always include the power to increase school fees. 5
Regarding the second argument, the petitioner maintains that students and parents are
interested parties that should be afforded an opportunity for a hearing before school fees are
increased. In sum, the petitioner stresses that the questioned Order constitutes a denial of
substantive and procedural due process of law.
Complying with the instructions of this Court, 6 the respondent Secretary submitted a
Comment on the Petition. 7The respondent Secretary maintains, inter alia, that the increase
in tuition and other school fees is urgent and necessary, and that the assailed Department
Order is not arbitrary in character. In due time, the petitioner submitted a Reply to the
Comment. 8 Thereafter, We considered the case submitted for resolution.
After a careful examination of the entire record of the case, We find the instant Petition
devoid of merit.
We are not convinced by the argument that the power to regulate school fees "does not
always include the power to increase" such fees. Section 57 (3) of Batas Pambansa Blg.
232, otherwise known as The Education Act of 1982, vests the DECS with the power to
regulate the educational system in the country, to wit:
SEC. 57. Educations and powers of the Ministry. The Ministry shall:
xxx xxx xxx
(3) Promulgate rules and regulations necessary for the administration,
supervision and regulation of the educational system in accordance
with declared policy.
xxx xxx xxx 9
Section 70 of the same Act grants the DECS the power to issue rules which are likewise
necessary to discharge its functions and duties under the law, to wit:
SEC. 70. Rule-making Authority. — The Minister of Education and
Culture, charged with the administration and enforcement of this Act,
shall promulgate the necessary implementing rules and regulations.
In the absence of a statute stating otherwise, this power includes the power to prescribe
school fees. No other government agency has been vested with the authority to fix school
fees and as such, the power should be considered lodged with the DECS if it is to properly
and effectively discharge its functions and duties under the law.
We find the remaining argument of the petitioner untenable. The petitioner invokes the due
process clause of the Constitution against the alleged arbitrariness of the assailed
Department Order. The petitioner maintains that the due process clause requires that prior
notice and hearing are indispensable for the Department Order to be validly issued.
We disagree.
The function of prescribing rates by an administrative agency may be either a legislative or
an adjudicative function. If it were a legislative function, the grant of prior notice and
hearing to the affected parties is not a requirement of due process. As regards rates
prescribed by an administrative agency in the exercise of its quasi-judicial function, prior
notice and hearing are essential to the validity of such rates. When the rules and/or rates
laid down by an administrative agency are meant to apply to all enterprises of a given kind
throughout the country, they may partake of a legislative character. Where the rules and the
41
rates imposed apply exclusively to a particular party, based upon a finding of fact, then its
function is quasi-judicial in character. 9a
Is Department Order No. 37 issued by the DECS in the exercise of its legislative function?
We believe so. The assailed Department Order prescribes the maximum school fees that
may be charged by all private schools in the country for schoolyear 1987 to 1988. This
being so, prior notice and hearing are not essential to the validity of its issuance.
This observation notwithstanding, there is a failure on the part of the petitioner to show
clear and convincing evidence of such arbitrariness. As the record of the case discloses, the
DECS is not without any justification for the issuance of the questioned Department Order.
It would be reasonable to assume that the report of the Task Force created by the DECS, on
which it based its decision to allow an increase in school fees, was made judiciously.
Moreover, upon the instance of the petitioner, as it so admits in its Petition, the DECS had
actually reduced the original rates of 15% to 20% down to 10% to 15%, accordingly. Under
the circumstances peculiar to this case, We cannot consider the assailed Department Order
arbitrary.
Under the Rules of Court, it is presumed that official duty has been regularly
performed. 10 In the absence of proof to the contrary, that presumption prevails. This being
so, the burden of proof is on the party assailing the regularity of official proceedings. In the
case at bar, the petitioner has not successfully disputed the presumption.
We commend the petitioner for taking the cudgels for the public, especially the parents and
the students of the country. Its zeal in advocating the protection of the consumers in its
activities should be lauded rather than discouraged. But a more convincing case should be
made out by it if it is to seek relief from the courts some time in the future. Petitioner must
establish that respondent acted without or in excess of her jurisdiction; or with grave abuse
of discretion, and there is no appeal or any other plain, speedy, and adequate remedy in the
ordinary course of law before the extraordinary writ of prohibition may issue. 11
This Court, however, does not go to the extent of saying that it gives its
judicial imprimatur to future increases in school fees. The increases must not be
unreasonable and arbitrary so as to amount to an outrageous exercise of government
authority and power. In such an eventuality, this Court will not hesitate to exercise the
power of judicial review in its capacity as the ultimate guardian of the Constitution.
WHEREFORE, in view of the foregoing, the instant Petition for prohibition is hereby
DISMISSED for lack of merit. We make no pronouncement as to costs.
SO ORDERED.
G.R. No. 148083 July 21, 2006
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
BICOLANDIA DRUG CORPORATION (Formerly known as ELMAS DRUG
CO.), respondent.
DECISION
VELASCO, JR., J.:
In cases of conflict between the law and the rules and regulations implementing the law, the
law shall always prevail. Should Revenue Regulations deviate from the law they seek to
implement, they will be struck down.
The Facts
In 1992, Republic Act No. 7432, otherwise known as "An Act to Maximize the
Contribution of Senior Citizens to Nation Building, Grant Benefits and Special Privileges
and For Other Purposes," granted senior citizens several privileges, one of which was
obtaining a 20 percent discount from all establishments relative to the use of transportation
services, hotels and similar lodging establishments, restaurants and recreation centers and
purchase of medicines anywhere in the country. 1 The law also provided that the private
establishments giving the discount to senior citizens may claim the cost as tax credit. 2 In
compliance with the law, the Bureau of Internal Revenue issued Revenue Regulations No.
2-94, which defined "tax credit" as follows:
Tax Credit – refers to the amount representing the 20% discount granted to a
qualified senior citizen by all establishments relative to their utilization of
transportation services, hotels and similar lodging establishments, restaurants,
halls, circuses, carnivals and other similar places of culture, leisure and
amusement, which discount shall be deducted by the said establishments from
their gross income for income tax purposes and from their gross sales for value-
added tax or other percentage tax purposes.3
42
In 1995, respondent Bicolandia Drug Corporation, a corporation engaged in the business of
retailing pharmaceutical products under the business style of "Mercury Drug," granted the
20 percent sales discount to qualified senior citizens purchasing their medicines in
compliance with R.A. No. 7432.4 Respondent treated this discount as a deduction from its
gross income in compliance with Revenue Regulations No. 2-94, which implemented R.A.
No. 7432.5 On April 15, 1996, respondent filed its 1995 Corporate Annual Income Tax
Return declaring a net loss position with nil income tax liability. 6
On December 27, 1996, respondent filed a claim for tax refund or credit in the amount of
PhP 259,659.00 with the Appellate Division of the Bureau of Internal Revenue—because
its net losses for the year 1995 prevented it from benefiting from the treatment of sales
discounts as a deduction from gross sales during the said taxable year. 7 It alleged that the
petitioner Commissioner of Internal Revenue erred in treating the 20 percent sales discount
given to senior citizens as a deduction from its gross income for income tax purposes or
other percentage tax purposes rather than as a tax credit. 8
On April 6, 1998, respondent appealed to the Court of Tax Appeals in order to toll the
running of two (2)-year prescriptive period to file a claim for refund pursuant to Section
230 of the Tax Code then.9 Respondent argued that since Section 4 of R.A. No. 7432
provided that discounts granted to senior citizens may be claimed as tax credit, Section 2(i)
of Revenue Regulations No. 2-94, which referred to the tax credit as the amount
representing the 20 percent discount that "shall be deducted by the said establishments from
their gross income for income tax purposes and from their gross sales for value-added tax
or other percentage tax purposes," 10 is illegal, void and without effect for being inconsistent
with the statute it implements.
Petitioner maintained that Revenue Regulations No. 2-94 is valid since the law tasked the
Department of Finance, among other government offices, with the issuance of the
necessary rules and regulations to carry out the objectives of the law. 11
Ruling of the Court of Tax Appeals
The Court of Tax Appeals declared that the provisions of R.A. No. 7432 would prevail over
Section 2(i) of Revenue Regulations No. 2-94, whose definition of "tax credit" deviated
from the intendment of the law; and as a result, partially granted the respondent's claim for
a refund. After examining the evidence on record, the Court of Tax Appeals reduced the
claimed 20 percent sales discount, thus reducing the refund to be given. It ruled that
"Respondent is hereby ORDERED to REFUND in favor of Petitioner the amount of
P236,321.52, representing overpaid income tax for the year 1995." 12
Ruling of the Court of Appeals
On appeal, the Court of Appeals modified the decision of the Court of Tax Appeals as the
law provided for a tax credit, not a tax refund. The fallo of the Decision states:
WHEREFORE, premises considered, the present appeal is hereby GRANTED
and the Decision of the Court of Tax Appeals in C.T.A. Case No. 5599 is hereby
MODIFIED in the sense that the award of tax refund is ANNULLED and SET
ASIDE. Instead, the petitioner is hereby ORDERED to issue a tax credit
certificate in favor of the respondent in the amount of P 236,321.52.
No pronouncement as to costs.13
The Issue
Petitioner now argues that the Court of Appeals erred in holding that the 20 percent sales
