G.R. No.

113375 May 5, 1994

KILOSBAYAN, INCORPORATED, JOVITO R. SALONGA, CIRILO A. RIGOS, ERME CAMBA, EMILIO C. CAPULONG, JR., JOSE T. APOLO,
EPHRAIM TENDERO, FERNANDO SANTIAGO, JOSE ABCEDE, CHRISTINE TAN, FELIPE L. GOZON, RAFAEL G. FERNANDO, RAOUL V.
VICTORINO, JOSE CUNANAN, QUINTIN S. DOROMAL, SEN. FREDDIE WEBB, SEN. WIGBERTO TAADA, and REP. JOKER P.
ARROYO, petitioners,
vs.
TEOFISTO GUINGONA, JR., in his capacity as Executive Secretary, Office of the President; RENATO CORONA, in his capacity as
Assistant Executive Secretary and Chairman of the Presidential review Committee on the Lotto, Office of the President;
PHILIPPINE CHARITY SWEEPSTAKES OFFICE; and PHILIPPINE GAMING MANAGEMENT CORPORATION, respondents.
DAVIDE, JR., J.:
This is a special civil action for prohibition and injunction, with a prayer for a temporary restraining order and preliminary
injunction, which seeks to prohibit and restrain the implementation of the "Contract of Lease" executed by the Philippine Charity
Sweepstakes Office (PCSO) and the Philippine Gaming Management Corporation (PGMC) in connection with the on- line lottery
system, also known as "lotto."
Petitioner Kilosbayan, Incorporated (KILOSBAYAN) avers that it is a non-stock domestic corporation composed of civic-spirited
citizens, pastors, priests, nuns, and lay leaders who are committed to the cause of truth, justice, and national renewal. The rest of
the petitioners, except Senators Freddie Webb and Wigberto Taada and Representative Joker P. Arroyo, are suing in their
capacities as members of the Board of Trustees of KILOSBAYAN and as taxpayers and concerned citizens. Senators Webb and
Taada and Representative Arroyo are suing in their capacities as members of Congress and as taxpayers and concerned citizens
of the Philippines.
The pleadings of the parties disclose the factual antecedents which triggered off the filing of this petition.
Pursuant to Section 1 of the charter of the PCSO (R.A. No. 1169, as amended by B.P. Blg. 42) which grants it the authority to hold
and conduct "charity sweepstakes races, lotteries and other similar activities," the PCSO decided to establish an on- line lottery
system for the purpose of increasing its revenue base and diversifying its sources of funds. Sometime before March 1993, after
learning that the PCSO was interested in operating an on-line lottery system, the Berjaya Group Berhad, "a multinational company
and one of the ten largest public companies in Malaysia," long "engaged in, among others, successful lottery operations in Asia,
running both Lotto and Digit games, thru its subsidiary, Sports Toto Malaysia," with its "affiliate, the International Totalizator
Systems, Inc., . . . an American public company engaged in the international sale or provision of computer systems, softwares,
terminals, training and other technical services to the gaming industry," "became interested to offer its services and resources to
PCSO." As an initial step, Berjaya Group Berhad (through its individual nominees) organized with some Filipino investors in March
1993 a Philippine corporation known as the Philippine Gaming Management Corporation (PGMC), which "was intended to be the
medium through which the technical and management services required for the project would be offered and delivered to PCSO."
1

Before August 1993, the PCSO formally issued a Request for Proposal (RFP) for the Lease Contract of an on-line lottery system for
the PCSO.
2
Relevant provisions of the RFP are the following:
1. EXECUTIVE SUMMARY
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1.2. PCSO is seeking a suitable contractor which shall build, at its own expense, all the facilities ('Facilities') needed to operate and
maintain a nationwide on-line lottery system. PCSO shall lease the Facilities for a fixed percentage ofquarterly gross receipts. All
receipts from ticket sales shall be turned over directly to PCSO. All capital, operating expenses and expansion expenses and risks
shall be for the exclusive account of the Lessor.
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1.4. The lease shall be for a period not exceeding fifteen (15) years.
1.5. The Lessor is expected to submit a comprehensive nationwide lottery development plan ("Development Plan") which will
include the game, the marketing of the games, and the logistics to introduce the games to all the cities and municipalities of the
country within five (5) years.
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1.7. The Lessor shall be selected based on its technical expertise, hardware and software capability, maintenance support, and
financial resources. The Development Plan shall have a substantial bearing on the choice of the Lessor. The Lessor shall be a
domestic corporation, with at least sixty percent (60%) of its shares owned by Filipino shareholders.
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The Office of the President, the National Disaster Control Coordinating Council, the Philippine National Police, and the National
Bureau of Investigation shall be authorized to use the nationwide telecommunications system of the Facilities Free of Charge.
1.8. Upon expiration of the lease, the Facilities shall be owned by PCSO without any additional consideration.
3

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2.2. OBJECTIVES
The objectives of PCSO in leasing the Facilities from a private entity are as follows:
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2.2.2. Enable PCSO to operate a nationwide on-line Lottery system at no expense or risk to the government.
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2.4. DUTIES AND RESPONSIBILITIES OF THE LESSOR
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2.4.2. THE LESSOR
The Proponent is expected to furnish and maintain the Facilities, including the personnel needed to operate the computers, the
communications network and sales offices under a build-lease basis. The printing of tickets shall be undertaken under the
supervision and control of PCSO. The Facilities shall enable PCSO to computerize the entire gaming system.
The Proponent is expected to formulate and design consumer-oriented Master Games Plan suited to the marketplace, especially
geared to Filipino gaming habits and preferences. In addition, the Master Games Plan is expected to include a Product Plan for
each game and explain how each will be introduced into the market. This will be an integral part of the Development Plan which
PCSO will require from the Proponent.
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The Proponent is expected to provide upgrades to modernize the entire gaming system over the life ofthe lease contract.
The Proponent is expected to provide technology transfer to PCSO technical personnel.
4

7. GENERAL GUIDELINES FOR PROPONENTS
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Finally, the Proponent must be able to stand the acid test of proving that it is an entity able to take on the role of responsible
maintainer of the on-line lottery system, and able to achieve PSCO's goal of formalizing an on-line lottery system to achieve its
mandated objective.
5

