Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No.

151908 August 12, 2003

shall be installed upon request of the customer at no additional charge except the presentation of a valid prepaid call card. (4) Subscribers shall be updated of the remaining value of their cards before the start of every call using the cards. (5) The unit of billing for the cellular mobile telephone service whether postpaid or prepaid shall be reduced from 1 minute per pulse to 6 seconds per pulse. The authorized rates per minute shall thus be divided by 10.1 The Memorandum Circular provided that it shall take effect 15 days after its publication in a newspaper of general circulation and three certified true copies thereof furnished the UP Law Center. It was published in the newspaper, The Philippine Star, on June 22, 2000.2 Meanwhile, the provisions of the Memorandum Circular pertaining to the sale and use of prepaid cards and the unit of billing for cellular mobile telephone service took effect 90 days from the effectivity of the Memorandum Circular. On August 30, 2000, the NTC issued a Memorandum to all cellular mobile telephone service (CMTS) operators which contained measures to minimize if not totally eliminate the incidence of stealing of cellular phone units. The Memorandum directed CMTS operators to: a. strictly comply with Section B(1) of MC 13-6-2000 requiring the presentation and verification of the identity and addresses of prepaid SIM card customers; b. require all your respective prepaid SIM cards dealers to comply with Section B(1) of MC 13-6-2000; c. deny acceptance to your respective networks prepaid and/or postpaid customers using stolen cellphone units or cellphone units registered to somebody other than the applicant when properly informed of all information relative to the stolen cellphone units; d. share all necessary information of stolen cellphone units to all other CMTS operators in order to prevent the use of stolen cellphone units; and e. require all your existing prepaid SIM card customers to register and present valid identification cards.3 This was followed by another Memorandum dated October 6, 2000 addressed to all public telecommunications entities, which reads: This is to remind you that the validity of all prepaid cards sold on 07 October 2000 and beyond shall be valid for at least two (2) years from date of first use pursuant to MC 13-6-2000.

SMART COMMUNICATIONS, INC. (SMART) and PILIPINO TELEPHONE CORPORATION (PILTEL), petitioners, vs. NATIONAL TELECOMMUNICATIONS COMMISSION (NTC), respondent. x---------------------------------------------------------x G.R. No. 152063 August 12, 2003 GLOBE TELECOM, INC. (GLOBE) and ISLA COMMUNICATIONS CO., INC. (ISLACOM), petitioners, vs. COURT OF APPEALS (The Former 6th Division) and the NATIONAL TELECOMMUNICATIONS COMMISSION, respondents. YNARES-SANTIAGO, J.: Pursuant to its rule-making and regulatory powers, the National Telecommunications Commission (NTC) issued on June 16, 2000 Memorandum Circular No. 13-6-2000, promulgating rules and regulations on the billing of telecommunications services. Among its pertinent provisions are the following: (1) The billing statements shall be received by the subscriber of the telephone service not later than 30 days from the end of each billing cycle. In case the statement is received beyond this period, the subscriber shall have a specified grace period within which to pay the bill and the public telecommunications entity (PTEs) shall not be allowed to disconnect the service within the grace period. (2) There shall be no charge for calls that are diverted to a voice mailbox, voice prompt, recorded message or similar facility excluding the customer's own equipment. (3) PTEs shall verify the identification and address of each purchaser of prepaid SIM cards. Prepaid call cards and SIM cards shall be valid for at least 2 years from the date of first use. Holders of prepaid SIM cards shall be given 45 days from the date the prepaid SIM card is fully consumed but not beyond 2 years and 45 days from date of first use to replenish the SIM card, otherwise the SIM card shall be rendered invalid. The validity of an invalid SIM card, however,

In addition, all CMTS operators are reminded that all SIM packs used by subscribers of prepaid cards sold on 07 October 2000 and beyond shall be valid for at least two (2) years from date of first use. Also, the billing unit shall be on a six (6) seconds pulse effective 07 October 2000. For strict compliance.4 On October 20, 2000, petitioners Isla Communications Co., Inc. and Pilipino Telephone Corporation filed against the National Telecommunications Commission, Commissioner Joseph A. Santiago, Deputy Commissioner Aurelio M. Umali and Deputy Commissioner Nestor C. Dacanay, an action for declaration of nullity of NTC Memorandum Circular No. 13-6-2000 (the Billing Circular) and the NTC Memorandum dated October 6, 2000, with prayer for the issuance of a writ of preliminary injunction and temporary restraining order. The complaint was docketed as Civil Case No. Q-00-42221 at the Regional Trial Court of Quezon City, Branch 77.5 Petitioners Islacom and Piltel alleged, inter alia, that the NTC has no jurisdiction to regulate the sale of consumer goods such as the prepaid call cards since such jurisdiction belongs to the Department of Trade and Industry under the Consumer Act of the Philippines; that the Billing Circular is oppressive, confiscatory and violative of the constitutional prohibition against deprivation of property without due process of law; that the Circular will result in the impairment of the viability of the prepaid cellular service by unduly prolonging the validity and expiration of the prepaid SIM and call cards; and that the requirements of identification of prepaid card buyers and call balance announcement are unreasonable. Hence, they prayed that the Billing Circular be declared null and void ab initio. Soon thereafter, petitioners Globe Telecom, Inc and Smart Communications, Inc. filed a joint Motion for Leave to Intervene and to Admit Complaint-in-Intervention.6 This was granted by the trial court. On October 27, 2000, the trial court issued a temporary restraining order enjoining the NTC from implementing Memorandum Circular No. 13-6-2000 and the Memorandum dated October 6, 2000.7 In the meantime, respondent NTC and its co-defendants filed a motion to dismiss the case on the ground of petitioners' failure to exhaust administrative remedies. Subsequently, after hearing petitioners' application for preliminary injunction as well as respondent's motion to dismiss, the trial court issued on November 20, 2000 an Order, the dispositive portion of which reads: WHEREFORE, premises considered, the defendants' motion to dismiss is hereby denied for lack of merit. The plaintiffs' application for the issuance of a writ of preliminary injunction is hereby granted. Accordingly, the defendants are hereby enjoined from implementing NTC Memorandum Circular 13-6-2000 and the NTC Memorandum, dated October 6, 2000, pending the issuance and finality of the decision in this case. The plaintiffs and intervenors are, however,

required to file a bond in the sum of FIVE HUNDRED THOUSAND PESOS (P500,000.00), Philippine currency. SO ORDERED.8 Defendants filed a motion for reconsideration, which was denied in an Order dated February 1, 2001.9 Respondent NTC thus filed a special civil action for certiorari and prohibition with the Court of Appeals, which was docketed as CA-G.R. SP. No. 64274. On October 9, 2001, a decision was rendered, the decretal portion of which reads: WHEREFORE, premises considered, the instant petition for certiorari and prohibition is GRANTED, in that, the order of the court a quo denying the petitioner's motion to dismiss as well as the order of the court a quo granting the private respondents' prayer for a writ of preliminary injunction, and the writ of preliminary injunction issued thereby, are hereby ANNULLED and SET ASIDE. The private respondents' complaint and complaint-in-intervention below are hereby DISMISSED, without prejudice to the referral of the private respondents' grievances and disputes on the assailed issuances of the NTC with the said agency. SO ORDERED.10 Petitioners' motions for reconsideration were denied in a Resolution dated January 10, 2002 for lack of merit.11 Hence, the instant petition for review filed by Smart and Piltel, which was docketed as G.R. No. 151908, anchored on the following grounds: A. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE NATIONAL TELECOMMUNICATIONS COMMISSION (NTC) AND NOT THE REGULAR COURTS HAS JURISDICTION OVER THE CASE. B. THE HONORABLE COURT OF APPEALS ALSO GRAVELY ERRED IN HOLDING THAT THE PRIVATE RESPONDENTS FAILED TO EXHAUST AN AVAILABLE ADMINISTRATIVE REMEDY. C.

THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE BILLING CIRCULAR ISSUED BY THE RESPONDENT NTC IS UNCONSTITUTIONAL AND CONTRARY TO LAW AND PUBLIC POLICY. D. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PRIVATE RESPONDENTS FAILED TO SHOW THEIR CLEAR POSITIVE RIGHT TO WARRANT THE ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION.12 Likewise, Globe and Islacom filed a petition for review, docketed as G.R. No. 152063, assigning the following errors: 1. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE THE DOCTRINES OF PRIMARY JURISDICTION AND EXHAUSTION OF ADMINISTRATIVE REMEDIES DO NOT APPLY SINCE THE INSTANT CASE IS FOR LEGAL NULLIFICATION (BECAUSE OF LEGAL INFIRMITIES AND VIOLATIONS OF LAW) OF A PURELY ADMINISTRATIVE REGULATION PROMULGATED BY AN AGENCY IN THE EXERCISE OF ITS RULE MAKING POWERS AND INVOLVES ONLY QUESTIONS OF LAW. 2. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE THE DOCTRINE ON EXHAUSTION OF ADMINISTRATIVE REMEDIES DOES NOT APPLY WHEN THE QUESTIONS RAISED ARE PURELY LEGAL QUESTIONS. 3. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE THE DOCTRINE OF EXHAUSTION OF ADMINISTRATIVE REMEDIES DOES NOT APPLY WHERE THE ADMINISTRATIVE ACTION IS COMPLETE AND EFFECTIVE, WHEN THERE IS NO OTHER REMEDY, AND THE PETITIONER STANDS TO SUFFER GRAVE AND IRREPARABLE INJURY. 4. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE PETITIONERS IN FACT EXHAUSTED ALL ADMINISTRATIVE REMEDIES AVAILABLE TO THEM. 5. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED IN ISSUING ITS QUESTIONED RULINGS IN THIS CASE BECAUSE GLOBE AND ISLA HAVE A CLEAR RIGHT TO AN INJUNCTION.13 The two petitions were consolidated in a Resolution dated February 17, 2003.14 On March 24, 2003, the petitions were given due course and the parties were required to submit their respective memoranda.15 We find merit in the petitions.

Administrative agencies possess quasi-legislative or rule-making powers and quasijudicial or administrative adjudicatory powers. Quasi-legislative or rule-making power is the power to make rules and regulations which results in delegated legislation that is within the confines of the granting statute and the doctrine of non-delegability and separability of powers.16 The rules and regulations that administrative agencies promulgate, which are the product of a delegated legislative power to create new and additional legal provisions that have the effect of law, should be within the scope of the statutory authority granted by the legislature to the administrative agency. It is required that the regulation be germane to the objects and purposes of the law, and be not in contradiction to, but in conformity with, the standards prescribed by law.17 They must conform to and be consistent with the provisions of the enabling statute in order for such rule or regulation to be valid. Constitutional and statutory provisions control with respect to what rules and regulations may be promulgated by an administrative body, as well as with respect to what fields are subject to regulation by it. It may not make rules and regulations which are inconsistent with the provisions of the Constitution or a statute, particularly the statute it is administering or which created it, or which are in derogation of, or defeat, the purpose of a statute. In case of conflict between a statute and an administrative order, the former must prevail.18 Not to be confused with the quasi-legislative or rule-making power of an administrative agency is its quasi-judicial or administrative adjudicatory power. This is the power to hear and determine questions of fact to which the legislative policy is to apply and to decide in accordance with the standards laid down by the law itself in enforcing and administering the same law. The administrative body exercises its quasi-judicial power when it performs in a judicial manner an act which is essentially of an executive or administrative nature, where the power to act in such manner is incidental to or reasonably necessary for the performance of the executive or administrative duty entrusted to it. In carrying out their quasi-judicial functions, the administrative officers or bodies are required to investigate facts or ascertain the existence of facts, hold hearings, weigh evidence, and draw conclusions from them as basis for their official action and exercise of discretion in a judicial nature.19 In questioning the validity or constitutionality of a rule or regulation issued by an administrative agency, a party need not exhaust administrative remedies before going to court. This principle applies only where the act of the administrative agency concerned was performed pursuant to its quasi-judicial function, and not when the assailed act pertained to its rule-making or quasi-legislative power. In Association of Philippine Coconut Dessicators v. Philippine Coconut Authority,20 it was held: The rule of requiring exhaustion of administrative remedies before a party may seek judicial review, so strenuously urged by the Solicitor General on behalf of respondent, has obviously no application here. The resolution in question was issued by the PCA in the exercise of its rule- making or legislative power. However, only judicial review of decisions of administrative agencies made in the exercise of their quasi-judicial function is subject to the exhaustion doctrine.

Even assuming arguendo that the principle of exhaustion of administrative remedies apply in this case, the records reveal that petitioners sufficiently complied with this requirement. Even during the drafting and deliberation stages leading to the issuance of Memorandum Circular No. 13-6-2000, petitioners were able to register their protests to the proposed billing guidelines. They submitted their respective position papers setting forth their objections and submitting proposed schemes for the billing circular.21 After the same was issued, petitioners wrote successive letters dated July 3, 200022 and July 5, 2000,23 asking for the suspension and reconsideration of the so-called Billing Circular. These letters were not acted upon until October 6, 2000, when respondent NTC issued the second assailed Memorandum implementing certain provisions of the Billing Circular. This was taken by petitioners as a clear denial of the requests contained in their previous letters, thus prompting them to seek judicial relief. In like manner, the doctrine of primary jurisdiction applies only where the administrative agency exercises its quasi-judicial or adjudicatory function. Thus, in cases involving specialized disputes, the practice has been to refer the same to an administrative agency of special competence pursuant to the doctrine of primary jurisdiction. The courts will not determine a controversy involving a question which is within the jurisdiction of the administrative tribunal prior to the resolution of that question by the administrative tribunal, where the question demands the exercise of sound administrative discretion requiring the special knowledge, experience and services of the administrative tribunal to determine technical and intricate matters of fact, and a uniformity of ruling is essential to comply with the premises of the regulatory statute administered. The objective of the doctrine of primary jurisdiction is to guide a court in determining whether it should refrain from exercising its jurisdiction until after an administrative agency has determined some question or some aspect of some question arising in the proceeding before the court. It applies where the claim is originally cognizable in the courts and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, has been placed within the special competence of an administrative body; in such case, the judicial process is suspended pending referral of such issues to the administrative body for its view.24 However, where what is assailed is the validity or constitutionality of a rule or regulation issued by the administrative agency in the performance of its quasi-legislative function, the regular courts have jurisdiction to pass upon the same. The determination of whether a specific rule or set of rules issued by an administrative agency contravenes the law or the constitution is within the jurisdiction of the regular courts. Indeed, the Constitution vests the power of judicial review or the power to declare a law, treaty, international or executive agreement, presidential decree, order, instruction, ordinance, or regulation in the courts, including the regional trial courts.25 This is within the scope of judicial power, which includes the authority of the courts to determine in an appropriate action the validity of the acts of the political departments.26 Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government.27 In the case at bar, the issuance by the NTC of Memorandum Circular No. 13-6-2000 and its Memorandum dated October 6, 2000 was pursuant to its quasi-legislative or rule-

making power. As such, petitioners were justified in invoking the judicial power of the Regional Trial Court to assail the constitutionality and validity of the said issuances. In Drilon v. Lim,28 it was held: We stress at the outset that the lower court had jurisdiction to consider the constitutionality of Section 187, this authority being embraced in the general definition of the judicial power to determine what are the valid and binding laws by the criterion of their conformity to the fundamental law. Specifically, B.P. 129 vests in the regional trial courts jurisdiction over all civil cases in which the subject of the litigation is incapable of pecuniary estimation, even as the accused in a criminal action has the right to question in his defense the constitutionality of a law he is charged with violating and of the proceedings taken against him, particularly as they contravene the Bill of Rights. Moreover, Article X, Section 5(2), of the Constitution vests in the Supreme Court appellate jurisdiction over final judgments and orders of lower courts in all cases in which the constitutionality or validity of any treaty, international or executive agreement, law, presidential decree, proclamation, order, instruction, ordinance, or regulation is in question.29 In their complaint before the Regional Trial Court, petitioners averred that the Circular contravened Civil Code provisions on sales and violated the constitutional prohibition against the deprivation of property without due process of law. These are within the competence of the trial judge. Contrary to the finding of the Court of Appeals, the issues raised in the complaint do not entail highly technical matters. Rather, what is required of the judge who will resolve this issue is a basic familiarity with the workings of the cellular telephone service, including prepaid SIM and call cards and this is judicially known to be within the knowledge of a good percentage of our population and expertise in fundamental principles of civil law and the Constitution. Hence, the Regional Trial Court has jurisdiction to hear and decide Civil Case No. Q-0042221. The Court of Appeals erred in setting aside the orders of the trial court and in dismissing the case. WHEREFORE, in view of the foregoing, the consolidated petitions are GRANTED. The decision of the Court of Appeals in CA-G.R. SP No. 64274 dated October 9, 2001 and its Resolution dated January 10, 2002 are REVERSED and SET ASIDE. The Order dated November 20, 2000 of the Regional Trial Court of Quezon City, Branch 77, in Civil Case No. Q-00-42221 is REINSTATED. This case is REMANDED to the court a quo for continuation of the proceedings. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila SPECIAL SECOND DIVISION G.R. NO. 135992 January 31, 2006

Officer-in-Charge (OIC), Kathleen G. Heceta, of the National Telecommunications Commission (NTC), stating thus: xxx Please be informed that the escrow deposit and performance bond were required to public telecommunications entities to ensure that the mandated installation of local exchange lines are installed within three (3) years pursuant to EO 109 and RA 7925. Since your company has already complied with its obligation by the installation of more than 300,000 lines in Quezon City, Malabon City and Valenzuela City in the National Capital Region and Region V in early 1997, the escrow deposit and performance bond were not required in your subsequent authorizations.2 In a Resolution dated October 4, 2004, the Court required petitioners and the NTC to file their respective comments on the motion.3 Subsequently, in its Manifestation/Comment filed on January 11, 2005, the Office of the Solicitor General (OSG), in behalf of the NTC, likewise referred to the same letter of OIC Heceta and declared that it fully agrees with respondent that the escrow deposit and performance bond are not required in subsequent authorizations for additional/new areas outside its original roll-out obligation under the Service Area Scheme of E.O. No. 109. Petitioners did not file any comment and it was only after the Court issued a show cause and compliance Resolution on October 19, 2005 that petitioners manifested in their Entry of Special Appearance, Manifestation and Compliance dated November 25, 2005 that they have no further comments on respondent s motion for partial reconsideration.4 The Court has observed in its Decision that Section 27 of NTC MC No. 11-9-93 is silent as to whether the posting of an escrow deposit and performance bond is a condition sine qua non for the grant of a provisional authority. The NTC, through the OSG, explicitly clarified, which was not disputed by petitioners, that the escrow deposit and performance bond are not required in subsequent authorizations for additional/new areas outside its original roll-out obligation under E.O. No. 109. The OSG agreed with respondent s stance that since the provisional authority in this case involves a voluntary application not covered by the original service areas created by the NTC under E.O. No. 109, then it is not subject to the posting of an escrow deposit and performance bond as required by E.O. No. 109, but only to the conditions provided in the provisional authority. Further, the OSG adapted the ratiocination of the Court of Appeals on this matter, i.e., respondent was not subjected to the foregoing escrow deposit and performance bond requirement because the landline obligation is already outside its original roll-out commitment under E.O. No. 109.5 The NTC, being the government agency entrusted with the regulation of activities coming under its special and technical forte, and possessing the necessary rule-making power to implement its objectives,6 is in the best position to interpret its own rules, regulations and guidelines. The Court has consistently yielded and accorded great respect to the interpretation by administrative agencies of their own rules unless there is an error of

EASTERN TELECOMMUNICATIONS PHILIPPINES, INC. and TELECOMMUNICATIONS TECHNOLOGIES, INC., petitioners, vs. INTERNATIONAL COMMUNICATION CORPORATION, Respondent. AMENDED DECISION AUSTRIA-MARTINEZ, J.: On July 23, 2004, the Court promulgated its Decision in the above-captioned case with the following dispositive portion: WHEREFORE, the petition for review on certiorari is PARTIALLY GRANTED. The Order of the National Telecommunications Commissions dated November 10, 1997 in NTC Case No. 96-195 is AFFIRMED with the following modifications: Respondent International Communication Corporation, in accordance with Section 27 of NTC MC No. 11-9-93, is required to: (1) Deposit in escrow in a reputable bank 20% of the investment required for the first two years of the implementation of the proposed project; and (2) Post a performance bond equivalent to 10% of the investment required for the first two years of the approved project but not to exceed P500 Million. within such period to be determined by the National Telecommunications Commission. No pronouncement as to costs. SO ORDERED.1 Respondent now seeks a partial reconsideration of the portion of the Court s decision requiring it to make a 20% escrow deposit and to post a 10% performance bond. Respondent claims that Section 27 of NTC MC No. 11-9-93, which required the foregoing amounts, pertains only to applications filed under Executive Order No. 109 (E.O. No. 109) and not to applications voluntarily filed. In its Manifestation in support of the motion for partial reconsideration, respondent attached a letter from Deputy Commissioner and

law, abuse of power, lack of jurisdiction or grave abuse of discretion clearly conflicting with the letter and spirit of the law.7 In City Government of Makati vs. Civil Service Commission,8 the Court cited cases where the interpretation of a particular administrative agency of a certain rule was adhered to, viz.: As properly noted, CSC was only interpreting its own rules on leave of absence and not a statutory provision in coming up with this uniform rule. Undoubtedly, the CSC like any other agency has the power to interpret its own rules and any phrase contained in them with its interpretation significantly becoming part of the rules themselves. As observed in West Texas Compress & Warehouse Co. v. Panhandle & S.F. Railing Co. xxx This principle is not new to us. In Geukeko v. Araneta this Court upheld the interpretation of the Department of Agriculture and Commerce of its own rules of procedure in suspending the period of appeal even if such action was nowhere stated therein. We said xxx x x x It must be remembered that Lands Administrative Order No. 6 is in the nature of procedural rules promulgated by the Secretary of Agriculture and Natural Resources pursuant to the power bestowed on said administrative agency to promulgate rules and regulations necessary for the proper discharge and management of the functions imposed by law upon said office. x x x x Recognizing the existence of such rule-making authority, what is the weight of an interpretation given by an administrative agency to its own rules or regulations? Authorities sustain the doctrine that the interpretation given to a rule or regulation by those charged with its execution is entitled to the greatest weight by the Court construing such rule or regulation, and such interpretation will be followed unless it appears to be clearly unreasonable or arbitrary (42 Am. Jur. 431). It has also been said that: xxx The same precept was enunciated in Bagatsing v. Committee on Privatization where we upheld the action of the Commission on Audit (COA) in validating the sale of Petron Corporation to Aramco Overseas Corporation on the basis of COA's interpretation of its own circular that set bidding and audit guidelines on the disposal of government assets The COA itself, the agency that adopted the rules on bidding procedure to be followed by government offices and corporations, had upheld the validity and legality of the questioned bidding. The interpretation of an agency of its own rules should be given more weight than the interpretation by that agency of the law it is merely tasked to administer (underscoring supplied).

Given the greater weight accorded to an agency's interpretation of its own rules than to its understanding of the statute it seeks to implement, we simply cannot set aside the former on the same grounds as we would overturn the latter. More specifically, in cases where the dispute concerns the interpretation by an agency of its own rules, we should apply only these standards: "Whether the delegation of power was valid; whether the regulation was within that delegation; and if so, whether it was a reasonable regulation under a due process test." An affirmative answer in each of these questions should caution us from discarding the agency's interpretation of its own rules. (Emphasis supplied) Thus, the Court holds that the interpretation of the NTC that Section 27 of NTC MC No. 11-9-93 regarding the escrow deposit and performance bond shall pertain only to a local exchange operator s original roll-out obligation under E.O. No. 109, and not to roll-out obligations made under subsequent or voluntary applications outside E.O. No. 109, should be sustained. IN VIEW THEREOF, respondent s Motion for Partial Reconsideration is GRANTED. The Court s Decision dated July 23, 2004 is AMENDED, the dispositive portion of which should read as follows: WHEREFORE, the petition for review on certiorari is DENIED. The Order of the National Telecommunications Commission dated November 10, 1997 in NTC Case No. 96-195 is AFFIRMED. thereby deleting the order requiring respondent to make a 20% escrow deposit and to post a 10% performance bond. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION

dumpsite in Tala Estate, Barangay Camarin, Caloocan City due to its harmful effects on the health of the residents and the possibility of pollution of the water content of the surrounding area. On November 15, 1991, the LLDA conducted an on-site investigation, monitoring and test sampling of the leachate 3 that seeps from said dumpsite to the nearby creek which is a tributary of the Marilao River. The LLDA Legal and Technical personnel found that the City Government of Caloocan was maintaining an open dumpsite at the Camarin area without first securing an Environmental Compliance Certificate (ECC) from the Environmental Management Bureau (EMB) of the Department of Environment and Natural Resources, as required under Presidential Decree No. 1586, 4 and clearance from LLDA as required under Republic Act No. 4850, 5 as amended by Presidential Decree No. 813 and Executive Order No. 927, series of 1983. 6 After a public hearing conducted on December 4, 1991, the LLDA, acting on the complaint of Task Force Camarin Dumpsite, found that the water collected from the leachate and the receiving streams could considerably affect the quality, in turn, of the receiving waters since it indicates the presence of bacteria, other than coliform, which may have contaminated the sample during collection or handling. 7 On December 5, 1991, the LLDA issued a Cease and Desist Order 8 ordering the City Government of Caloocan, Metropolitan Manila Authority, their contractors, and other entities, to completely halt, stop and desist from dumping any form or kind of garbage and other waste matter at the Camarin dumpsite. The dumping operation was forthwith stopped by the City Government of Caloocan. However, sometime in August 1992 the dumping operation was resumed after a meeting held in July 1992 among the City Government of Caloocan, the representatives of Task Force Camarin Dumpsite and LLDA at the Office of Environmental Management Bureau Director Rodrigo U. Fuentes failed to settle the problem. After an investigation by its team of legal and technical personnel on August 14, 1992, the LLDA issued another order reiterating the December 5, 1991, order and issued an Alias Cease and Desist Order enjoining the City Government of Caloocan from continuing its dumping operations at the Camarin area. On September 25, 1992, the LLDA, with the assistance of the Philippine National Police, enforced its Alias Cease and Desist Order by prohibiting the entry of all garbage dump trucks into the Tala Estate, Camarin area being utilized as a dumpsite. Pending resolution of its motion for reconsideration earlier filed on September 17, 1992 with the LLDA, the City Government of Caloocan filed with the Regional Trial Court of Caloocan City an action for the declaration of nullity of the cease and desist order with prayer for the issuance of writ of injunction, docketed as Civil Case No. C-15598. In its complaint, the City Government of Caloocan sought to be declared as the sole authority empowered to promote the health and safety and enhance the right of the people in Caloocan City to a balanced ecology within its territorial jurisdiction. 9

G.R. No. 110120 March 16, 1994 LAGUNA LAKE DEVELOPMENT AUTHORITY, petitioner, vs. COURT OF APPEALS, HON. MANUEL JN. SERAPIO, Presiding Judge RTC, Branch 127, Caloocan City, HON. MACARIO A. ASISTIO, JR., City Mayor of Caloocan and/or THE CITY GOVERNMENT OF CALOOCAN, respondents. Alberto N. Hidalgo and Ma. Teresa T. Oledan for petitioner. The City Legal Officer & Chief, Law Department for Mayor Macario A. Asistio, Jr. and the City Government of Caloocan.