discount granted to qualified senior citizens by the respondent pursuant to R.A. No. 7432
may be claimed as a tax credit, instead of a deduction from gross income or gross sales. 14
The Court's Ruling
The petition is not meritorious.
Redefining "Tax Credit" as "Tax Deduction"
The problem stems from the issuance of Revenue Regulations No. 2-94, which was
supposed to implement R.A. No. 7432, and the radical departure it made when it defined
the "tax credit" that would be granted to establishments that give 20 percent discount to
senior citizens. Under Revenue Regulations No. 2-94, the tax credit is "the amount
representing the 20 percent discount granted to a qualified senior citizen by all
establishments relative to their utilization of transportation services, hotels and similar
lodging establishments, restaurants, drugstores, recreation centers, theaters, cinema houses,
concert halls, circuses, carnivals and other similar places of culture, leisure and amusement,
which discount shall be deducted by the said establishments from their gross income for
income tax purposes and from their gross sales for value-added tax or other percentage tax
purposes."15 It equated "tax credit" with "tax deduction," contrary to the definition in
Black's Law Dictionary, which defined tax credit as:
An amount subtracted from an individual's or entity's tax liability to arrive at the
total tax liability. A tax credit reduces the taxpayer's liability x x x, compared to a
deduction which reduces taxable income upon which the tax liability is
calculated. A credit differs from deduction to the extent that the former is
43
 subtracted from the tax while the latter is subtracted from income before the tax
is computed.16
The interpretation of an administrative government agency, which is tasked to implement
the statute, is accorded great respect and ordinarily controls the construction of the
courts.17 Be that as it may, the definition laid down in the questioned Revenue Regulations
can still be subjected to scrutiny. Courts will not hesitate to set aside an executive
interpretation when it is clearly erroneous. There is no need for interpretation when there is
no ambiguity in the rule, or when the language or words used are clear and plain or readily
understandable to an ordinary reader.18 The definition of the term "tax credit" is plain and
clear, and the attempt of Revenue Regulations No. 2-94 to define it differently is the root of
the conflict.
Tax Credit is not Tax Refund
Petitioner argues that the tax credit is in the nature of a tax refund and should be treated as a
return for tax payments erroneously or excessively assessed against a taxpayer, in line with
Section 204(c) of Republic Act No. 8424, or the National Internal Revenue Code of 1997.
Petitioner claims that there should first be payment of the tax before the tax credit can be
claimed. However, in the National Internal Revenue Code, we see at least one instance
where this is not the case. Any VAT-registered person, whose sales are zero-rated or
effectively zero-rated may, within two (2) years after the close of the taxable quarter when
the sales were made, apply for the issuance of a tax credit certificate or refund of creditable
input tax due or paid attributable to such sales, except transitional input tax, to the extent
that such input tax has not been applied against output tax. 19 It speaks of a tax credit for tax
due, so payment of the tax has not yet been made in that particular example.
The Court of Appeals expressly recognized the differences between a "tax credit" and a
"tax refund," and stated that the same are not synonymous with each other, which is why it
modified the ruling of the Court of Tax Appeals.
Revenue Regulations No. 2-94 vs. R.A. No. 7432 and
R.A. No. 7432 vs. the National Internal Revenue Code
Petitioner contends that since R.A. No. 7432 used the word "may," the availability of the
tax credit to private establishments is only permissive and not absolute or mandatory. From
that starting point, petitioner further argues that the definition of the term "tax credit" in
Revenue Regulations No. 2-94 was validly issued under the authority granted by the law to
the Department of Finance to formulate the needed guidelines. It further explained that
Revenue Regulations No. 2-94 can be harmonized with R.A No. 7432, such that the
definition of the term "tax credit" in Revenue Regulations No. 2-94 is controlling. It claims
that to do otherwise would result in Section 4(a) of R.A. No. 7432 impliedly repealing
Section 204 (c) of the National Internal Revenue Code.
These arguments must also fail.
Revenue Regulations No. 2-94 is still subordinate to R.A. No. 7432, and in cases of
conflict, the implementing rule will not prevail over the law it seeks to implement. While
seemingly conflicting laws must be harmonized as far as practicable, in this particular case,
the conflict cannot be resolved in the manner the petitioner wishes. There is a great divide
separating the idea of "tax credit" and "tax deduction," as seen in the definition in Black's
Law Dictionary.
The claimed absurdity of Section 4(a) of R.A. No. 7432 impliedly repealing Section 204(c)
of the National Internal Revenue Code could only come about if it is accepted that a tax
credit is akin to a tax refund wherein payment of taxes must be made in order for it to be
claimed. But as shown in Section 112(a) of the National Internal Revenue Code, it is not
always necessary for payment to be made for a tax credit to be available.
Looking into R.A. No. 7432
Finally, petitioner argues that should private establishments, which count respondent in
their number, be allowed to claim tax credits for discounts given to senior citizens, they
would be earning and not just be reimbursed for the discounts given.
It cannot be denied that R.A. No. 7432 has a laudable goal. Moreover, it cannot be argued
that it was the intent of lawmakers for private establishments to be the primary
beneficiaries of the law. However, while the purpose of the law to benefit senior citizens is
praiseworthy, the concerns of the affected private establishments were also considered by
the lawmakers. As in other cases wherein private property is taken by the State for public
use, there must be just compensation. In this particular case, it took the form of the tax
credit granted to private establishments, purposely chosen by the lawmakers. In the similar
case of Commissioner of Internal Revenue v. Central Luzon Drug
Corporation,20 scrutinizing the deliberations of the Bicameral Conference Committee
Meeting on Social Justice on February 5, 1992 which finalized R.A. No. 7432, the
discussions of the lawmakers clearly showed the intent that the cost of the 20 percent
discount may be claimed by the private establishments as a tax credit. An excerpt from the
deliberations is as follows:
SEN. ANGARA. In the case of private hospitals they got the grant of 15%
discount, provided that, the private hospitals can claim the expense as a tax
credit.
44
 REP. AQUINO. Yah could be allowed as deductions in the preparation of
(inaudible) income.
SEN. ANGARA. I-tax credit na lang natin para walang cash-out?
REP. AQUINO. Oo, tax credit. Tama. Okay. Hospitals ba o lahat ng
establishments na covered.
THE CHAIRMAN. Sa kuwan lang yon, as private hospitals lang.
REP. AQUINO. Ano ba yung establishments na covered?
SEN. ANGARA. Restaurant, lodging houses, recreation centers.
REP. AQUINO. All establishments covered siguro?
SEN. ANGARA. From all establishments. Alisin na natin `yung kuwan kung
ganon. Can we go back to Section 4 ha?
REP. AQUINO. Oho.
SEN. ANGARA. Letter A. To capture that thought, we'll say the grant of 20%
discount from all establishments et cetera, et cetera, provided that said
establishments may claim the cost as a tax credit. Ganon ba `yon?
REP. AQUINO. Yah.
SEN. ANGARA. Dahil kung government, they don't need to claim it.
THE CHAIRMAN. Tax credit.
21
SEN. ANGARA. As a tax credit [rather] than a kuwan – deduction, Okay.
It is clear that the lawmakers intended the grant of a tax credit to complying private
establishments like the respondent.
If the private establishments appear to benefit more from the tax credit than originally
intended, it is not for petitioner to say that they shouldn't. The tax credit may actually have
provided greater incentive for the private establishments to comply with R.A. No. 7432, or
quicker relief from the cut into profits of these businesses.
Revenue Regulations No. 2-94 Null and Void
From the above discussion, it must be concluded that Revenue Regulations No. 2-94 is null
and void for failing to conform to the law it sought to implement. 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.22
Revenue Regulations No. 2-94 being null and void, it must be ruled then that under R.A.
No. 7432, which was effective at the time, respondent is entitled to its claim of a tax credit,
and the ruling of the Court of Appeals must be affirmed.
But even as this particular case is decided in this manner, it must be noted that the concerns
of the petitioner regarding tax credits granted to private establishments giving discounts to
senior citizens have been addressed. R.A. No. 7432 has been amended by Republic Act No.
9257, the "Expanded Senior Citizens Act of 2003." In this, the term "tax credit" is no longer
used. The 20 percent discount granted by hotels and similar lodging establishments,
restaurants and recreation centers, and in the purchase of medicines in all establishments
for the exclusive use and enjoyment of senior citizens is treated in the following manner:
The establishment may claim the discounts granted under (a), (f), (g) and (h) as
tax deduction based on the net cost of the goods sold or services
rendered: Provided, That the cost of the discount shall be allowed as deduction
from gross income for the same taxable year that the discount is
granted. Provided, further, that the total amount of the claimed tax deduction net
of value added tax if applicable, shall be included in their gross sales receipts for
tax purposes and shall be subject to proper documentation and to the provisions
of the National Internal Revenue Code, as amended. 23
This time around, there is no conflict between the law and the implementing Revenue
Regulations. Under Revenue Regulations No. 4-2006, "(o)nly the actual amount of the
discount granted or a sales discount not exceeding 20% of the gross selling price can be
deducted from the gross income, net of value added tax, if applicable, for income tax
purposes, and from gross sales or gross receipts of the business enterprise concerned, for
VAT or other percentage tax purposes."24 Under the new law, there is no tax credit to speak
of, only deductions.
45
Petitioner can find some vindication in the amendment made to R.A. No. 7432 by R.A. No.
9257, which may be more in consonance with the principles of taxation, but as it was R.A.
No. 7432 in force at the time this case arose, this law controls the result in this particular
case, for which reason the petition must fail.