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16. DEFINITION OF TERMS
Facilities: All capital equipment, computers, terminals, software, nationwide telecommunication network,
ticket sales offices, furnishings, and fixtures; printing costs; cost of salaries and wages; advertising and
promotion expenses; maintenance costs; expansion and replacement costs; security and insurance, and all
other related expenses needed to operate nationwide on-line lottery system.
6

Considering the above citizenship requirement, the PGMC claims that the Berjaya Group "undertook to reduce its equity stakes in
PGMC to 40%," by selling 35% out of the original 75% foreign stockholdings to local investors.
On 15 August 1993, PGMC submitted its bid to the PCSO.
7

The bids were evaluated by the Special Pre-Qualification Bids and Awards Committee (SPBAC) for the on-line lottery and its Bid
Report was thereafter submitted to the Office of the President.
8
The submission was preceded by complaints by the Committee's
Chairperson, Dr. Mita Pardo de Tavera.
9

On 21 October 1993, the Office of the President announced that it had given the respondent PGMC the go-signal to operate the
country's on-line lottery system and that the corresponding implementing contract would be submitted not later than 8
November 1993 "for final clearance and approval by the Chief Executive."
10
This announcement was published in the Manila
Standard, Philippine Daily Inquirer, and the Manila Times on 29 October 1993.
11

On 4 November 1993, KILOSBAYAN sent an open letter to Presidential Fidel V. Ramos strongly opposing the setting up to the on-
line lottery system on the basis of serious moral and ethical considerations.
12

At the meeting of the Committee on Games and Amusements of the Senate on 12 November 1993, KILOSBAYAN reiterated its
vigorous opposition to the on-line lottery on account of its immorality and illegality.
13

On 19 November 1993, the media reported that despite the opposition, "Malacaang will push through with the operation of an
on-line lottery system nationwide" and that it is actually the respondent PCSO which will operate the lottery while the winning
corporate bidders are merely "lessors."
14

On 1 December 1993, KILOSBAYAN requested copies of all documents pertaining to the lottery award from Executive Secretary
Teofisto Guingona, Jr. In his answer of 17 December 1993, the Executive Secretary informed KILOSBAYAN that the requested
documents would be duly transmitted before the end of the month.
15
. However, on that same date, an agreement denominated
as "Contract of Lease" was finally executed by respondent PCSO and respondent PGMC.
16
The President, per the press statement
issued by the Office of the President, approved it on 20 December 1993.
17