ROMERO, J.: The clash between the responsibility of the City Government of Caloocan to dispose off the 350 tons of garbage it collects daily and the growing concern and sensitivity to a pollution-free environment of the residents of Barangay Camarin, Tala Estate, Caloocan City where these tons of garbage are dumped everyday is the hub of this controversy elevated by the protagonists to the Laguna Lake Development Authority (LLDA) for adjudication. The instant case stemmed from an earlier petition filed with this Court by Laguna Lake Development Authority (LLDA for short) docketed as G.R. No. 107542 against the City Government of Caloocan, et al. In the Resolution of November 10, 1992, this Court referred G.R. No. 107542 to the Court of Appeals for appropriate disposition. Docketed therein as CA-G.R. SP No. 29449, the Court of Appeals, in a decision 1 promulgated on January 29, 1993 ruled that the LLDA has no power and authority to issue a cease and desist order enjoining the dumping of garbage in Barangay Camarin, Tala Estate, Caloocan City. The LLDA now seeks, in this petition, a review of the decision of the Court of Appeals. The facts, as disclosed in the records, are undisputed. On March 8, 1991, the Task Force Camarin Dumpsite of Our Lady of Lourdes Parish, Barangay Camarin, Caloocan City, filed a letter-complaint 2 with the Laguna Lake Development Authority seeking to stop the operation of the 8.6-hectare open garbage

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 order 11 denying LLDA's motion to dismiss and granting the issuance of a writ of preliminary injunction enjoining the LLDA, its agent and all persons acting for and on its behalf, from enforcing or implementing its cease and desist order which prevents plaintiff City of Caloocan from dumping garbage at the Camarin dumpsite during the pendency of this case and/or until further orders of the court. On November 5, 1992, the LLDA filed a petition for certiorari, prohibition and injunction with prayer for restraining order with the Supreme Court, docketed as G.R. No. 107542, seeking to nullify the aforesaid order dated October 16, 1992 issued by the Regional Trial Court, Branch 127 of Caloocan City denying its motion to dismiss. The Court, acting on the petition, issued a Resolution 12 on November 10, 1992 referring the case to the Court of Appeals for proper disposition and at the same time, without giving due course to the petition, required the respondents to comment on the petition and file the same with the Court of Appeals within ten (10) days from notice. In the meantime, the Court issued a temporary restraining order, effective immediately and continuing until further orders from it, ordering the respondents: (1) Judge Manuel Jn. Serapio, Presiding Judge, Regional Trial Court, Branch 127, Caloocan City to cease and desist from exercising jurisdiction over the case for declaration of nullity of the cease and desist order issued by the Laguna Lake Development Authority (LLDA); and (2) City Mayor of Caloocan and/or the City Government of Caloocan to cease and desist from dumping its garbage at the Tala Estate, Barangay Camarin, Caloocan City. Respondents City Government of Caloocan and Mayor Macario A. Asistio, Jr. filed on November 12, 1992 a motion for reconsideration and/or to quash/recall the temporary restraining order and an urgent motion for reconsideration alleging that ". . . in view of the calamitous situation that would arise if the respondent city government fails to collect 350 tons of garbage daily for lack of dumpsite (i)t is therefore, imperative that the

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

Court of the issue on the proper interpretation of the powers and authority of the LLDA under its enabling law. 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. (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 Caloocan 21 with due regard and adequate provisions for environmental management and control, preservation of the quality of human life and ecological systems, and the prevention of undue ecological disturbances, deterioration and pollution. Under such a broad grant and power and authority, the LLDA, by virtue of its special charter, obviously has the responsibility to protect the inhabitants of the Laguna Lake region from the deleterious effects of pollutants emanating from the discharge of wastes from the surrounding areas. In carrying out the aforementioned declared policy, the LLDA is mandated, among others, to pass upon and approve or disapprove all plans, programs, and projects proposed by local government offices/agencies within the region, public corporations, and private persons or enterprises where such plans, programs and/or projects are related to those of the LLDA for the development of the region. 22 In the instant case, when the complainant Task Force Camarin Dumpsite of Our Lady of Lourdes Parish, Barangay Camarin, Caloocan City, filed its letter-complaint before the LLDA, the latter's jurisdiction under its charter was validly invoked by complainant on the basis of its allegation that the open dumpsite project of the City Government of Caloocan in Barangay Camarin was undertaken without a clearance from the LLDA, as required under Section 4, par. (d), of Republic Act. No. 4850, as amended by P.D. No. 813 and Executive Order No. 927. While there is also an allegation that the said project was without an Environmental Compliance Certificate from the Environmental Management Bureau (EMB) of the DENR, the primary jurisdiction of the LLDA over this case was recognized by the Environmental Management Bureau of the DENR when the latter acted as intermediary at the meeting among the representatives of the City Government of Caloocan, Task Force Camarin Dumpsite and LLDA sometime in July 1992 to discuss the possibility of re-opening the open dumpsite. Having thus resolved the threshold question, the inquiry then narrows down to the following issue: Does the LLDA have the power and authority to issue a "cease and desist" order under Republic Act No. 4850 and its amendatory laws, on the basis of the facts presented in this case, enjoining the dumping of garbage in Tala Estate, Barangay Camarin, Caloocan City. The irresistible answer is in the affirmative. 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 to the express grant to the defunct National Pollution Control Commission under Section 7 of P.D. No. 984 which, admittedly was not reproduced in P.D. No. 813 and E.O. No. 927, series of 1983. However, it would be a mistake to draw therefrom the conclusion that there is a denial of the power to issue the order in question when the power "to make, alter or modify orders requiring the discontinuance of pollution" is expressly and clearly bestowed upon the LLDA by Executive Order No. 927, series of 1983. Assuming arguendo that the authority to issue a "cease and desist order" were not expressly conferred by law, there is jurisprudence enough to the effect that the rule granting such authority need not necessarily be express. 25 While it is a fundamental rule that an administrative agency has only such powers as are expressly granted to it by law, it is likewise a settled rule that an administrative agency has also such powers as are necessarily implied in the exercise of its express powers. 26 In the exercise, therefore, of its express powers under its charter as a regulatory and quasi-judicial body with respect to pollution cases in the Laguna Lake region, the authority of the LLDA to issue a "cease and desist order" is, perforce, implied. Otherwise, it may well be reduced to a "toothless" paper agency. In this connection, it must be noted that in Pollution Adjudication Board v. Court of Appeals, et al., 27 the Court ruled that the Pollution Adjudication Board (PAB) has the power to issue an ex-parte cease and desist order when there is prima facie evidence of an establishment exceeding the allowable standards set by the anti-pollution laws of the country. 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.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 109976 April 26, 2005

of the claim for tax refund/credit was supposedly a receivable account of PNOC from NAPOCOR.7 On 08 October 1986, the BIR sent a demand letter to PNB, as withholding agent, for the payment of the final tax on the interest earnings and/or yields from PNOC's money placements with the bank, from 15 October 1984 to 15 October 1986, in the total amount of P376,301,133.33.8 On the same date, the BIR also mailed a letter to PNOC informing it of the demand letter sent to PNB.9 PNOC, in another letter, dated 14 October 1986, reiterated its proposal to settle its tax liability through the set-off of the said tax liability against NAPOCOR'S pending claim for tax refund/credit.10 The BIR replied on 11 November 1986 that the proposal for set-off was premature since NAPOCOR's claim was still under process. Once more, BIR requested PNOC to settle its tax liability in the total amount of P385,961,580.82, consisting of P303,343,765.32 final tax, plus P82,617,815.50 interest computed until 15 November 1986.11 On 09 June 1987, PNOC made another offer to the BIR to settle its tax liability. This time, however, PNOC proposed a compromise by paying P91,003,129.89, representing 30% of the P303,343,766.29 basic tax, in accordance with the provisions of Executive Order (E.O.) No. 44.12 Then BIR Commissioner Bienvenido A. Tan, in a letter, dated 22 June 1987, accepted the compromise. The BIR received a total tax payment on the interest earnings and/or yields from PNOC's money placements with PNB in the amount of P93,955,479.12, broken down as follows: Previous payment made by PNB Add: Payment made by PNOC pursuant to the compromise agreement of June 22, 1987 Total tax payment P P P

PHILIPPINE NATIONAL OIL COMPANY, Petitioner, vs. THE HON. COURT OF APPEALS, THE COMMISSIONER OF INTERNAL REVENUE and TIRSO SAVELLANO, Respondents. x--------------------x G.R. No. 112800 April 26, 2005

PHILIPPINE NATIONAL BANK, Petitioner, vs. THE HON. COURT OF APPEALS, COURT OF TAX APPEALS, TIRSO B. SAVELLANO and COMMISSIONER OF INTERNAL REVENUE, Respondents. DECISION CHICO-NAZARIO, J.: This is a consolidation of two Petitions for Review on Certiorari filed by the Philippine National Oil Company (PNOC)1 and the Philippine National Bank (PNB),<2 assailing the decisions of the Court of Appeals in CA-G.R. SP No. 295833 and CA-G.R. SP No. 29526,4 respectively, which both affirmed the decision of the Court of Tax Appeals (CTA) in CTA Case No. 4249.5 The Petitions before this Court originated from a sworn statement submitted by private respondent Tirso B. Savellano (Savellano) to the Bureau of Internal Revenue (BIR) on 24 June 1986. Through his sworn statement, private respondent Savellano informed the BIR that PNB had failed to withhold the 15% final tax on interest earnings and/or yields from the money placements of PNOC with the said bank, in violation of Presidential Decree (P.D.) No. 1931. P.D. No. 1931, which took effect on 11 June 1984, withdrew all tax exemptions of government-owned and controlled corporations. In a letter, dated 08 August 1986, the BIR requested PNOC to settle its liability for taxes on the interests earned by its money placements with PNB and which PNB did not withhold.6 PNOC wrote the BIR on 25 September 1986, and made an offer to compromise its tax liability, which it estimated to be in the sum of P304,419,396.83, excluding interest and surcharges, as of 31 July 1986. PNOC proposed to set-off its tax liability against a claim for tax refund/credit of the National Power Corporation (NAPOCOR), then pending with the BIR, in the amount of P335,259,450.21. The amount

2,952,

91,003,

93,955,47

Private respondent Savellano, through four installments, was paid the informer's reward in the total amount of P14,093,321.89, representing 15% of the P93,955,479.12 tax collected by the BIR from PNOC and PNB. He received the last installment on 01 December 1987.14 On 07 January 1988, private respondent Savellano, through his legal counsel, wrote the BIR to demand payment of the balance of his informer's reward, computed as follows: BIR tax assessment Final tax rate Informer's reward due (BIR deficiency tax assessment x Final tax rate) Less: Payment received by private respondent Savellano Outstanding balance P P

P 385,96

57,89

14,09

P 43,800

BIR Commissioner Tan replied through a letter, dated 08 March 1988, that private respondent Savellano was already fully paid the informer's reward equivalent to 15% of the amount of tax actually collected by the BIR pursuant to its compromise agreement with PNOC. BIR Commissioner Tan further explained that the compromise was in accordance with the provisions of E.O. No. 44, Revenue Memorandum Order (RMO) No. 39-86, and RMO No. 4-87.16 Private respondent Savellano submitted another letter, dated 24 March 1988, to BIR Commissioner Tan, seeking reconsideration of his decision to compromise the tax liability of PNOC. In the same letter, private respondent Savellano questioned the legality of the compromise agreement entered into by the BIR and PNOC and claimed that the tax liability should have been collected in full.17 On 08 April 1988, while the aforesaid Motion for Reconsideration was still pending with the BIR, private respondent Savellano filed a Petition for Review ad cautelam with the CTA, docketed as CTA Case No. 4249. He claimed therein that BIR Commissioner Tan acted "with grave abuse of discretion and/or whimsical exercise of jurisdiction" in entering into a compromise agreement that resulted in "a gross and unconscionable diminution" of his reward. Private respondent Savellano prayed for the enforcement and collection of the total tax assessment against taxpayer PNOC and/or withholding agent PNB; and the payment to him by the BIR Commissioner of the 15% informer's reward on the total tax collected.18 He would later amend his Petition to implead PNOC and PNB as necessary and indispensable parties since they were parties to the compromise agreement.19 In his Answer filed with the CTA, BIR Commissioner Tan asserted that the Petition stated no cause of action against him, and that private respondent Savellano was already paid the informer's reward due him. Alleging that the Petition was baseless and malicious, BIR Commissioner Tan filed a counterclaim for exemplary damages against private respondent Savellano.20 PNOC and PNB filed separate Motions to Dismiss, both arguing that the CTA lacked jurisdiction to decide the case.21 In its Resolution, dated 28 November 1988, the CTA denied the Motions to Dismiss since the question of lack of jurisdiction and/or cause of action do not appear to be indubitable.22 After their Motions to Dismiss were denied by the CTA, PNOC and PNB filed their respective Answers to the amended Petition. PNOC averred, among other things, that (1) it had no privity with private respondent Savellano; (2) the BIR Commissioner's discretionary act in entering into the compromise agreement had legal basis under E.O. No. 44 and RMO No. 39-86 and RMO No. 4-87; and (3) the CTA had no jurisdiction to resolve the case against it.23 On the other hand, PNB asserted that (1) the CTA lacked jurisdiction over the case; and (2) the BIR Commissioner's decision to accept the compromise was discretionary on his part and, therefore, cannot be reviewed or interfered with by the courts.24 PNOC and PNB later filed their amended Answer invoking an opinion of the Commission on Audit (COA) disallowing the payment by the BIR of informer's reward to private respondent Savellano.25

The CTA, thereafter, ordered the parties to submit their evidence,26 to be followed by their respective Memoranda.27 On 23 November 1990, private respondent Savellano, filed a Manifestation with Motion for Suspension of Proceedings, claiming that his pending Motion for Reconsideration with the BIR Commissioner may soon be resolved.28 Both PNOC and PNB opposed the said Motion.29 Subsequently, the new BIR Commissioner, Jose U. Ong, in a letter to PNB, dated 16 January 1991, demanded that PNB pay deficiency withholding tax on the interest earnings and/or yields from PNOC's money placements, in the amount of P294,958,450.73, computed as follows: Withholding tax, plus interest under the letter of demand P dated November 11, 1986 Less: Amount paid under E.O. No. 44 Amount still due and collectible P P 385,961,580.82 91,003,129.89 294,958,450.7330

This BIR letter was received by PNB on 06 February 1991,31 and was protested by it through a letter, dated 11 April 1991.32 The BIR denied PNB's protest on the ground that it was filed out of time and, thus, the assessment had already become final.33 Private respondent Savellano, on 22 February 1991, filed an Omnibus Motion moving to withdraw his previous Motion for Suspension of Proceeding since BIR Commissioner Ong had finally resolved his Motion for Reconsideration, and submitting by way of supplemental offer of evidence (1) the letter of BIR Commissioner Ong, dated 13 February 1991, informing private respondent Savellano of the action on his Motion for Reconsideration; and (2) the demand-letter of BIR Commissioner Ong to PNB, dated 16 January 1991.34 Despite the oppositions of PNOC and PNB, the CTA, in a Resolution, dated 02 May 1991, resolved to allow private respondent Savellano to withdraw his previous Motion for Suspension of Proceeding and to admit the supplementary evidence being offered by the same party.35 In its Order, dated 03 June 1991, the CTA considered the case submitted for decision as of the following day, 04 June 1991.36 On 11 June 1991, PNB appealed to the Department of Justice (DOJ) the BIR assessment, dated 16 January 1991, for deficiency withholding tax in the sum of P294,958,450.73. PNB alleged that its appeal to the DOJ was sanctioned under P.D. No. 242, which provided for the administrative settlement of disputes between government offices, agencies, and instrumentalities, including government-owned and controlled corporations.37 Three days later, on 14 June 1991, PNB filed a Motion to Suspend Proceedings before the CTA since it had a pending appeal before the DOJ.38 On 04 July 1991, PNB filed with the

CTA a Motion for Reconsideration of its Order, dated 03 June 1991, submitting the case for decision as of 04 June 1991, and prayed that the CTA hold its resolution of the case in view of PNB's appeal pending before the DOJ.39 On 17 July 1991, PNB filed a Motion to Suspend the Collection of Tax by the BIR. It alleged that despite its request for reconsideration of the deficiency withholding tax assessment, dated 16 January 1991, BIR Commissioner Ong sent another letter, dated 23 April 1991, demanding payment of the P294,958,450.73 deficiency withholding tax on the interest earnings and/or yields from PNOC's money placements. The same letter informed PNB that this was the BIR Commissioner's final decision on the matter and that the BIR Commissioner was set to issue a warrant of distraint and/or levy against PNB's deposits with the Central Bank of the Philippines. PNB further alleged that the levy and distraint of PNB's deposits, unless restrained by the CTA, would cause great and irreparable prejudice not only to PNB, a government-owned and controlled corporation, but also to the Government itself.40 Pursuant to the Order of the CTA, during the hearing on 19 July 1991,41 the parties submitted their respective Memoranda on PNB's Motion to Suspend Proceedings.42 On 20 September 1991, private respondent Savellano filed another Omnibus Motion calling the attention of the CTA to the fact that the BIR already issued, on 12 August 1991, a warrant of garnishment addressed to the Central Bank Governor and against PNB. In compliance with the said warrant, the Central Bank issued, on 23 August 1991, a debit advice against the demand deposit account of PNB with the Central Bank for the amount of P294,958,450.73, with a corresponding transfer of the same amount to the demand deposit-in-trust of BIR with the Central Bank. Since the assessment had already been enforced, PNB's Motion to Suspend Proceedings became moot and academic. Private respondent Savellano, thus, moved for the denial of PNB's Motion to Suspend Proceedings and for an order requiring BIR to deposit with the CTA the amount of P44,243,767.00 as his informer's reward, representing 15% of the deficiency withholding tax collected.43 Both PNOC and PNB opposed private respondent Savellano's Omnibus Motion, dated 20 September 1991, arguing that the DOJ already ordered the suspension of the collection of the tax deficiency. There was therefore no basis for private respondent Savellano's Motion as the same was premised on the erroneous assumption that the tax deficiency had been collected. When the DOJ denied the BIR Commissioner's Motion to Dismiss and required him to file his answer, the DOJ assumed jurisdiction over PNB's appeal, and the CTA should first suspend its proceedings to give the DOJ the opportunity to decide the validity and propriety of the tax assessment against PNB.44 The CTA, on 28 May 1992, rendered its decision, wherein it upheld its jurisdiction and disposed of the case as follows: WHEREFORE, judgment is rendered declaring the COMPROMISE AGREEMENT between the Bureau of Internal Revenue, on the one hand, and the Philippine National Oil Company and Philippine National Bank, on the other, as WITHOUT FORCE AND EFFECT;

The Commissioner of Internal Revenue is hereby ordered to ENFORCE the ASSESSMENT of January 16, 1991 against Philippine National Bank which has become final and unappealable by collecting from Philippine National Bank the deficiency withholding tax, plus interest totalling (sic) P294,958,450.73; Petitioner may be paid, upon collection of the deficiency withholding tax, the balance of his entitlement to informer's reward based on fifteen percent (15%) of the deficiency withholding total tax collected in this case or P44,243.767.00 subject to existing rules and regulations governing payment of reward to informers.45 In a Resolution, dated 16 November 1992, the CTA denied the Motions for Reconsideration filed by PNOC and PNB since they substantially raised the same issues in their previous pleadings and which had already been passed upon and resolved adversely against them.46 PNOC and PNB filed separate appeals with the Court of Appeals seeking the reversal of the CTA decision in CTA Case No. 4249, dated 28 May 1992, and the CTA Resolution in the same case, dated 16 November 1992. PNOC's appeal was docketed as CA-G.R. SP No. 29583, while PNB's appeal was CA-G.R. SP No. 29526. In both cases, the Court of Appeals affirmed the decision of the CTA. In the meantime, the Central Bank again issued on 02 September 1992 a debit advice against the demand deposit account of PNB with the Central Bank for the amount of P294,958,450.73,47 and on 15 September 1992, credited the same amount to the demand deposit account of the Treasurer of the Republic of the Philippines.48 On 04 November 1992, the Treasurer of the Republic issued a journal voucher transferring P294,958,450.73 to the account of the BIR.49 PNB, in turn, debited P294,958,450.73 from the deposit account of PNOC with PNB.50 PNOC and PNB then filed separate Petitions for Review on Certiorari with this Court, praying that the decisions of the Court of Appeals in CA-G.R. SP No. 29583 and CA-G.R. SP No. 29526, respectively, both affirming the decision of the CTA in CTA Case No. 4249, be reversed and set aside. These two Petitions were consolidated since they involved identical parties and factual background, and the resolution of related, if not exactly, the same issues. In its Petition for Review, PNOC alleged the following errors committed by the Court of Appeals in CA-G.R. SP No. 29583: 1. The Court of Appeals erred in holding that the deficiency taxes of PNOC could not be the subject of a compromise under Executive Order No. 44; and 2. The Court of Appeals erred in holding that Savellano is entitled to additional informer's reward.51 PNB, in its own Petition for Review, assailed the decision of the Court of Appeals in CAG.R. SP No. 29526, assigning the following errors:

1. Respondent Court erred in not finding that the Court of Tax Appeals lacks jurisdiction on the controversy involving BIR and PNB (both government instrumentalities) regarding the new assessment of BIR against PNB; 2. The respondent Court erred in not finding that the Court of Tax Appeals has no jurisdiction to question the compromise agreement entered into by the Commissioner of Internal Revenue; and 3. The respondent Court erred in not ruling that the Commissioner of Internal Revenue cannot unilaterally annul tax compromises validly entered into by his predecessor.52 The decisions of the Court of Appeals in CA-GR SP No. 29583 and CA-G.R. SP No. 29526, affirmed the decision of the CTA in CTA Case No. 4249. The resolution, therefore, of the assigned errors in the Court of Appeals' decisions essentially requires a review of the CTA decision itself. In consolidating the present Petitions, this Court finds that PNOC and PNB are basically questioning the (1) Jurisdiction of the CTA in CTA Case No. 4249; (2) Declaration by the CTA that the compromise agreement was without force and effect; (3) Finding of the CTA that the deficiency withholding tax assessment against PNB had already become final and unappealable and, thus, enforceable; and (4) Order of the CTA directing payment of additional informer's reward to private respondent Savellano. I Jurisdiction of the CTA A. The demand letter, dated 16 January 1991 did not constitute a new assessment against PNB. The main argument of PNB in assailing the jurisdiction of the CTA in CTA Case No. 4249 is that the BIR demand letter, dated 16 January 1991,53 should be considered as a new assessment against PNB. As a new assessment, it gave rise to a new dispute and controversy solely between the BIR and PNB that should be administratively settled or adjudicated, as provided in P.D. No. 242. This argument is without merit. The issuance by the BIR of the demand letter, dated 16 January 1991, was merely a development in the continuing effort of the BIR to collect the tax assessed against PNOC and PNB way back in 1986. BIR's first letter, dated 08 August 1986, was addressed to PNOC, requesting it to settle its tax liability. The BIR subsequently sent another letter, dated 08 October 1986, to PNB, as withholding agent, demanding payment of the tax it had failed to withhold on the interest earnings and/or yields from PNOC's money placements. PNOC wrote the BIR three succeeding letters offering to compromise its tax liability; PNB, on the other hand, did not act on the demand letter it received, dated 08 October 1986. The BIR and PNOC

eventually reached a compromise agreement on 22 June 1987. Private respondent Savellano questioned the validity of the compromise agreement because the reduced amount of tax collected from PNOC, by virtue of the compromise agreement, also proportionately reduced his informer's reward. Private respondent Savellano then requested the BIR Commissioner to review and reconsider the compromise agreement. Acting on the request of private respondent Savellano, the new BIR Commissioner declared the compromise agreement to be without basis and issued the demand letter, dated 16 January 1991, against PNB, as the withholding agent for PNOC. It is clear from the foregoing that the BIR demand letter, dated 16 January 1991, could not stand alone as a new assessment. It should always be considered in the factual context summarized above. In fact, the demand letter, dated 16 January 1991, actually referred to the withholding tax assessment first issued in 1986 and its eventual settlement through a compromise agreement. In addition, the computation of the deficiency withholding tax was based on the figures from the 1986 assessments against PNOC and PNB, and BIR no longer conducted a new audit or investigation of either PNOC and PNB before it issued the demand letter on 16 January 1991. These constant references to past events and circumstances demonstrate that the demand letter, dated 16 January 1991, was not a new assessment, but rather, the latest action taken by the BIR to collect on the tax assessments issued against PNOC and PNB in 1986. PNB argues that the demand letter, dated 16 January 1991, introduced a new controversy. We see it differently as the said demand letter presented the resolution by BIR Commissioner Ong of the previous controversy involving the compromise of the 1986 tax assessments. BIR Commissioner Ong explicitly declared therein that the compromise agreement was without legal basis, and requested PNB, as the withholding agent, to pay the amount of withholding tax still due. B. The CTA correctly retained jurisdiction over CTA Case No. 4249 by virtue of Republic Act No. 1125. Having established that the BIR demand letter, dated 16 January 1991, did not constitute a new assessment, then, there could be no basis for PNB's claim that any dispute arising from the new assessment should only be between BIR and PNB. Still proceeding from the argument that there was a new dispute between PNB and BIR, PNB sought the suspension of the proceedings in CTA Case No. 4249, after it contested the deficiency withholding tax assessment against it and the demand for payment thereof before the DOJ, pursuant to P.D. No. 242. The CTA, however, correctly sustained its jurisdiction and continued the proceedings in CTA Case No. 4249; and, in effect, rejected DOJ's claim of jurisdiction to administratively settle or adjudicate BIR's assessment against PNB.

The CTA assumed jurisdiction over the Petition for Review filed by private respondent Savellano based on the following provision of Rep. Act No. 1125, the Act creating the Court of Tax Appeals: SECTION 7. Jurisdiction. The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal, as herein provided (1) Decisions of the Collector of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the National Internal Revenue Code or other law or part of law administered by the Bureau of Internal Revenue; . . . (Underscoring ours.) In his Petition before the CTA, private respondent Savellano requested a review of the decisions of then BIR Commissioner Tan to enter into a compromise agreement with PNOC and to reject his claim for additional informer's reward. He submitted before the CTA questions of law involving the interpretation and application of (1) E.O. No. 44, and its implementing rules and regulations, which authorized the BIR Commissioner to compromise delinquent accounts and disputed assessments pending as of 31 December 1985; and (2) Section 316(1) of the National Internal Revenue Code of 1977 (NIRC of 1977), as amended, which granted to the informer a reward equivalent to 15% of the actual amount recovered or collected by the BIR.54 These should undoubtedly be considered as matters arising from the NIRC and other laws being administered by the BIR, thus, appealable to the CTA under Section 7(1) of Rep. Act No. 1125. PNB, however, insists on the jurisdiction of the DOJ over its appeal of the deficiency withholding tax assessment by virtue of P.D. No. 242. Provisions on jurisdiction of P.D. No. 242 read: SECTION 1. Provisions of law to the contrary notwithstanding, all disputes, claims and controversies solely between or among the departments, bureaus, offices, agencies, and instrumentalities of the National Government, including government-owned or controlled corporations, but excluding constitutional offices or agencies, arising from the interpretation and application of statutes, contracts or agreements, shall henceforth be administratively settled or adjudicated as provided hereinafter; Provided, That this shall not apply to cases already pending in court at the time of the effectivity of this decree. SECTION 2. In all cases involving only questions of law, the same shall be submitted to and settled or adjudicated by the Secretary of Justice, as Attorney General and ex officio legal adviser of all government-owned or controlled corporations and entities, in consonance with Section 83 of the Revised Administrative Code. His ruling or determination of the question in each case shall be conclusive and binding upon all the parties concerned. SECTION 3. Cases involving mixed questions of law and of fact or only factual issues shall be submitted to and settled or adjudicated by:

(a) The Solicitor General, with respect to disputes or claims controversies between or among the departments, bureaus, offices and other agencies of the National Government; (b) The Government Corporate Counsel, with respect to disputes or claims or controversies between or among government-owned or controlled corporations or entities being served by the Office of the Government Corporate Counsel; and (c) The Secretary of Justice, with respect to all other disputes or claims or controversies which do not fall under the categories mentioned in paragraphs (a) and (b). The PNB and DOJ are of the same position that P.D. No. 242, the more recent law, repealed Section 7(1) of Rep. Act No. 1125,55 based on the pronouncement of this Court in Development Bank of the Philippines v. Court of Appeals, et al., 56] quoted below: The Court expresses its entire agreement with the conclusion of the Court of Appeals and the basic premises thereof that there is an "irreconcilable repugnancy between Section 7(2) of R.A. No. 1125 and P.D. No. 242," and hence, that the later enactment (P.D. No. 242), being the latest expression of the legislative will, should prevail over the earlier. In the said case, it was expressly declared that P.D. No. 242 repealed Section 7(2) of Rep. Act No. 1125, which provides for the exclusive appellate jurisdiction of the CTA over decisions of the Commissioner of Customs. PNB contends that P.D. No. 242 should be deemed to have likewise repealed Section 7(1) of Rep. Act No. 1125, which provide for the exclusive appellate jurisdiction of the CTA over decisions of the BIR Commissioner.57 After re-examining the provisions on jurisdiction of Rep. Act No. 1125 and P.D. No. 242, this Court finds itself in disagreement with the pronouncement made in Development Bank of the Philippines v. Court of Appeals, et al.,58 and refers to the earlier case of Lichauco & Company, Inc. v. Apostol, et al.,59 for the guidelines in determining the relation between the two statutes in question, to wit: The cases relating to the subject of repeal by implication all proceed on the assumption that if the act of later date clearly reveals an intention on the part of the law making power to abrogate the prior law, this intention must be given effect; but there must always be a sufficient revelation of this intention, and it has become an unbending rule of statutory construction that the intention to repeal a former law will not be imputed to the Legislature when it appears that the two statutes, or provisions, with reference to which the question arises bear to each other the relation of general to special. (Underscoring ours.) When there appears to be an inconsistency or conflict between two statutes and one of the statutes is a general law, while the other is a special law, then repeal by implication is not the primary rule applicable. The following rule should principally govern instead:

Specific legislation upon a particular subject is not affected by a general law upon the same subject unless it clearly appears that the provisions of the two laws are so repugnant that the legislators must have intended by the later to modify or repeal the earlier legislation. The special act and the general law must stand together, the one as the law of the particular subject and the other as the general law of the land. (Ex Parte United States, 226 U. S., 420; 57 L. ed., 281; Ex Parte Crow Dog, 109 U. S., 556; 27 L. ed., 1030; Partee vs. St. Louis & S. F. R. Co., 204 Fed. Rep., 970.) Where there are two acts or provisions, one of which is special and particular, and certainly includes the matter in question, and the other general, which, if standing alone, would include the same matter and thus conflict with the special act or provision, the special must be taken as intended to constitute an exception to the general act or provision, especially when such general and special acts or provisions are contemporaneous, as the Legislature is not to be presumed to have intended a conflict. (Crane v. Reeder and Reeder, 22 Mich., 322, 334; University of Utah vs. Richards, 77 Am. St. Rep., 928.)60 It has, thus, become an established rule of statutory construction that between a general law and a special law, the special law prevails Generalia specialibus non derogant.61 Sustained herein is the contention of private respondent Savellano that P.D. No. 242 is a general law that deals with administrative settlement or adjudication of disputes, claims and controversies between or among government offices, agencies and instrumentalities, including government-owned or controlled corporations. Its coverage is broad and sweeping, encompassing all disputes, claims and controversies. It has been incorporated as Chapter 14, Book IV of E.O. No. 292, otherwise known as the Revised Administrative Code of the Philippines.62 On the other hand, Rep. Act No. 1125 is a special law63 dealing with a specific subject matter the creation of the CTA, which shall exercise exclusive appellate jurisdiction over the tax disputes and controversies enumerated therein. Following the rule on statutory construction involving a general and a special law previously discussed, then P.D. No. 242 should not affect Rep. Act No. 1125. Rep. Act No. 1125, specifically Section 7 thereof on the jurisdiction of the CTA, constitutes an exception to P.D. No. 242. Disputes, claims and controversies, falling under Section 7 of Rep. Act No. 1125, even though solely among government offices, agencies, and instrumentalities, including government-owned and controlled corporations, remain in the exclusive appellate jurisdiction of the CTA. Such a construction resolves the alleged inconsistency or conflict between the two statutes, and the fact that P.D. No. 242 is the more recent law is no longer significant. Even if, for the sake of argument, that P.D. No. 242 should prevail over Rep. Act No. 1125, the present dispute would still not be covered by P.D. No. 242. Section 1 of P.D. No. 242 explicitly provides that only disputes, claims and controversies solely between or among departments, bureaus, offices, agencies, and instrumentalities of the National Government, including constitutional offices or agencies, as well as government-owned and controlled corporations, shall be administratively settled or adjudicated. While the BIR is obviously a government bureau, and both PNOC and PNB are government-owned and controlled corporations, respondent Savellano is a private citizen. His standing in

the controversy could not be lightly brushed aside. It was private respondent Savellano who gave the BIR the information that resulted in the investigation of PNOC and PNB; who requested the BIR Commissioner to reconsider the compromise agreement in question; and who initiated CTA Case No. 4249 by filing a Petition for Review. In Bay View Hotel, Inc. v. Manila Hotel Workers' Union-PTGWO, et al.,64] this Court upheld the jurisdiction of the Court of Industrial Relations over the ordinary courts and justified its decision in the following manner: We are unprepared to break away from the teaching in the cases just adverted to. To draw a tenuous jurisdictional line is to undermine stability in labor litigations. A piecemeal resort to one court and another gives rise to multiplicity of suits. To force the employees to shuttle from one court to another to secure full redress is a situation gravely prejudicial. The time to be lost, effort wasted, anxiety augmented, additional expense incurred these are considerations which weigh heavily against split jurisdiction. Indeed, it is more in keeping with orderly administration of justice that all the causes of action here "be cognizable and heard by only one court: the Court of Industrial Relations." The same justification is used in the present case to reject DOJ's jurisdiction over the BIR and PNB, to the exclusion of the other parties. The rights of all four parties in CTA Case No. 4249, namely the BIR, as the tax collector; PNOC, the taxpayer; PNB, the withholding agent; and private respondent Savellano, the informer claiming his reward; arose from the same factual background and were so closely interrelated, that a pronouncement as to one would definitely have repercussions on the others. The ends of justice were best served when the CTA continued to exercise its jurisdiction over CTA Case No. 4249. The CTA, which had assumed jurisdiction over all the parties to the controversy, could render a comprehensive resolution of the issues raised and grant complete relief to the parties. II Validity of the Compromise Agreement A. PNOC could not apply for a compromise under E.O. No. 44 because its tax liability was not a delinquent account or a disputed assessment as of 31 December 1985. PNOC and PNB, on different grounds, dispute the decision of the CTA in CTA Case No. 4249 declaring the compromise agreement between BIR and PNOC without force and effect. PNOC asserts that the compromise agreement was in accordance with E.O. No. 44, and its implementing rules and regulations, and should be binding upon the parties thereto. E.O. No. 44 granted the BIR Commissioner or his duly authorized representatives the power to compromise any disputed assessment or delinquent account pending as of 31 December 1985, upon the payment of an amount equal to 30% of the basic tax assessed;

in which case, the corresponding interests and penalties shall be condoned. E.O. No. 44 took effect on 04 September 1986 and remained effective until 31 March 1987. The disputed assessments or delinquent accounts that the BIR Commissioner could compromise under E.O. No. 44 are defined under Revenue Regulation (RR) No. 17-86, as follows: a) Delinquent account Refers to the amount of tax due on or before December 31, 1985 from a taxpayer who failed to pay the same within the time prescribed for its payment arising from (1) a self assessed tax, whether or not a tax return was filed, or (2) a deficiency assessment issued by the BIR which has become final and executory. Where no return was filed, the taxpayer shall be considered delinquent as of the time the tax on such return was due, and in availing of the compromise, a tax return shall be filed as a basis for computing the amount of compromise to be paid. b) Disputed assessment refers to a tax assessment disputed or protested on or before December 31, 1985 under any of the following categories: 1) if the same is administratively protested within thirty (30) days from the date the taxpayer received the assessment, or 2.) if the decision of the BIR on the taxpayer's administrative protest is appealed by the taxpayer before an appropriate court. PNOC's tax liability could not be considered a delinquent account since (1) it was not self-assessed, because the BIR conducted an investigation and assessment of PNOC and PNB after obtaining information regarding the non-withholding of tax from private respondent Savellano; and (2) the demand letter, issued against it on 08 August 1986, could not have been a deficiency assessment that became final and executory by 31 December 1985. The dissenting opinion contends, however, that the tax liability of PNOC constitutes a self-assessed tax, and is, therefore, a delinquent account as of 31 December 1985, qualifying for a compromise under E.O. No. 44. It anchors its argument on the declaration made by this Court in Tupaz v. Ulep,65 that internal revenue taxes are selfassessing. It is not denied herein that the self-assessing system governs Philippine internal revenue taxes. The dissenting opinion itself defines self-assessed tax as, "a tax that the taxpayer himself assesses or computes and pays to the taxing authority." Clearly, such a system imposes upon the taxpayer the obligation to conduct an assessment of himself so he could determine and declare the amount to be used as tax basis, any deductions therefrom, and finally, the tax due.

E.O. No. 44 covers self-assessed tax, whether or not a tax return was filed. The phrase "whether or not a tax return was filed" only refers to the compliance by the taxpayer with the obligation to file a return on the dates specified by law, but it does not do away with the requisite that the tax must be self-assessed in order for the taxpayer to avail of the compromise. The second paragraph of Section 2(a) of RR No. 17-86 expressly commands, and still imposes upon the taxpayer, who is availing of the compromise under E.O. No. 44, and who has not previously filed any return, the duty to conduct selfassessment by filing a tax return that would be used as the basis for computing the amount of compromise to be paid. Section 2(a)(1) of RR No. 17-86 thus involves a situation wherein a taxpayer, after conducting a self-assessment, discovers or becomes aware that he had failed to pay a tax due on or before 31 December 1985, regardless of whether he had previously filed a return to reflect such tax; voluntarily comes forward and admits to the BIR his tax liability; and applies for a compromise thereof. In case the taxpayer has not previously filed any return, he must fill out such a return reflecting therein his own declaration of the taxable amount and computation of the tax due. The compromise payment shall be computed based on the amount reflected in the tax return submitted by the taxpayer himself. Neither PNOC nor PNB, the taxpayer and the withholding agent, respectively, conducted self-assessment in this case. There is no showing that in the absence of the tax assessment issued by the BIR against them, that PNOC and/or PNB would have voluntarily admitted their tax liabilities, already amounting to P385,961,580.82, as of 15 November 1986, and would have offered to compromise the same. In fact, both PNOC and PNB were conspicuously silent about their tax liabilities until they were assessed thereon. Any attempt by PNOC and PNB to assess and declare by themselves their tax liabilities had already been overtaken by the BIR's conduct of its audit and investigation and subsequent issuance of the assessments, dated 08 August 1986 and 08 October 1986, against PNOC and PNB, respectively. The said tax assessments, uncontested and undisputed, presented the results of the BIR audit and investigation and the computation of the total amount of tax liabilities of PNOC and PNB. They should be controlling in this case, and should not be so easily and conveniently ignored and set aside. It would be a contradiction to claim that the tax liabilities of PNOC and PNB are self-assessed and, at the same time, BIR-assessed; when it is clear and simple that it had been the BIR that conducted the assessment and determined the tax liabilities of PNOC and PNB. That the BIR-assessed tax liability should be differentiated from a self-assessed one, is supported by the provisions of RR No. 17-86 on the basis for computing the amount of compromise payment. Note that where tax liabilities are self-assessed, the compromise payment shall be computed based on the tax return filed by the taxpayer.66 On the other hand, where the BIR already issued an assessment, the compromise payment shall be computed based on the tax due on the assessment notice.67 For instances where the BIR had already issued an assessment against the taxpayer, the tax liability could still be compromised under E.O. No. 44 only if: (1) the assessment had been final and executory on or before 31 December 1985 and, therefore, considered a

delinquent account as of said date;68 or (2) the assessment had been disputed or protested on or before 31 December 1985.69 RMO No. 39-86, which provides the guidelines for the implementation of E.O. No. 44, does mention different types of assessments that may be compromised under said statute (i.e., jeopardy assessments, arbitrary assessments, and tax assessments of doubtful validity). RMO No. 39-86 may not have expressly stated any qualification for these particular types of assessments; nonetheless, E.O. No. 44 specifically refers only to assessments that were delinquent or disputed as of 31 December 1985. E.O. No. 44 and all BIR issuances to implement said statute should be interpreted so that they are harmonized and consistent with each other. Accordingly, this Court finds that the different types of assessments mentioned in RMO No. 39-86 would still have to qualify as delinquent accounts or disputed assessments as of 31 Dcember 1985, so that they could be compromised under E.O. No. 44. The BIR had first written to PNOC on 08 August 1986, demanding payment of the income tax on the interest earnings and/or yields from PNOC's money placements with PNB from 15 October 1984 to 15 October 1986. This demand letter could be regarded as the first assessment notice against PNOC. Such an assessment, issued only on 08 August 1986, could not have been final and executory as of 31 December 1985 so as to constitute a delinquent account. Neither was the assessment against PNOC an assessment that could have been disputed or protested on or before 31 December 1985, having been issued on a later date. Given that PNOC's tax liability did not constitute a delinquent account or a disputed assessment as of 31 December 1985, then it could not be compromised under E.O. No. 44. The assessment against PNOC, instead, was more appropriately covered by Revenue Memorandum Circular (RMC) No. 31-86. RMC No. 31-86 clarifies the scope of availment of the tax amnesty under E.O. No. 4170 and compromise payments on delinquent accounts and disputed assessments under E.O. No. 44. The third paragraph of RMC No. 31-86 reads: [T]axpayers against whom assessments had been issued from January 1 to August 21, 1986 may settle their tax liabilities by way of compromise under Section 246 of the Tax Code as amended by paying 30% of the basic assessment excluding surcharge, interest, penalties and other increments thereto. The above-quoted paragraph supports the position that only assessments that were disputed or that were final and executory by 31 December 1985 could be the subject of a compromise under E.O. No. 44. Assessments issued between 01 January to 21 August 1986 could still be compromised by payment of 30% of the basic tax assessed, not anymore pursuant to E.O. No. 44, but pursuant to Section 246 of the NIRC of 1977, as amended.

Section 246 of the NIRC of 1977, as amended, granted the BIR Commissioner the authority to compromise the payment of any internal revenue tax under the following circumstances: (1) there exists a reasonable doubt as to the validity of the claim against the taxpayer; or (2) the financial position of the taxpayer demonstrates a clear inability to pay the assessed tax.71 There are substantial differences in circumstances under which compromises may be granted under Section 246 of the NIRC of 1977, as amended, and E.O. No. 44. Although PNOC and PNB have extensively argued their entitlement to compromise under E.O. No. 44, neither of them has alleged, much less, has presented any evidence to prove that it may compromise its tax liability under Section 246 of the NIRC of 1977, as amended. B. The tax liability of PNB as withholding agent also did not qualify for compromise under E.O. No. 44. Before proceeding any further, this Court reconsiders the conclusion made by BIR Commissioner Ong in his demand letter, dated 16 January 1991, that the compromise settlement executed between the BIR and PNOC was without legal basis because withholding taxes were not actually taxes that could be compromised, but a penalty for PNB's failure to withhold and for which it was made personally liable. E.O. No. 44 covers disputed or delinquency cases where the person assessed was himself the taxpayer rather than a mere agent.72 RMO No. 39-86 expressly allows a withholding agent, who failed to withhold the required tax because of neglect, ignorance of the law, or his belief that he was not required by law to withhold tax, to apply for a compromise settlement of his withholding tax liability under E.O. No. 44. A withholding agent, in such a situation, may compromise the withholding tax assessment against him precisely because he is being held directly accountable for the tax.73 RMO No. 39-86 distinguishes between the withholding agent in the foregoing situation from the withholding agent who withheld the tax but failed to remit the amount to the Government. A withholding agent in the latter situation is the one disqualified from applying for a compromise settlement because he is being made accountable as an agent, who held funds in trust for the Government.74 Both situations, however, involve withholding agents. The right to compromise under these provisions should have been claimed by PNB, the withholding agent for PNOC. The BIR held PNB personally accountable for its failure to withhold the tax on the interest earnings and/or yields from PNOC's money placements with PNB. The BIR sent a demand letter, dated 08 October 1986, addressed directly to PNB, for payment of the withholding tax assessed against it, but PNB failed to take any action on the said demand letter. Yet, all the offers to compromise the withholding tax assessment came from PNOC and PNOC did not claim that it made the offers to compromise on behalf of PNB. Moreover, the general requirement of E.O. No. 44 still applies to withholding agents that the withholding tax liability must either be a delinquent account or a disputed assessment as of 31 December 1985 to qualify for compromise settlement. The demand letter against PNB, which also served as its assessment notice, had been issued on 08

October 1986 or two months later than PNOC's. PNB's withholding tax liability could not be considered a delinquent account or a disputed assessment, as defined under RR No. 17-86, for the same reasons that PNOC's tax liability did not constitute as such. The tax liability of PNB, therefore, was also not eligible for compromise settlement under E.O. No. 44. C. Even assuming arguendo that PNOC and/or PNB qualified under E.O. No. 44, their application for compromise was filed beyond the deadline. Despite already ruling that the tax liabilities of PNOC and PNB could not be compromised under E.O. No. 44, this Court still deems it necessary to discuss the finding of the CTA that the compromise agreement had been filed beyond the effectivity of E.O. No. 44, since the CTA made a declaration in relation thereto that paragraph 2 of RMO No. 39-86 was null and void for unduly extending the effectivity of E.O. No. 44. Paragraph 2 of RMO No. 39-86 provides that: 2. Period for availment. Filing of application for compromise settlement under the said law shall be effective only until March 31, 1987. Applications filed on or before this date shall be valid even if the payment or payments of the compromise amount shall be made after the said date, subject, however, to the provisions of Executive Order No. 44 and its implementing Revenue Regulations No. 17-86. It is well-settled in this jurisdiction that administrative authorities are vested with the power to make rules and regulations because it is impracticable for the lawmakers to provide general regulations for various and varying details of management. The interpretation given to a rule or regulation by those charged with its execution is entitled to the greatest weight by the court construing such rule or regulation, and such interpretation will be followed unless it appears to be clearly unreasonable or arbitrary.75 RMO No. 39-86, particularly paragraph 2 thereof, does not appear to be unreasonable or arbitrary. It does not unduly expand the coverage of E.O. No. 44 by merely providing that applications for compromise filed until 31 March 1987 are still valid, even if payment of the compromised amount is made on a later date. It cannot be expected that the compromise allowed under E.O. No. 44 can be automatically granted upon mere filing of the application by the taxpayer. Irrefutably, the applications would still have to be processed by the BIR to determine compliance with the requirements of E.O. No. 44. As it is uncontested that a taxpayer could still file an application for compromise on 31 March 1987, the very last day of effectivity of E.O. No. 44, it would be unreasonable to expect the BIR to process and approve the taxpayer's application within the same date considering the volume of applications filed and pending approval, plus the other matters the BIR personnel would also have to attend to. Thus, RMO No. 39-86 merely assures the taxpayers that their applications would still be processed and could be approved on a later date. Payment, of course, shall be made

by the taxpayer only after his application had been approved and the compromised amount had been determined. Given that paragraph 2 of RMO No. 39-86 is valid, the next question that needs to be addressed is whether PNOC had been able to submit an application for compromise on or before 31 March 1987 in compliance thereof. Although the compromise agreement was executed only on 22 June 1987, PNOC is claiming that it had already written a letter to the BIR, as early as 25 September 1986, offering to compromise its tax liability, and that the said letter should be considered as PNOC's application for compromise settlement. A perusal of PNOC's letter, dated 25 September 1986, would reveal, however, that the terms of its proposed compromise did not conform to those authorized by E.O. No. 44. PNOC did not offer to pay outright 30% of the basic tax assessed against it as required by E.O. No. 44; and instead, made the following offer: (2) That PNOC be permitted to set-off its foregoing mentioned tax liability of P304,419,396.83 against the tax refund/credit claims of the National Power Corporation (NPC) for specific taxes on fuel oil sold to NPC totaling P335,259,450.21, which tax refunds/credits are actually receivable accounts of our Company from NPC.76 PNOC reiterated the offer in its letter to the BIR, dated 14 October 1986.77 The BIR, in its letters to PNOC, dated 8 October 198678 and 11 November 1986,79 consistently denied PNOC's offer because the claim for tax refund/credit of NAPOCOR was still under process, so that the offer to set-off such claim against PNOC's tax liability was premature. Furthermore, E.O. No. 44 does not contemplate compromise payment by set-off of a tax liability against a claim for tax refund/credit. Compromise under E.O. No. 44 may be availed of only in the following circumstances: SEC. 3. Who may avail. Any person, natural or juridical, may settle thru a compromise any delinquent account or disputed assessment which has been due as of December 31, 1985, by paying an amount equal to thirty percent (30%) of the basic tax assessed.

SEC. 6. Mode of Payment. Upon acceptance of the proposed compromise, the amount offered as compromise in complete settlement of the delinquent account shall be paid immediately in cash or manager's certified check. Deferred or staggered payments of compromise amounts over P50,000 may be considered on a case to case basis in accordance with the extant regulations of the Bureau upon approval of the Commissioner of Internal Revenue, his Deputy or Assistant as delineated in their respective jurisdictions.

If the Compromise amount is not paid as required herein, the compromise agreement is automatically nullified and the delinquent account reverted to the original amount plus the statutory increments, which shall be collected thru the summary and/or judicial processes provided by law. E.O. No. 44 is not for the benefit of the taxpayer alone, who can extinguish his tax liability by paying the compromise amount equivalent to 30% of the basic tax. It also benefits the Government by making collection of delinquent accounts and disputed assessments simpler, easier, and faster. Payment of the compromise amount must be made immediately, in cash or in manager's check. Although deferred or staggered payments may be allowed on a case-to-case basis, the mode of payment remains unchanged, and must still be made either in cash or in manager's check. PNOC's offer to set-off was obviously made to avoid actual cash-out by the company. The offer defeated the purpose of E.O. No. 44 because it would not only delay collection, but more importantly, it would not guarantee collection. First of all, BIR's collection was contingent on whether the claim for tax refund/credit of NAPOCOR would be subsequently granted. Second, collection could not be made immediately and would have to wait until the resolution of the claim for tax refund/credit of NAPOCOR. Third, there is no proof, other than the bare allegation of PNOC, that NAPOCOR's claim for tax refund/credit is an account receivable of PNOC. A possible dispute between NAPOCOR and PNOC as to the proceeds of the tax refund/credit would only delay collection by the BIR even further. It was only in its letter, dated 09 June 1987, that PNOC actually offered to compromise its tax liability in accordance with the terms and circumstances prescribed by E.O. No. 44 and its implementing rules and regulations, by stating that: Consequently, we reiterate our previous request for compromise under E.O. No. 44, and convey our preparedness to settle the subject tax assessment liability by payment of the compromise amount of P91,003,129.89, representing thirty percent (30%) of the basic tax assessment of P303,343,766.29, in accordance with E.O. No. 44 and its implementing BIR Revenue Memorandum Order No. 39-86.80 PNOC claimed in the same letter that it had previously requested for a compromise under the terms of E.O. No. 44, but this Court could not find evidence of such previous request. There are stark and substantial differences in the terms of PNOC's offer to compromise in its earlier letters, dated 25 September 1986 and 14 October 1986 (set-off of the entire amount of its tax liability against the claim for tax refund/credit of NAPOCOR), to those in its letter, dated 09 June 1987 (payment of the compromise amount representing 30% of the basic tax assessed against it), making it difficult for this Court to accept that the letter of 09 June 1987 merely reiterated PNOC's offer to compromise in its earlier letters. This Court likewise cannot give credence to PNOC's allegation that beginning 25 September 1986, the date of its first letter to the BIR, there were continuing negotiations between PNOC and BIR that culminated in the compromise agreement on 22 June 1987.

Aside from the exchange of letters recounted in the preceding paragraphs, both PNOC and PNB failed to present any other proof of the supposed negotiations. After the BIR denied the second offer of PNOC to set-off its tax liability against the claim for tax refund/credit of NAPOCOR in a letter, dated 11 November 1986, there is no other evidence of subsequent communication between PNOC and the BIR. It was only after almost seven months, or on 09 June 1987, that PNOC again wrote a letter to the BIR, this time offering to pay the compromise amount of 30% of the basic tax assessed against. This letter was already filed beyond 31 March 1987, after the lapse of the effectivity of E.O. No. 44 and the deadline for filing applications for compromise under the said statute. Evidence of meetings between PNOC and the BIR, or any other form of communication, wherein the parties presented their offer and counter-offer to the other, would have been very valuable in explaining and supporting BIR Commissioner Tan's decision to accept PNOC's third offer to compromise after denying the previous two. The absence of such evidence herein negates PNOC's claim of actual negotiations with the BIR. Therefore, even assuming arguendo that the tax liabilities of PNOC and PNB qualify as delinquent accounts or disputed assessments as of 31 December 1985, the application for compromise filed by PNOC on 09 June 1987, and accepted by then BIR Commissioner Tan on 22 June 1987, was still filed way beyond 31 March 1987, the expiration date of the effectivity of E.O. No. 44 and the deadline for filing of applications for compromise under RMO No. 39-86. D. The BIR Commissioner's discretionary authority to enter into a compromise agreement is not absolute and the CTA may inquire into allegations of abuse thereof. The foregoing discussion supports the CTA's conclusion that the compromise agreement between PNOC and the BIR was indeed without legal basis. Despite this lack of legal support for the execution of the said compromise agreement, PNB argues that the CTA still had no jurisdiction to review and set aside the compromise agreement. It contends that the authority to compromise is purely discretionary on the BIR Commissioner and the courts cannot interfere with his exercise thereof. It is generally true that purely administrative and discretionary functions may not be interfered with by the courts; but when the exercise of such functions by the administrative officer is tainted by a failure to abide by the command of the law, then it is incumbent on the courts to set matters right, with this Court having the last say on the matter.81 The manner by which BIR Commissioner Tan exercised his discretionary power to enter into a compromise was brought under the scrutiny of the CTA amidst allegations of "grave abuse of discretion and/or whimsical exercise of jurisdiction."82 The discretionary power of the BIR Commissioner to enter into compromises cannot be superior over the power of judicial review by the courts.

The discretionary authority to compromise granted to the BIR Commissioner is never meant to be absolute, uncontrolled and unrestrained. No such unlimited power may be validly granted to any officer of the government, except perhaps in cases of national emergency.83 In this case, the BIR Commissioner's authority to compromise, whether under E.O. No. 44 or Section 246 of the NIRC of 1977, as amended, can only be exercised under certain circumstances specifically identified in said statutes. The BIR Commissioner would have to exercise his discretion within the parameters set by the law, and in case he abuses his discretion, the CTA may correct such abuse if the matter is appealed to them.84 Petitioners PNOC and PNB both contend that BIR Commissioner Tan merely exercised his authority to enter into a compromise specially granted by E.O. No. 44. Since this Court has already made a determination that the compromise agreement did not qualify under E.O. No. 44, BIR Commissioner Tan's decision to agree to the compromise should have been reviewed in the light of the general authority granted to the BIR Commissioner to compromise taxes under Section 246 of the NIRC of 1977, as amended. Then again, petitioners PNOC and PNB failed to allege, much less present evidence, that BIR Commissioner Tan acted in accordance with Section 246 of the NIRC of 1977, as amended, when he entered into the compromise agreement with PNOC. E. The CTA may set aside a compromise agreement that is contrary to law and public policy. PNB also asserts that the CTA had no jurisdiction to set aside a compromise agreement entered into in good faith. It relies on the decision of this Court in Republic v. Sandiganbayan85 that a compromise agreement cannot be set aside merely because it is too one-sided. A compromise agreement should be respected by the courts as the res judicata between the parties thereto. This Court, though, finds that there are substantial differences in the factual background of Republic v. Sandiganbayan and the present case. The compromise agreement executed between the Presidential Commission on Good Government (PCGG) and Roberto S. Benedicto in Republic v. Sandiganbayan was judicially approved by the Sandiganbayan. The Sandiganbayan had ample opportunity to examine the validity of the compromise agreement since two years elapsed from the time the agreement was executed up to the time it was judicially approved. This Court even stated in the said case that, "We are not dealing with the usual compromise agreement perfunctorily submitted to a court and approved as a matter of course. The PCGG-Benedicto agreement was thoroughly and, at times, disputatiously discussed before the respondent court. There could be no deception or misrepresentation foisted on either the PCGG or the Sandiganbayan."86 In addition, the new PCGG Chairman originally prayed for the re-negotiation of the compromise agreement so that it could be more just, fair, and equitable, an action considered by this Court as an implied admission that the agreement was not contrary to law, public policy or morals nor was there any circumstance which had vitiated consent.87

The above-mentioned circumstances strongly supported the validity of the compromise agreement in Republic v. Sandiganbayan, which was why this Court refused to set it aside. Unfortunately for the petitioners in the present case, the same cannot be said herein. The Court of Appeals, in upholding the jurisdiction of the CTA to set aside the compromise agreement, ruled that: We are unable to accept petitioner's submissions. Its formulation of the issues on CIR and CTA's lack of jurisdiction to disturb a compromise agreement presupposes a compromise agreement validly entered into by the CIR and not, when as in this case, it was indubitably shown that the supposed compromise agreement is without legal support. In case of arbitrary or capricious exercise by the Commissioner or if the proceedings were fatally defective, the compromise can be attacked and reversed through the judicial process (Meralco Securities Corporation v. Savellano, 117 SCRA 805, 812 [1982]; Sarah E. Ramsay, et. al. v. U.S. 21 Ct. C1 443, aff'd 120 U.S. 214, 30 L. Ed. 582; Tyson v. U.S., 39 F. Supp. 135 cited in page 18 of decision) .88 Although the general rule is that compromises are to be favored, and that compromises entered into in good faith cannot be set aside,89 this rule is not without qualification. A court may still reject a compromise or settlement when it is repugnant to law, morals, good customs, public order, or public policy.90 The compromise agreement between the BIR and PNOC was contrary to law having been entered into by BIR Commissioner Tan in excess or in abuse of the authority granted to him by legislation. E.O. No. 44 and the NIRC of 1977, as amended, had identified the situations wherein the BIR Commissioner may compromise tax liabilities, and none of these situations existed in this case. The compromise, moreover, was contrary to public policy. The primary duty of the BIR is to collect taxes, since taxes are the lifeblood of the Government and their prompt and certain availability are imperious needs.91 In the present case, however, BIR Commissioner Tan, by entering into the compromise agreement that was bereft of any legal basis, would have caused the Government to lose almost P300 million in tax revenues and would have deprived the Government of much needed monetary resources. Allegations of good faith and previous execution of the terms of the compromise agreement on the part of PNOC would not be enough for this Court to disregard the demands of law and public policy. Compromise may be the favored method to settle disputes, but when it involves taxes, it may be subject to closer scrutiny by the courts. A compromise agreement involving taxes would affect not just the taxpayer and the BIR, but also the whole nation, the ultimate beneficiary of the tax revenues collected. F. The Government cannot be estopped from collecting taxes by the mistake, negligence, or omission of its agents.