This case should remind all heads of executive agencies which are given the power to
promulgate rules and regulations, that they assume the roles of lawmakers. It is well-settled HOLY SPIRIT HOMEOWNERS G.R. No. 163980
that a regulation should not conflict with the law it implements. Thus, those drafting the ASSOCIATION, INC. and NESTORIO
regulations should study well the laws their rules will implement, even to the extent of F. APOLINARIO, in his personal
reviewing the minutes of the deliberations of Congress about its intent when it drafted the capacity and as President of Holy
law. They may also consult the Secretary of Justice or the Solicitor General for their Spirit Homeowners Association, Inc., Present:
opinions on the drafted rules. Administrative rules, regulations and orders have the efficacy Petitioners,
and force of law so long as they do not contravene any statute or the Constitution. 25 It is PANGANIBAN, C.J.,
then the duty of the agencies to ensure that their rules do not deviate from or amend acts of - versus - PUNO,
Congress, for their regulations are always subordinate to law. QUISUMBING,
YNARES-SANTIAGO,
SECRETARY MICHAEL DEFENSOR, SANDOVAL-GUTIERREZ,
WHEREFORE, the Petition is hereby DENIED. The assailed Decision of the Court of in his capacity as Chairman of the CARPIO,
Appeals is AFFIRMED. There is no pronouncement as to costs. Housing and Urban Development AUSTRIA-MARTINEZ,
Coordinating Council (HUDCC), CORONA,
SO ORDERED. ATTY. EDGARDO PAMINTUAN, CARPIO MORALES,
in his capacity as General Manager of CALLEJO, SR.,
the National Housing Authority (NHA), AZCUNA,
MR. PERCIVAL CHAVEZ, in his TINGA,
capacity as Chairman of the Presidential CHICO-NAZARIO,
Commission for the Urban Poor (PCUP), GARCIA, and
MAYOR FELICIANO BELMONTE, in VELASCO, JR., JJ.
his capacity as Mayor of Quezon City,
SECRETARY ELISEA GOZUN, in her
capacity as Secretary of the Department
of Environment and Natural Resources
(DENR) and SECRETARY FLORENTE Promulgated:
SORIQUEZ, in his capacity as Secretary
of the Department of Public Works and
Highways (DPWH) as ex-officio members
of the NATIONAL GOVERNMENT August 3, 2006
CENTER ADMINISTRATION
COMMITTEE,
Respondents.