In view of their materiality and relevance, we quote the following salient provisions of the Contract of Lease:
1. DEFINITIONS
The following words and terms shall have the following respective meanings:
1.1 Rental Fee Amount to be paid by PCSO to the LESSOR as compensation for the fulfillment of the obligations of the LESSOR
under this Contract, including, but not limited to the lease of the Facilities.
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1.3 Facilities All capital equipment, computers, terminals, software (including source codes for the On-Line Lottery application
software for the terminals, telecommunications and central systems), technology, intellectual property rights,
telecommunications network, and furnishings and fixtures.
1.4 Maintenance and Other Costs All costs and expenses relating to printing, manpower, salaries and wages, advertising and
promotion, maintenance, expansion and replacement, security and insurance, and all other related expenses needed to operate
an On-Line Lottery System, which shall be for the account of the LESSOR. All expenses relating to the setting-up, operation and
maintenance of ticket sales offices of dealers and retailers shall be borne by PCSO's dealers and retailers.
1.5 Development Plan The detailed plan of all games, the marketing thereof, number of players, value of winnings and the
logistics required to introduce the games, including the Master Games Plan as approved by PCSO, attached hereto as Annex "A",
modified as necessary by the provisions of this Contract.
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1.8 Escrow Deposit The proposal deposit in the sum of Three Hundred Million Pesos (P300,000,000.00) submitted by the
LESSOR to PCSO pursuant to the requirements of the Request for Proposals.
2. SUBJECT MATTER OF THE LEASE
The LESSOR shall build, furnish and maintain at its own expense and risk the Facilities for the On-Line Lottery System of PCSO in
the Territory on an exclusive basis. The LESSOR shall bear all Maintenance and Other Costs as defined herein.
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3. RENTAL FEE
For and in consideration of the performance by the LESSOR of its obligations herein, PCSO shall pay LESSOR a fixed Rental Fee
equal to four point nine percent (4.9%) of gross receipts from ticket sales, payable net of taxes required by law to be withheld, on
a semi-monthly basis. Goodwill, franchise and similar fees shall belong to PCSO.
4. LEASE PERIOD
The period of the lease shall commence ninety (90) days from the date of effectivity of this Contract and shall run for a period of
eight (8) years thereafter, unless sooner terminated in accordance with this Contract.
5. RIGHTS AND OBLIGATIONS OF PCSO AS OPERATOR OF THE ON-LINE LOTTERY SYSTEM
PCSO shall be the sole and individual operator of the On-Line Lottery System. Consequently:
5.1 PCSO shall have sole responsibility to decide whether to implement, fully or partially, the Master Games Plan of the LESSOR.
PCSO shall have the sole responsibility to determine the time for introducing new games to the market. The Master Games Plan
included in Annex "A" hereof is hereby approved by PCSO.
5.2 PCSO shall have control over revenues and receipts of whatever nature from the On-Line Lottery System. After paying the
Rental Fee to the LESSOR, PCSO shall have exclusive responsibility to determine the Revenue Allocation Plan; Provided, that the
same shall be consistent with the requirement of R.A. No. 1169, as amended, which fixes a prize fund of fifty five percent (55%) on
the average.
5.3 PCSO shall have exclusive control over the printing of tickets, including but not limited to the design, text, and contents
thereof.
5.4 PCSO shall have sole responsibility over the appointment of dealers or retailers throughout the country. PCSO shall appoint the
dealers and retailers in a timely manner with due regard to the implementation timetable of the On-Line Lottery System. Nothing
herein shall preclude the LESSOR from recommending dealers or retailers for appointment by PCSO, which shall act on said
recommendation within forty-eight (48) hours.
5.5 PCSO shall designate the necessary personnel to monitor and audit the daily performance of the On-Line Lottery System. For
this purpose, PCSO designees shall be given, free of charge, suitable and adequate space, furniture and fixtures, in all offices of the
LESSOR, including but not limited to its headquarters, alternate site, regional and area offices.
5.6 PCSO shall have the responsibility to resolve, and exclusive jurisdiction over, all matters involving the operation of the On-Line
Lottery System not otherwise provided in this Contract.
5.7 PCSO shall promulgate procedural and coordinating rules governing all activities relating to the On-Line Lottery System.
5.8 PCSO will be responsible for the payment of prize monies, commissions to agents and dealers, and taxes and levies (if any)
chargeable to the operator of the On-Line Lottery System. The LESSOR will bear all other Maintenance and Other Costs, except as
provided in Section 1.4.
5.9 PCSO shall assist the LESSOR in the following:
5.9.1 Work permits for the LESSOR's staff;
5.9.2 Approvals for importation of the Facilities;
5.9.3 Approvals and consents for the On-Line Lottery System; and
5.9.4 Business and premises licenses for all offices of the LESSOR and licenses for the telecommunications network.
5.10 In the event that PCSO shall pre-terminate this Contract or suspend the operation of the On-Line Lottery System, in breach of
this Contract and through no fault of the LESSOR, PCSO shall promptly, and in any event not later than sixty (60) days, reimburse
the LESSOR the amount of its total investment cost associated with the On-Line Lottery System, including but not limited to the
cost of the Facilities, and further compensate the LESSOR for loss of expected net profit after tax, computed over the unexpired
term of the lease.
6. DUTIES AND RESPONSIBILITIES OF THE LESSOR
The LESSOR is one of not more than three (3) lessors of similar facilities for the nationwide On-Line Lottery System of PCSO. It is
understood that the rights of the LESSOR are primarily those of a lessor of the Facilities, and consequently, all rights involving the
business aspects of the use of the Facilities are within the jurisdiction of PCSO. During the term of the lease, the LESSOR shall.
6.1 Maintain and preserve its corporate existence, rights and privileges, and conduct its business in an orderly, efficient, and
customary manner.
6.2 Maintain insurance coverage with insurers acceptable to PCSO on all Facilities.
6.3 Comply with all laws, statues, rules and regulations, orders and directives, obligations and duties by which it is legally bound.
6.4 Duly pay and discharge all taxes, assessments and government charges now and hereafter imposed of whatever nature that
may be legally levied upon it.
6.5 Keep all the Facilities in fail safe condition and, if necessary, upgrade, replace and improve the Facilities from time to time as
new technology develops, in order to make the On-Line Lottery System more cost-effective and/or competitive, and as may be
required by PCSO shall not impose such requirements unreasonably nor arbitrarily.
6.6 Provide PCSO with management terminals which will allow real-time monitoring of the On-Line Lottery System.
6.7 Upon effectivity of this Contract, commence the training of PCSO and other local personnel and the transfer of technology and
expertise, such that at the end of the term of this Contract, PCSO will be able to effectively take-over the Facilities and efficiently
operate the On-Line Lottery System.
6.8 Undertake a positive advertising and promotions campaign for both institutional and product lines without engaging in
negative advertising against other lessors.
6.9 Bear all expenses and risks relating to the Facilities including, but not limited to, Maintenance and Other Costs and:
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6.10 Bear all risks if the revenues from ticket sales, on an annualized basis, are insufficient to pay the entire prize money.
6.11 Be, and is hereby, authorized to collect and retain for its own account, a security deposit from dealers and retailers, in an
amount determined with the approval of PCSO, in respect of equipment supplied by the LESSOR. PCSO's approval shall not be
unreasonably withheld.
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6.12 Comply with procedural and coordinating rules issued by PCSO.
7. REPRESENTATIONS AND WARRANTIES
The LESSOR represents and warrants that:
7.1 The LESSOR is corporation duly organized and existing under the laws of the Republic of the Philippines, at least sixty percent
(60%) of the outstanding capital stock of which is owned by Filipino shareholders. The minimum required Filipino equity