The new BIR Commissioner, Commissioner Ong, had acted well within his powers when he set aside the compromise agreement, dated 22 June 1987, after finding that the said compromise agreement was without legal basis. When he took over from his predecessor, there was still a pending motion for reconsideration of the said compromise agreement, filed by private respondent Savellano on 24 March 1988. To resolve the said motion, he reviewed the compromise agreement and, thereafter, came upon the conclusion that it did not comply with E.O. No. 44 and its implementing rules and regulations. It had been declared by this Court in Hilado v. Collector of Internal Revenue, et al.,92 that an administrative officer, such as the BIR Commissioner, may revoke, repeal or abrogate the acts or previous rulings of his predecessor in office. The construction of a statute by those administering it is not binding on their successors if, thereafter, the latter becomes satisfied that a different construction should be given. It is evident in this case that the new BIR Commissioner, Commissioner Ong, construed E.O. No. 44 and its implementing rules and regulations differently from that of his predecessor, former Commissioner Tan, which led to Commissioner Ong's revocation of the BIR approval of the compromise agreement, dated 22 June 1987. Such a revocation was only proper considering that the former BIR Commissioner's decision to approve the said compromise agreement was based on the erroneous construction of the law (i.e., E.O. No. 44 and its implementing rules and regulations) and should not give rise to any vested right on PNOC.93 Furthermore, approval of the compromise agreement and acceptance of the compromise payment by his predecessor cannot estop BIR Commissioner Ong from setting aside the compromise agreement, dated 22 June 1987, for lack of legal basis; and from demanding payment of the deficiency withholding tax from PNB. As a general rule, the Government cannot be estopped from collecting taxes by the mistake, negligence, or omission of its agents94 because: . . . Upon taxation depends the Government ability to serve the people for whose benefit taxes are collected. To safeguard such interest, neglect or omission of government officials entrusted with the collection of taxes should not be allowed to bring harm or detriment to the people, in the same manner as private persons may be made to suffer individually on account of his own negligence, the presumption being that they take good care of their personal affairs. This should not hold true to government officials with respect to matters not of their own personal concern. This is the philosophy behind the government's exception, as a general rule, from the operation of the principle of estoppel. (Republic vs. Caballero, L-27437, September 30, 1977, 79 SCRA 177; Manila Lodge No. 761, Benevolent and Protective Order of the Elks, Inc. vs. Court of Appeals, L-41001, September 30, 1976, 73 SCRA 162; Sy vs. Central Bank of the Philippines, L-41480, April 30, 1976, 70 SCRA 571; Balmaceda vs. Corominas & Co., Inc., 66 SCRA 553; Auyong Hian vs. Court of Tax Appeals, 59 SCRA 110; Republic vs. Philippine Rabbit Bus Lines, Inc., 66 SCRA 553; Republic vs. Philippine Long Distance Telephone Company, L-18841, January 27, 1969, 26 SCRA 620; Zamora vs. Court of Tax Appeals, L-23272, November 26, 1970, 36

SCRA 77; E. Rodriguez, Inc. vs. Collector of Internal Revenue, L-23041, July 31, 1969, 28 SCRA 119).95 III Finality of the Tax Assessment A. The issue on whether the BIR complied with the notice requirements under RR No. 12-85 is raised for the first time on appeal and should not be given due course. PNB, in another effort to block the collection of the deficiency withholding tax, this time raises doubts as to the validity of the deficiency withholding tax assessment issued against it on 16 January 1991. It submits that the BIR failed to comply with the notice requirements set forth in RR No. 12-85.96 Whether or not the BIR complied with the notice requirements of RR No. 12-85 is a new issue raised by PNB only before this Court. Such a question has not been ventilated before the lower courts. For an appellate tribunal to consider a legal question, it should have been raised in the court below.97 If raised earlier, the matter would have been seriously delved into by the CTA and the Court of Appeals.98 B. The assessment against PNB had become final and unappealable, and therefore, enforceable. The CTA and the Court of Appeals declared as final and unappealable, and thus, enforceable, the assessment against PNB, dated 16 January 1991, since PNB failed to protest said assessment within the 30-day prescribed period. This Court, though, finds that the significant BIR assessment, as far as this case is concerned, should be the one issued by the BIR against PNB on 08 October 1986. The BIR issued on 08 October 1986 an assessment against PNB for its withholding tax liability on the interest earnings and/or yields from PNOC's money placements with the bank. It had 30 days from receipt to protest the BIR's assessment.99 PNB, however, did not take any action as to the said assessment so that upon the lapse of the period to protest, the withholding tax assessment against it, dated 8 October 1986, became final and unappealable, and could no longer be disputed.100 The courts may therefore order the enforcement of this assessment. It is the enforcement of this BIR assessment against PNB, dated 08 October 1986, that is in issue in the instant case. If the compromise agreement is valid, it would effectively bar the BIR from enforcing the assessment and collecting the assessed tax; on the other hand, if the compromise agreement is void, then the courts can order the BIR to enforce the assessment and collect the assessed tax. As has been previously discussed by this Court, the BIR demand letter, dated 16 January 1991, is not a new assessment against PNB. It only demanded from PNB the payment of the balance of the withholding tax assessed against it on 08 October 1986. The same

demand letter also has no substantial effect or impact on the resolution of the present case. It is already unnecessary and superfluous, having been issued by the BIR when CTA Case No. 4249 was already pending before the CTA. At best, the demand letter, dated 16 January 1991, constitute a useful reference for the courts in computing the balance of PNB's tax liability, after applying as partial payment thereon the amount previously received by the BIR from PNOC pursuant to the compromise agreement. IV Prescription A. The defense of prescription was never raised by petitioners PNOC and PNB, and should be considered waived. The dissenting opinion takes the position that the right of the BIR to assess and collect income tax on the interest earnings and/or yields from PNOC's money placements with PNB, particularly for taxable year 1985, had already prescribed, based on Section 268 of the NIRC of 1977, as amended. Section 268 of the NIRC of 1977, as amended, provides a three-year period of limitation for the assessment and collection of internal revenue taxes, which begins to run after the last day prescribed for filing of the return.101 The dissenting opinion points out that more than four years have elapsed from 25 January 1986 (the last day prescribed by law for PNB to file its withholding tax return for the fourth quarter of 1985) to 16 January 1991 (the date when the alleged final assessment of PNB's tax liability was issued). The issue of prescription, however, was brought up only in the dissenting opinion and was never raised by PNOC and PNB in the proceedings before the BIR nor in any of their pleadings submitted to the CTA and the Court of Appeals. Section 1, Rule 9 of the Rules of Civil Procedure lays down the rule on defenses and objections not pleaded, and reads: SECTION 1. Defenses and objections not pleaded. Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived. However, when it appears from the pleadings or the evidence on record that the court has no jurisdiction over the subject matter, that there is another action pending between the parties for the same cause, or that the action is barred by prior judgment or by the statute of limitations, the court shall dismiss the claim. The general rule enunciated in the above-quoted provision governs the present case, that is, the defense of prescription, not pleaded in a motion to dismiss or in the answer, is deemed waived. The exception in same provision cannot be applied herein because the

pleadings and the evidence on record do not sufficiently show that the action is barred by prescription. It has been consistently held in earlier tax cases that the defense of prescription of the period for the assessment and collection of tax liabilities shall be deemed waived when such defense was not properly pleaded and the facts alleged and evidences submitted by the parties were not sufficient to support a finding by this Court on the matter.102 In Querol v. Collector of Internal Revenue,103 this Court pronounced that prescription, being a matter of defense, imposes the burden on the taxpayer to prove that the full period of the limitation has expired; and this requires him to positively establish the date when the period started running and when the same was fully accomplished. In making its conclusion that the assessment and collection in this case had prescribed, the dissenting opinion took liberties to assume the following facts even in the absence of allegations and evidences to the effect that: (1) PNB filed returns for its withholding tax obligations for taxable year 1985; (2) PNB reported in the said returns the interest earnings of PNOC's money placements with the bank; and (3) that the returns were filed on or before the prescribed date, which was 25 January 1986. It is not safe to adopt the first and second assumptions in this case considering that Section 269 of the NIRC of 1977, as amended, provides for a different period of limitation for assessment and collection of taxes in case of false or fraudulent return or for failure to file a return. In such cases, the BIR is given 10 years after discovery of the falsity, fraud, or omission within which to make an assessment.104 It is also not safe to accept the third assumption since there can be a possibility that PNB filed the withholding tax return later than the prescribed date, in which case, following the dictates of Section 268 of the NIRC of 1977, as amended, the three-year prescriptive period shall be counted from the date the return was actually filed.105 PNB's withholding tax returns for taxable year 1985, duly received by the BIR, would have been the best evidence to prove actual filing, the date of filing and the contents thereof. These facts are relevant in determining which prescriptive period should apply, and when such prescriptive period should begin to run and when it had lapsed. Yet, the pleadings did not refer to any return, and no return was made part of the records of the present case. This Court could not make a proper ruling on the matter of prescription on the mere basis of assumptions; such an issue should have been properly raised, argued, and supported by evidences submitted by the parties themselves before the BIR and the courts below. B. Granting that this Court can take cognizance of the defense of prescription, this Court finds that the assessment of the withholding tax liability against PNOC and collection of the tax assessed were done within the prescriptive period. Assuming, for the sake of argument, that this Court can give due course to the defense of prescription, it finds that the assessment against PNB for its withholding tax liability for

taxable year 1985 and the collection of the tax assessed therein were accomplished within the prescribed periods for assessment and collection under the NIRC of 1977, as amended. If this Court adopts the assumption made by the dissenting opinion that PNB filed its withholding tax return for the last quarter of 1985 on 25 January 1986, then the BIR had until 24 January 1989 to assess PNB. The original assessment against PNB was issued as early as 08 October 1986, well-within the three-year prescriptive period for making the assessment as prescribed by the following provisions of the NIRC of 1977, as amended: SEC. 268. Period of limitation upon assessment and collection. Except as provided in the succeeding section, internal revenue taxes shall be assessed within three years after the last day prescribed by law for the filing of the return, and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period SEC. 269. Exceptions as to period of limitation of assessment and collection of taxes.

The present case is unique, however, because the Petition for Review was filed by private respondent Savellano, the informer, against the BIR, PNOC, and PNB. The BIR, the collecting government agency; PNOC, the taxpayer; and PNB, the withholding agent, initially found themselves on the same side. The prayer in the Amended Petition for Review of private respondent Savellano reads: WHEREFORE, in view of the foregoing, petitioner respectfully prays that the compromise agreement of June 22, 1987 be reviewed and declared null and void, and that this Court directs: a) respondent Commissioner to enforce and collect and respondents PNB and/or PNOC to pay in a joint and several capacity, the total tax liability of P387,987,785.73, plus interests from 31 October 1986; and b) respondent Commissioner to pay unto petitioner, as informer's reward, 15% of the tax liability collected under clause (a) hereof. Other equitable reliefs under the premises are likewise prayed for.107 (Underscoring ours.) Private respondent Savellano, in his Amended Petition for Review in CTA Case No. 4249, prayed for (1) the CTA to direct the BIR Commissioner to enforce and collect the tax, and (2) PNB and/or PNOC to pay the tax making CTA Case No. 4249 a collection case. That the Amended Petition for Review was filed by the informer and not the taxpayer; and that the prayer for the enforcement of the tax assessment and payment of the tax was also made by the informer, not the BIR, should not affect the nature of the case as a judicial action for collection. In case the CTA grants the Petition and the prayer therein, as what has happened in the present case, the ultimate result would be the collection of the tax assessed. Consequently, upon the filing of the Amended Petition for Review by private respondent Savellano, judicial action for collection of the tax had been initiated and the running of the prescriptive period for collection of the said tax was terminated. Supposing that CTA Case No. 4249 is not a collection case which stops the running of the prescriptive period for the collection of the tax, CTA Case No. 4249, at the very least, suspends the running of the said prescriptive period. Under Section 271 of the NIRC of 1977, as amended, the running of the prescriptive period to collect deficiency taxes shall be suspended for the period during which the BIR Commissioner is prohibited from beginning a distraint or levy or instituting a proceeding in court, and for 60 days thereafter.108 Just as in the cases of Republic v. Ker & Co., Ltd.109 and Protector's Services, Inc. v. Court of Appeals,110 this Court declares herein that the pendency of the present case before the CTA, the Court of Appeals and this Court, legally prevents the BIR Commissioner from instituting an action for collection of the same tax liabilities assessed against PNOC and PNB in the CTA or the regular trial courts. To rule otherwise would be to violate the judicial policy of avoiding multiplicity of suits and the rule on lis pendens. Once again, that CTA Case No. 4249 was initiated by private respondent Savellano, the informer, instead of PNOC, the taxpayer, or PNB, the withholding agent, would not prevent the suspension of the running of the prescriptive period for collection of the tax.

(c) Any internal revenue tax which has been assessed within the period of limitation above-prescribed may be collected by distraint or levy or by a proceeding in court within three years following the assessment of the tax. Sections 268 and 269(c) of the NIRC of 1977, as amended, should be read in conjunction with one another. Section 268 requires that assessment be made within three years from the last day prescribed by law for the filing of the return. Section 269(c), on the other hand, provides that when an assessment is issued within the prescribed period provided in Section 268, the BIR has three years, counted from the date of the assessment, to collect the tax assessed either by distraint, levy or court action. Therefore, when an assessment is timely issued in accordance with Section 268, the BIR is given another three-year period, under Section 269(c), within which to collect the tax assessed, reckoned from the date of the assessment. In the case of PNB, an assessment was issued against it by the BIR on 08 October 1986, so that the BIR had until 07 October 1989 to enforce it and to collect the tax assessed. The filing, however, by private respondent Savellano of his Amended Petition for Review before the CTA on 02 July 1988 already constituted a judicial action for collection of the tax assessed which stops the running of the three-year prescriptive period for collection thereof. A judicial action for the collection of a tax may be initiated by the filing of a complaint with the proper regular trial court; or where the assessment is appealed to the CTA, by filing an answer to the taxpayer's petition for review wherein payment of the tax is prayed for.106

What is controlling herein is the fact that the BIR Commissioner cannot file a judicial action in any other court for the collection of the tax because such a case would necessarily involve the same parties and involve the same issues already being litigated before the CTA in CTA Case No. 4249. The three-year prescriptive period for collection of the tax shall commence to run only after the promulgation of the decision of this Court in which the issues of the present case are resolved with finality. Whether the filing of the Amended Petition for Review by private respondent Savellano entirely stops or merely suspends the running of the prescriptive period for collection of the tax, it had been premature for the BIR Commissioner to issue a writ of garnishment against PNB on 12 August 1991 and for the Central Bank of the Philippines to debit the account of PNB on 02 September 1992 pursuant to the said writ, because the case was by then, pending review by the Court of Appeals. However, since this Court already finds that the compromise agreement is without force and effect and hereby orders the enforcement of the assessment against PNB, then, any issue or controversy arising from the premature garnishment of PNB's account and collection of the tax by the BIR has become moot and academic at this point. V Additional Informer's Reward Private respondent Savellano is entitled to additional informer's reward since the BIR had already collected the full amount of the tax assessment against PNB. PNOC insists that private respondent Savellano is not entitled to additional informer's reward because there was no voluntary payment of the withholding tax liability. PNOC, however, fails to state any legal basis for its argument. Section 316(1) of the NIRC of 1977, as amended, granted a reward to an informer equivalent to 15% of the revenues, surcharges, or fees recovered, plus, any fine or penalty imposed and collected.111 The provision was clear and uncomplicated an informer was entitled to a reward of 15% of the total amount actually recovered or collected by the BIR based on his information. The provision did not make any distinction as to the manner the tax liability was collected whether it was through voluntary payment by the taxpayer or through garnishment of the taxpayer's property. Applicable herein is another well-known maxim in statutory construction Ubi lex non distinguit nec nos distinguere debemos when the law does not distinguish, we should not distinguish.112 Pursuant to the writ of garnishment issued by the BIR, the Central Bank issued a debit advice against the demand deposit account of PNB with the Central Bank for the amount of P294,958,450.73, and credited the same amount to the demand deposit account of the Treasurer of the Republic of the Philippines. The Treasurer of the Republic, in turn, already issued a journal voucher transferring P294,958,450.73 to the account of the BIR. Since the BIR had already collected P294,958,450.73 from PNB through the execution of the writ of garnishment over PNB's deposit with the Central Bank, then private

respondent Savellano should be awarded 15% thereof as reward since the said collection could still be traced to the information he had given. WHEREFORE, in view of the foregoing, the Petitions of PNOC and PNB in G.R. No. 109976 and G.R. No. 112800, respectively, are hereby DENIED. This Court AFFIRMS the assailed Decisions of the Court of Appeals in CA-G.R. SP No. 29583 and CA-G.R. SP No. 29526, which affirmed the decision of the CTA in CTA Case No. 4249, with modifications, to wit: (1) The compromise agreement between PNOC and the BIR, dated 22 June 1987, is declared void for being contrary to law and public policy, and is without force and effect; (2)Paragraph 2 of RMO No. 39-86 remains a valid provision of the regulation; (3)The withholding tax assessment against PNB, dated 08 October 1986, had become final and unappealable. The BIR Commissioner is ordered to enforce the said assessment and collect the amount of P294,958,450.73, the balance of tax assessed after crediting the previous payment made by PNOC pursuant to the compromise agreement, dated 22 June 1987; and (4) Private respondent Savellano shall be paid the remainder of his informer's reward, equivalent to 15% of the deficiency withholding tax ordered collected herein, or P 44,243,767.61. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-16704 March 17, 1962

The single issue involved in this appeal is whether or not Circular No. 22 is a rule or regulation, as contemplated in Section 4(a) of Republic Act 1161 empowering the Social Security Commission "to adopt, amend and repeal subject to the approval of the President such rules and regulations as may be necessary to carry out the provisions and purposes of this Act." There can be no doubt that there is a distinction between an administrative rule or regulation and an administrative interpretation of a law whose enforcement is entrusted to an administrative body. When an administrative agency promulgates rules and regulations, it "makes" a new law with the force and effect of a valid law, while when it renders an opinion or gives a statement of policy, it merely interprets a pre-existing law (Parker, Administrative Law, p. 197; Davis, Administrative Law, p. 194). Rules and regulations when promulgated in pursuance of the procedure or authority conferred upon the administrative agency by law, partake of the nature of a statute, and compliance therewith may be enforced by a penal sanction provided in the law. This is so because statutes are usually couched in general terms, after expressing the policy, purposes, objectives, remedies and sanctions intended by the legislature. The details and the manner of carrying out the law are often times left to the administrative agency entrusted with its enforcement. In this sense, it has been said that rules and regulations are the product of a delegated power to create new or additional legal provisions that have the effect of law. (Davis, op. cit., p. 194.) . A rule is binding on the courts so long as the procedure fixed for its promulgation is followed and its scope is within the statutory authority granted by the legislature, even if the courts are not in agreement with the policy stated therein or its innate wisdom (Davis, op. cit., 195-197). On the other hand, administrative interpretation of the law is at best merely advisory, for it is the courts that finally determine what the law means. Circular No. 22 in question was issued by the Social Security Commission, in view of the amendment of the provisions of the Social Security Law defining the term "compensation" contained in Section 8 (f) of Republic Act No. 1161 which, before its amendment, reads as follows: . (f) Compensation All remuneration for employment include the cash value of any remuneration paid in any medium other than cash except (1) that part of the remuneration in excess of P500 received during the month; (2) bonuses, allowances or overtime pay; and (3) dismissal and all other payments which the employer may make, although not legally required to do so. Republic Act No. 1792 changed the definition of "compensation" to:

VICTORIAS MILLING COMPANY, INC., petitioner-appellant, vs. SOCIAL SECURITY COMMISSION, respondent-appellee. Ross, Selph and Carrascoso for petitioner-appellant. Office of the Solicitor General and Ernesto T. Duran for respondent-appellee. BARRERA, J.: On October 15, 1958, the Social Security Commission issued its Circular No. 22 of the following tenor: . Effective November 1, 1958, all Employers in computing the premiums due the System, will take into consideration and include in the Employee's remuneration all bonuses and overtime pay, as well as the cash value of other media of remuneration. All these will comprise the Employee's remuneration or earnings, upon which the 3-1/2% and 2-1/2% contributions will be based, up to a maximum of P500 for any one month. Upon receipt of a copy thereof, petitioner Victorias Milling Company, Inc., through counsel, wrote the Social Security Commission in effect protesting against the circular as contradictory to a previous Circular No. 7, dated October 7, 1957 expressly excluding overtime pay and bonus in the computation of the employers' and employees' respective monthly premium contributions, and submitting, "In order to assist your System in arriving at a proper interpretation of the term 'compensation' for the purposes of" such computation, their observations on Republic Act 1161 and its amendment and on the general interpretation of the words "compensation", "remuneration" and "wages". Counsel further questioned the validity of the circular for lack of authority on the part of the Social Security Commission to promulgate it without the approval of the President and for lack of publication in the Official Gazette. Overruling these objections, the Social Security Commission ruled that Circular No. 22 is not a rule or regulation that needed the approval of the President and publication in the Official Gazette to be effective, but a mere administrative interpretation of the statute, a mere statement of general policy or opinion as to how the law should be construed. Not satisfied with this ruling, petitioner comes to this Court on appeal.

(f) Compensation All remuneration for employment include the cash value of any remuneration paid in any medium other than cash except that part of the remuneration in excess of P500.00 received during the month. It will thus be seen that whereas prior to the amendment, bonuses, allowances, and overtime pay given in addition to the regular or base pay were expressly excluded, or exempted from the definition of the term "compensation", such exemption or exclusion

was deleted by the amendatory law. It thus became necessary for the Social Security Commission to interpret the effect of such deletion or elimination. Circular No. 22 was, therefore, issued to apprise those concerned of the interpretation or understanding of the Commission, of the law as amended, which it was its duty to enforce. It did not add any duty or detail that was not already in the law as amended. It merely stated and circularized the opinion of the Commission as to how the law should be construed. 1wph1.t The case of People v. Jolliffe (G.R. No. L-9553, promulgated on May 30, 1959) cited by appellant, does not support its contention that the circular in question is a rule or regulation. What was there said was merely that a regulation may be incorporated in the form of a circular. Such statement simply meant that the substance and not the form of a regulation is decisive in determining its nature. It does not lay down a general proposition of law that any circular, regardless of its substance and even if it is only interpretative, constitutes a rule or regulation which must be published in the Official Gazette before it could take effect. The case of People v. Que Po Lay (50 O.G. 2850) also cited by appellant is not applicable to the present case, because the penalty that may be incurred by employers and employees if they refuse to pay the corresponding premiums on bonus, overtime pay, etc. which the employer pays to his employees, is not by reason of non-compliance with Circular No. 22, but for violation of the specific legal provisions contained in Section 27(c) and (f) of Republic Act No. 1161. We find, therefore, that Circular No. 22 purports merely to advise employers-members of the System of what, in the light of the amendment of the law, they should include in determining the monthly compensation of their employees upon which the social security contributions should be based, and that such circular did not require presidential approval and publication in the Official Gazette for its effectivity. It hardly need be said that the Commission's interpretation of the amendment embodied in its Circular No. 22, is correct. The express elimination among the exemptions excluded in the old law, of all bonuses, allowances and overtime pay in the determination of the "compensation" paid to employees makes it imperative that such bonuses and overtime pay must now be included in the employee's remuneration in pursuance of the amendatory law. It is true that in previous cases, this Court has held that bonus is not demandable because it is not part of the wage, salary, or compensation of the employee. But the question in the instant case is not whether bonus is demandable or not as part of compensation, but whether, after the employer does, in fact, give or pay bonus to his employees, such bonuses shall be considered compensation under the Social Security Act after they have been received by the employees. While it is true that terms or words are to be interpreted in accordance with their well-accepted meaning in law, nevertheless, when such term or word is specifically defined in a particular law, such interpretation must be adopted in enforcing that particular law, for it can not be gainsaid that a particular phrase or term may have one meaning for one purpose and another meaning for some other purpose. Such is the case that is now before us. Republic Act 1161 specifically defined what "compensation" should mean "For the purposes of this Act". Republic Act 1792 amended such definition by deleting same exemptions authorized in the original Act. By virtue of this express substantial change in the phraseology of the

law, whatever prior executive or judicial construction may have been given to the phrase in question should give way to the clear mandate of the new law. IN VIEW OF THE FOREGOING, the Resolution appealed from is hereby affirmed, with costs against appellant. So ordered. Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Paredes, Dizon and De Leon, JJ., concur.

Republic of the Philippines SUPREME COURT THIRD DIVISION G.R. No. 163123. April 15, 2005 PHILIPPINE HEALTH INSURANCE CORPORATION, Petitioners, vs. CHINESE GENERAL HOSPITAL AND MEDICAL CENTER, Respondents. DECISION CORONA, J.: Before us is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the March 29, 2004 decision1 of the Court of Appeals, the dispositive portion of which read: FOR THE FOREGOING DISQUISITIONS, the petition is GRANTED, the Philippine Health Insurance Corporation2 is hereby ordered to give due course to petitioner s, Chinese General Hospital and Medical Center, claims for the period from 1989 to 1992, amounting to FOURTEEN MILLION TWO HUNDRED NINETY ONE THOUSAND FIVE HUNDRED SIXTY EIGHT PESOS and 71/100 PESOS (P14,291,568.71).3 The facts, as culled by the Court of Appeals, follow. On February 14, 1995, Republic Act No. 7875, otherwise known as "An Act Instituting a National Health Insurance Program for all Filipinos and Establishing the Philippine Health Insurance Corporation For the Purpose," was approved and signed into law. As its guiding principle, it is provided in Section 2 thereof, thus: "Section 2. Declaration of Principles and Policies. Section 11, Article XIII of the Constitution of the Republic of the Philippines declares that the state shall adopt an integrated and comprehensive approach to health development which shall endeavor to make essential goods, health and other social services available to all the people at affordable cost. Priority for the needs of the underprivileged, sick, elderly, disabled, women, and children should be recognized. Likewise, it shall be the policy of the State to provide free medical care to paupers. Prior to the enactment of R.A. 7875. CGH4 had been an accredited health care provider under the Philippine Medical Care Commission (PMCC), more popularly known as Medicare. As defined by R.A. 7875, a health care provider refers to a health care institution, which is duly licensed and accredited devoted primarily to the maintenance and operation of facilities for health promotion, prevention, diagnosis, treatment and care of individuals suffering from illness, disease, injury, disability or deformity, or in need of obstetrical or other medical and nursing care.5

As such, petitioner6 filed its Medicare claims with the Social Security System (SSS), which, together with the Government Service Insurance System (GSIS), administered the Health Insurance Fund of the PMMC. Thus, petitioner filed its claim from 1989 to 1992 with the SSS, amounting to EIGHT MILLION ONE HUNDRED TWO THOUSAND SEVEN HUNDRED EIGHTY-TWO and 10/100 (P8,102,782.10). Its application for the payment of its claim with the SSS was overtaken by the passage of R.A. 7875, which in Section 51 and 52, provides: SECTION 51. Merger. Within sixty (60) days from the promulgation of the implementing rules and regulations, all functions and assets of the Philippine Medical Care Commission shall be merged with those of the Corporation (PHILHEALTH) without need of conveyance, transfer or assignment. The PMCC shall thereafter cease to exist. The liabilities of the PMCC shall be treated in accordance with existing laws and pertinent rules and regulations. xxx SECTION 52. Transfer of Health Insurance Funds of the SSS and GSIS. The Health Insurance Funds being administered by the SSS and GSIS shall be transferred to the Corporation within sixty (60) days from the promulgation of the implementing rules and regulations. The SSS and GSIS shall, however, continue to perform Medicare functions under contract with the Corporation until such time that such functions are assumed by the Corporation xxx. Being the successor of the PMCC, PHILHEALTH, in compliance with the mandate of R.A. 7875,7 promulgated the rules and regulations implementing said act, Section 52 of which provides: SECTION 52. Fee for Service Guidelines on Claims Payment. xxx b. All claims for payment of services rendered shall be filed within sixty (60) calendar days from the date of discharge of the patient. Otherwise, the claim shall be barred from payment except if the delay in the filing of thee claim is due to natural calamities and other fortuitous events. If the claim is sent through mail, the date of the mailing as stamped by the post office of origin shall be considered as the date of the filing. If the delay in the filing is due to natural calamities or other fortuitous events, the health care provider shall be accorded an extension period of sixty (60) calendar days. If the delay in the filing of the claim is caused by the health care provider, and the Medicare benefits had already been deducted, the claim will not be paid. If the claim is not yet deducted, it will be paid to the member chargeable to the future claims of the health care provider. Instead of giving due course to petitioner s claims totaling to EIGHT MILLION ONE HUNDRED TWO THOUSAND SEVEN HUNDRED EIGHTY-TWO and 10/100 (P8,102,782.10), only ONE MILLION THREE HUNDRED SIXTY-FIVE THOUSAND FIVE HUNDRED FIFTY-SIX and 32/100 Pesos (1,365,556.32) was paid to petitioner, representing its claims from 1989 to 1992 (sic).