x ---------------------------------------------------------------------------------- x

46
 (DENR), and Secretary Florante Soriquez of the Department of Public Works and

DECISION Highways (DPWH).

Prior to the passage of R.A. No. 9207, a number of presidential issuances authorized the
TINGA, J.:
creation and development of what is now known as the National Government Center

(NGC).
The instant petition for prohibition under Rule 65 of the 1997 Rules of Civil Procedure,

with prayer for the issuance of a temporary restraining order and/or writ of preliminary On March 5, 1972, former President Ferdinand Marcos issued Proclamation No.

injunction, seeks to prevent respondents from enforcing the implementing rules and 1826, reserving a parcel of land in Constitution Hills, Quezon City, covering a little over

regulations (IRR) of Republic Act No. 9207, otherwise known as the National Government 440 hectares as a national government site to be known as the NGC. [1]

Center (NGC) Housing and Land Utilization Act of 2003.

On August 11, 1987, then President Corazon Aquino issued Proclamation No.
Petitioner Holy Spirit Homeowners Association, Inc. (Association) is a homeowners
137, excluding 150 of the 440 hectares of the reserved site from the coverage of
association from the West Side of the NGC. It is represented by its president, Nestorio F.
Proclamation No. 1826 and authorizing instead the disposition of the excluded portion by
Apolinario, Jr., who is a co-petitioner in his own personal capacity and on behalf of the
direct sale to the bona fide residents therein.[2]
association.

In view of the rapid increase in population density in the portion excluded by

Named respondents are the ex-officio members of the National Government Center
Proclamation No. 137 from the coverage of Proclamation No. 1826, former President Fidel
Administration Committee (Committee). At the filing of the instant petition, the Committee
Ramos issued Proclamation No. 248 on September 7, 1993, authorizing the vertical
was composed of Secretary Michael Defensor, Chairman of the Housing and Urban
development of the excluded portion to maximize the number of families who can
Development Coordinating Council (HUDCC), Atty. Edgardo Pamintuan, General
effectively become beneficiaries of the governments socialized housing program. [3]
Manager of the National Housing Authority (NHA), Mr. Percival Chavez, Chairman of the

Presidential Commission for Urban Poor (PCUP), Mayor Feliciano Belmonte of Quezon On May 14, 2003, President Gloria Macapagal-Arroyo signed into law R.A. No.

City, Secretary Elisea Gozun of the Department of Environment and Natural Resources 9207. Among the salient provisions of the law are the following:

47
 In accordance with Section 5 of R.A. No. 9207, [4] the Committee formulated the
SEC. 2. Declaration of Policy. It is hereby declared the
policy of the State to secure the land tenure of the urban poor. Toward Implementing Rules and Regulations (IRR) of R.A. No. 9207 on June 29, 2004. Petitioners
this end, lands located in the NGC, Quezon City shall be utilized for
housing, socioeconomic, civic, educational, religious and other subsequently filed the instant petition, raising the following issues:
purposes.
WHETHER OR NOT SECTION 3.1 (A.4), 3.1 (B.2), 3.2
SEC. 3. Disposition of Certain Portions of
(A.1) AND 3.2 (C.1) OF THE RULES AND REGULATIONS OF
the National Government Center Site to Bona Fide Residents.
REPUBLIC ACT NO. 9207, OTHERWISE KNOWN AS NATIONAL
Proclamation No. 1826, Series of 1979, is hereby amended by
GOVERNMENT CENTER (NGC) HOUSING AND LAND
excluding from the coverage thereof, 184 hectares on the west side and
UTILIZATION ACT OF 2003 SHOULD BE DECLARED NULL
238 hectares on the east side of Commonwealth Avenue, and declaring
AND VOID FOR BEING INCONSISTENT WITH THE LAW IT
the same open for disposition to bona fide residents therein: Provided,
SEEKS TO IMPLEMENT.
That the determination of the bona fide residents on the west side shall
be based on the census survey conducted in 1994 and the determination
WHETHER OR NOT SECTION 3.1 (A.4), 3.1 (B.2), 3.2
of the bona fide residents on the east side shall be based on the census
(A.1) AND 3.2 (C.1) OF THE RULES AND REGULATIONS OF
survey conducted in 1994 and occupancy verification survey conducted
REPUBLIC ACT NO. 9207, OTHERWISE KNOWN AS NATIONAL
in 2000: Provided, further, That all existing legal agreements, programs
GOVERNMENT CENTER (NGC) HOUSING AND LAND
and plans signed, drawn up or implemented and actions taken,
UTILIZATION ACT OF 2003 SHOULD BE DECLARED NULL
consistent with the provisions of this Act are hereby adopted.
AND VOID FOR BEING ARBITRARY, CAPRICIOUS AND
WHIMSICAL.[5]
SEC. 4. Disposition of Certain Portions of
the National Government Center Site for Local Government or First, the procedural matters.
Community Facilities, Socioeconomic, Charitable, Educational and
Religious Purposes. Certain portions of land within the aforesaid area
for local government or community facilities, socioeconomic, The Office of the Solicitor General (OSG) argues that petitioner Association
charitable, educational and religious institutions are hereby reserved for
disposition for such purposes: Provided, That only cannot question the implementation of Section 3.1 (b.2) and Section 3.2 (c.1) since it does
those institutions already operating and with existing facilities or
structures, or those occupying the land may avail of the disposition not claim any right over the NGC East Side. Section 3.1 (b.2) provides for the maximum
program established under the provisions this Act; Provided, further,
That in ascertaining the specific areas that may be disposed of in favor lot area that may be awarded to a resident-beneficiary of the NGC East Side, while Section
of these institutions, the existing site allocation shall be used as basis
therefore: Provided, finally. That in determining the reasonable lot 3.2 (c.1) imposes a lot price escalation penalty to a qualified beneficiary who fails to
allocation of such institutions without specific lot allocations, the land
area that may be allocated to them shall be based on the area actually execute a contract to sell within the prescribed period. [6] Also, the OSG contends that since
used by said institutions at the time of effectivity of this Act. (Emphasis
supplied.) petitioner association is not the duly recognized peoples organization in the NGC and since

48
petitioners not qualify as beneficiaries, they cannot question the manner of disposition of NGC East Side, the rest of the assailed provisions of the IRR, namely, Sections 3.1 (a.4),

lots in the NGC.[7] 3.2 (a.1) and 3.2 (c.1), govern the disposition of lots in the West Side itself or all the lots in

the NGC.
Legal standing or locus standi has been defined as a personal and substantial

interest in the case such that the party has sustained or will sustain direct injury as a result

of the governmental act that is being challenged. The gist of the question of standing is

whether a party alleges such personal stake in the outcome of the controversy as to assure

that concrete adverseness which sharpens the presentation of issues upon which the court

depends for illumination of difficult constitutional questions. [8]

We cannot, therefore, agree with the OSG on the issue of locus standi. The

Petitioner association has the legal standing to institute the instant petition, petition does not merit dismissal on that ground.