participation shall not be impaired through voluntary or involuntary transfer, disposition, or sale of shares of stock by the present
stockholders.
7.2 The LESSOR and its Affiliates have the full corporate and legal power and authority to own and operate their properties and to
carry on their business in the place where such properties are now or may be conducted. . . .
7.3 The LESSOR has or has access to all the financing and funding requirements to promptly and effectively carry out the terms of
this Contract. . . .
7.4 The LESSOR has or has access to all the managerial and technical expertise to promptly and effectively carry out the terms of
this Contract. . . .
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10. TELECOMMUNICATIONS NETWORK
The LESSOR shall establish a telecommunications network that will connect all municipalities and cities in the Territory in
accordance with, at the LESSOR's option, either of the LESSOR's proposals (or a combinations of both such proposals) attached
hereto as Annex "B," and under the following PCSO schedule:
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PCSO may, at its option, require the LESSOR to establish the telecommunications network in accordance with the above Timetable
in provinces where the LESSOR has not yet installed terminals. Provided, that such provinces have existing nodes. Once a
municipality or city is serviced by land lines of a licensed public telephone company, and such lines are connected to Metro
Manila, then the obligation of the LESSOR to connect such municipality or city through a telecommunications network shall cease
with respect to such municipality or city. The voice facility will cover the four offices of the Office of the President, National
Disaster Control Coordinating Council, Philippine National Police and the National Bureau of Investigation, and each city and
municipality in the Territory except Metro Manila, and those cities and municipalities which have easy telephone access from
these four offices. Voice calls from the four offices shall be transmitted via radio or VSAT to the remote municipalities which will
be connected to this voice facility through wired network or by radio. The facility shall be designed to handle four private
conversations at any one time.
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13. STOCK DISPERSAL PLAN
Within two (2) years from the effectivity of this Contract, the LESSOR shall cause itself to be listed in the local stock exchange and
offer at least twenty five percent (25%) of its equity to the public.
14. NON-COMPETITION
The LESSOR shall not, directly or indirectly, undertake any activity or business in competition with or adverse to the On-Line
Lottery System of PCSO unless it obtains the latter's prior written consent thereto.
15. HOLD HARMLESS CLAUSE
15.1 The LESSOR shall at all times protect and defend, at its cost and expense, PCSO from and against any and all liabilities and
claims for damages and/or suits for or by reason of any deaths of, or any injury or injuries to any person or persons, or damages to
property of any kind whatsoever, caused by the LESSOR, its subcontractors, its authorized agents or employees, from any cause or
causes whatsoever.
15.2 The LESSOR hereby covenants and agrees to indemnify and hold PCSO harmless from all liabilities, charges, expenses
(including reasonable counsel fees) and costs on account of or by reason of any such death or deaths, injury or injuries, liabilities,
claims, suits or losses caused by the LESSOR's fault or negligence.
15.3 The LESSOR shall at all times protect and defend, at its own cost and expense, its title to the facilities and PCSO's interest
therein from and against any and all claims for the duration of the Contract until transfer to PCSO of ownership of the serviceable
Facilities.
16. SECURITY
16.1 To ensure faithful compliance by the LESSOR with the terms of the Contract, the LESSOR shall secure a Performance Bond
from a reputable insurance company or companies acceptable to PCSO.
16.2 The Performance Bond shall be in the initial amount of Three Hundred Million Pesos (P300,000,000.00), to its U.S. dollar
equivalent, and shall be renewed to cover the duration of the Contract. However, the Performance Bond shall be reduced
proportionately to the percentage of unencumbered terminals installed; Provided, that the Performance Bond shall in no case be
less than One Hundred Fifty Million Pesos (P150,000,000.00).
16.3 The LESSOR may at its option maintain its Escrow Deposit as the Performance Bond. . . .
17. PENALTIES
17.1 Except as may be provided in Section 17.2, should the LESSOR fail to take remedial measures within seven (7) days, and
rectify the breach within thirty (30) days, from written notice by PCSO of any wilfull or grossly negligent violation of the material
terms and conditions of this Contract, all unencumbered Facilities shall automatically become the property of PCSO without
consideration and without need for further notice or demand by PCSO. The Performance Bond shall likewise be forfeited in favor
of PCSO.
17.2 Should the LESSOR fail to comply with the terms of the Timetables provided in Section 9 and 10, it shall be subject to an initial
Penalty of Twenty Thousand Pesos (P20,000.00), per city or municipality per every month of delay; Provided, that the Penalty shall
increase, every ninety (90) days, by the amount of Twenty Thousand Pesos (P20,000.00) per city or municipality per month, whilst
shall failure to comply persists. The penalty shall be deducted by PCSO from the rental fee.
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20. OWNERSHIP OF THE FACILITIES
After expiration of the term of the lease as provided in Section 4, the Facilities directly required for the On-Line Lottery System
mentioned in Section 1.3 shall automatically belong in full ownership to PCSO without any further consideration other than the
Rental Fees already paid during the effectivity of the lease.
21. TERMINATION OF THE LEASE
PCSO may terminate this Contract for any breach of the material provisions of this Contract, including the following:
21.1 The LESSOR is insolvent or bankrupt or unable to pay its debts, stops or suspends or threatens to stop or suspend payment of
all or a material part of its debts, or proposes or makes a general assignment or an arrangement or compositions with or for the
benefit of its creditors; or
21.2 An order is made or an effective resolution passed for the winding up or dissolution of the LESSOR or when it ceases or
threatens to cease to carry on all or a material part of its operations or business; or
21.3 Any material statement, representation or warranty made or furnished by the LESSOR proved to be materially false or
misleading;
said termination to take effect upon receipt of written notice of termination by the LESSOR and failure to take remedial action
within seven (7) days and cure or remedy the same within thirty (30) days from notice.
Any suspension, cancellation or termination of this Contract shall not relieve the LESSOR of any liability that may have already
accrued hereunder.
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Considering the denial by the Office of the President of its protest and the statement of Assistant Executive Secretary Renato
Corona that "only a court injunction can stop Malacaang," and the imminent implementation of the Contract of Lease in
February 1994, KILOSBAYAN, with its co-petitioners, filed on 28 January 1994 this petition.
In support of the petition, the petitioners claim that:
. . . X X THE OFFICE OF THE PRESIDENT, ACTING THROUGH RESPONDENTS EXECUTIVE SECRETARY AND/OR ASSISTANT EXECUTIVE
SECRETARY FOR LEGAL AFFAIRS, AND THE PCSO GRAVELY ABUSE[D] THEIR DISCRETION AND/OR FUNCTIONS TANTAMOUNT TO
LACK OF JURISDICTION AND/OR AUTHORITY IN RESPECTIVELY: (A) APPROVING THE AWARD OF THE CONTRACT TO, AND (B)
ENTERING INTO THE SO-CALLED "CONTRACT OF LEASE" WITH, RESPONDENT PGMC FOR THE INSTALLATION, ESTABLISHMENT AND
OPERATION OF THE ON-LINE LOTTERY AND TELECOMMUNICATION SYSTEMS REQUIRED AND/OR AUTHORIZED UNDER THE SAID
CONTRACT, CONSIDERING THAT:
a) Under Section 1 of the Charter of the PCSO, the PCSO is prohibited from holding and conducting lotteries
"in collaboration, association or joint venture with any person, association, company or entity";
b) Under Act No. 3846 and established jurisprudence, a Congressional franchise is required before any
person may be allowed to establish and operate said telecommunications system;
c) Under Section 11, Article XII of the Constitution, a less than 60% Filipino-owned and/or controlled
corporation, like the PGMC, is disqualified from operating a public service, like the said telecommunications
system; and
d) Respondent PGMC is not authorized by its charter and under the Foreign Investment Act (R.A. No. 7042)
to install, establish and operate the on-line lotto and telecommunications systems.
18