Petitioner again filed its claims representing services rendered to its patients from 1998 to 1999, amounting to SEVEN MILLION FIVE HUNDRED FIFTY FOUR THOUSAND THREE HUNDRED FORTY TWO and 93/100 Pesos (P7,554,342.93). For being allegedly filed beyond the sixty (60) day period allowed by the implementing rules and regulations, Section 52 thereof, petitioner s claims were denied by the Claims Review Unit of Philhealth in its letter dated January 14, 200, thus: "xxx This pertains to your three hundred seventy three Philhealth medicare claims (373) which were primarily denied by Claims Processing Department for late filing and for which you made an appeal to this office. We regret to inform you that after thorough evaluation of your claims, [your] 361 medicare claims were DENIED, due to the fact that the claims were filed 5 to 16 months after discharge. However, the remaining medicare claims have been forwarded to Claims Processing Department (CPD) for payment. SECTION 52 (B) Rule 52 (B) Rule VIII of the Implementing Rules and Regulations of 7875 provides that all claims for payment of services rendered shall be filed within sixty (60) days from the day of discharge of the patient. However, Philhealth Circular No, 31-A, series of 1998, state that all claims pending with Philhealth as of September 15, 1998 and claims with discharge dates from September to December 31, 1998 are given one hundred twenty (120) days from the date of discharge to file their claim. In as much as we would like to grant your request for reconsideration, the Corporation could no longer extend the period of filing xxx. Petitioner s claim was denied with finality by PHILHEALTH in its assailed decision dated June 6, 2000. In a petition for review under Rule 43 of the Rules of Court, the Court of Appeals ordered herein petitioner Philippine Health Insurance Corporation (Philhealth) to pay the claims in the amount of Fourteen Million Two Hundred Ninety-one Thousand Five Hundred Sixty-eight Pesos and 71/100 (P14,291,568.71), principally on the ground of liberal application of the 60-day rule under Section 52 of RA 7875 s Implementing Rules and Regulations. According to the Court of Appeals: The avowed policy in the creation of a national health program is, as provided in Section 11, Article XIII of the 1987 Constitution, to adopt an integrated and comprehensive approach to health development which shall endeavor to make essential goods, health and other social services available to all people at affordable cost. To assist the state in pursuing this policy, hospitals and medical institutions such as herein petitioner are accredited to provide health care. It is true, as aptly stated by the OGCC, that petitioner was not required by the government to take part in its program, it did so voluntarily. But the fact that the government did not "twist" petitioner s arm, so to speak, to participate does not make petitioner s participation in the program less commendable, considering that at rate PHILHEALTH is denying claims of health care givers, it is more risky rather than providential for health care givers to take part in the government s health program.

It is Our firmly held view that the policy of the state in creating a national health insurance program would be better served by granting the instant petition. Thus, it is noteworthy to mention that health care givers are threatening to "boycott" PHILHEALTH, reasoning that the claims approved by PHILHEALTH are not commensurate to the services rendered by them to its members. Thus, how can these accredited health care givers be encouraged to serve an increasing number of members when they end up on the losing end of this venture. We must admit that the costs of operating these medical institutions cannot be taken lightly. They must also earn a modicum amount of profit in order to operate properly. Again, it is trite to emphasize that essentially, the purpose of the national health insurance program is to provide members immediate medical care with the least amount of cash expended. Thus, with PHILHEALTH, members/patients need only to present their card to prove their membership and the accredited health care giver is mandated by law to provide the necessary medical assistance, said health care giver shouldering the PHILHEALTH part of the bill. However, it is the members/patients who bear the brunt. Thus, they are made to shoulder the PHILHEALTH part of the bill, and the refund thereof is subject to whether or not the claims of the health care providers are approved by PHILHEALTH. This is blatantly contrary to the very purpose for which the National Health Insurance Program was created.8 xxxxxxxxx We agree. The state policy in creating a national health insurance program is to grant discounted medical coverage to all citizens, with priority to the needs of the underprivileged, sick, elderly, disabled, women and children, and free medical care to paupers9. The very same policy was adopted in RA 787510 which sought to: a) provide all citizens of the Philippines with the mechanism to gain financial access to health services; b) create the National Health Insurance Program to serve as the means to help the people pay for the health services; c) prioritize and accelerate the provision of health services to all Filipinos, especially that segment of the population who cannot afford such services; and d) establish the Philippine Health Insurance Corporation that will administer the program at central and local levels.11 To assist the state in pursuing the aforementioned policy, health institutions were granted the privilege of applying for accreditation as health care providers.12 Respondent Chinese General Hospital and Medical Center (CGH) was one of those which received such accreditation.

Under the rules promulgated by the Philhealth Board pursuant to RA 7875, any claim for payment of services rendered (to a patient) shall be filed within sixty (60) calendar days from the date of discharge of the patient. Otherwise, the claim is barred.13 But before a claim is filed with petitioner Philhealth for services already rendered, an accredited health care provider like respondent CGH is required to: a. accomplish a Philhealth claim form; b. accomplish an itemized list of the medicines administered to and medical supplies used by the patient concerned, indicating therein the quality, unit, price and total price corresponding thereto; c. require the patient concerned and his/her employer to accomplish and submit a Philhealth member/employer certification; d. in case the patient gave birth, require her to submit a certified true copy of the child s birth certificate; e. in case the patient died, require the immediate relatives to submit a certified true copy of the deceased s death certificate; and f. in case a member s dependent is hospitalized for which the member seeks coverage, require the member to submit proof of relationship to the patient and to execute an affidavit of support.14 Apart from the foregoing requirements which often necessitate securing documents from other government offices, and the fact that most patients are unable to immediately accomplish and submit the required documents, an accredited health care provider like CGH has to contend with an average of about a thousand members and/or dependents seeking medical treatment for various illnesses per month. Under these circumstances, it is unreasonable to expect respondent CGH to comply 100% of the time with the prescribed 60-day rule of Philhealth. Despite the prescribed standard procedures, respondent has no assurance of the members prompt submission of the required documents. This factor is completely beyond its control. There will always be delay not attributable to respondent. The unreasonably strict implementation of the 60-day rule, without regard to the causes of delay beyond respondent s control, will be counter-productive to the long-term effectiveness of the NHIP. Instead of placing a premium on participation in the Program, Philhealth punishes an accredited health provider like CGH by refusing to pay its claims for services already rendered. Under these circumstances, no accredited provider will gamble on honoring claims with delayed supporting papers no matter how meritorious knowing that reimbursement from Philhealth will not be forthcoming.

This Court will not hesitate, whenever necessary, to allow a liberal implementation of the rules and regulations of an administrative agency in cases where their unjustifiably rigid enforcement will result in a deprivation of legal rights. In this case, respondent had already rendered the services for which it was filing its claims. Technicalities should not be allowed to defeat respondent s right to be reimbursed, specially since petitioner s charter itself guarantees such reimbursement. A careful reading of RA 7875 shows that the law itself does not provide for any specific period within which to file claims. We can safely presume therefore that the period for filing was not per se the principal concern of the legislature. More important than mere technicalities is the realization of the state policy to provide Philhealth members with the requisite medical care at the least possible cost. Truly, nothing can be more disheartening than to see the Act s noble objective frustrated by the overly stringent application of technical rules. The fact is that it was not RA 7875 itself but Section 52 of its Implementing Rules and Regulations which established the 60-day cut-off for the filing of claims. While it is doctrinal in administrative law that the rules and regulations of administrative bodies interpreting the law they are entrusted to enforce have the force of law15, these issuances are by no means iron-clad norms. Administrative bodies themselves can and have in fact "bent the rules" for reasons of public interest. On September 15, 1998, for instance, petitioner issued Philhealth Circular No. 31-A:16 IN ORDER to allow members of the National Health Insurance Program (NHIP) sufficient time to complete all documents to support their medical care claims, Philhealth is temporarily suspending the sixty (60)-day reglementary period for filing claims. While Section 52 (b), Rule VIII of the Implementing Rules and Regulations of R.A. 7875 provides that all claims for payment of services shall be filed within 60 calendar days from the day of discharge of a patient, there is a need to extend this period to minimize the incidence of late filing due to members personal difficulties and circumstances beyond their control. (emphasis ours) And then again, on April 20, 1999, Philhealth Circular No. 50 was issued: TO MINIMIZE the incidence of late filing of claims due to members personal difficulties in preparing the needed documents, Philhealth is extending the period for filing of claims xxx (emphasis ours) The above circulars indubitably recognized the necessity of extending the 60-day period because of the difficulties encountered by members in completing the required documents, often due to circumstances beyond their control. Petitioner appeared to be well aware of the problems encountered by its members in complying with the 60-day rule. Furthermore, implicit in the wording of the circulars was the cognition of the fact that the fault was not always attributable to the health care providers like CGH but to the members themselves.

Delay on the part of members is an ordinary occurrence. There is no need to make a mountain out of a molehill as far as this particular point is concerned. To this day, members continue to encounter delay in submitting their documents. There was therefore no compelling reason for the exacting and meticulous enforcement of the rule when, in at least two instances, petitioner itself implemented it liberally and on the same ground that it was using against respondent. Petitioner likewise contends that respondent failed to exhaust administrative remedies before resorting to judicial intervention. We disagree. Under the doctrine of exhaustion of administrative remedies, an administrative decision must first be appealed to the administrative superiors at the highest level before it may be elevated to a court of justice for review. This doctrine, however, is a relative one and its flexibility is conditioned on the peculiar circumstances of a case.17 There are a number of instances when the doctrine has been held to be inapplicable. Among the established exceptions are: 1) when the question raised is purely legal; 2) when the administrative body is in estoppel; 3) when the act complained of is patently illegal; 4) when there is urgent need for judicial intervention; 5) when the claim involved is small; 6) when irreparable damage will be suffered; 7) when there is no other plain, speedy and adequate remedy; 8) when strong public interest is involved; 9) when the subject of the controversy is private land; 10) in quo warranto proceedings.18 As explained by the appellate court: It is Our view that the instant case falls as one of the exceptions, concerning as it does public interest. As mentioned earlier, although they were not made parties to the instant case, the rights of millions of Filipinos who are members of PHILHEALTH and who obviously rely on it for their health care, are considered, nonetheless, parties to the present case. This Court is mandated herein to take conscious and detailed consideration of the interplay of the interests of the state, the health care giver and the members. With

these in mind, We hold that the greater interest of the greater number of people, mostly members of PHILHEALTH, is paramount. Furthermore, when the representatives of herein petitioner met with Dr. Enrique Zalamea, PHILHEALTH s President and Chief Executive Officer, he informed them that, in lieu of protest to be filed directly with him, the representatives could make representations with the Office of the President, which petitioner did to no avail, considering that the formal protest filed was referred back by the Office of the President to Dr. Zalamea. Being then the head of PHILHEALTH, and expected to have an intimate knowledge of the law and the rules creating the National Health Insurance Program, under which PHILHEALTH was created, he instructed herein petitioner to pursue a remedy not sanctioned by the rules and not in accord with the rule of exhaustion of administrative remedies. In so doing, PHILHEALTH is deemed estopped from assailing the instant petition for failure to exhaust administrative remedies when PHILHEALTH itself, through its president, does not subscribe to it.19 There is no need to belabor the fact that the baseless denial of respondent s claims will be gravely disturbing to the health care industry, specially the providers whose claims will be unpaid. The unfortunate reality is that there are today some health care providers who admit numbers for treatment and/or confinement yet require them to pay the portion which ought to be shouldered by Philhealth. A refund is made only if their claim is first paid, due to the apprehension of not being reimbursed. Simply stated, a member cannot avail of his benefits under the NHIP at the time he needs it most. We cannot turn a deaf ear to respondent s plea for fairness which essentially demands that its claims for services already rendered be honored as the National Health Insurance Program law intended. WHEREFORE, the assailed decision of the Court of Appeals is hereby AFFIRMED. Petitioner is hereby ordered to pay respondent s claims representing services rendered to its members from 1989 to 1992. No costs. SO ORDERED.

[1987V291] VALENTIN TIO doing business under the name and style of OMI ENTERPRISES, petitioner, vs. VIDEOGRAM REGULATORY BOARD, MINISTER OF FINANCE, METRO MANILA COMMISSION, CITY MAYOR and CITY TREASURER OF MANILA, respondents.1987 June 18En BancG.R. No. L-75697D E C I S I O N MELENCIO-HERRERA, J.:

"1. WHEREAS, the proliferation and unregulated circulation of videograms including, among others, videotapes, discs, cassettes or any technical improvement or variation thereof, have greatly prejudiced the operations of moviehouses and theaters, and have caused a sharp decline in theatrical attendance by at least forty 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 Million annually in government revenues;

This petition was filed on September 1, 1986 by petitioner on his own behalf and purportedly on behalf of other videogram operators adversely affected. It assails the constitutionality of Presidential Decree No. 1987 entitled "An Act Creating the Videogram Regulatory Board" with broad powers to regulate and supervise the videogram industry (hereinafter briefly referred to as the BOARD). The Decree was promulgated on October 5, 1985 and took effect on April 10, 1986, fifteen (15) days after completion of its publication in the Official Gazette.

"2. WHEREAS, videogram(s) establishments collectively earn around P600 Million per annum from rentals, sales and disposition of videograms, and such earnings have not been subjected to tax, thereby depriving the Government of approximately P180 Million in taxes each year;

On November 5, 1985, a month after the promulgation of the abovementioned decree, Presidential Decree No. 1994 amended the National Internal Revenue Code providing, inter alia:

"3. WHEREAS, the unregulated activities of videogram establishments have also affected the viability of the movie industry, particularly the more than 1,200 movie houses and theaters throughout the country, and occasioned industry-wide displacement and unemployment due to the shutdown of numerous moviehouses and theaters;

"SEC. 134. Video Tapes. There shall be collected on each processed video-tape 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."

"4. WHEREAS, in order to ensure national economic recovery, it is imperative for the Government to create an environment conducive to growth and development of all business industries, including the movie industry which has an accumulated investment of about P3 Billion.

On October 23, 1986, the Greater Manila Theaters Association, Integrated Movie Producers, Importers and Distributors Association of the Philippines, and Philippine Motion Pictures Producers Association, hereinafter collectively referred to as the Intervenors, were permitted by the Court to intervene in the case, over petitioner's opposition, upon the allegations that intervention was necessary for the complete protection of their rights and that their "survival and very existence is threatened by the unregulated proliferation of film piracy." The Intervenors were thereafter allowed to file their Comment in Intervention.

"5. WHEREAS, proper taxation of the activities of videogram establishments will not only alleviate the dire financial condition of the movie industry upon which more than 75,000 families and 500,00 workers depend for their livelihood, but also provide an additional source of revenue for the Government, and at the same time rationalize the heretofore distribution of videograms;

The rationale behind the enactment of the DECREE, is set out in its preambular clauses as follows:

"6. WHEREAS, the rampant and unregulated showing of obscene videogram features constitutes a clear and present danger to the moral and spiritual well-being of the youth, and impairs the mandate of the Constitution for the State to support the rearing of the youth for civic efficiency and the development of moral character and promote their physical, intellectual, and social being;

"7. WHEREAS, civic-minded citizens and groups have called for remedial measures to curb these blatant malpractice's which have flaunted our censorship and copyright law;

"8. WHEREAS, in the face of these grave emergencies corroding the moral values of the people and betraying the national economic recovery program, bold emergency measures must be adopted with dispatch; . . ."

Petitioner's attack on the constitutionality of the DECREE rests on the following grounds:

1. The Constitutional requirement that "every bill shall embrace only one subject which shall be expressed in the title thereof" 1 is sufficiently complied with if the title be comprehensive enough to include the general purpose which a statute seeks to achieve. It is not necessary that the title express each and every end that the statute wishes to accomplish. The requirement is satisfied if all the parts of the statute are related, and are germane to the subject matter expressed in the title, or as long as they are not inconsistent with or foreign to the general subject and title. 2 An act having a single general subject, 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 be considered in furtherance of such subject by providing for the method and means of carrying out the general object." 3 The rule also is that the constitutional requirement as to the title of a bill should not be so narrowly construed as to cripple or impede the power of legislation. 4 It should be given a practical rather than technical construction. 5

"1. Section 10 thereof, which imposes a tax of 30% on the gross receipts payable to the local government is a RIDER and the same is not germane to the subject matter thereof; Tested by the foregoing criteria, petitioner's contention that the tax provision of the DECREE is a rider is without merit. That section reads, inter alia: "2. The tax imposed is harsh, confiscatory, oppressive and/or in unlawful restraint of trade in violation of the due process clause of the Constitution; "Section 10. Tax on Sale, Lease or Disposition of Videograms. ---- Notwithstanding any provision of law to the contrary, the province shall collect a tax of thirty percent (30%) of the purchase price or rental rate, as the case may be, for every sale, lease or disposition of a videogram containing a reproduction of any motion picture or audiovisual program. Fifty percent (50%) of the proceeds of the tax collected shall accrue to the province, and the other fifty percent (50%) shall accrue to the municipality where the tax is collected; PROVIDED, That in Metropolitan Manila, the tax shall be shared equally by the City/Municipality and the Metropolitan Manila Commission.

"3. There is no factual nor legal basis for the exercise by the President of the vast powers conferred upon him by Amendment No. 6;

"4. There is undue delegation of power and authority;

"5. The Decree is an ex-post facto law; and

-xxx-

-x-

-xxx-

"6. There is over regulation of the video industry as if it were a nuisance, which it is not."

We shall consider the foregoing objections in seriatim.

The foregoing provision is allied and germane to, and is reasonably necessary for the accomplishment of, the general object of the DECREE, which is the regulation of the video industry through the Videogram Regulatory Board as expressed in its title. The tax provision is not inconsistent with, nor foreign to that general subject and title. As a tool for regulation 6 it is simply one of the regulatory and control mechanisms scattered throughout the DECREE. The express purpose of the DECREE to include taxation of the video industry in order to regulate and rationalize the heretofore uncontrolled distribution of videograms is evident from Preambles 2 and 5, supra. Those preambles explain the motives of the lawmaker in presenting the measure. The title of the DECREE,

which is the creation 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 express all those objectives in the title or that the latter be an index to the body of the DECREE. 7

particular class for taxation or exemption infringe no constitutional limitation'." 12 Taxation has been made the implement of the state's police power. 13

At bottom, the rate of tax is a matter better addressed to the taxing legislature. 2. Petitioner also submits that the thirty percent (30%) tax imposed is harsh and oppressive, confiscatory, and in restraint of trade. However, it is beyond serious question that a tax does not cease to be valid merely because it regulates, discourages, or even definitely deters the activities taxed. 8 The power to impose taxes is one so unlimited in force and so searching in extent, that the courts scarcely venture to declare that it is subject to any restrictions whatever, except such as rest in the discretion of the authority which exercises it. 9 In imposing a tax, the legislature acts upon its constituents. This is, in general, a sufficient security against erroneous and oppressive taxation. 10

3. Petitioner argues that there was no legal nor factual basis for the promulgation of the DECREE by the former President under Amendment No. 6 of the 1973 Constitution providing that "whenever in the judgment of the President . . ., there exists a grave emergency or a threat or imminence thereof, or whenever the interim Batasang Pambansa or the regular National Assembly fails or is unable to act adequately on any matter for any reason that in his judgment requires immediate action, he may, in order to meet the exigency, issue the necessary decrees, orders, or letters of instructions, which sharp form part of the law of the land."

The tax imposed by the DECREE is not only a regulatory but also a revenue measure prompted by the realization that earnings of videogram establishments of around P600 million per annum have not been subjected to tax, thereby depriving the Government of an additional source of revenue. It is an end-user tax, imposed on retailers for every videogram they make available for public viewing. It is similar to the 30% amusement tax imposed or borne by the movie industry which the theater-owners pay to the government, but which is passed on to the entire cost of the admission ticket, thus shifting the tax burden on the buying or the viewing public. It is a tax that is imposed uniformly on all videogram operators.

In refutation, the Intervenors and the Solicitor General's Office aver that the 8th "whereas" clause sufficiently summarizes the justification in that grave emergencies corroding the moral values of the people and betraying the national economic recovery problem necessitated bold emergency measures to be adopted with dispatch. Whatever the reasons "in the judgment" of the then President, considering that the issue of the validity of the exercise of legislative power under the said Amendment still pends resolution in several other cases, we reserve resolution of the question raised at the proper time.

The levy of the 30% tax is for a public purpose. It was imposed primarily to answer the need for regulating the video industry, particularly because of the rampant film piracy, the flagrant violation of intellectual property rights, and the proliferation of pornographic video tapes. And while it was also an objective of the DECREE to protect the movie industry, the tax remains a valid imposition.

4. Neither can it be successfully argued that the DECREE contains an undue delegation of legislative power. The grant in Section 11 of the DECREE of authority to the BOARD to "solicit the direct assistance of other agencies and units of the government and deputize, for a fixed and limited period, the heads or personnel of such agencies and units to perform enforcement functions for the Board" is not a delegation of the power to legislate but merely a conferment of authority or discretion as to its execution, enforcement, and implementation.

"The public purpose of a tax may legally exist even if the motive which impelled the legislature to impose the tax was to favor one industry over another. 11 "The true distinction is between the delegation of power to make the law, which necessarily involves a discretion as to what it shall be, and conferring authority or discretion as to its execution to be exercised under and in pursuance of the law. The first cannot be done; to the latter, no valid objection can be made." 14 Besides, in the very language of the decree, the authority of the BOARD to solicit such assistance is for a

"It is inherent in the power to tax that a state be free to select the subjects of taxation, and it has been repeatedly held that "inequities which result from a singling out of one

"fixed and limited period" with the deputized agencies concerned being "subject to the direction and control of the BOARD." That the grant of such authority might be the source of graft and corruption would not stigmatize the DECREE as unconstitutional. Should the eventuality occur, the aggrieved parties will not be without adequate remedy in law.

the guilt of the accused and shift the burden of proof provided there be a rational connection between the facts proved and the ultimate facts presumed so that the inference of the one from proof of the others is not unreasonable and arbitrary because of lack of connection between the two in common experience'." 16

5. The DECREE is not violative of the ex post facto principle. An ex post facto law is, among other categories, one which "alters the legal rules of evidence, and authorizes conviction upon less or different testimony than the law required at the time of the commission of the offense." It is petitioner's position that Section 15 of the DECREE in providing that:

Applied to the challenged provision, there is no question that there is a rational connection between the fact proved, which is non-registration, and the ultimate fact presumed which is violation of the DECREE, besides the fact that the prima facie presumption of violation of the DECREE attaches only after a forty-five-day period counted from its effectivity and is, therefore, neither retrospective in character.

"All videogram establishments in the Philippines are hereby given a period of forty-five (45) days after the effectivity of this Decree within which to register with and secure a permit from the BOARD to engage in the videogram business and to register with the BOARD all their inventories of videograms, including videotapes, discs, cassettes or other technical improvements or variations thereof, before they could be sold, leased, or otherwise disposed of. Thereafter any videogram found in the possession of any person engaged in the videogram business without the required proof of registration by the BOARD, shall be prima facie evidence of violation of the Decree, whether the possession of such videogram be for private showing and/or public exhibition."

6. We do not share petitioner's fears that the video industry is being over-regulated and being eased out of existence as if it were a nuisance. Being a relatively new industry, the need for its regulation was apparent. While the underlying objective of the DECREE is to protect the moribund movie industry, there is no question that public welfare is at bottom of its enactment, considering "the unfair competition posed by rampant film piracy; the erosion of the moral fiber of the viewing public brought about by the availability of unclassified and unreviewed video tapes containing pornographic films and films with brutally violent sequences; and losses in government revenues due to the drop in theatrical attendance, not to mention the fact that the activities of video establishments are virtually untaxed since mere payment of Mayor's permit and municipal license fees are required to engage in business." 17

raises immediately a prima facie evidence of violation of the DECREE when the required proof of registration of any videogram cannot be presented and thus partakes of the nature of an ex post facto law.

The enactment of the Decree since April 10, 1986 has not brought about the "demise" of the video industry. On the contrary, video establishments are seen to have proliferated in many places notwithstanding the 30% tax imposed. 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.

The argument is untenable. As this Court held in the recent case of Vallarta vs. Court of Appeals, et al. 15

". . . it is now well settled that 'there is no constitutional objection to the passage of a law providing that the presumption of innocence may be overcome by a contrary presumption founded upon the experience of human conduct, and enacting what evidence shall be sufficient to overcome such presumption of innocence' (People vs. Mingoa, 92 Phil. 856 [1953] at 858-59, citing 1 COOLEY, A TREATISE ON THE CONSTITUTIONAL LIMITATIONS, 639-641). And the 'legislature may enact that when certain facts have been proved that they shall be prima facie evidence of the existence of

"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 corporate 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.

No costs.

SO ORDERED.

SECOND DIVISION [G.R. No. 119528. March 26, 1997] 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,i[1] as restated by the Court of Appeals in Avia Filipinas International vs. Civil Aeronautics Boardii[2] and Silangan Airways, Inc. vs. Grand International Airways, Inc., and the Hon. Civil Aeronautics Board.iii[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.iv[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 obtained a franchise to operate from Congress.

B. The petitioner's application is deficient in form and substance in that: 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."v[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."vi[6]

On December 23, 1994, the Board promulgated Resolution No. 119(92) approving the issuance of a Temporary Operating Permit in favor of Grand Airvii[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.viii[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 petitionercomplaint, 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; 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 GrandAir s 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,ix[9] and Section 1, Article VI,x[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 convenience and necessity is a regulatory measure which constitutes the franchise s 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.xi[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.xii[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."xiii[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.xiv[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.xv[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.xvi[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.xvii[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,xviii[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 exclusive authority to issue the same. Franchises issued by Congress are not required before each and every public utility may operate.xix[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.xx[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.xxi[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."xxii[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."xxiii[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:

"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; (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.xxiv[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 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.xxv[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. Regalado (Chairman), and Puno, JJ., concur. Romero, J., no part. Related to counsel. Mendoza, J., no part. Relative in management of party.

THIRD DIVISION G.R. No. 144109. February 17, 2003] ASSOCIATED COMMUNICATIONS & WIRELESS SERVICES UNITED BROADCASTING NETWORKS, Petitioner, v. NATIONAL TELECOMMUNICATIONS COMMISSION, respondent. DECISION PUNO, J.: For many years now, there has been a pervading confusion in the state of affairs of the broadcast industry brought about by conflicting laws, decrees, executive orders and other pronouncements promulgated during the Martial Law regime. The question that has taken a long life is whether the operation of a radio or television station requires a congressional franchise. The Court shall now lay to rest the issue. This is a petition for review on certiorari of the Court of Appeals January 31, 2000 decision and February 21, 2000 resolution affirming the January 13, 1999 decision of the National Telecommunications Commission (NTC for brevity). First, the facts. On November 11, 1931, Act No. 3846, entitled An Act Providing for the Regulation of Radio Stations and Radio Communications in the Philippines and for Other Purposes, was enacted. Sec. 1 of the law reads, viz: Sec. 1. No person, firm, company, association, or corporation shall construct, install, establish, or operate a radio transmitting station, or a radio receiving station used for commercial purposes, or a radio broadcasting station, without having first obtained a franchise therefor from the Congress of the Philippines... Pursuant to the above provision, Congress enacted in 1965 R.A. No. 4551, entitled An Act Granting Marcos J. Villaverde, Jr. and Winfred E. Villaverde a Franchise to Construct, Install, Maintain and Operate Public Radiotelephone and Radiotelegraph Coastal Stations, and Public Fixed and Public Based and Land Mobile Stations within the Philippines for the Reception and Transmission of Radiotelephone and Radiotelegraph for Domestic Communications and Provincial Telephone Systems in Certain Provinces. It gave the grantees a 50-year franchise. In 1969, the franchise was transferred to petitioner Associated Communications & Wireless Services United Broadcasting Network, Inc. (ACWS for brevity) through Congress Concurrent Resolution No. 58. Petitioner ACWS then engaged in the installation and operation of several radio stations around the country.