whether or not it is the duly recognized association of homeowners in the NGC. There is no
There are, however, other procedural impediments to the granting of the instant
dispute that the individual members of petitioner association are residents of the NGC. As
petition. The OSG claims that the instant petition for prohibition is an improper remedy
such they are covered and stand to be either benefited or injured by the enforcement of the
because the writ of prohibition does not lie against the exercise of a quasi-legislative
IRR, particularly as regards the selection process of beneficiaries and lot allocation to
function.[9] Since in issuing the questioned IRR of R.A. No. 9207, the Committee was not
qualified beneficiaries. Thus, petitioner association may assail those provisions in the IRR
exercising judicial, quasi-judicial or ministerial function, which is the scope of a petition
which it believes to be unfavorable to the rights of its members. Contrary to the OSGs
for prohibition under Section 2, Rule 65 of the 1997 Rules of Civil Procedure, the instant
allegation that the failure of petitioner association and its members to qualify as
prohibition should be dismissed outright, the OSG contends. For their part, respondent
beneficiaries effectively bars them from questioning the provisions of the IRR, such
Mayor of Quezon City[10] and respondent NHA[11] contend that petitioners violated the
circumstance precisely operates to confer on them the legal personality to assail the IRR.
doctrine of hierarchy of courts in filing the instant petition with this Court and not with the
Certainly, petitioner and its members have sustained direct injury arising from the
Court of Appeals, which has concurrent jurisdiction over a petition for prohibition.
enforcement of the IRR in that they have been disqualified and eliminated from the

selection process. While it is true that petitioners claim rights over the NGC West Side only

and thus cannot be affected by the implementation of Section 3.1 (b.2), which refers to the

49
 The cited breaches are mortal. The petition deserves to be spurned as a course to assail its validity must follow the doctrine of hierarchy of courts. Although the

consequence. Supreme Court, Court of Appeals and the Regional Trial Courts have concurrent

jurisdiction to issue writs of certiorari, prohibition, mandamus, quo warranto, habeas

Administrative agencies possess quasi-legislative or rule-making powers and
corpus and injunction, such concurrence does not give the petitioner unrestricted freedom
quasi-judicial or administrative adjudicatory powers. Quasi-legislative or rule-making
of choice of court forum.[15]
power is the power to make rules and regulations which results in delegated legislation that

is within the confines of the granting statute and the doctrine of non-delegability and True, this Court has the full discretionary power to take cognizance of the

separability of powers.[12] petition filed directly with it if compelling reasons, or the nature and importance of the

issues raised, so warrant.[16]A direct invocation of the Courts original jurisdiction to issue
In questioning the validity or constitutionality of a rule or regulation issued by an
these writs should be allowed only when there are special and important reasons therefor,
administrative agency, a party need not exhaust administrative remedies before going to
clearly and specifically set out in the petition. [17]
court. This principle, however, applies only where the act of the administrative agency

concerned was performed pursuant to its quasi-judicial function, and not when the assailed In Heirs of Bertuldo Hinog v. Melicor,[18] the Court said that it will not entertain

act pertained to its rule-making or quasi-legislative power. [13] direct resort to it unless the redress desired cannot be obtained in the appropriate courts,

and exceptional and compelling circumstances, such as cases of national interest and of
The assailed IRR was issued pursuant to the quasi-legislative power of the
serious implications, justify the availment of the extraordinary remedy of writ of certiorari,
Committee expressly authorized by R.A. No. 9207. The petition rests mainly on the theory
calling for the exercise of its primary jurisdiction. [19] A perusal, however, of the petition for
that the assailed IRR issued by the Committee is invalid on the ground that it is not
prohibition shows no compelling, special or important reasons to warrant the Courts taking
germane to the object and purpose of the statute it seeks to implement. Where what is
cognizance of the petition in the first instance. Petitioner also failed to state any reason that
assailed is the validity or constitutionality of a rule or regulation issued by the
precludes the lower courts from passing upon the validity of the questioned IRR. Moreover,
administrative agency in the performance of its quasi-legislative function, the regular courts
as provided in Section 5, Article VIII of the
have jurisdiction to pass upon the same.[14]

Since the regular courts have jurisdiction to pass upon the validity of the assailed

IRR issued by the Committee in the exercise of its quasi-legislative power, the judicial

50
 Constitution,[20] the Courts power to evaluate the validity of an implementing rule without or in excess of their jurisdiction may appropriately be enjoined by the trial court

or regulation is generally appellate in nature. Thus, following the doctrine of hierarchy of through a writ of injunction or a temporary restraining order.

courts, the instant petition should have been initially filed with the Regional Trial Court.
In a number of petitions, [24] the Court adequately resolved them on other grounds

A petition for prohibition is also not the proper remedy to assail an IRR issued in without adjudicating on the constitutionality issue when there were no compelling reasons

the exercise of a quasi-legislative function. Prohibition is an extraordinary writ directed to pass upon the same. In like manner, the instant petition may be dismissed based on the

against any tribunal, corporation, board, officer or person, whether exercising judicial, foregoing procedural grounds. Yet, the Court will not shirk from its duty to rule on the

quasi-judicial or ministerial functions, ordering said entity or person to desist from further merits of this petition to facilitate the speedy resolution of this case. In proper cases,

proceedings when said proceedings are without or in excess of said entitys or persons procedural rules may be relaxed or suspended in the interest of substantial justice. And the

jurisdiction, or are accompanied with grave abuse of discretion, and there is no appeal or power of the Court to except a particular case from its rules whenever the purposes of

any other plain, speedy and adequate remedy in the ordinary course of law. [21] Prohibition justice require it cannot be questioned.[25]

lies against judicial or ministerial functions, but not against legislative or quasi-legislative
Now, we turn to the substantive aspects of the petition. The outcome, however, is
functions. Generally, the purpose of a writ of prohibition is to keep a lower court within the
just as dismal for petitioners.
limits of its jurisdiction in order to maintain the administration of justice in orderly

channels.[22] Prohibition is the proper remedy to afford relief against usurpation of Petitioners assail the following provisions of the IRR:

jurisdiction or power by an inferior court, or when, in the exercise of jurisdiction in

handling matters clearly within its cognizance the inferior court transgresses the bounds Section 3. Disposition of Certain portions of the NGC Site to the
bonafide residents
prescribed to it by the law, or where there is no adequate remedy available in the ordinary

course of law by which such relief can be obtained. [23] Where the principal relief sought is 3.1. Period for Qualification of Beneficiaries

to invalidate an IRR, petitioners remedy is an ordinary action for its nullification, an action xxxx

which properly falls under the jurisdiction of the Regional Trial Court. In any case, (a.4) Processing and evaluation of qualifications shall be based on the
Code of Policies and subject to the condition that a beneficiary is
petitioners allegation that respondents are performing or threatening to perform functions qualified to acquire only one (1) lot with a minimum of 36 sq. m. and
maximum of 54 sq. m. and subject further to the availability of lots.

xxxx

51
 (b.2) Applications for qualification as beneficiary shall be beneficiaries shall be based on the area actually used or occupied by bona fide residents
processed and evaluated based on the Code of Policies including the
minimum and maximum lot allocation of 35 sq. m. and 60 sq. m. without limitation to area. The argument is utterly baseless.