Petitioners submit that the PCSO cannot validly enter into the assailed Contract of Lease with the PGMC because it is an
arrangement wherein the PCSO would hold and conduct the on-line lottery system in "collaboration" or "association" with the
PGMC, in violation of Section 1(B) of R.A. No. 1169, as amended by B.P. Blg. 42, which prohibits the PCSO from holding and
conducting charity sweepstakes races, lotteries, and other similar activities "in collaboration, association or joint venture with any
person, association, company or entity, foreign or domestic." Even granting arguendo that a lease of facilities is not within the
contemplation of "collaboration" or "association," an analysis, however, of the Contract of Lease clearly shows that there is a
"collaboration, association, or joint venture between respondents PCSO and PGMC in the holding of the On-Line Lottery System,"
and that there are terms and conditions of the Contract "showing that respondent PGMC is the actual lotto operator and not
respondent PCSO."
19

The petitioners also point out that paragraph 10 of the Contract of Lease requires or authorizes PGMC to establish a
telecommunications network that will connect all the municipalities and cities in the territory. However, PGMC cannot do that
because it has no franchise from Congress to construct, install, establish, or operate the network pursuant to Section 1 of Act No.
3846, as amended. Moreover, PGMC is a 75% foreign-owned or controlled corporation and cannot, therefore, be granted a
franchise for that purpose because of Section 11, Article XII of the 1987 Constitution. Furthermore, since "the subscribed foreign
capital" of the PGMC "comes to about 75%, as shown by paragraph EIGHT of its Articles of Incorporation," it cannot lawfully enter
into the contract in question because all forms of gambling and lottery is one of them are included in the so-called foreign
investments negative list under the Foreign Investments Act (R.A. No. 7042) where only up to 40% foreign capital is allowed.
20

Finally, the petitioners insist that the Articles of Incorporation of PGMC do not authorize it to establish and operate an on-line
lottery and telecommunications systems.
21

Accordingly, the petitioners pray that we issue a temporary restraining order and a writ of preliminary injunction commanding the
respondents or any person acting in their places or upon their instructions to cease and desist from implementing the challenged
Contract of Lease and, after hearing the merits of the petition, that we render judgment declaring the Contract of Lease void and
without effect and making the injunction permanent.
22

We required the respondents to comment on the petition.
In its Comment filed on 1 March 1994, private respondent PGMC asserts that "(1) [it] is merely an independent contractor for a
piece of work, (i.e., the building and maintenance of a lottery system to be used by PCSO in the operation of its lottery franchise);
and (2) as such independent contractor, PGMC is not a co-operator of the lottery franchise with PCSO, nor is PCSO sharing its
franchise, 'in collaboration, association or joint venture' with PGMC as such statutory limitation is viewed from the context,
intent, and spirit of Republic Act 1169, as amended by Batas Pambansa 42." It further claims that as an independent contractor for
a piece of work, it is neither engaged in "gambling" nor in "public service" relative to the telecommunications network, which the
petitioners even consider as an "indispensable requirement" of an on-line lottery system. Finally, it states that the execution and
implementation of the contract does not violate the Constitution and the laws; that the issue on the "morality" of the lottery
franchise granted to the PCSO is political and not judicial or legal, which should be ventilated in another forum; and that the
"petitioners do not appear to have the legal standing or real interest in the subject contract and in obtaining the reliefs sought."
23

In their Comment filed by the Office of the Solicitor General, public respondents Executive Secretary Teofisto Guingona, Jr.,
Assistant Executive Secretary Renato Corona, and the PCSO maintain that the contract of lease in question does not violate
Section 1 of R.A. No. 1169, as amended by B.P. Blg. 42, and that the petitioner's interpretation of the phrase "in collaboration,
association or joint venture" in Section 1 is "much too narrow, strained and utterly devoid of logic" for it "ignores the reality that
PCSO, as a corporate entity, is vested with the basic and essential prerogative to enter into all kinds of transactions or contracts as
may be necessary for the attainment of its purposes and objectives." What the PCSO charter "seeks to prohibit is that
arrangement akin to a "joint venture" or partnership where there is "community of interest in the business, sharing of profits and
losses, and a mutual right of control," a characteristic which does not obtain in a contract of lease." With respect to the challenged
Contract of Lease, the "role of PGMC is limited to that of a lessor of the facilities" for the on-line lottery system; in "strict technical
and legal sense," said contract "can be categorized as a contract for a piece of work as defined in Articles 1467, 1713 and 1644 of
the Civil Code."
They further claim that the establishment of the telecommunications system stipulated in the Contract of Lease does not require a
congressional franchise because PGMC will not operate a public utility; moreover, PGMC's "establishment of a
telecommunications system is not intended to establish a telecommunications business," and it has been held that where the
facilities are operated "not for business purposes but for its own use," a legislative franchise is not required before a certificate of
public convenience can be granted.
24
Even granting arguendo that PGMC is a public utility, pursuant to Albano S.
Reyes,
25
"it can establish a telecommunications system even without a legislative franchise because not every public utility is
required to secure a legislative franchise before it could establish, maintain, and operate the service"; and, in any case, "PGMC's
establishment of the telecommunications system stipulated in its contract of lease with PCSO falls within the exceptions under
Section 1 of Act No. 3846 where a legislative franchise is not necessary for the establishment of radio stations."
They also argue that the contract does not violate the Foreign Investment Act of 1991; that the Articles of Incorporation of PGMC
authorize it to enter into the Contract of Lease; and that the issues of "wisdom, morality and propriety of acts of the executive
department are beyond the ambit of judicial review."
Finally, the public respondents allege that the petitioners have no standing to maintain the instant suit, citing our resolution in
Valmonte vs. Philippine Charity Sweepstakes Office.
26