In 1974, P.D. No. 576-A, Regulating the Ownership and Operation of Radio and Television Stations and for other Purposes was issued, with the following pertinent provisions on franchise of radio and television broadcasting systems: Sec. 1. No radio station or television channel may obtain a franchise unless it has sufficient capital on the basis of equity for its operation for at least one year, including purchase of equipment. xxx Sec. 6. All franchises, grants, licenses, permits, certificates or other forms of authority to operate radio or television broadcasting systems shall terminate on December 31, 1981. Thereafter, irrespective of any franchise, grant, license, permit, certificate or other forms of authority to operate granted by any office, agency or person, no radio or television station shall be authorized to operate without the authority of the Board of Communications and the Secretary of Public Works and Communications or their successors who have the right and authority to assign to qualified parties frequencies, channels or other means of identifying broadcasting system; Provided, however, that any conflict over, or disagreement with a decision of the aforementioned authorities may be appealed finally to the Office of the President within fifteen days from the date the decision is received by the party in interest. A few years later or in 1979, E.O. No. 546 was issued. It integrated the Board of Communications and the Telecommunications Control Bureau under the Integrated Reorganization Plan of 1972 into the NTC. Among the powers vested in the NTC under Sec. 15 of E.O. No. 546 are the following: a. Issue Certificate of Public Convenience for the operation of communication utilities and services, radio communications systems, wire or wireless telephone or telegraph system, radio and television broadcasting system and other similar public utilities; xxx c. Grant permits for the use of radio frequencies for wireless telephone and telegraph systems and radio communication systems including amateur radio stations and radio and television broadcasting systems; . . . Upon termination of petitioners franchise on December 31, 1981 pursuant to P.D. No. 576-A, it continued operating its radio stations under permits granted by the NTC. As these presidential issuances relating to the radio and television broadcasting industry brought about confusion as to whether the NTC could issue permits to radio and television broadcast stations without legislative franchise, the NTC sought the opinion of the Department of Justice (DOJ) on the matter. On June 20, 1991, the DOJ rendered Opinion No. 98, Series of 1991, viz:

We believe that under P.D. No. 576-A dated November 11, 1974 and prior to the issuance of E.O No. 546 dated July 23, 1979, the NTC, then Board of Communications, had no authority to issue permits or authorizations to operate radio and television broadcasting systems without a franchise first being obtained pursuant to Section 1 of Act No. 3846, as amended. A close reading of the provisions of Sections 1 and 6 of P.D. No. 576-A, supra, does not reveal any indication of a legislative intent to do away with the franchising requirement under Section 1 of Act No. 3846. In fact, a mere reading of Section 1 would readily indicate that a franchise was necessary for the operation of radio and television broadcasting systems as it expressly provided that no such franchise may be obtained unless the radio station or television channel has sufficient capital on the basis of equity for its operation for at least one year, including purchase of equipment. It is believed that the termination of all franchises granted for the operation of radio and television broadcasting systems effective December 31, 1981 and the vesting of the power to authorize the operation of any radio or television station upon the Board of Communications and the Secretary of Public Works and Communications and their successors under Section 6 of P.D. No. 576-A does not necessarily imply the abrogation of the requirement of obtaining a franchise under Section 1 of Act No. 3846, as amended, in the absence of a clear provision in P.D. No. 576-A providing to this effect. It should be noted that under Act No. 3846, as amended, a person, firm or entity desiring to operate a radio broadcasting station must obtain the following: (a) a franchise from Congress (Sec. 1); (b) a permit to construct or install a station from the Secretary of Commerce and Industry (Sec. 2); and (c) a license to operate the station also from the Secretary of Commerce and Industry (id.). The franchise is the privilege granted by the State through its legislative body and is subject to regulation by the State itself by virtue of its police power through its administrative agencies (RCPI vs. NTC, 150 SCRA 450). The permit and license are the administrative authorizations issued by the administrative agency in the exercise of regulation. It is clear that what was transferred to the Board of Communications and the Secretary of Commerce and Industry under Section 6 of P.D. No. 576-A was merely the regulatory powers vested solely in the Secretary of Commerce and Industry under Section 2 of Act No. 3846, as amended. The franchising authority was retained by the then incumbent President as repository of legislative power under Martial Law, as is clearly indicated in the first WHEREAS clause of P.D. No. 576-A to wit: WHEREAS, the President of the Philippines is empowered under the Constitution to review and approve franchises for public utilities. Of course, under the Constitution, said power (the power to review and approve franchises), belongs to the lawmaking body (Sec. 5, Art. XIV, 1973 Constitution; Sec. 11, Art. XII, 1987 Constitution). The corollary question to be resolved is: Has E.O. No 546 (which is a law issued pursuant to P.D. No. 1416, as amended by P.D. No. 1771, granting the then President continuing authority to reorganize the administrative structure of the national government) modified the franchising and licensing arrangement for radio and television broadcasting systems under P.D. No. 576-A?

We believe so. E.O. No. 546 integrated the Board of Communications and the Telecommunications Bureau into a single entity known as the NTC (See Sec. 14), and vested the new body with broad powers, among them, the power to issue Certificates of Public Convenience for the operation of communications utilities, including radio and televisions broadcasting systems and the power to grant permits for the use of radio frequencies (Sec. 14[a] and [c], supra). Additionally, NTC was vested with broad rule making authority to encourage a larger and more effective use of communications, radio and television broadcasting facilities, and to maintain effective competition among private entities in these activities whenever the Commission finds it reasonably feasible (Sec. 15[f]). In the recent case of Albano vs. Reyes (175 SCRA 264), the Supreme Court held that franchises issued by Congress are not required before each and every public utility may operate. Administrative agencies may be empowered by law to grant licenses for or to authorize the operation of certain public utilities. The Supreme Court stated that the provision in the Constitution (Art. XII, Sec. 11) that the issuance of a franchise, certificate or other form of authorization for the operation of a public utility shall be subject to amendment, alteration or repeal by Congress, does not necessarily imply . . . that only Congress has the power to grant such authorization. Our statute books are replete with laws granting specified agencies in the Executive Branch the power to issue such authorization for certain classes of public utilities. We believe that E.O. No. 546 is one law which authorizes an administrative agency, the NTC, to issue authorizations for the operation of radio and television broadcasting systems without need of a prior franchise issued by Congress. Based on all the foregoing, we hold the view that NTC is empowered under E.O. No. 546 to issue authorization and permits to operate radio and television broadcasting system. However, on May 3, 1994, the NTC, the Committee on Legislative Franchises of Congress, and the Kapisanan ng mga Brodkaster sa Pilipinas of which petitioner is a member of good standing, entered into a Memorandum of Understanding (MOU) that requires a congressional franchise to operate radio and television stations. The MOU states, viz: WHEREAS, under the provisions of Section 1 of Act No. 3846 (Radio Laws of the Philippines, as amended), only radio and television broadcast stations with legislative franchise are authorized to operate. WHEREAS, Executive Order No. 546, which created the National Telecommunications Commission (NTC) and abolished the Board of Communications (BOC) and the Telecommunications Control Bureau (TCB), and integrated the functions and prerogative of the latter two agencies into the National Telecommunications Commission (NTC); WHEREAS, the National Telecommunications Commission (NTC) is authorized to issue certificate of public convenience for the operation of radio and television broadcast stations;

WHEREAS, there is a pervading confusion in the state of affairs of the broadcast industry brought about by conflicting laws, decrees, executive orders and other pronouncements promulgated during the Martial Law regime, the parties in their common desire to rationalize the broadcast industry, promote the interest of public welfare, avoid a vacuum in the delivery of broadcast services, and foremost to better serve the ends of press freedom, the parties hereto have agreed as follows: The NTC shall continue to issue and grant permits or authorizations to operate radio and television broadcast stations within their mandate under Section 15 of Executive Order No. 546, provided that such temporary permits or authorization to operate shall be valid for two (2) years within which the permittee shall be required to file an application for legislative franchise with Congress not later than December 31, 1994; provided finally, that if the permittee of the temporary permit or authorization to operate fails to secure the legislative franchise with Congress within this period, the NTC shall not extend or renew its permit or authorization to operate any further. Prior to the December 31, 1994 deadline set by the MOU, petitioner filed with Congress an application for a franchise on December 20, 1994. Pending its approval, the NTC issued to petitioner a temporary permit dated July 7, 1995 to operate a television station via Channel 25 of the UHF Band from June 29, 1995 to June 28, 1997. In 1996, the NTC authorized petitioner to increase the power output of Channel 25 from 1.0 kilowatt to 25 kilowatts after finding it financially and technically capable; it also granted petitioner a permit to purchase radio transmitters/transceivers for use in its television Channel 25 broadcasting. Shortly before the expiration of its temporary permit, petitioner applied for its renewal on May 14, 1997. On October 28, 1997, the House Committee on Legislative Franchises of Congress replied to an inquiry of the NTCs Broadcast Division Chief regarding the franchise application of ACWS filed on December 20, 1994. The Committee certified that petitioners franchise application was not deliberated on by the 9th Congress because petitioner failed to submit the required supporting documents. In the next Congress, petitioner did not refile its application. The following month or on November 17, 1997, the NTCs Broadcast Service Department wrote to petitioner ordering it to submit a new congressional franchise for the operation of its seven radio stations and informing it that pending compliance, its application for temporary permits to operate these radio stations would be held in abeyance. Petitioner failed to comply with the franchise requirement; it claims that it did not receive the November 17, 1997 letter. Despite the absence of a congressional franchise, the NTC notified petitioner on January 19, 1998 that its May 14, 1997 application for renewal of its temporary permit to operate television Channel 25 was approved and would be released upon payment of the prescribed fee of P3,600.00. After paying said amount, however, the NTC refused to release to petitioner its renewed permit. Instead, the NTC commenced against petitioner Administrative Case No. 98-009 based on the November 17, 1997 letter. On February 26, 1998, the NTC issued an Order directing petitioner to show cause why its assigned frequency, television Channel 25, should not be recalled for lack of the required

congressional franchise. Petitioner was also directed to cease and desist from operating Channel 25 unless subsequently authorized by the NTC. In compliance with the February 26, 1998 Order, petitioner filed its Answer on March 17, 1998. In a hearing on April 22, 1998, petitioner presented evidence and asked for continuance of the presentation to May 20, 1998. On May 4, 1998, however, petitioner filed before the Court of Appeals a Petition for Mandamus, Prohibition, and Damages to compel the NTC to release its temporary permit to operate Channel 25 which was approved in January 1998. The appellate court denied the petition on September 30, 1998. Meantime, on August 17, 1998, the NTC issued Memorandum Circular No. 14-10-98 which reads, viz: SUBJECT: Guidelines in the Renewal/Extension of Temporary Permit of Radio/TV Broadcast operators who failed to secure a legislative franchise conformably with the Memorandum of Understanding (MOU) dated May 3, 1994, entered into by and between the National Telecommunications and the Committee on Legislative Franchises, House of Representatives, and the Kapisanan ng mga Brodkaster sa Pilipinas (KBP). In compliance with the MOU and in order to clear the ambiguity surrounding the operation of broadcast operators who were not able to have their legislative franchise approved during the last congress, the following guidelines are hereby issued: 1. Existing broadcast operators who were not able to secure a legislative franchise up to this date are given up to December 31, 1999 within which to have their application for a legislative franchise bill approved by Congress. The franchise bill must be filed immediately but not later than November 30th of this year to give both Houses time to deliberate upon and recommend approval/disapproval thereof. 2. Broadcast operators affected by this circular must file their respective applications for renewal/extension of their Temporary Permits in the prescribed form together with the certification from the Committee on Legislative Franchises, House of Representatives that a franchise bill has indeed been filed prior to 30 November 1998. 3. In the event the permittee will not be able to have its franchise bill approved within the prescribed period, the NTC will no longer renew/extend its Temporary Permit and the Commission shall initiate the recall of its assigned frequency provided that due process of law is observed. 4. Henceforth, no application/petition for Certificate of Public Convenience (CPC) to establish, maintain and operate a broadcast station in the broadcast service shall be accepted for filing without showing that the applicant has an approved Legislative Franchise. This Memorandum Circular shall be published in one (1) newspaper of general circulation in the Philippines and shall take effect thirty (30) days from its publication.

August 17, 1998, Quezon City, Philippines. The Memorandum Circular was published in the Philippine Star on October 15, 1998. Well within the November 30, 1998 deadline under the Memorandum Circular, House Bill No. 3216, entitled An Act Granting the ACWS-United Broadcasting Network, Inc. a Franchise to Construct, Install, Operate and Maintain Radio and Television Broadcasting Stations within the Philippines, and for other Purposes, was filed with the Legislative Calendar Section, Bills and Index Division on September 2, 1998. On January 13, 1999, the NTC rendered a decision on Administrative Case No. 98-009 against petitioner, the dispositive portion of which reads: WHEREFORE, for lack of a legal personality to justify the issuance of any permit or license to the respondent (ACWS), the respondent not having a valid legislative franchise, the Commission hereby renders judgment as follows: 1) Channel 25 assigned to herein respondent ACWS is hereby RECALLED; 2) Respondents application for renewal of its temporary permit to operate Channel 25 is hereby DENIED; and 3) Respondent is hereby ordered to CEASE and DESIST from further operating Channel 25. Petitioner sought recourse at the Court of Appeals which affirmed the NTC decision. Hence, this petition for review on certiorari on the following grounds: I. THE COURT OF APPEALS ERRED IN UPHOLDING THE RULING OF THE NTC THAT A CONGRESSIONAL FRANCHISE IS A CONDITION SINE QUA NON IN THE OPERATION OF A RADIO AND TELEVISION BROADCASTING SYSTEM. II. THE COURT OF APPEALS ERRED IN NOT CONSIDERING OPINION 98 SERIES OF 1991 DATED JUNE 20, 1991 OF THE SECRETARY OF JUSTICE HOLDING THAT THE NTC MAY ISSUE AUTHORIZATION FOR THE OPERATION OF RADIO AND TELEVISION BROADCASTING SYSTEMS, WITHOUT THE NEED OF A PRIOR FRANCHISE ISSUED BY CONGRESS, AS BINDING ON THE NTC WHO REQUESTED FOR SAID OPINION AND IS NOT MERELY ADVISORY, AS IT IS PREDICATED ON A DECISION OF THIS HONORABLE COURT. III.

THE COURT OF APPEALS ERRED IN CONSIDERING ACT NO. 3846 AS REQUIRING A FRANCHISE FROM CONGRESS FOR THE LAWFUL OPERATION OF RADIO OR TELEVISION BROADCASTING STATIONS WHEN CLEARLY ITS PROVISIONS COVER ONLY RADIO BUT IT DOES NOT INCLUDE TELEVISION STATIONS. IV. THE COURT OF APPEALS ERRED IN UPHOLDING THE RECALL OF THE FREQUENCY CHANNEL 25 PREVIOUSLY ASSIGNED TO THE PETITIONER AND/OR THE CANCELLATION OF ITS PERMIT TO OPERATE WHICH IS UNREASONABLE, UNFAIR, OPPRESSIVE, WHIMSICAL AND CONFISCATORY WHEN IT PREVIOUSLY ISSUED THE SAID PERMIT WITHOUT REQUIRING A LEGISLATIVE FRANCHISE. V. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT NTC CASE NO. 98-009 HAD BEEN RENDERED MOOT AND ACADEMIC WITH THE ADOPTION AND PROMULGATION BY THE NTC OF MEMORANDUM CIRCULAR NO. 14-10-98 DATED AUGUST 17, 1998 AS PETITIONER FILED THE APPLICATION FOR LEGISLATIVE FRANCHISE PURSUANT THERETO. The petition is devoid of merit. We shall discuss together the first three assigned errors as they are interrelated. Petitioner stresses that Act. No. 3846 covers only the operation of radio and not television stations as Section 1 of the said law does not mention television stations in its coverage, viz: Sec. 1. No person, firm, company, association or corporation shall construct, install, establish, or operate a radio transmitting station, or a radio receiving station used for commercial purposes, or a radio broadcasting station, without having first obtained a franchise therefor from the Congress of the Philippines Petitioner observes that quite understandably, television stations were not included in Act No. 3846 because the law was enacted in 1931 when there was yet no television station in the Philippines. Following the rule in statutory construction that what is not included in the law is deemed excluded, petitioner avers that television stations are not covered by Act No. 3846. Petitioner notes that in fact, the NTC previously issued to it a temporary permit dated July 7, 1995 to operate Channel 25 from June 29, 1995 to June 28, 1997 without requiring a congressional franchise. Likewise, in 1996, the NTC issued to it a permit to increase its television operating power and to purchase a radio transmitter/transceiver for use in its television broadcasting, again without requiring a congressional franchise. Petitioner thus argues that, contrary to the January 19, 1999 decision of the NTC, its application for renewal of its temporary permit to operate television Channel 25 does not require a congressional franchise.

In upholding the NTC decision, the Court of Appeals held that a congressional franchise is required for the operation of radio and television broadcasting stations as this requirement under Act No. 3846 was not expressly repealed by P.D. No. 576-A nor E.O. No. 546. Citing Berces, Sr. v. Guingona, it ruled that without an express repeal, a subsequent law cannot be construed as repealing a prior law unless there is an irreconcilable inconsistency and repugnancy in the language of the new and old laws, which petitioner was not able to show. The appellate court correctly ruled that a congressional franchise is necessary for petitioner to operate television Channel 25. Even assuming that Act No. 3846 applies only to radio stations and not to television stations as petitioner adamantly insists, the subsequent P.D. No. 576-A clearly shows in Section 1 that a franchise is required to operate radio as well as television stations, viz: Sec. 1. No radio station or television channel may obtain a franchise unless it has sufficient capital on the basis of equity for its operation for at least one year, including purchase of equipment. (emphasis supplied) As pointed out in DOJ Opinion No. 98, there is nothing in P.D. No. 576-A that reveals any intention to do away with the requirement of a franchise for the operation of radio and television stations. Section 6 of P.D. No. 576-A merely identifies the regulatory agencies from whom authorizations, in addition to the required congressional franchise, must be secured after December 31, 1981, viz: Sec. 6. All franchises, grants, licenses, permits, certificates or other forms of authority to operate radio or television broadcasting systems shall terminate on December 31, 1981. Thereafter, irrespective of any franchise, grant, license, permit, certificate or other forms of authority to operate granted by any office, agency or person, no radio or television station shall be authorized to operate without the authority of the Board of Communications and the Secretary of Public Works and Communications or their successors who have the right and authority to assign to qualified parties frequencies, channels or other means of identifying broadcasting system . . . (emphasis supplied) To understand why it was necessary to identify these agencies, we turn a heedful eye on the laws regarding authorizations for the operation of radio and television stations that preceded P.D. No. 576-A. Act No. 3846 of 1931 provides, viz: Sec. 1. No person, firm, company, association, or corporation shall construct, install, establish, or operate a radio transmitting station, or a radio receiving station used for commercial purposes, or a radio broadcasting station, without having first obtained a franchise therefor from the Congress of the Philippines: xxx

Sec. 1-A. No person, firm, company, association or corporation shall possess or own transmitters or transceivers (combination transmitter-receiver), without registering the same with the Secretary of Public Works and Communications . . . and no person, firm, company, association or corporation shall construct or manufacture, or purchase radio transmitters or transceivers without a permit issued by the Secretary of Public Works and Communications. xxx Sec. 3. The Secretary of Public Works and Communications is hereby empowered to regulate the construction or manufacture, possession, control, sale and transfer of radio transmitters or transceivers (combination transmitter-receiver) and the establishment, use, the operation of all radio stations and of all forms of radio communications and transmissions within the Philippines. In addition to the above, he shall have the following specific powers and duties: xxx (c) He shall assign call letter and assign frequencies for each station licensed by him and for each station established by virtue of a franchise granted by the Congress of the Philippines and specify the stations to which each of such frequencies may be used;. . . Shortly after the declaration of Martial Law, then President Marcos issued P.D. No. 1 dated September 24, 1972, through which the Integrated Reorganization Plan for the executive branch was adopted. Under the Plan, the Public Service Commission was abolished and its functions transferred to special regulatory boards, among which was the Board of Communications with the following functions: 5a. Issue Certificates of Public Convenience for the operation of communications utilities and services, radio communications systems . . ., radio and television broadcasting systems and other similar public utilities; xxx c. Grant permits for the use of radio frequencies for . . . radio and television broadcasting systems including amateur radio stations. With the creation of the Board of Communications under the Plan, it was no longer sufficient to secure authorization from the Secretary of Public Works and Communications as provided in Act No. 3846. The Boards authorization was also necessary. Thus, P.D. No. 576-A provides in Section 6 that radio and television station operators must secure authorization from both the Secretary of Public Works and Communications and the Board of Communications. Dispensing with the requirement of a congressional franchise is not in line with the declared purposes of P.D. No. 576-A, viz:

WHEREAS, it has been observed that some public utilities, especially radio and television stations, have a tendency toward monopoly in ownership and operation to such an extent that a region or section of the country may be covered by any number of such broadcast stations, all or most of which are owned, operated or managed by one person or corporation; xxx WHEREAS, on account of the limited number of frequencies available for broadcasting in the Philippines, it is necessary to regulate the ownership and operation of radio and television stations and provide measures that would enhance quality and viability in broadcasting and help serve the public interests; . . . A textual interpretation of Section 6 of P.D. No. 576-A yields the same interpretation that after December 31, 1981, a franchise is still necessary to operate radio and television stations. Were it the intention of the law to do away with the requirement of a franchise after said date, then the phrase (t)hereafter, irrespective of any franchise, grant, license, permit, certificate or other forms of authority to operate granted by any office, agency or person (emphasis supplied) would not have been necessary because the first sentence of Section 6 already states that (a)ll franchises, grants, licenses, permits, certificates or other forms of authority to operate radio or television broadcasting systems shall terminate on December 31, 1981. It is therefore already understood that these forms of authority have no more force and effect after December 31, 1981. If the intention were to do away with the franchise requirement, Section 6 would have simply laid down after the first sentence the requirements to operate radio and television stations after December 31, 1981, i.e., no radio or television station shall be authorized to operate without the authority of the Board of Communications and the Secretary of Public Works and Communications. Instead, however, the phrase irrespective of any franchise, was inserted to emphasize that a franchise or any other form of authorization from any office, agency or person does not suffice to operate radio and television stations because the authorizations of both the Board of Communications and the Secretary of Public Works and Communications are required as well. This interpretation adheres to the rule in statutory construction that words in a statute should not be construed as surplusage if a reasonable construction which will give them some force and meaning is possible. Contrary to the opinion of the Secretary of Justice in DOJ Opinion No. 98, Series of 1991, the appellate court was correct in ruling that E.O. No. 546 which came after P.D. No. 576A did not dispense with the requirement of a congressional franchise. It merely abolished the Board of Communications and the Telecommunications Control Bureau under the Reorganization Plan and transferred their functions to the NTC, including the power to issue Certificates of Public Convenience (CPC) and grant permits for the use of frequencies, viz: Sec. 15. a. Issue Certificate of Public Convenience for the operation of communication utilities and services, radio communications systems, wire or wireless telephone or telegraph system, radio and television broadcasting system and other similar public utilities; xxx

c. Grant permits for the use of radio frequencies for wireless telephone and telegraph systems and radio communication systems including amateur radio stations and radio and television broadcasting systems; . . . E.O. No. 546 defines the regulatory and technical aspect of the legal process preparatory to the full exercise of the privilege to operate radio and television stations, which is different from the grant of a franchise from Congress, viz: The statutory functions of NTC may then be given effect as Congress prerogative to grant franchises under Act No. 3846 is upheld for they are distinct forms of authority. The former covers matters dealing mostly with the technical side of radio or television broadcasting, while the latter involves the exercise by the legislature of an exclusive power resulting in a franchise or a grant under authority of government, conferring a special right to do an act or series of acts of public concern (37 C.J.S., secs. 1, 14, pp. 144, 157). In fine, there being no clear showing that the laws here involved cannot stand together, the presumption is against inconsistency or repugnance, hence, against implied repeal of the earlier law by the later statute (Agujetas v. Court of Appeals, 261 SCRA 17, 1996). As we held in Radio Communication of the Philippines, Inc. v. National Telecommunications Commission, a franchise is distinguished from a CPC in that the former is a grant or privilege from the sovereign power, while the latter is a form of regulation through the administrative agencies, viz: A franchise started out as a royal privilege or (a) branch of the Kings prerogative, subsisting in the hands of a subject. This definition was given by Finch, adopted by Blackstone, and accepted by every authority since (State v. Twin Village Water Co., 98 Me 214, 56 A 763 [1903]). Today, a franchise, being merely a privilege emanating from the sovereign power of the state and owing its existence to a grant, is subject to regulation by the state itself by virtue of its police power through its administrative agencies. Even prior to E.O. No. 546, the NTCs precursor, i.e., the Board of Communications, already had the function of issuing CPC under the Integrated Reorganization Plan. The CPC was required by the Board at the same time that P.D. No. 576-A required a franchise to operate radio and television stations. The function of the NTC to issue CPC under E.O. No. 546 is thus nothing new and exists alongside the requirement of a congressional franchise under P.D. No. 576-A. There is no conflict between E.O. No. 546 and P.D. No 576-A; Section 15 of the former does not dispense with the franchise requirement in the latter. We adhere to the cardinal rule in statutory construction that statutes in pare materia, although in apparent conflict, or containing apparent inconsistencies, should, as far as reasonably possible, be construed in harmony with each other, so as to give force and effect to each. The ruling of this Court in Crusaders Broadcasting System, Inc. v. National Telecommunications Commission, buttresses the interpretation that the requirement of a congressional franchise for the operation of radio and television stations exists alongside the requirement of a CPC. In that case, we held that under E.O. No. 546, the regulation of radio communications is a function assigned to and performed by the NTC and at the same time recognized the requirement of a congressional franchise for the operation of a radio station under Act No. 3846. We did not interpret E.O. No. 546

to have repealed the congressional franchise requirement under Act No. 3846 as these two laws are not inconsistent and can both be given effect. Likewise, in Radio Communication of the Philippines, Inc. v. National Telecommunications Commission, we recognized the necessity of both a congressional franchise under Act No. 3846 and a CPC under E.O. No. 546 to operate a radio communications system. In buttressing its position that a congressional franchise is not required to operate its television station, petitioner banks on DOJ Opinion No. 98, Series of 1991 which states that under E.O. No. 546, the NTC may issue a permit or authorization for the operation of radio and television broadcasting systems without a prior franchise issued by Congress. Petitioner argues that the opinion is binding and conclusive upon the NTC as the NTC itself requested the advisory from the Secretary of Justice who is the legal adviser of government. Petitioner claims that it was precisely because of the above DOJ Opinion No. 98 that the NTC did not previously require a congressional franchise in all of its applications for permits with the NTC. Petitioner, however, cannot rely on DOJ Opinion No. 98 as this opinion is merely persuasive and not necessarily controlling. As shown above, the opinion is erroneous insofar as it holds that E.O. No. 546 dispenses with the requirement of a congressional franchise to operate radio and television stations. The case of Albano v. Reyes cited in the DOJ opinion, which allegedly makes it binding upon the NTC, does not lend support to petitioners cause. In that case, we held, viz: Franchises issued by Congress are not required before each and every public utility may operate. Thus, the law has granted certain administrative agencies the power to grant licenses for or to authorize the operation of certain public utilities. (See E.O. Nos. 172 and 202) That the Constitution provides in Art. XII, Sec. 11 that the issuance of a franchise, certificate or other form of authorization for the operation of a public utility shall be subject to amendment, alteration or repeal by Congress does not necessarily imply, as petitioner posits, that only Congress has the power to grant such authorization. Our statute books are replete with laws granting specified agencies in the Executive Branch the power to issue such authorization for certain classes of public utilities. (footnote omitted) Our ruling in Albano that a congressional franchise is not required before each and every public utility may operate should be viewed in its proper light. Where there is a law such as P.D. No. 576-A which requires a franchise for the operation of radio and television stations, that law must be followed until subsequently repealed. As we have earlier shown, however, there is nothing in the subsequent E.O. No. 546 which evinces an intent to dispense with the franchise requirement. In contradistinction with the case at bar, the law applicable in Albano, i.e., E.O. No. 30, did not require a franchise for the Philippine Ports Authority to take over, manage and operate the Manila International Port Complex and undertake the providing of cargo handling and port related services thereat. Similarly, in Philippine Airlines, Inc. v. Civil Aeronautics Board, et al., we ruled that a legislative franchise is not necessary for the operation of domestic air transport because 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. Thus, while it is correct to say that specified agencies in the Executive Branch have the power to issue authorization for certain classes of public utilities, this does not mean that the authorization or CPC issued by the NTC dispenses with the requirement of a franchise as this is clearly required under P.D. No. 576-A. Petitioner contends that the NTC erroneously denied its application for renewal of its temporary permit to operate Channel 25 and recalled its Channel 25 frequency based on the May 3, 1994 MOU that requires a congressional franchise for the operation of television broadcast stations. The MOU is not an act of Congress and thus cannot amend Act No. 3846 which requires a congressional franchise for the operation of radio stations alone, and not television stations. We find no merit in petitioners contention. As we have shown, even assuming that Act No. 3846 requires only radio stations to secure a congressional franchise for its operation, P.D. No. 576-A was subsequently issued in 1974, which clearly requires a franchise for both radio and television stations. Thus, the 1994 MOU did not amend any law, but merely clarified the existing law that requires a franchise. That the legislative intent is to continue requiring a franchise for the operation of radio and television broadcasting stations is clear from the franchises granted by Congress after the effectivity of E.O. No. 546 in 1979 for the operation of radio and television stations. Among these are: (1) R.A. No. 9131 dated April 24, 2001, entitled An Act Granting the Iddes Broadcast Group, Inc., a Franchise to Construct, Install, Establish, Operate and Maintain Radio and Television Broadcasting Stations in the Philippines; (2) R.A. No. 9148 dated July 31, 2001, entitled An Act Granting the Hypersonic Broadcasting Center, Inc., a Franchise to Construct, Install, Establish, Operate and Maintain Radio Broadcasting Stations in the Philippines; and (3) R.A. No. 7678 dated February 17, 1994, entitled An Act Granting the Digital Telecommunication Philippines, Incorporated, a Franchise to Install, Operate and Maintain Telecommunications Systems Throughout the Philippines. All three franchises require the grantees to secure a CPCN/license/permit to construct and operate their stations/systems. Likewise, the Tax Reform Act of 1997 provides in Section 119 for tax on franchise of radio and/or television broadcasting companies, viz: Sec. 119. Tax on Franchises. Any provision of general or special law to the contrary notwithstanding, there shall be levied, assessed and collected in respect to all franchises on radio and/or television broadcasting companies whose annual gross receipts of the preceding year does not exceed Ten million pesos (P10,000,000), subject to Section 236 of this Code, a tax of three percent (3%) and on electric, gas and water utilities, a tax of two percent (2%) on the gross receipts derived from the business covered by the law granting the franchise. . . (emphasis supplied) Undeniably, petitioner is aware that a congressional franchise is necessary to operate its television station Channel 25 as shown by its actuations. Shortly before the December 31, 1994 deadline set in the MOU, petitioner filed an application for a franchise with Congress. It was not, however, acted upon in the 9th Congress for petitioners failure to submit the necessary supporting documents; petitioner failed to re-file the application in the following Congress. Petitioner also filed an application for a franchise with Congress

on September 2, 1998, before the November 30, 1998 deadline under Memorandum Circular No. 14-10-98. We now come to the fourth assigned error. Petitioner avers that the Court of Appeals erred in upholding the recall of frequency Channel 25 previously assigned to it and the cancellation of its permit to operate which was already approved in January 1998. It claims that these acts of the NTC were unreasonable, unfair, oppressive, whimsical and confiscatory considering that the NTC previously issued petitioner a temporary permit without requiring a congressional franchise. On February 26, 1998, the NTC issued a show cause order to petitioner with the following decretal portion: IN VIEW THEREOF, respondents are hereby directed to show cause in writing within ten (10) days from receipt of this order why their assigned frequency, more specifically Channel 25 in the UHF Band, should not be recalled for lack of the necessary Congressional Franchise as required by Section 1, Act No. 3846, as amended. Moreover, respondent is hereby directed to cease and desist from operating DWQH-TV, unless subsequently authorized by the Commission. The order was supposedly based on a letter of the NTC dated November 17, 1997 informing petitioner that its application for renewal of temporary permits of its seven radio stations were being held in abeyance pending submission of its new congressional franchise. Petitioner was directed to submit the franchise within thirty days from expiration of its temporary permits to be renewed and informed that its failure to do so might constitute denial of its application. Petitioner is correct that the November 17, 1997 letter referred only to its radio stations and not to its television Channel 25. Thus, it could not serve as basis for the February 26, 1998 show cause order which referred solely to its television Channel 25. Besides, petitioner claims that it did not receive the letter. Be that as it may, the NTCs February 26, 1998 order for petitioner to cease and desist from operating Channel 25 was not unreasonable, unfair, oppressive, whimsical and confiscatory. The 1994 MOU states in unmistakable terms that petitioners temporary permit to operate Channel 25 would be valid for only two years, i.e., from June 29, 1995 to June 28, 1997. During these two years, petitioner was supposed to have secured a congressional franchise, otherwise the NTC shall not extend or renew its permit or authorization to operate any further. Apparently, petitioner did not submit a congressional franchise to the NTC in applying for renewal of this temporary permit on May 14, 1997. The NTCs approval of petitioners application to renew its temporary permit in January 1998 was thus erroneous because under the 1994 MOU, the NTC could not renew petitioners temporary permit to operate Channel 25 without a congressional franchise. In the absence of a renewed temporary permit, the NTC was correct in ordering petitioner to cease and desist from operating Channel 25, regardless of whether or not petitioner received the November 17, 1997 letter. The NTCs erroneous approval of petitioners application in January 1998 did not estop the NTC from ordering petitioner on February 26, 1998 to cease and desist from operating Channel 25 for failure to comply with the franchise requirement as estoppel does not work against the government.