xxxx

3.2. Execution of the Contract to Sell The beneficiaries of lot allocations in the NGC may be classified into two groups,

namely, the urban poor or the bona fide residents within the NGC site and certain
(a) Westside
government institutions including the local government. Section 3, R.A. No. 9207
(a.1) All qualified beneficiaries shall execute
Contract to Sell (CTS) within sixty (60) days from the mandates the allocation of additional property within the NGC for disposition to its bona
effectivity of the IRR in order to avail of the lot at P700.00
per sq. m. fide residents and the manner by which this area may be distributed to qualified

xxxx beneficiaries. Section 4, R.A. No. 9207, on the other hand, governs the lot disposition to

(c) for both eastside and westside government institutions. While it is true that Section 4 of R.A. No. 9207 has a proviso

(c.1) Qualified beneficiaries who failed to execute mandating that the lot allocation shall be based on the land area actually used or occupied
CTS on the deadline set in item a.1 above in case of westside
and in case of eastside six (6) months after approval of the at the time of the laws effectivity, this proviso applies only to institutional beneficiaries
subdivision plan shall be subjected to lot price escalation.
consisting of the local government, socioeconomic, charitable, educational and religious
The rate shall be based on the formula to be set by
institutions which do not have specific lot allocations, and not to the bona fide residents of
the National Housing Authority factoring therein the
affordability criteria. The new rate shall be approved by the NGC. There is no proviso which even hints that a bona fide resident of the NGC is likewise
NGC-Administration Committee (NGC-AC).
entitled to the lot area actually occupied by him.

Petitioners contend that the aforequoted provisions of the IRR are constitutionally Petitioners interpretation is also not supported by the policy of R.A. No. 9207 and
infirm as they are not germane to and/or are in conflict with the object and purpose of the the prior proclamations establishing the NGC. The governments policy to set aside public
law sought to be implemented. property aims to benefit not only the urban poor but also the local government and various

government institutions devoted to socioeconomic, charitable, educational and

First. According to petitioners, the limitation on the areas to be awarded to

qualified beneficiaries under Sec. 3.1 (a.4) and (b.2) of the IRR is not in harmony with the

provisions of R.A. No. 9207, which mandates that the lot allocation to qualified

52
religious purposes.[26] Thus, although Proclamation No. 137 authorized the sale of lots such penalty imposed by R.A. No. 9207. Thus, they conclude that the assailed provisions

to bona fide residents in the NGC, only a third of the entire area of the NGC was declared conflict with R.A. No. 9207 and should be nullified. The argument deserves scant

open for disposition subject to the condition that those portions being used or earmarked for consideration.

public or quasi-public purposes would be excluded from the housing program for NGC
Where a rule or regulation has a provision not expressly stated or contained in the
residents. The same policy of rational and optimal land use can be read in Proclamation
statute being implemented, that provision does not necessarily contradict the statute. A
No. 248 issued by then President Ramos. Although the proclamation recognized the rapid
legislative rule is in the nature of subordinate legislation, designed to implement a primary
increase in the population density in the NGC, it did not allocate additional property within
legislation by providing the details thereof. [27] All that is required is that the regulation
the NGC for urban poor housing but instead authorized the vertical development of the
should be germane to the objects and purposes of the law; that the regulation be not in
same 150 hectares identified previously by Proclamation No. 137 since the distribution of
contradiction to but in conformity with the standards prescribed by the law. [28]
individual lots would not adequately provide for the housing needs of all the bona

fide residents in the NGC. In Section 5 of R.A. No. 9207, the Committee is granted the power to

administer, formulate guidelines and policies, and implement the disposition of the areas
In addition, as provided in Section 4 of R.A. No. 9207, the institutional
covered by the law. Implicit in this authority and the statutes objective of urban poor
beneficiaries shall be allocated the areas actually occupied by them; hence, the portions
housing is the power of the Committee to formulate the manner by which the reserved
intended for the institutional beneficiaries is fixed and cannot be allocated for other non-
property may be allocated to the beneficiaries. Under this broad power, the Committee is
institutional beneficiaries. Thus, the areas not intended for institutional beneficiaries would
mandated to fill in the details such as the qualifications of beneficiaries, the selling price of
have to be equitably distributed among the bona fide residents of the NGC. In order to
the lots, the terms and conditions governing the sale and other key particulars necessary to
accommodate all qualified residents, a limitation on the area to be awarded to each
implement the objective of the law. These details are purposely omitted from the statute and
beneficiary must be fixed as a necessary consequence.
their determination is left to the discretion of the Committee because the latter possesses

Second. Petitioners note that while Sec. 3.2 (a.1) of the IRR fixes the selling rate special knowledge and technical expertise over these matters.

of a lot at P700.00 per sq. m., R.A. No. 9207 does not provide for the price. They add Sec.
The Committees authority to fix the selling price of the lots may be likened to the
3.2 (c.1) penalizes a beneficiary who fails to execute a contract to sell within six (6) months
rate-fixing power of administrative agencies. In case of a delegation of rate-fixing power,
from the approval of the subdivision plan by imposing a price escalation, while there is no

53
the only standard which the legislature is required to prescribe for the guidance of the there is observance of more than the minimum requirements of due process in the adoption

administrative authority is that the rate be reasonable and just. However, it has been held of the questioned IRR is not a ground to invalidate the same.

that even in the absence of an express requirement as to reasonableness, this standard may In sum, the petition lacks merit and suffers from procedural deficiencies.

be implied.[29] In this regard, petitioners do not even claim that the selling price of the lots is
WHEREFORE, the instant petition for prohibition is DISMISSED. Costs against
unreasonable.
petitioners.

The provision on the price escalation clause as a penalty imposed to a beneficiary

who fails to execute a contract to sell within the prescribed period is also within the SO ORDERED.

Committees authority to formulate guidelines and policies to implement R.A. No. 9207. G.R. No. L-75697

The Committee has the power to lay down the terms and conditions governing the

disposition of said lots, provided that these are reasonable and just. There is nothing VALENTIN TIO doing business under the name and style of OMI

objectionable about prescribing a period within which the parties must execute the contract ENTERPRISES, petitioner,

to sell. This condition can ordinarily be found in a contract to sell and is not contrary to vs.

law, morals, good customs, public order, or public policy. VIDEOGRAM REGULATORY BOARD, MINISTER OF FINANCE,

METRO MANILA COMMISSION, CITY MAYOR and CITY TREASURER OF

Third. Petitioners also suggest that the adoption of the assailed IRR suffers from a
MANILA, respondents.
procedural flaw. According to them the IRR was adopted and concurred in by several

representatives of peoples organizations contrary to the express mandate of R.A. No. 9207
Nelson Y. Ng for petitioner.
that only two representatives from duly recognized peoples organizations must compose the
The City Legal Officer for respondents City Mayor and City Treasurer.
NGCAC which promulgated the assailed IRR. It is worth noting that petitioner association

is not a duly recognized peoples organization.