Several parties filed motions to intervene as petitioners in this case,
27
but only the motion of Senators Alberto Romulo, Arturo
Tolentino, Francisco Tatad, Gloria Macapagal-Arroyo, Vicente Sotto III, John Osmea, Ramon Revilla, and Jose Lina
28
was granted,
and the respondents were required to comment on their petition in intervention, which the public respondents and PGMC did.
In the meantime, the petitioners filed with the Securities and Exchange Commission on 29 March 1994 a petition against PGMC
for the nullification of the latter's General Information Sheets. That case, however, has no bearing in this petition.
On 11 April 1994, we heard the parties in oral arguments. Thereafter, we resolved to consider the matter submitted for resolution
and pending resolution of the major issues in this case, to issue a temporary restraining order commanding the respondents or
any person acting in their place or upon their instructions to cease and desist from implementing the challenged Contract of
Lease.
In the deliberation on this case on 26 April 1994, we resolved to consider only these issues: (a) the locus standi of the petitioners,
and (b) the legality and validity of the Contract of Lease in the light of Section 1 of R.A. No. 1169, as amended by B.P. Blg. 42,
which prohibits the PCSO from holding and conducting lotteries "in collaboration, association or joint venture with any person,
association, company or entity, whether domestic or foreign." On the first issue, seven Justices voted to sustain the locus standi of
the petitioners, while six voted not to. On the second issue, the seven Justices were of the opinion that the Contract of Lease
violates the exception to Section 1(B) of R.A. No. 1169, as amended by B.P. Blg. 42, and is, therefore, invalid and contrary to law.
The six Justices stated that they wished to express no opinion thereon in view of their stand on the first issue. The Chief Justice
took no part because one of the Directors of the PCSO is his brother-in-law.
This case was then assigned to this ponente for the writing of the opinion of the Court.
The preliminary issue on the locus standi of the petitioners should, indeed, be resolved in their favor. A party's standing before
this Court is a procedural technicality which it may, in the exercise of its discretion, set aside in view of the importance of the
issues raised. In the landmark Emergency Powers Cases,
29
this Court brushed aside this technicality because "the transcendental
importance to the public of these cases demands that they be settled promptly and definitely, brushing aside, if we must,
technicalities of procedure. (Avelino vs. Cuenco, G.R. No. L-2821)." Insofar as taxpayers' suits are concerned, this Court had
declared that it "is not devoid of discretion as to whether or not it should be entertained,"
30
or that it "enjoys an open discretion
to entertain the same or not."
31
In De La Llana vs. Alba,
32
this Court declared:
1. The argument as to the lack of standing of petitioners is easily resolved. As far as Judge de la Llana is concerned, he certainly
falls within the principle set forth in Justice Laurel's opinion in People vs. Vera [65 Phil. 56 (1937)]. Thus: "The unchallenged rule is
that the person who impugns the validity of a statute must have a personal and substantial interest in the case such that he has
sustained, or will sustain, direct injury as a result of its enforcement [Ibid, 89]. The other petitioners as members of the bar and
officers of the court cannot be considered as devoid of "any personal and substantial interest" on the matter. There is relevance to
this excerpt from a separate opinion in Aquino, Jr. v. Commission on Elections [L-40004, January 31, 1975, 62 SCRA 275]: "Then
there is the attack on the standing of petitioners, as vindicating at most what they consider a public right and not protecting their
rights as individuals. This is to conjure the specter of the public right dogma as an inhibition to parties intent on keeping public
officials staying on the path of constitutionalism. As was so well put by Jaffe; "The protection of private rights is an essential
constituent of public interest and, conversely, without a well-ordered state there could be no enforcement of private rights.
Private and public interests are, both in a substantive and procedural sense, aspects of the totality of the legal order." Moreover,
petitioners have convincingly shown that in their capacity as taxpayers, their standing to sue has been amply demonstrated. There
would be a retreat from the liberal approach followed in Pascual v. Secretary of Public Works, foreshadowed by the very decision
of People v. Vera where the doctrine was first fully discussed, if we act differently now. I do not think we are prepared to take that
step. Respondents, however, would hard back to the American Supreme Court doctrine in Mellon v. Frothingham, with their claim
that what petitioners possess "is an interest which is shared in common by other people and is comparatively so minute and
indeterminate as to afford any basis and assurance that the judicial process can act on it." That is to speak in the language of a
bygone era, even in the United States. For as Chief Justice Warren clearly pointed out in the later case of Flast v. Cohen, the barrier
thus set up if not breached has definitely been lowered.
In Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. vs. Tan,
33
reiterated in Basco vs. Philippine Amusements and
Gaming Corporation,
34
this Court stated:
Objections to taxpayers' suits for lack of sufficient personality standing or interest are, however, in the main procedural matters.
Considering the importance to the public of the cases at bar, and in keeping with the Court's duty, under the 1987 Constitution, to
determine whether or not the other branches of government have kept themselves within the limits of the Constitution and the
laws and that they have not abused the discretion given to them, this Court has brushed aside technicalities of procedure and has
taken cognizance of these petitions.
and in Association of Small Landowners in the Philippines, Inc. vs. Secretary of Agrarian Reform,
35
it declared:
With particular regard to the requirement of proper party as applied in the cases before us, we hold that the same is satisfied by
the petitioners and intervenors because each of them has sustained or is in danger of sustaining an immediate injury as a result of
the acts or measures complained of. [Ex Parte Levitt, 303 US 633]. And even if, strictly speaking, they are not covered by the
definition, it is still within the wide discretion of the Court to waive the requirement and so remove the impediment to its
addressing and resolving the serious constitutional questions raised.
In the first Emergency Powers Cases, ordinary citizens and taxpayers were allowed to question the constitutionality of several
executive orders issued by President Quirino although they were invoking only an indirect and general interest shared in common
with the public. The Court dismissed the objective that they were not proper parties and ruled that the transcendental importance
to the public of these cases demands that they be settled promptly and definitely, brushing aside, if we must, technicalities of
procedure. We have since then applied this exception in many other cases. (Emphasis supplied)
In Daza vs. Singson,
36
this Court once more said:
. . . For another, we have early as in the Emergency Powers Cases that where serious constitutional questions are involved, "the
transcendental importance to the public of these cases demands that they be settled promptly and definitely, brushing aside, if
we must, technicalities of procedure." The same policy has since then been consistently followed by the Court, as in Gonzales vs.
Commission on Elections [21 SCRA 774] . . .
The Federal Supreme Court of the United States of America has also expressed its discretionary power to liberalize the rule on
locus standi. In United States vs. Federal Power Commission and Virginia Rea Association vs. Federal Power Commission,
37
it held:
We hold that petitioners have standing. Differences of view, however, preclude a single opinion of the Court as to both
petitioners. It would not further clarification of this complicated specialty of federal jurisdiction, the solution of whose problems is
in any event more or less determined by the specific circumstances of individual situations, to set out the divergent grounds in
support of standing in these cases.
In line with the liberal policy of this Court on locus standi, ordinary taxpayers, members of Congress, and even association of
planters, and non-profit civic organizations were allowed to initiate and prosecute actions before this Court to question the
constitutionality or validity of laws, acts, decisions, rulings, or orders of various government agencies or instrumentalities. Among
such cases were those assailing the constitutionality of (a) R.A. No. 3836 insofar as it allows retirement gratuity and commutation
of vacation and sick leave to Senators and Representatives and to elective officials of both Houses of Congress;
38
(b) Executive
Order No. 284, issued by President Corazon C. Aquino on 25 July 1987, which allowed members of the cabinet, their
undersecretaries, and assistant secretaries to hold other government offices or positions;
39
(c) the automatic appropriation for
debt service in the General Appropriations Act;
40
(d) R.A. No. 7056 on the holding of desynchronized elections;
41
(d) R.A. No. 1869
(the charter of the Philippine Amusement and Gaming Corporation) on the ground that it is contrary to morals, public policy, and
order;
42
and (f) R.A. No. 6975, establishing the Philippine National
Police.
43