Likewise, the NTCs denial of petitioners application for renewal of its temporary permit to operate Channel 25 and recall of its Channel 25 frequency in its January 13, 1999 decision were not unreasonable, unfair, oppressive, whimsical and confiscatory so as to offend petitioners right to due process. In Crusaders Broadcasting System, Inc. v. National Telecommunications Commission,41 the Court ruled that although a particular ground for suspending operations of the broadcasting company was not reflected in the show cause order, the NTC could nevertheless raise said ground if any basis therefore was gleaned during the administrative proceedings. In the instant case, the lack of congressional franchise as ground for denial of petitioners application for renewal of temporary permit and recall of its Channel 25 frequency was raised not only during the administrative proceedings against it, but was even stated in the February 26, 1998 show cause order, viz: IN VIEW THEREOF, respondents are hereby directed to show cause in writing within ten (10) days from receipt of this order why their assigned frequency, more specifically Channel 25 in the UHF Band, should not be recalled for lack of the necessary Congressional Franchise as required by Section 1, Act No. 3846, as amended. Moreover, respondent is hereby directed to cease and desist from operating DWQH-TV, unless subsequently authorized by the Commission. (emphasis supplied) In Eastern Broadcasting Corporation v. Dans, Jr., et al., we held that the requirements of due process in administrative proceedings laid down by this Court in Ang Tibay v. Court of Industrial Relations should be satisfied before a broadcast station may be closed or its operations curtailed. We enumerated these requirements, viz: . . . (1) the right to a hearing which includes the right to present ones case and submit evidence in support thereof; (2) the tribunal must consider the evidence presented; (3) the decision must have something to support itself; (4) the evidence must be substantial. Substantial evidence means such reasonable evidence as a reasonable mind might accept as adequate to support a conclusion; (5) the decision must be based on the evidence presented at the hearing, or at least contained in the record and disclosed to the parties affected; (6) the tribunal or body or any of its judges must act on its own independent consideration of the law and facts of the controversy and not simply accept the views of a subordinate; (7) the board or body should, in all controversial questions, render its decisions in such a manner that the parties to the proceeding can know the various issues involved, and the reasons for the decision rendered. Petitioner had the opportunity to present its case and submit evidence on why its assigned frequency Channel 25 should not be recalled and its application for renewal denied. Petitioner filed its Answer to the show cause order on March 17, 1998. A hearing was held on April 22, 1998 wherein petitioner presented its evidence in compliance with the show cause order. Based on the NTCs findings that petitioner failed to comply with the requirement of a congressional franchise, the NTC denied its application for renewal of its temporary permit to operate Channel 25 and recalled its assigned Channel 25

frequency. The requirements of due process in Ang Tibay were satisfied, thus petitioner cannot say that the NTCs actions were unreasonable, unfair, oppressive, whimsical and confiscatory. Finally, petitioner contends that the Court of Appeals erred in not holding that Administrative Case No. 98-009, the administrative proceeding against it for failure to secure a congressional franchise to operate its television Channel 25, has been rendered moot and academic by the adoption and promulgation of NTC Memorandum Circular No. 14-10-98 dated August 17, 1998 which took effect on November 15, 1998. The Memorandum Circular states, viz: In compliance with the MOU and in order to clear the ambiguity surrounding the operation of broadcast operators who were not able to have their legislative franchise approved during the last Congress, the following guidelines are hereby issued: 1. Existing broadcast operators who were not able to secure a legislative franchise up to this date (August 17, 1998) are given up to December 31, 1999 within which to have their application for a legislative franchise bill approved by Congress. The franchise bill must be filed immediately but not later than November 30th of this year . . . Petitioner avers that the NTC erroneously held that this Memorandum Circular is not applicable to it because the words of the circular are clear that it covers existing broadcasting operators including petitioner. In compliance with the Memorandum Circular, petitioner filed House Bill No. 32 on September 2, 1998, well within the November 30, 1998 deadline. Thus, petitioner argues that the NTC erred in denying its application for renewal of permit to operate Channel 25 and recalling its assigned Channel 25 frequency on January 13, 1999, long before the Memorandum Circulars December 31, 1999 deadline to secure a congressional franchise. Petitioner posits that the NTCs premature and arbitrary promulgation of its January 13, 1999 decision slammed the door for the petitioner to secure its legislative franchise. The pending application for legislative franchise of petitioner was effectively struck out by said NTC decision. Whether or not the benefits of the Memorandum Circular extend to petitioner, the fact is, as correctly pointed out by the appellate court, petitioner failed to secure a legislative franchise by December 31, 1999. Consequently, the NTCs recall of petitioners assigned frequency Channel 25 and denial of its application for renewal of its permit to operate the said television channel were proper as the Memorandum Circular provides, viz: 1. Existing broadcast operators who are not able to secure a legislative franchise up to this date (August 17, 1998) are given up to December 31, 1999 within which to have their application for a legislative franchise approved by Congress. The franchise bill must be filed immediately but not later than November 30th of this year . . . xxx 3. In the event the permittee will not be able to have its franchise bill approved within the prescribed period, the NTC will no longer renew/extend its temporary permit

and the Commission shall initiate the recall of its assigned frequency provided that due process of law is observed. 4. Henceforth, no application/petition for Certificate of Public Convenience (CPC) to establish, maintain and operate a broadcast station in the broadcast service shall be accepted for filing without showing that the applicant has an approved legislative franchise.(emphasis supplied) Petitioners argument is flawed when it states that the January 13, 1999 decision of the NTC slammed the door on its application for a congressional franchise as the process of securing a congressional franchise is separate and distinct from the process of applying for renewal of a temporary permit with the NTC. The latter is not a prerequisite to the former. In fact, in the normal course of securing authorizations to operate a television and radio station, the application for a CPC with the NTC comes after securing a franchise from Congress.[48 The CPC is not a condition for the grant of a congressional franchise. The Court is not unmindful that there is a trend towards delegating the legislative power to authorize the operation of certain public utilities to administrative agencies and dispensing with the requirement of a congressional franchise as in the Albano case which involved the provision of cargo handling and port related services at the Manila International Port Complex and the PAL case involving the operation of domestic air transport. The rationale for this trend was explained in the PAL case, viz: . . . 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. (Pangasinan Transportation Co., Inc. vs. The Public Service Commission, G.R. No. 47065, June 26, 1940, 70 Phil 221.) 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. (Dyer vs. Tuskaloosa Bridge Co., 2 Port. 296, 27 Am. D. 655; ChristianTodd Tel. Co. vs. Commonwealth, 161 S.W. 543, 156 Ky. 557, 37 C.J.S. 158) 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. (Superior Water, Light and Power Co. vs. City of Superior, 181 N.W. 113, 174 Wis. 257, affirmed 183 N.W. 254, 37 C.J.S. 158.) 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.

The criticism against the requirement of a congressional franchise is incisively expressed by a public utilities lawyer, viz: As will be noted, a legislative franchise is required to install and operate a radio station before an applicant can apply for a Certificate of Public Convenience to operate a radio station based in any part of the country. Under Act No. 3846 of 1929, Sec. 1, it was provided that no one may install and operate a radio station without having first obtained a franchise therefore from the Congress of the Philippines. Since then, this has been strictly followed. And this holds true with respect to application for electric, telephone and many other telecommunications services. Before, even mere application for authority to operate an ice plant must have prior congressional franchise. But this was not strictly followed until ice plant operations were eventually deregulated. Right now, the both houses of the legislature are saddled with House Bill Nos. etc. for the grant of legislative franchise to operate this and that public utility services in various places in the Philippines. We hear during sessions in both houses the time wasted on reports and considerations of these house bills for grant of franchises. The legislature is empowered and has created respective regulatory bodies with requisite expertise to handle franchising and regulation of such types of public utility services, why not just entrust all these functions to them? What exactly is the reason or rationale for imposing a prior congressional franchise? There seems to be no valid reason for it except to impose added burden and expenses on the part of the applicant. The justification appears to be simply because this was required in the past so it is now. We are reminded of the forceful denunciation of Justice Holmes of a stubborn adherence to an anachronistic rule of law: It is revolting to have no better reason for a rule of law that so it was laid down in the time of Henry IV. It is still more revolting if the grounds upon which it was laid down have vanished long since, and the rule simply persists from blind imitation of the past. (The Path of the Law, Collected Legal Papers [1920] 210, 212 quoted from The Justice Holmes Reader, Julius N. Marke, 1955 ed., p. 278.) The call to dispense with the requisite legislative franchise must, however, be addressed to Congress as the lawmaker of the land for the Courts function is to interpret and not to rewrite the law. As long as the law remains unchanged, the requirement of a franchise to operate a television station must be upheld. WHEREFORE, the petition is DENIED and the Court of Appeals January 13, 2000 decision and February 21, 2000 resolution are AFFIRMED. No costs. SO ORDERED.

Schechter Poultry Corp. v. United States Facts of the Case: Section 3 of the National Industrial Recovery Act empowered the President to implement industrial codes to regulate weekly employment hours, wages, and minimum ages of employees. The codes had standing as penal statutes. Question: Did Congress unconstitutionally delegate legislative power to the President? Conclusion: The Court held that Section 3 was "without precedent" and violated the Constitution. The law did not establish rules or standards to evaluate industrial activity. In other words, it did not make codes, but simply empowered the President to do so. A unanimous Court found this to be an unconstitutional delegation of legislative authority. In the midst of the Great Depression, President Franklin Roosevelt worked with the Democratic Congress to enact several sweeping economic reform bills, known as the New Deal. In 1935, in A.L.A. Schechter Poultry Corp. v. United States, the Supreme Court declared unconstitutional a central piece of this New Deal legislation. In reviewing the conviction of a poultry company for breaking the Live Poultry Code, the Court held that the code violated the Constitution's separation of powers because it was written by agents of the president with no genuine congressional direction. The Court also held that much of the code exceeded the powers of Congress because the activities it policed were beyond what Congress could constitutionally regulate. The Live Poultry Code, written and promulgated by the Roosevelt administration in 1934, was a part of the National Industrial Recovery Act (NIRA), a law passed by Congress to regulate companies as a means to combat the Great Depression. Section 3 of NIRA gave the president authority to approve such "codes of unfair competition." Roosevelt's poultry code fixed the maximum number of hours a poultry employee could work, imposed a minimum wage for poultry employees, and banned certain methods of "unfair competition." Schechter Poultry Corporation, the defendant in the case, purchased live poultry from commissioners in New York City and Philadelphia and sold slaughtered poultry to retailers and butchers in Brooklyn. Schechter was charged by the U.S. government with violating the poultry code by selling "unfit chickens," illegally selling chickens on an individual basis, avoiding inspections by local poultry regulators, falsifying records of poultry sold, and selling poultry to nonlicensed purchasers. Schechter was convicted in a federal district court, lost an appeal to the circuit court, and appealed to the Supreme Court, which reviewed the case in 1935. The Supreme Court held that the Live Poultry Code was unconstitutional and that the conviction of Schechter must be overturned. First, the Court found that the president lacked the power to write the code, citing the U.S. Constitution, Article I, which states that all legislative power is to be vested in the Congress. Article I is thus violated if Congress grants its exclusive legislative power to the president. The NIRA allowed the president to write new codes, such as the poultry code, so long as they regulated "unfair competition." The Court found the phrase "unfair competition" too ambiguous to constitute an "intelligible principle" necessary to limit the president's actions in enforcing the NIRA. Lacking such a principle, the NIRA effectively allowed the president "unfettered discretion" to create "new laws" without congressional approval. Second, the Court held that the poultry code violated the Constitution's Commerce Clause. The Constitution limits the activities over which Congress may legislate, reserving all other activities for the states to govern. While the Constitution allows Congress to regulate "interstate commerce" under the clause, the Court found Schechter's activities had nothing to do with interstate commerce. Schechter bought poultry from out of state, but its offending conduct was confined to New York State. The activities of Schechter thus fell outside congressional power because they constituted intrastate (in-state) commerce. Additionally, some provisions of the poultry code were found unconstitutional on their face. The effect of a butcher's hours and wage practices on interstate commerce, for example, was found far too "indirect" to be within the congressional powers to regulate under the Commerce Clause. Schechter Poultry's sweeping interpretations of legislative power had devastating effects on President Roosevelt's New Deal programs in the 1930s. The centerpiece of the New Deal legislation, the NIRA, was essentially declared unconstitutional. Ultimately, President Roosevelt responded by proposing a "court packing" scheme in 1937, allowing a new Supreme Court justice to be appointed for every current sitting justice over the age of 70. The scheme was designed to help tip the Court's ideological balance to Roosevelt's side. It failed in Congress and never became law. By the late 1930s, however, the Supreme Court began reading Congress's powers under the Commerce Clause more broadly. Indeed, by the 1960s, the Court held that congressional statutes outlawing racial segregation in local businesses were constitutional under the Commerce Clause.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 17122 February 27, 1922

Section 3 defines what shall constitute a monopoly or hoarding of palay, rice or corn within the meaning of this Act, but does not specify the price of rice or define any basic for fixing the price. SEC. 4. The violations of any of the provisions of this Act or of the regulations, orders and decrees promulgated in accordance therewith shall be punished by a fine of not more than five thousands pesos, or by imprisonment for not more than two years, or both, in the discretion of the court: Provided, That in the case of companies or corporations the manager or administrator shall be criminally liable. SEC. 7. At any time that the Governor-General, with the consent of the Council of State, shall consider that the public interest requires the application of the provisions of this Act, he shall so declare by proclamation, and any provisions of other laws inconsistent herewith shall from then on be temporarily suspended. Upon the cessation of the reasons for which such proclamation was issued, the Governor-General, with the consent of the Council of State, shall declare the application of this Act to have likewise terminated, and all laws temporarily suspended by virtue of the same shall again take effect, but such termination shall not prevent the prosecution of any proceedings or cause begun prior to such termination, nor the filing of any proceedings for an offense committed during the period covered by the Governor-General's proclamation. August 1, 1919, the Governor-General issued a proclamation fixing the price at which rice should be sold. August 8, 1919, a complaint was filed against the defendant, Ang Tang Ho, charging him with the sale of rice at an excessive price as follows: The undersigned accuses Ang Tang Ho of a violation of Executive Order No. 53 of the Governor-General of the Philippines, dated the 1st of August, 1919, in relation with the provisions of sections 1, 2 and 4 of Act No. 2868, committed as follows: That on or about the 6th day of August, 1919, in the city of Manila, Philippine Islands, the said Ang Tang Ho, voluntarily, illegally and criminally sold to Pedro Trinidad, one ganta of rice at the price of eighty centavos (P.80), which is a price greater than that fixed by Executive Order No. 53 of the Governor-General of the Philippines, dated the 1st of August, 1919, under the authority of section 1 of Act No. 2868. Contrary to law. Upon this charge, he was tried, found guilty and sentenced to five months' imprisonment and to pay a fine of P500, from which he appealed to this court, claiming that the lower court erred in finding Executive Order No. 53 of 1919, to be of any force and effect, in finding the accused guilty of the offense charged, and in imposing the sentence.

THE UNITED STATES, plaintiff-appellee, vs. ANG TANG HO, defendant-appellant. Williams & Ferrier for appellant. Acting Attorney-General Tuason for appellee. JOHNS, J.: At its special session of 1919, the Philippine Legislature passed Act No. 2868, entitled "An Act penalizing the monopoly and holding of, and speculation in, palay, rice, and corn under extraordinary circumstances, regulating the distribution and sale thereof, and authorizing the Governor-General, with the consent of the Council of State, to issue the necessary rules and regulations therefor, and making an appropriation for this purpose," the material provisions of which are as follows: Section 1. The Governor-General is hereby authorized, whenever, for any cause, conditions arise resulting in an extraordinary rise in the price of palay, rice or corn, to issue and promulgate, with the consent of the Council of State, temporary rules and emergency measures for carrying out the purpose of this Act, to wit: (a) To prevent the monopoly and hoarding of, and speculation in, palay, rice or corn. (b) To establish and maintain a government control of the distribution or sale of the commodities referred to or have such distribution or sale made by the Government itself. (c) To fix, from time to time the quantities of palay rice, or corn that a company or individual may acquire, and the maximum sale price that the industrial or merchant may demand. (d) . . . SEC. 2. It shall be unlawful to destroy, limit, prevent or in any other manner obstruct the production or milling of palay, rice or corn for the purpose of raising the prices thereof; to corner or hoard said products as defined in section three of this Act; . . .

The official records show that the Act was to take effect on its approval; that it was approved July 30, 1919; that the Governor-General issued his proclamation on the 1st of August, 1919; and that the law was first published on the 13th of August, 1919; and that the proclamation itself was first published on the 20th of August, 1919. The question here involves an analysis and construction of Act No. 2868, in so far as it authorizes the Governor-General to fix the price at which rice should be sold. It will be noted that section 1 authorizes the Governor-General, with the consent of the Council of State, for any cause resulting in an extraordinary rise in the price of palay, rice or corn, to issue and promulgate temporary rules and emergency measures for carrying out the purposes of the Act. By its very terms, the promulgation of temporary rules and emergency measures is left to the discretion of the Governor-General. The Legislature does not undertake to specify or define under what conditions or for what reasons the Governor-General shall issue the proclamation, but says that it may be issued "for any cause," and leaves the question as to what is "any cause" to the discretion of the Governor-General. The Act also says: "For any cause, conditions arise resulting in an extraordinary rise in the price of palay, rice or corn." The Legislature does not specify or define what is "an extraordinary rise." That is also left to the discretion of the GovernorGeneral. The Act also says that the Governor-General, "with the consent of the Council of State," is authorized to issue and promulgate "temporary rules and emergency measures for carrying out the purposes of this Act." It does not specify or define what is a temporary rule or an emergency measure, or how long such temporary rules or emergency measures shall remain in force and effect, or when they shall take effect. That is to say, the Legislature itself has not in any manner specified or defined any basis for the order, but has left it to the sole judgement and discretion of the Governor-General to say what is or what is not "a cause," and what is or what is not "an extraordinary rise in the price of rice," and as to what is a temporary rule or an emergency measure for the carrying out the purposes of the Act. Under this state of facts, if the law is valid and the Governor-General issues a proclamation fixing the minimum price at which rice should be sold, any dealer who, with or without notice, sells rice at a higher price, is a criminal. There may not have been any cause, and the price may not have been extraordinary, and there may not have been an emergency, but, if the Governor-General found the existence of such facts and issued a proclamation, and rice is sold at any higher price, the seller commits a crime. By the organic law of the Philippine Islands and the Constitution of the United States all powers are vested in the Legislative, Executive and Judiciary. It is the duty of the Legislature to make the law; of the Executive to execute the law; and of the Judiciary to construe the law. The Legislature has no authority to execute or construe the law, the Executive has no authority to make or construe the law, and the Judiciary has no power to make or execute the law. Subject to the Constitution only, the power of each branch is supreme within its own jurisdiction, and it is for the Judiciary only to say when any Act of the Legislature is or is not constitutional. Assuming, without deciding, that the Legislature itself has the power to fix the price at which rice is to be sold, can it delegate that power to another, and, if so, was that power legally delegated by Act No. 2868? In other words, does the Act delegate legislative power to the Governor-General? By the Organic Law, all Legislative power is vested in the Legislature, and the power conferred upon the Legislature to make laws cannot be delegated to the Governor-General, or any one else. The Legislature cannot delegate the legislative power to enact any law. If Act no 2868 is a law unto itself and within itself, and it does nothing more than to authorize the

Governor-General to make rules and regulations to carry the law into effect, then the Legislature itself created the law. There is no delegation of power and it is valid. On the other hand, if the Act within itself does not define crime, and is not a law, and some legislative act remains to be done to make it a law or a crime, the doing of which is vested in the Governor-General, then the Act is a delegation of legislative power, is unconstitutional and void. The Supreme Court of the United States in what is known as the Granger Cases (94 U.S., 183-187; 24 L. ed., 94), first laid down the rule: Railroad companies are engaged in a public employment affecting the public interest and, under the decision in Munn vs. Ill., ante, 77, are subject to legislative control as to their rates of fare and freight unless protected by their charters. The Illinois statute of Mar. 23, 1874, to establish reasonable maximum rates of charges for the transportation of freights and passengers on the different railroads of the State is not void as being repugnant to the Constitution of the United States or to that of the State. It was there for the first time held in substance that a railroad was a public utility, and that, being a public utility, the State had power to establish reasonable maximum freight and passenger rates. This was followed by the State of Minnesota in enacting a similar law, providing for, and empowering, a railroad commission to hear and determine what was a just and reasonable rate. The constitutionality of this law was attacked and upheld by the Supreme Court of Minnesota in a learned and exhaustive opinion by Justice Mitchell, in the case of State vs. Chicago, Milwaukee & St. Paul ry. Co. (38 Minn., 281), in which the court held: Regulations of railway tariffs Conclusiveness of commission's tariffs. Under Laws 1887, c. 10, sec. 8, the determination of the railroad and warehouse commission as to what are equal and reasonable fares and rates for the transportation of persons and property by a railway company is conclusive, and, in proceedings by mandamus to compel compliance with the tariff of rates recommended and published by them, no issue can be raised or inquiry had on that question. Same constitution Delegation of power to commission. The authority thus given to the commission to determine, in the exercise of their discretion and judgement, what are equal and reasonable rates, is not a delegation of legislative power. It will be noted that the law creating the railroad commission expressly provides That all charges by any common carrier for the transportation of passengers and property shall be equal and reasonable.

With that as a basis for the law, power is then given to the railroad commission to investigate all the facts, to hear and determine what is a just and reasonable rate. Even then that law does not make the violation of the order of the commission a crime. The only remedy is a civil proceeding. It was there held That the legislative itself has the power to regulate railroad charges is now too well settled to require either argument or citation of authority. The difference between the power to say what the law shall be, and the power to adopt rules and regulations, or to investigate and determine the facts, in order to carry into effect a law already passed, is apparent. The true distinction is between the delegation of power to make the law, which necessarily involves a discretion as to what it shall be, and the conferring an authority or discretion to be exercised under and in pursuance of the law. The legislature enacts that all freights rates and passenger fares should be just and reasonable. It had the undoubted power to fix these rates at whatever it deemed equal and reasonable. They have not delegated to the commission any authority or discretion as to what the law shall be, which would not be allowable, but have merely conferred upon it an authority and discretion, to be exercised in the execution of the law, and under and in pursuance of it, which is entirely permissible. The legislature itself has passed upon the expediency of the law, and what is shall be. The commission is intrusted with no authority or discretion upon these questions. It can neither make nor unmake a single provision of law. It is merely charged with the administration of the law, and with no other power. The delegation of legislative power was before the Supreme Court of Wisconsin in Dowling vs. Lancoshire Ins. Co. (92 Wis., 63). The opinion says: "The true distinction is between the delegation of power to make the law, which necessarily involves a discretion as to what it shall be, and conferring authority or discretion as to its execution, to be exercised under and in pursuance of the law. The first cannot be done; to the latter no valid objection can be made." The act, in our judgment, wholly fails to provide definitely and clearly what the standard policy should contain, so that it could be put in use as a uniform policy required to take the place of all others, without the determination of the insurance commissioner in respect to maters involving the exercise of a legislative discretion that could not be delegated, and without which the act could not possibly be put in use as an act in confirmity to which all fire insurance policies were required to be issued. The result of all the cases on this subject is that a law must be complete, in all its terms and provisions, when it leaves the legislative branch of the government, and nothing must be left to the judgement of the electors or other appointee or delegate of the legislature, so that, in form and substance, it is a law in all its details in presenti, but

which may be left to take effect in futuro, if necessary, upon the ascertainment of any prescribed fact or event. The delegation of legislative power was before the Supreme Court in United States vs. Grimaud (220 U.S., 506; 55 L. ed., 563), where it was held that the rules and regulations of the Secretary of Agriculture as to a trespass on government land in a forest reserve were valid constitutional. The Act there provided that the Secretary of Agriculture ". . . may make such rules and regulations and establish such service as will insure the object of such reservations; namely, to regulate their occupancy and use, and to preserve the forests thereon from destruction; and any violation of the provisions of this act or such rules and regulations shall be punished, . . ." The brief of the United States Solicitor-General says: In refusing permits to use a forest reservation for stock grazing, except upon stated terms or in stated ways, the Secretary of Agriculture merely assert and enforces the proprietary right of the United States over land which it owns. The regulation of the Secretary, therefore, is not an exercise of legislative, or even of administrative, power; but is an ordinary and legitimate refusal of the landowner's authorized agent to allow person having no right in the land to use it as they will. The right of proprietary control is altogether different from governmental authority. The opinion says: From the beginning of the government, various acts have been passed conferring upon executive officers power to make rules and regulations, not for the government of their departments, but for administering the laws which did govern. None of these statutes could confer legislative power. But when Congress had legislated power. But when Congress had legislated and indicated its will, it could give to those who were to act under such general provisions "power to fill up the details" by the establishment of administrative rules and regulations, the violation of which could be punished by fine or imprisonment fixed by Congress, or by penalties fixed by Congress, or measured by the injury done. That "Congress cannot delegate legislative power is a principle universally recognized as vital to the integrity and maintenance of the system of government ordained by the Constitution." If, after the passage of the act and the promulgation of the rule, the defendants drove and grazed their sheep upon the reserve, in violation of the regulations, they were making an unlawful use of the government's property. In doing so they thereby made themselves liable to the penalty imposed by Congress. The subjects as to which the Secretary can regulate are defined. The lands are set apart as a forest reserve. He is required to make provisions to protect them from depredations and from harmful uses. He is authorized 'to regulate the occupancy and use and to

preserve the forests from destruction.' A violation of reasonable rules regulating the use and occupancy of the property is made a crime, not by the Secretary, but by Congress." The above are leading cases in the United States on the question of delegating legislative power. It will be noted that in the "Granger Cases," it was held that a railroad company was a public corporation, and that a railroad was a public utility, and that, for such reasons, the legislature had the power to fix and determine just and reasonable rates for freight and passengers. The Minnesota case held that, so long as the rates were just and reasonable, the legislature could delegate the power to ascertain the facts and determine from the facts what were just and reasonable rates,. and that in vesting the commission with such power was not a delegation of legislative power. The Wisconsin case was a civil action founded upon a "Wisconsin standard policy of fire insurance," and the court held that "the act, . . . wholly fails to provide definitely and clearly what the standard policy should contain, so that it could be put in use as a uniform policy required to take the place of all others, without the determination of the insurance commissioner in respect to matters involving the exercise of a legislative discretion that could not be delegated." The case of the United States Supreme Court, supra dealt with rules and regulations which were promulgated by the Secretary of Agriculture for Government land in the forest reserve. These decisions hold that the legislative only can enact a law, and that it cannot delegate it legislative authority. The line of cleavage between what is and what is not a delegation of legislative power is pointed out and clearly defined. As the Supreme Court of Wisconsin says: That no part of the legislative power can be delegated by the legislature to any other department of the government, executive or judicial, is a fundamental principle in constitutional law, essential to the integrity and maintenance of the system of government established by the constitution. Where an act is clothed with all the forms of law, and is complete in and of itself, it may be provided that it shall become operative only upon some certain act or event, or, in like manner, that its operation shall be suspended. The legislature cannot delegate its power to make a law, but it can make a law to delegate a power to determine some fact or state of things upon which the law makes, or intends to make, its own action to depend. The Village of Little Chute enacted an ordinance which provides:

All saloons in said village shall be closed at 11 o'clock P.M. each day and remain closed until 5 o'clock on the following morning, unless by special permission of the president. Construing it in 136 Wis., 526; 128 A. S. R., 1100,1 the Supreme Court of that State says: We regard the ordinance as void for two reasons; First, because it attempts to confer arbitrary power upon an executive officer, and allows him, in executing the ordinance, to make unjust and groundless discriminations among persons similarly situated; second, because the power to regulate saloons is a lawmaking power vested in the village board, which cannot be delegated. A legislative body cannot delegate to a mere administrative officer power to make a law, but it can make a law with provisions that it shall go into effect or be suspended in its operations upon the ascertainment of a fact or state of facts by an administrative officer or board. In the present case the ordinance by its terms gives power to the president to decide arbitrary, and in the exercise of his own discretion, when a saloon shall close. This is an attempt to vest legislative discretion in him, and cannot be sustained. The legal principle involved there is squarely in point here. It must be conceded that, after the passage of act No. 2868, and before any rules and regulations were promulgated by the Governor-General, a dealer in rice could sell it at any price, even at a peso per "ganta," and that he would not commit a crime, because there would be no law fixing the price of rice, and the sale of it at any price would not be a crime. That is to say, in the absence of a proclamation, it was not a crime to sell rice at any price. Hence, it must follow that, if the defendant committed a crime, it was because the Governor-General issued the proclamation. There was no act of the Legislature making it a crime to sell rice at any price, and without the proclamation, the sale of it at any price was to a crime. The Executive order2 provides: (5) The maximum selling price of palay, rice or corn is hereby fixed, for the time being as follows: In Manila Palay at P6.75 per sack of 57 kilos, or 29 centavos per ganta. Rice at P15 per sack of 57 kilos, or 63 centavos per ganta. Corn at P8 per sack of 57 kilos, or 34 centavos per ganta. In the provinces producing palay, rice and corn, the maximum price shall be the Manila price less the cost of transportation from the source of supply and

necessary handling expenses to the place of sale, to be determined by the provincial treasurers or their deputies. In provinces, obtaining their supplies from Manila or other producing provinces, the maximum price shall be the authorized price at the place of supply or the Manila price as the case may be, plus the transportation cost, from the place of supply and the necessary handling expenses, to the place of sale, to be determined by the provincial treasurers or their deputies. (6) Provincial treasurers and their deputies are hereby directed to communicate with, and execute all instructions emanating from the Director of Commerce and Industry, for the most effective and proper enforcement of the above regulations in their respective localities. The law says that the Governor-General may fix "the maximum sale price that the industrial or merchant may demand." The law is a general law and not a local or special law. The proclamation undertakes to fix one price for rice in Manila and other and different prices in other and different provinces in the Philippine Islands, and delegates the power to determine the other and different prices to provincial treasurers and their deputies. Here, then, you would have a delegation of legislative power to the Governor-General, and a delegation by him of that power to provincial treasurers and their deputies, who "are hereby directed to communicate with, and execute all instructions emanating from the Director of Commerce and Industry, for the most effective and proper enforcement of the above regulations in their respective localities." The issuance of the proclamation by the Governor-General was the exercise of the delegation of a delegated power, and was even a sub delegation of that power. Assuming that it is valid, Act No. 2868 is a general law and does not authorize the Governor-General to fix one price of rice in Manila and another price in Iloilo. It only purports to authorize him to fix the price of rice in the Philippine Islands under a law, which is General and uniform, and not local or special. Under the terms of the law, the price of rice fixed in the proclamation must be the same all over the Islands. There cannot be one price at Manila and another at Iloilo. Again, it is a mater of common knowledge, and of which this court will take judicial notice, that there are many kinds of rice with different and corresponding market values, and that there is a wide range in the price, which varies with the grade and quality. Act No. 2868 makes no distinction in price for the grade or quality of the rice, and the proclamation, upon which the defendant was tried and convicted, fixes the selling price of rice in Manila "at P15 per sack of 57 kilos, or 63 centavos per ganta," and is uniform as to all grades of rice, and says nothing about grade or quality. Again, it will be noted that the law is confined to palay, rice and corn. They are products of the Philippine Islands. Hemp, tobacco, coconut, chickens, eggs, and many other things are also products. Any law which single out palay, rice or corn from the numerous other products of the Islands is not general or uniform, but is a local or special law. If such a law is valid, then by the same principle, the Governor-General could be authorized by proclamation to fix the price of meat, eggs, chickens, coconut, hemp, and tobacco, or any other product of the Islands. In the very nature of things, all of that class of laws should be general and uniform. Otherwise, there would be an unjust

discrimination of property rights, which, under the law, must be equal and inform. Act No. 2868 is nothing more than a floating law, which, in the discretion and by a proclamation of the Governor-General, makes it a floating crime to sell rice at a price in excess of the proclamation, without regard to grade or quality. When Act No. 2868 is analyzed, it is the violation of the proclamation of the GovernorGeneral which constitutes the crime. Without that proclamation, it was no crime to sell rice at any price. In other words, the Legislature left it to the sole discretion of the Governor-General to say what was and what was not "any cause" for enforcing the act, and what was and what was not "an extraordinary rise in the price of palay, rice or corn," and under certain undefined conditions to fix the price at which rice should be sold, without regard to grade or quality, also to say whether a proclamation should be issued, if so, when, and whether or not the law should be enforced, how long it should be enforced, and when the law should be suspended. The Legislature did not specify or define what was "any cause," or what was "an extraordinary rise in the price of rice, palay or corn," Neither did it specify or define the conditions upon which the proclamation should be issued. In the absence of the proclamation no crime was committed. The alleged sale was made a crime, if at all, because the Governor-General issued the proclamation. The act or proclamation does not say anything about the different grades or qualities of rice, and the defendant is charged with the sale "of one ganta of rice at the price of eighty centavos (P0.80) which is a price greater than that fixed by Executive order No. 53." We are clearly of the opinion and hold that Act No. 2868, in so far as it undertakes to authorized the Governor-General in his discretion to issue a proclamation, fixing the price of rice, and to make the sale of rice in violation of the price of rice, and to make the sale of rice in violation of the proclamation a crime, is unconstitutional and void. It may be urged that there was an extraordinary rise in the price of rice and profiteering, which worked a severe hardship on the poorer classes, and that an emergency existed, but the question here presented is the constitutionality of a particular portion of a statute, and none of such matters is an argument for, or against, its constitutionality. The Constitution is something solid, permanent an substantial. Its stability protects the life, liberty and property rights of the rich and the poor alike, and that protection ought not to change with the wind or any emergency condition. The fundamental question involved in this case is the right of the people of the Philippine Islands to be and live under a republican form of government. We make the broad statement that no state or nation, living under republican form of government, under the terms and conditions specified in Act No. 2868, has ever enacted a law delegating the power to any one, to fix the price at which rice should be sold. That power can never be delegated under a republican form of government. In the fixing of the price at which the defendant should sell his rice, the law was not dealing with government property. It was dealing with private property and private rights, which are sacred under the Constitution. If this law should be sustained, upon the same principle and for the same reason, the Legislature could authorize the GovernorGeneral to fix the price of every product or commodity in the Philippine Islands, and empower him to make it a crime to sell any product at any other or different price.

It may be said that this was a war measure, and that for such reason the provision of the Constitution should be suspended. But the Stubborn fact remains that at all times the judicial power was in full force and effect, and that while that power was in force and effect, such a provision of the Constitution could not be, and was not, suspended even in times of war. It may be claimed that during the war, the United States Government undertook to, and did, fix the price at which wheat and flour should be bought and sold, and that is true. There, the United States had declared war, and at the time was at war with other nations, and it was a war measure, but it is also true that in doing so, and as a part of the same act, the United States commandeered all the wheat and flour, and took possession of it, either actual or constructive, and the government itself became the owner of the wheat and flour, and fixed the price to be paid for it. That is not this case. Here the rice sold was the personal and private property of the defendant, who sold it to one of his customers. The government had not bought and did not claim to own the rice, or have any interest in it, and at the time of the alleged sale, it was the personal, private property of the defendant. It may be that the law was passed in the interest of the public, but the members of this court have taken on solemn oath to uphold and defend the Constitution, and it ought not to be construed to meet the changing winds or emergency conditions. Again, we say that no state or nation under a republican form of government ever enacted a law authorizing any executive, under the conditions states, to fix the price at which a price person would sell his own rice, and make the broad statement that no decision of any court, on principle or by analogy, will ever be found which sustains the constitutionality of the particular portion of Act No. 2868 here in question. By the terms of the Organic Act, subject only to constitutional limitations, the power to legislate and enact laws is vested exclusively in the Legislative, which is elected by a direct vote of the people of the Philippine Islands. As to the question here involved, the authority of the Governor-General to fix the maximum price at which palay, rice and corn may be sold in the manner power in violation of the organic law. This opinion is confined to the particular question here involved, which is the right of the Governor-General, upon the terms and conditions stated in the Act, to fix the price of rice and make it a crime to sell it at a higher price, and which holds that portions of the Act unconstitutional. It does not decide or undertake to construe the constitutionality of any of the remaining portions of the Act. The judgment of the lower court is reversed, and the defendant discharged. So ordered. Araullo, C.J., Johnson, Street and Ostrand, JJ., concur. Romualdez, J., concurs in the result.

EN BANC G.R. No. 74457 March 20, 1987

carabeef, and to deserving farmers through dispersal as the Director of Animal Industry may see fit, in the case of carabaos. SECTION 2. This Executive Order shall take effect immediately.

RESTITUTO YNOT, petitioner, vs. INTERMEDIATE APPELLATE COURT, THE STATION COMMANDER, INTEGRATED NATIONAL POLICE, BAROTAC NUEVO, ILOILO and THE REGIONAL DIRECTOR, BUREAU OF ANIMAL INDUSTRY, REGION IV, ILOILO CITY, respondents. Ramon A. Gonzales for petitioner. CRUZ, J.: The essence of due process is distilled in the immortal cry of Themistocles to Alcibiades "Strike but hear me first!" It is this cry that the petitioner in effect repeats here as he challenges the constitutionality of Executive Order No. 626-A. The said executive order reads in full as follows: WHEREAS, the President has given orders prohibiting the interprovincial movement of carabaos and the slaughtering of carabaos not complying with the requirements of Executive Order No. 626 particularly with respect to age; WHEREAS, it has been observed that despite such orders the violators still manage to circumvent the prohibition against inter-provincial movement of carabaos by transporting carabeef instead; and WHEREAS, in order to achieve the purposes and objectives of Executive Order No. 626 and the prohibition against interprovincial movement of carabaos, it is necessary to strengthen the said Executive Order and provide for the disposition of the carabaos and carabeef subject of the violation; NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution, do hereby promulgate the following: SECTION 1. Executive Order No. 626 is hereby amended such that henceforth, no carabao regardless of age, sex, physical condition or purpose and no carabeef shall be transported from one province to another. The carabao or carabeef transported in violation of this Executive Order as amended shall be subject to confiscation and forfeiture by the government, to be distributed to charitable institutions and other similar institutions as the Chairman of the National Meat Inspection Commission may ay see fit, in the case of

Done in the City of Manila, this 25th day of October, in the year of Our Lord, nineteen hundred and eighty. The petitioner had transported six carabaos in a pump boat from Masbate to Iloilo on January 13, 1984, when they were confiscated by the police station commander of Barotac Nuevo, Iloilo, for violation of the above measure. 1 The petitioner sued for recovery, and the Regional Trial Court of Iloilo City issued a writ of replevin upon his filing of a supersedeas bond of P12,000.00. After considering the merits of the case, the court sustained the confiscation of the carabaos and, since they could no longer be produced, ordered the confiscation of the bond. The court also declined to rule on the constitutionality of the executive order, as raise by the petitioner, for lack of authority and also for its presumed validity. 2 The petitioner appealed the decision to the Intermediate Appellate Court,* 3 which upheld the trial court, ** and he has now come before us in this petition for review on certiorari. The thrust of his petition is that the executive order is unconstitutional insofar as it authorizes outright confiscation of the carabao or carabeef being transported across provincial boundaries. His claim is that the penalty is invalid because it is imposed without according the owner a right to be heard before a competent and impartial court as guaranteed by due process. He complains that the measure should not have been presumed, and so sustained, as constitutional. There is also a challenge to the improper exercise of the legislative power by the former President under Amendment No. 6 of the 1973 Constitution. 4 While also involving the same executive order, the case of Pesigan v. Angeles 5 is not applicable here. The question raised there was the necessity of the previous publication of the measure in the Official Gazette before it could be considered enforceable. We imposed the requirement then on the basis of due process of law. In doing so, however, this Court did not, as contended by the Solicitor General, impliedly affirm the constitutionality of Executive Order No. 626-A. That is an entirely different matter. This Court has declared that while lower courts should observe a becoming modesty in examining constitutional questions, they are nonetheless not prevented from resolving the same whenever warranted, subject only to review by the highest tribunal. 6 We have jurisdiction under the Constitution to "review, revise, reverse, modify or affirm on appeal or certiorari, as the law or rules of court may provide," final judgments and orders of lower courts in, among others, all cases involving the constitutionality of certain measures. 7 This simply means that the resolution of such cases may be made in the first instance by these lower courts.

And while it is true that laws are presumed to be constitutional, that presumption is not by any means conclusive and in fact may be rebutted. Indeed, if there be a clear showing of their invalidity, and of the need to declare them so, then "will be the time to make the hammer fall, and heavily," 8 to recall Justice Laurel's trenchant warning. Stated otherwise, courts should not follow the path of least resistance by simply presuming the constitutionality of a law when it is questioned. On the contrary, they should probe the issue more deeply, to relieve the abscess, paraphrasing another distinguished jurist, 9 and so heal the wound or excise the affliction. Judicial power authorizes this; and when the exercise is demanded, there should be no shirking of the task for fear of retaliation, or loss of favor, or popular censure, or any other similar inhibition unworthy of the bench, especially this Court. The challenged measure is denominated an executive order but it is really presidential decree, promulgating a new rule instead of merely implementing an existing law. It was issued by President Marcos not for the purpose of taking care that the laws were faithfully executed but in the exercise of his legislative authority under Amendment No. 6. It was provided thereunder that whenever in his judgment there existed a grave emergency or a threat or imminence thereof or whenever the legislature failed or was unable to act adequately on any matter that in his judgment required immediate action, he could, in order to meet the exigency, issue decrees, orders or letters of instruction that were to have the force and effect of law. As there is no showing of any exigency to justify the exercise of that extraordinary power then, the petitioner has reason, indeed, to question the validity of the executive order. Nevertheless, since the determination of the grounds was supposed to have been made by the President "in his judgment, " a phrase that will lead to protracted discussion not really necessary at this time, we reserve resolution of this matter until a more appropriate occasion. For the nonce, we confine ourselves to the more fundamental question of due process. It is part of the art of constitution-making that the provisions of the charter be cast in precise and unmistakable language to avoid controversies that might arise on their correct interpretation. That is the Ideal. In the case of the due process clause, however, this rule was deliberately not followed and the wording was purposely kept ambiguous. In fact, a proposal to delineate it more clearly was submitted in the Constitutional Convention of 1934, but it was rejected by Delegate Jose P. Laurel, Chairman of the Committee on the Bill of Rights, who forcefully argued against it. He was sustained by the body. 10 The due process clause was kept intentionally vague so it would remain also conveniently resilient. This was felt necessary because due process is not, like some provisions of the fundamental law, an "iron rule" laying down an implacable and immutable command for all seasons and all persons. Flexibility must be the best virtue of the guaranty. The very elasticity of the due process clause was meant to make it adapt easily to every situation, enlarging or constricting its protection as the changing times and circumstances may require. Aware of this, the courts have also hesitated to adopt their own specific description of due process lest they confine themselves in a legal straitjacket that will deprive them of the elbow room they may need to vary the meaning of the clause whenever indicated.

Instead, they have preferred to leave the import of the protection open-ended, as it were, to be "gradually ascertained by the process of inclusion and exclusion in the course of the decision of cases as they arise." 11 Thus, Justice Felix Frankfurter of the U.S. Supreme Court, for example, would go no farther than to define due process and in so doing sums it all up as nothing more and nothing less than "the embodiment of the sporting Idea of fair play." 12 When the barons of England extracted from their sovereign liege the reluctant promise that that Crown would thenceforth not proceed against the life liberty or property of any of its subjects except by the lawful judgment of his peers or the law of the land, they thereby won for themselves and their progeny that splendid guaranty of fairness that is now the hallmark of the free society. The solemn vow that King John made at Runnymede in 1215 has since then resounded through the ages, as a ringing reminder to all rulers, benevolent or base, that every person, when confronted by the stern visage of the law, is entitled to have his say in a fair and open hearing of his cause. The closed mind has no place in the open society. It is part of the sporting Idea of fair play to hear "the other side" before an opinion is formed or a decision is made by those who sit in judgment. Obviously, one side is only one-half of the question; the other half must also be considered if an impartial verdict is to be reached based on an informed appreciation of the issues in contention. It is indispensable that the two sides complement each other, as unto the bow the arrow, in leading to the correct ruling after examination of the problem not from one or the other perspective only but in its totality. A judgment based on less that this full appraisal, on the pretext that a hearing is unnecessary or useless, is tainted with the vice of bias or intolerance or ignorance, or worst of all, in repressive regimes, the insolence of power. The minimum requirements of due process are notice and hearing 13 which, generally speaking, may not be dispensed with because they are intended as a safeguard against official arbitrariness. It is a gratifying commentary on our judicial system that the jurisprudence of this country is rich with applications of this guaranty as proof of our fealty to the rule of law and the ancient rudiments of fair play. We have consistently declared that every person, faced by the awesome power of the State, is entitled to "the law of the land," which Daniel Webster described almost two hundred years ago in the famous Dartmouth College Case, 14 as "the law which hears before it condemns, which proceeds upon inquiry and renders judgment only after trial." It has to be so if the rights of every person are to be secured beyond the reach of officials who, out of mistaken zeal or plain arrogance, would degrade the due process clause into a worn and empty catchword. This is not to say that notice and hearing are imperative in every case for, to be sure, there are a number of admitted exceptions. The conclusive presumption, for example, bars the admission of contrary evidence as long as such presumption is based on human experience or there is a rational connection between the fact proved and the fact ultimately presumed therefrom. 15 There are instances when the need for expeditions action will justify omission of these requisites, as in the summary abatement of a nuisance per se, like a mad dog on the loose, which may be killed on sight because of the immediate danger it poses to the safety and lives of the people. Pornographic materials, contaminated meat and narcotic drugs are inherently pernicious and may be summarily

destroyed. The passport of a person sought for a criminal offense may be cancelled without hearing, to compel his return to the country he has fled. 16 Filthy restaurants may be summarily padlocked in the interest of the public health and bawdy houses to protect the public morals. 17 In such instances, previous judicial hearing may be omitted without violation of due process in view of the nature of the property involved or the urgency of the need to protect the general welfare from a clear and present danger. The protection of the general welfare is the particular function of the police power which both restraints and is restrained by due process. The police power is simply defined as the power inherent in the State to regulate liberty and property for the promotion of the general welfare. 18 By reason of its function, it extends to all the great public needs and is described as the most pervasive, the least limitable and the most demanding of the three inherent powers of the State, far outpacing taxation and eminent domain. The individual, as a member of society, is hemmed in by the police power, which affects him even before he is born and follows him still after he is dead from the womb to beyond the tomb in practically everything he does or owns. Its reach is virtually limitless. It is a ubiquitous and often unwelcome intrusion. Even so, as long as the activity or the property has some relevance to the public welfare, its regulation under the police power is not only proper but necessary. And the justification is found in the venerable Latin maxims, Salus populi est suprema lex and Sic utere tuo ut alienum non laedas, which call for the subordination of individual interests to the benefit of the greater number. It is this power that is now invoked by the government to justify Executive Order No. 626-A, amending the basic rule in Executive Order No. 626, prohibiting the slaughter of carabaos except under certain conditions. The original measure was issued for the reason, as expressed in one of its Whereases, that "present conditions demand that the carabaos and the buffaloes be conserved for the benefit of the small farmers who rely on them for energy needs." We affirm at the outset the need for such a measure. In the face of the worsening energy crisis and the increased dependence of our farms on these traditional beasts of burden, the government would have been remiss, indeed, if it had not taken steps to protect and preserve them. A similar prohibition was challenged in United States v. Toribio, 19 where a law regulating the registration, branding and slaughter of large cattle was claimed to be a deprivation of property without due process of law. The defendant had been convicted thereunder for having slaughtered his own carabao without the required permit, and he appealed to the Supreme Court. The conviction was affirmed. The law was sustained as a valid police measure to prevent the indiscriminate killing of carabaos, which were then badly needed by farmers. An epidemic had stricken many of these animals and the reduction of their number had resulted in an acute decline in agricultural output, which in turn had caused an incipient famine. Furthermore, because of the scarcity of the animals and the consequent increase in their price, cattle-rustling had spread alarmingly, necessitating more effective measures for the registration and branding of these animals. The Court held that the questioned statute was a valid exercise of the police power and declared in part as follows: To justify the State in thus interposing its authority in behalf of the public, it must appear, first, that the interests of the public generally, as distinguished from those of a particular class, require such

interference; and second, that the means are reasonably necessary for the accomplishment of the purpose, and not unduly oppressive upon individuals. ... From what has been said, we think it is clear that the enactment of the provisions of the statute under consideration was required by "the interests of the public generally, as distinguished from those of a particular class" and that the prohibition of the slaughter of carabaos for human consumption, so long as these animals are fit for agricultural work or draft purposes was a "reasonably necessary" limitation on private ownership, to protect the community from the loss of the services of such animals by their slaughter by improvident owners, tempted either by greed of momentary gain, or by a desire to enjoy the luxury of animal food, even when by so doing the productive power of the community may be measurably and dangerously affected. In the light of the tests mentioned above, we hold with the Toribio Case that the carabao, as the poor man's tractor, so to speak, has a direct relevance to the public welfare and so is a lawful subject of Executive Order No. 626. The method chosen in the basic measure is also reasonably necessary for the purpose sought to be achieved and not unduly oppressive upon individuals, again following the above-cited doctrine. There is no doubt that by banning the slaughter of these animals except where they are at least seven years old if male and eleven years old if female upon issuance of the necessary permit, the executive order will be conserving those still fit for farm work or breeding and preventing their improvident depletion. But while conceding that the amendatory measure has the same lawful subject as the original executive order, we cannot say with equal certainty that it complies with the second requirement, viz., that there be a lawful method. We note that to strengthen the original measure, Executive Order No. 626-A imposes an absolute ban not on the slaughter of the carabaos but on their movement, providing that "no carabao regardless of age, sex, physical condition or purpose (sic) and no carabeef shall be transported from one province to another." The object of the prohibition escapes us. The reasonable connection between the means employed and the purpose sought to be achieved by the questioned measure is missing We do not see how the prohibition of the inter-provincial transport of carabaos can prevent their indiscriminate slaughter, considering that they can be killed anywhere, with no less difficulty in one province than in another. Obviously, retaining the carabaos in one province will not prevent their slaughter there, any more than moving them to another province will make it easier to kill them there. As for the carabeef, the prohibition is made to apply to it as otherwise, so says executive order, it could be easily circumvented by simply killing the animal. Perhaps so. However, if the movement of the live animals for the purpose of preventing their slaughter cannot be prohibited, it should follow that there is no reason either to prohibit their transfer as, not to be flippant dead meat.

Even if a reasonable relation between the means and the end were to be assumed, we would still have to reckon with the sanction that the measure applies for violation of the prohibition. The penalty is outright confiscation of the carabao or carabeef being transported, to be meted out by the executive authorities, usually the police only. In the Toribio Case, the statute was sustained because the penalty prescribed was fine and imprisonment, to be imposed by the court after trial and conviction of the accused. Under the challenged measure, significantly, no such trial is prescribed, and the property being transported is immediately impounded by the police and declared, by the measure itself, as forfeited to the government. In the instant case, the carabaos were arbitrarily confiscated by the police station commander, were returned to the petitioner only after he had filed a complaint for recovery and given a supersedeas bond of P12,000.00, which was ordered confiscated upon his failure to produce the carabaos when ordered by the trial court. The executive order defined the prohibition, convicted the petitioner and immediately imposed punishment, which was carried out forthright. The measure struck at once and pounced upon the petitioner without giving him a chance to be heard, thus denying him the centuries-old guaranty of elementary fair play. It has already been remarked that there are occasions when notice and hearing may be validly dispensed with notwithstanding the usual requirement for these minimum guarantees of due process. It is also conceded that summary action may be validly taken in administrative proceedings as procedural due process is not necessarily judicial only. In the exceptional cases accepted, however. there is a justification for the omission of the right to a previous hearing, to wit, the immediacy of the problem sought to be corrected and the urgency of the need to correct it. In the case before us, there was no such pressure of time or action calling for the petitioner's peremptory treatment. The properties involved were not even inimical per se as to require their instant destruction. There certainly was no reason why the offense prohibited by the executive order should not have been proved first in a court of justice, with the accused being accorded all the rights safeguarded to him under the Constitution. Considering that, as we held in Pesigan v. Angeles, Executive Order No. 626-A is penal in nature, the violation thereof should have been pronounced not by the police only but by a court of justice, which alone would have had the authority to impose the prescribed penalty, and only after trial and conviction of the accused. We also mark, on top of all this, the questionable manner of the disposition of the confiscated property as prescribed in the questioned executive order. It is there authorized that the seized property shall "be distributed to charitable institutions and other similar institutions as the Chairman of the National Meat Inspection Commission may see fit, in the case of carabeef, and to deserving farmers through dispersal as the Director of Animal Industry may see fit, in the case of carabaos." (Emphasis supplied.) The phrase "may see fit" is an extremely generous and dangerous condition, if condition it is. It is laden with perilous opportunities for partiality and abuse, and even corruption. One searches in vain for the usual standard and the reasonable guidelines, or better still, the limitations that the said officers must observe when they make their distribution. There is none. Their options are apparently boundless. Who shall be the fortunate beneficiaries of their generosity and by what criteria shall they be chosen? Only the

officers named can supply the answer, they and they alone may choose the grantee as they see fit, and in their own exclusive discretion. Definitely, there is here a "roving commission," a wide and sweeping authority that is not "canalized within banks that keep it from overflowing," in short, a clearly profligate and therefore invalid delegation of legislative powers. To sum up then, we find that the challenged measure is an invalid exercise of the police power because the method employed to conserve the carabaos is not reasonably necessary to the purpose of the law and, worse, is unduly oppressive. Due process is violated because the owner of the property confiscated is denied the right to be heard in his defense and is immediately condemned and punished. The conferment on the administrative authorities of the power to adjudge the guilt of the supposed offender is a clear encroachment on judicial functions and militates against the doctrine of separation of powers. There is, finally, also an invalid delegation of legislative powers to the officers mentioned therein who are granted unlimited discretion in the distribution of the properties arbitrarily taken. For these reasons, we hereby declare Executive Order No. 626-A unconstitutional. We agree with the respondent court, however, that the police station commander who confiscated the petitioner's carabaos is not liable in damages for enforcing the executive order in accordance with its mandate. The law was at that time presumptively valid, and it was his obligation, as a member of the police, to enforce it. It would have been impertinent of him, being a mere subordinate of the President, to declare the executive order unconstitutional and, on his own responsibility alone, refuse to execute it. Even the trial court, in fact, and the Court of Appeals itself did not feel they had the competence, for all their superior authority, to question the order we now annul. The Court notes that if the petitioner had not seen fit to assert and protect his rights as he saw them, this case would never have reached us and the taking of his property under the challenged measure would have become a fait accompli despite its invalidity. We commend him for his spirit. Without the present challenge, the matter would have ended in that pump boat in Masbate and another violation of the Constitution, for all its obviousness, would have been perpetrated, allowed without protest, and soon forgotten in the limbo of relinquished rights. The strength of democracy lies not in the rights it guarantees but in the courage of the people to invoke them whenever they are ignored or violated. Rights are but weapons on the wall if, like expensive tapestry, all they do is embellish and impress. Rights, as weapons, must be a promise of protection. They become truly meaningful, and fulfill the role assigned to them in the free society, if they are kept bright and sharp with use by those who are not afraid to assert them. WHEREFORE, Executive Order No. 626-A is hereby declared unconstitutional. Except as affirmed above, the decision of the Court of Appeals is reversed. The supersedeas bond is cancelled and the amount thereof is ordered restored to the petitioner. No costs. SO ORDERED.