MELENCIO-HERRERA, J.:

In subordinate legislation, as long as the passage of the rule or regulation had the

benefit of a hearing, the procedural due process requirement is deemed complied with. That

54
 This petition was filed on September 1, 1986 by petitioner on his own behalf and proliferation of film piracy." The Intervenors were thereafter allowed to file their Comment

purportedly on behalf of other videogram operators adversely affected. It assails the in Intervention.

constitutionality of Presidential Decree No. 1987 entitled "An Act Creating the Videogram

Regulatory Board" with broad powers to regulate and supervise the videogram industry The rationale behind the enactment of the DECREE, is set out in its preambular

(hereinafter briefly referred to as the BOARD). The Decree was promulgated on October 5, clauses as follows:

1985 and took effect on April 10, 1986, fifteen (15) days after completion of its publication

in the Official Gazette. 1. WHEREAS, the proliferation and unregulated circulation of

videograms including, among others, videotapes, discs, cassettes or any technical

On November 5, 1985, a month after the promulgation of the abovementioned improvement or variation thereof, have greatly prejudiced the operations of moviehouses

decree, Presidential Decree No. 1994 amended the National Internal Revenue Code and theaters, and have caused a sharp decline in theatrical attendance by at least forty

providing, inter alia: percent (40%) and a tremendous drop in the collection of sales, contractor's specific,

amusement and other taxes, thereby resulting in substantial losses estimated at P450

SEC. 134. Video Tapes. — There shall be collected on each processed video-tape Million annually in government revenues;

cassette, ready for playback, regardless of length, an annual tax of five pesos; Provided,

That locally manufactured or imported blank video tapes shall be subject to sales tax. 2. WHEREAS, videogram(s) establishments collectively earn around

P600 Million per annum from rentals, sales and disposition of videograms, and such

On October 23, 1986, the Greater Manila Theaters Association, Integrated Movie earnings have not been subjected to tax, thereby depriving the Government of

Producers, Importers and Distributors Association of the Philippines, and Philippine approximately P180 Million in taxes each year;

Motion Pictures Producers Association, hereinafter collectively referred to as the 3. WHEREAS, the unregulated activities of videogram establishments

Intervenors, were permitted by the Court to intervene in the case, over petitioner's have also affected the viability of the movie industry, particularly the more than 1,200

opposition, upon the allegations that intervention was necessary for the complete protection movie houses and theaters throughout the country, and occasioned industry-wide

of their rights and that their "survival and very existence is threatened by the unregulated displacement and unemployment due to the shutdown of numerous moviehouses and

theaters;

55
 4. "WHEREAS, in order to ensure national economic recovery, it is Petitioner's attack on the constitutionality of the DECREE rests on the following

imperative for the Government to create an environment conducive to growth and grounds:

development of all business industries, including the movie industry which has an 1. Section 10 thereof, which imposes a tax of 30% on the gross receipts

accumulated investment of about P3 Billion; payable to the local government is a RIDER and the same is not germane to the subject

5. WHEREAS, proper taxation of the activities of videogram matter thereof;

establishments will not only alleviate the dire financial condition of the movie industry 2. The tax imposed is harsh, confiscatory, oppressive and/or in unlawful

upon which more than 75,000 families and 500,000 workers depend for their livelihood, restraint of trade in violation of the due process clause of the Constitution;

but also provide an additional source of revenue for the Government, and at the same time 3. There is no factual nor legal basis for the exercise by the President of

rationalize the heretofore uncontrolled distribution of videograms; the vast powers conferred upon him by Amendment No. 6;

4. There is undue delegation of power and authority;

6. WHEREAS, the rampant and unregulated showing of obscene 5. The Decree is an ex-post facto law; and

videogram features constitutes a clear and present danger to the moral and spiritual well- 6. There is over regulation of the video industry as if it were a nuisance,

being of the youth, and impairs the mandate of the Constitution for the State to support the which it is not.

rearing of the youth for civic efficiency and the development of moral character and We shall consider the foregoing objections in seriatim.

promote their physical, intellectual, and social well-being; 1. The Constitutional requirement that "every bill shall embrace only one

7. WHEREAS, civic-minded citizens and groups have called for remedial subject which shall be expressed in the title thereof" 1 is sufficiently complied with if the

measures to curb these blatant malpractices which have flaunted our censorship and title be comprehensive enough to include the general purpose which a statute seeks to

copyright laws; achieve. It is not necessary that the title express each and every end that the statute wishes

8. WHEREAS, in the face of these grave emergencies corroding the moral to accomplish. The requirement is satisfied if all the parts of the statute are related, and are

values of the people and betraying the national economic recovery program, bold germane to the subject matter expressed in the title, or as long as they are not inconsistent

emergency measures must be adopted with dispatch; ... (Numbering of paragraphs with or foreign to the general subject and title. 2 An act having a single general subject,

supplied). indicated in the title, may contain any number of provisions, no matter how diverse they

may be, so long as they are not inconsistent with or foreign to the general subject, and may

56
be considered in furtherance of such subject by providing for the method and means of industry in order to regulate and rationalize the heretofore uncontrolled distribution of

carrying out the general object." 3 The rule also is that the constitutional requirement as to videograms is evident from Preambles 2 and 5, supra. Those preambles explain the motives

the title of a bill should not be so narrowly construed as to cripple or impede the power of of the lawmaker in presenting the measure. The title of the DECREE, which is the creation

legislation. 4 It should be given practical rather than technical construction. 5 of the Videogram Regulatory Board, is comprehensive enough to include the purposes

expressed in its Preamble and reasonably covers all its provisions. It is unnecessary to

Tested by the foregoing criteria, petitioner's contention that the tax provision of express all those objectives in the title or that the latter be an index to the body of the

the DECREE is a rider is without merit. That section reads, inter alia: DECREE. 7

2. Petitioner also submits that the thirty percent (30%) tax imposed is

Section 10. Tax on Sale, Lease or Disposition of Videograms. — Notwithstanding harsh and oppressive, confiscatory, and in restraint of trade. However, it is beyond serious

any provision of law to the contrary, the province shall collect a tax of thirty percent (30%) question that a tax does not cease to be valid merely because it regulates, discourages, or

of the purchase price or rental rate, as the case may be, for every sale, lease or disposition even definitely deters the activities taxed. 8 The power to impose taxes is one so unlimited

of a videogram containing a reproduction of any motion picture or audiovisual program. in force and so searching in extent, that the courts scarcely venture to declare that it is

Fifty percent (50%) of the proceeds of the tax collected shall accrue to the province, and subject to any restrictions whatever, except such as rest in the discretion of the authority

the other fifty percent (50%) shall acrrue to the municipality where the tax is collected; which exercises it. 9 In imposing a tax, the legislature acts upon its constituents. This is, in

PROVIDED, That in Metropolitan Manila, the tax shall be shared equally by the general, a sufficient security against erroneous and oppressive taxation. 10

City/Municipality and the Metropolitan Manila Commission. The tax imposed by the DECREE is not only a regulatory but also a revenue

xxx xxx xxx measure prompted by the realization that earnings of videogram establishments of around

The foregoing provision is allied and germane to, and is reasonably necessary for P600 million per annum have not been subjected to tax, thereby depriving the Government

the accomplishment of, the general object of the DECREE, which is the regulation of the of an additional source of revenue. It is an end-user tax, imposed on retailers for every

video industry through the Videogram Regulatory Board as expressed in its title. The tax videogram they make available for public viewing. It is similar to the 30% amusement tax

provision is not inconsistent with, nor foreign to that general subject and title. As a tool for imposed or borne by the movie industry which the theater-owners pay to the government,

regulation 6 it is simply one of the regulatory and control mechanisms scattered throughout but which is passed on to the entire cost of the admission ticket, thus shifting the tax burden

the DECREE. The express purpose of the DECREE to include taxation of the video

57
on the buying or the viewing public. It is a tax that is imposed uniformly on all videogram In refutation, the Intervenors and the Solicitor General's Office aver that the 8th

operators. "whereas" clause sufficiently summarizes the justification in that grave emergencies

The levy of the 30% tax is for a public purpose. It was imposed primarily to corroding the moral values of the people and betraying the national economic recovery

answer the need for regulating the video industry, particularly because of the rampant film program necessitated bold emergency measures to be adopted with dispatch. Whatever the

piracy, the flagrant violation of intellectual property rights, and the proliferation of reasons "in the judgment" of the then President, considering that the issue of the validity of

pornographic video tapes. And while it was also an objective of the DECREE to protect the the exercise of legislative power under the said Amendment still pends resolution in several

movie industry, the tax remains a valid imposition. other cases, we reserve resolution of the question raised at the proper time.