Other cases where we have followed a liberal policy regarding locus standi include those attacking the validity or legality of (a) an
order allowing the importation of rice in the light of the prohibition imposed by R.A. No. 3452;
44
(b) P.D. Nos. 991 and 1033
insofar as they proposed amendments to the Constitution and P.D. No. 1031 insofar as it directed the COMELEC to supervise,
control, hold, and conduct the referendum-plebiscite on 16 October 1976;
45
(c) the bidding for the sale of the 3,179 square
meters of land at Roppongi, Minato-ku, Tokyo, Japan;
46
(d) the approval without hearing by the Board of Investments of the
amended application of the Bataan Petrochemical Corporation to transfer the site of its plant from Bataan to Batangas and the
validity of such transfer and the shift of feedstock from naphtha only to naphtha and/or liquefied petroleum gas;
47
(e) the
decisions, orders, rulings, and resolutions of the Executive Secretary, Secretary of Finance, Commissioner of Internal Revenue,
Commissioner of Customs, and the Fiscal Incentives Review Board exempting the National Power Corporation from indirect tax
and duties;
48
(f) the orders of the Energy Regulatory Board of 5 and 6 December 1990 on the ground that the hearings conducted
on the second provisional increase in oil prices did not allow the petitioner substantial cross-examination;
49
(g) Executive Order
No. 478 which levied a special duty of P0.95 per liter or P151.05 per barrel of imported crude oil and P1.00 per liter of imported oil
products;
50
(h) resolutions of the Commission on Elections concerning the apportionment, by district, of the number of elective
members of Sanggunians;
51
and (i) memorandum orders issued by a Mayor affecting the Chief of Police of Pasay City.
52

In the 1975 case of Aquino vs. Commission on Elections,
53
this Court, despite its unequivocal ruling that the petitioners therein had
no personality to file the petition, resolved nevertheless to pass upon the issues raised because of the far-reaching implications of
the petition. We did no less in De Guia vs. COMELEC
54
where, although we declared that De Guia "does not appear to have locus
standi, a standing in law, a personal or substantial interest," we brushed aside the procedural infirmity "considering the
importance of the issue involved, concerning as it does the political exercise of qualified voters affected by the apportionment,
and petitioner alleging abuse of discretion and violation of the Constitution by respondent."
We find the instant petition to be of transcendental importance to the public. The issues it raised are of paramount public interest
and of a category even higher than those involved in many of the aforecited cases. The ramifications of such issues immeasurably
affect the social, economic, and moral well-being of the people even in the remotest barangays of the country and the counter-
productive and retrogressive effects of the envisioned on-line lottery system are as staggering as the billions in pesos it is expected
to raise. The legal standing then of the petitioners deserves recognition and, in the exercise of its sound discretion, this Court
hereby brushes aside the procedural barrier which the respondents tried to take advantage of.
And now on the substantive issue.
Section 1 of R.A. No. 1169, as amending by B.P. Blg. 42, prohibits the PCSO from holding and conducting lotteries "in collaboration,
association or joint venture with any person, association, company or entity, whether domestic or foreign." Section 1 provides:
Sec. 1. The Philippine Charity Sweepstakes Office. The Philippine Charity Sweepstakes Office, hereinafter designated the Office,
shall be the principal government agency for raising and providing for funds for health programs, medical assistance and services
and charities of national character, and as such shall have the general powers conferred in section thirteen of Act Numbered One
thousand four hundred fifty-nine, as amended, and shall have the authority:
A. To hold and conduct charity sweepstakes races, lotteries and other similar activities, in such frequency and manner, as shall be
determined, and subject to such rules and regulations as shall be promulgated by the Board of Directors.
B. Subject to the approval of the Minister of Human Settlements, to engage in health and welfare-related investments, programs,
projects and activities which may be profit-oriented, by itself or in collaboration, association or joint venture with any person,
association, company or entity, whether domestic or foreign, except for the activities mentioned in the preceding paragraph (A),
for the purpose of providing for permanent and continuing sources of funds for health programs, including the expansion of
existing ones, medical assistance and services, and/or charitable grants: Provided, That such investment will not compete with the
private sector in areas where investments are adequate as may be determined by the National Economic and Development
Authority. (emphasis supplied)
The language of the section is indisputably clear that with respect to its franchise or privilege "to hold and conduct charity
sweepstakes races, lotteries and other similar activities," the PCSO cannot exercise it "in collaboration, association or joint
venture" with any other party. This is the unequivocal meaning and import of the phrase "except for the activities mentioned in
the preceding paragraph (A)," namely, "charity sweepstakes races, lotteries and other similar activities."
B.P. Blg. 42 originated from Parliamentary Bill No. 622, which was covered by Committee Report No. 103 as reported out by the
Committee on Socio-Economic Planning and Development of the Interim Batasang Pambansa. The original text of paragraph B,
Section 1 of Parliamentary Bill No. 622 reads as follows:
To engage in any and all investments and related profit-oriented projects or programs and activities by itself or in collaboration,
association or joint venture with any person, association, company or entity, whether domestic or foreign, for the main purpose of
raising funds for health and medical assistance and services and charitable grants.
55

During the period of committee amendments, the Committee on Socio-Economic Planning and Development, through
Assemblyman Ronaldo B. Zamora, introduced an amendment by substitution to the said paragraph B such that, as amended, it
should read as follows:
Subject to the approval of the Minister of Human Settlements, to engage in health-oriented investments, programs, projects and
activities which may be profit- oriented, by itself or in collaboration, association, or joint venture with any person, association,
company or entity, whether domestic or foreign, for the purpose of providing for permanent and continuing sources of funds for
health programs, including the expansion of existing ones, medical assistance and services and/or charitable grants.
56