The public purpose of a tax may legally exist even if the motive which impelled 4. Neither can it be successfully argued that the DECREE contains an

the legislature to impose the tax was to favor one industry over another. 11 undue delegation of legislative power. The grant in Section 11 of the DECREE of authority

It is inherent in the power to tax that a state be free to select the subjects of to the BOARD to "solicit the direct assistance of other agencies and units of the

taxation, and it has been repeatedly held that "inequities which result from a singling out of government and deputize, for a fixed and limited period, the heads or personnel of such

one particular class for taxation or exemption infringe no constitutional limitation". 12 agencies and units to perform enforcement functions for the Board" is not a delegation of

Taxation has been made the implement of the state's police power.13 the power to legislate but merely a conferment of authority or discretion as to its execution,

At bottom, the rate of tax is a matter better addressed to the taxing legislature. enforcement, and implementation. "The true distinction is between the delegation of power

3. Petitioner argues that there was no legal nor factual basis for the to make the law, which necessarily involves a discretion as to what it shall be, and

promulgation of the DECREE by the former President under Amendment No. 6 of the 1973 conferring authority or discretion as to its execution to be exercised under and in pursuance

Constitution providing that "whenever in the judgment of the President ... , there exists a of the law. The first cannot be done; to the latter, no valid objection can be made." 14

grave emergency or a threat or imminence thereof, or whenever the interim Batasang Besides, in the very language of the decree, the authority of the BOARD to solicit such

Pambansa or the regular National Assembly fails or is unable to act adequately on any assistance is for a "fixed and limited period" with the deputized agencies concerned being

matter for any reason that in his judgment requires immediate action, he may, in order to "subject to the direction and control of the BOARD." That the grant of such authority might

meet the exigency, issue the necessary decrees, orders, or letters of instructions, which shall be the source of graft and corruption would not stigmatize the DECREE as

form part of the law of the land." unconstitutional. Should the eventuality occur, the aggrieved parties will not be without

adequate remedy in law.

58
 5. The DECREE is not violative of the ex post facto principle. An ex post Phil. 856 [1953] at 858-59, citing 1 COOLEY, A TREATISE ON THE

facto law is, among other categories, one which "alters the legal rules of evidence, and CONSTITUTIONAL LIMITATIONS, 639-641). And the "legislature may enact that when

authorizes conviction upon less or different testimony than the law required at the time of certain facts have been proved that they shall be prima facie evidence of the existence of

the commission of the offense." It is petitioner's position that Section 15 of the DECREE in the guilt of the accused and shift the burden of proof provided there be a rational

providing that: connection between the facts proved and the ultimate facts presumed so that the inference

All videogram establishments in the Philippines are hereby given a period of of the one from proof of the others is not unreasonable and arbitrary because of lack of

forty-five (45) days after the effectivity of this Decree within which to register with and connection between the two in common experience". 16

secure a permit from the BOARD to engage in the videogram business and to register with Applied to the challenged provision, there is no question that there is a rational

the BOARD all their inventories of videograms, including videotapes, discs, cassettes or connection between the fact proved, which is non-registration, and the ultimate fact

other technical improvements or variations thereof, before they could be sold, leased, or presumed which is violation of the DECREE, besides the fact that the prima facie

otherwise disposed of. Thereafter any videogram found in the possession of any person presumption of violation of the DECREE attaches only after a forty-five-day period

engaged in the videogram business without the required proof of registration by the counted from its effectivity and is, therefore, neither retrospective in character.

BOARD, shall be prima facie evidence of violation of the Decree, whether the possession 6. We do not share petitioner's fears that the video industry is being over-

of such videogram be for private showing and/or public exhibition. regulated and being eased out of existence as if it were a nuisance. Being a relatively new

raises immediately a prima facie evidence of violation of the DECREE when the industry, the need for its regulation was apparent. While the underlying objective of the

required proof of registration of any videogram cannot be presented and thus partakes of DECREE is to protect the moribund movie industry, there is no question that public welfare

the nature of an ex post facto law. is at bottom of its enactment, considering "the unfair competition posed by rampant film

The argument is untenable. As this Court held in the recent case of Vallarta vs. piracy; the erosion of the moral fiber of the viewing public brought about by the

Court of Appeals, et al. 15 availability of unclassified and unreviewed video tapes containing pornographic films and

... it is now well settled that "there is no constitutional objection to the passage of films with brutally violent sequences; and losses in government revenues due to the drop in

a law providing that the presumption of innocence may be overcome by a contrary theatrical attendance, not to mention the fact that the activities of video establishments are

presumption founded upon the experience of human conduct, and enacting what evidence virtually untaxed since mere payment of Mayor's permit and municipal license fees are

shall be sufficient to overcome such presumption of innocence" (People vs. Mingoa 92 required to engage in business. 17

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 The enactment of the Decree since April 10, 1986 has not brought about the No costs.

"demise" of the video industry. On the contrary, video establishments are seen to have

proliferated in many places notwithstanding the 30% tax imposed. SO ORDERED.

In the last analysis, what petitioner basically questions is the necessity, wisdom

and expediency of the DECREE. These considerations, however, are primarily and

exclusively a matter of legislative concern.

Only congressional power or competence, not the wisdom of the action taken,

may be the basis for declaring a statute invalid. This is as it ought to be. The principle of

separation of powers has in the main wisely allocated the respective authority of each

department and confined its jurisdiction to such a sphere. There would then be intrusion not

allowable under the Constitution if on a matter left to the discretion of a coordinate branch,

the judiciary would substitute its own. If there be adherence to the rule of law, as there

ought to be, the last offender should be courts of justice, to which rightly litigants submit

their controversy precisely to maintain unimpaired the supremacy of legal norms and

prescriptions. The attack on the validity of the challenged provision likewise insofar as

there may be objections, even if valid and cogent on its wisdom cannot be sustained. 18

In fine, petitioner has not overcome the presumption of validity which attaches to

a challenged statute. We find no clear violation of the Constitution which would justify us

in pronouncing Presidential Decree No. 1987 as unconstitutional and void.

WHEREFORE, the instant Petition is hereby dismissed.

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