Before the motion of Assemblyman Zamora for the approval of the amendment could be acted upon, Assemblyman Davide
introduced an amendment to the amendment:
MR. DAVIDE. Mr. Speaker.
THE SPEAKER. The gentleman from Cebu is recognized.
MR. DAVIDE. May I introduce an amendment to the committee amendment? The amendment would be to insert after "foreign" in
the amendment just read the following: EXCEPT FOR THE ACTIVITY IN LETTER (A) ABOVE.
When it is joint venture or in collaboration with any entity such collaboration or joint venture must not include activity activity
letter (a) which is the holding and conducting of sweepstakes races, lotteries and other similar acts.
MR. ZAMORA. We accept the amendment, Mr. Speaker.
MR. DAVIDE. Thank you, Mr. Speaker.
THE SPEAKER. Is there any objection to the amendment? (Silence) The amendment, as amended, is approved.
57

Further amendments to paragraph B were introduced and approved. When Assemblyman Zamora read the final text of paragraph
B as further amended, the earlier approved amendment of Assemblyman Davide became "EXCEPT FOR THE ACTIVITIES
MENTIONED IN PARAGRAPH (A)"; and by virtue of the amendment introduced by Assemblyman Emmanuel Pelaez, the word
PRECEDING was inserted before PARAGRAPH. Assemblyman Pelaez introduced other amendments. Thereafter, the new
paragraph B was approved.
58

This is now paragraph B, Section 1 of R.A. No. 1169, as amended by B.P. Blg. 42.
No interpretation of the said provision to relax or circumvent the prohibition can be allowed since the privilege to hold or conduct
charity sweepstakes races, lotteries, or other similar activities is a franchise granted by the legislature to the PCSO. It is a settled
rule that "in all grants by the government to individuals or corporations of rights, privileges and franchises, the words are to be
taken most strongly against the grantee .... [o]ne who claims a franchise or privilege in derogation of the common rights of the
public must prove his title thereto by a grant which is clearly and definitely expressed, and he cannot enlarge it by equivocal or
doubtful provisions or by probable inferences. Whatever is not unequivocally granted is withheld. Nothing passes by mere
implication."
59

In short then, by the exception explicitly made in paragraph B, Section 1 of its charter, the PCSO cannot share its franchise with
another by way of collaboration, association or joint venture. Neither can it assign, transfer, or lease such franchise. It has been
said that "the rights and privileges conferred under a franchise may, without doubt, be assigned or transferred when the grant is
to the grantee and assigns, or is authorized by statute. On the other hand, the right of transfer or assignment may be restricted by
statute or the constitution, or be made subject to the approval of the grantor or a governmental agency, such as a public utilities
commission, exception that an existing right of assignment cannot be impaired by subsequent legislation."
60

It may also be pointed out that the franchise granted to the PCSO to hold and conduct lotteries allows it to hold and conduct a
species of gambling. It is settled that "a statute which authorizes the carrying on of a gambling activity or business should be
strictly construed and every reasonable doubt so resolved as to limit the powers and rights claimed under its authority."
61

Does the challenged Contract of Lease violate or contravene the exception in Section 1 of R.A. No. 1169, as amended by B.P. Blg.
42, which prohibits the PCSO from holding and conducting lotteries "in collaboration, association or joint venture with" another?
We agree with the petitioners that it does, notwithstanding its denomination or designation as a (Contract of Lease). We are
neither convinced nor moved or fazed by the insistence and forceful arguments of the PGMC that it does not because in reality it
is only an independent contractor for a piece of work, i.e., the building and maintenance of a lottery system to be used by the
PCSO in the operation of its lottery franchise. Whether the contract in question is one of lease or whether the PGMC is merely an
independent contractor should not be decided on the basis of the title or designation of the contract but by the intent of the
parties, which may be gathered from the provisions of the contract itself. Animus hominis est anima scripti. The intention of the
party is the soul of the instrument. In order to give life or effect to an instrument, it is essential to look to the intention of the
individual who executed it.
62
And, pursuant to Article 1371 of the Civil Code, "to determine the intention of the contracting
parties, their contemporaneous and subsequent acts shall be principally considered." To put it more bluntly, no one should be
deceived by the title or designation of a contract.
A careful analysis and evaluation of the provisions of the contract and a consideration of the contemporaneous acts of the PCSO
and PGMC indubitably disclose that the contract is not in reality a contract of lease under which the PGMC is merely an
independent contractor for a piece of work, but one where the statutorily proscribed collaboration or association, in the least, or
joint venture, at the most, exists between the contracting parties. Collaboration is defined as the acts of working together in a
joint project.
63
Association means the act of a number of persons in uniting together for some special purpose or business.
64
Joint
venture is defined as an association of persons or companies jointly undertaking some commercial enterprise; generally all
contribute assets and share risks. It requires a community of interest in the performance of the subject matter, a right to direct
and govern the policy in connection therewith, and duty, which may be altered by agreement to share both in profit and
losses.
65

The contemporaneous acts of the PCSO and the PGMC reveal that the PCSO had neither funds of its own nor the expertise to
operate and manage an on-line lottery system, and that although it wished to have the system, it would have it "at no expense or
risks to the government." Because of these serious constraints and unwillingness to bear expenses and assume risks, the PCSO was
candid enough to state in its RFP that it is seeking for "a suitable contractor which shall build, at its own expense, all the facilities
needed to operate and maintain" the system; exclusively bear "all capital, operating expenses and expansion expenses and risks";
and submit "a comprehensive nationwide lottery development plan . . . which will include the game, the marketing of the games,
and the logistics to introduce the game to all the cities and municipalities of the country within five (5) years"; and that the
operation of the on-line lottery system should be "at no expense or risk to the government" meaning itself, since it is a
government-owned and controlled agency. The facilities referred to means "all capital equipment, computers, terminals,
software, nationwide telecommunications network, ticket sales offices, furnishings and fixtures, printing costs, costs of salaries
and wages, advertising and promotions expenses, maintenance costs, expansion and replacement costs, security and insurance,
and all other related expenses needed to operate a nationwide on-line lottery system."
In short, the only contribution the PCSO would have is its franchise or authority to operate the on-line lottery system; with the
rest, including the risks of the business, being borne by the proponent or bidder. It could be for this reason that it warned that
"the proponent must be able to stand to the acid test of proving that it is an entity able to take on the role of responsible
maintainer of the on-line lottery system." The PCSO, however, makes it clear in its RFP that the proponent can propose a period of
the contract which shall not exceed fifteen years, during which time it is assured of a "rental" which shall not exceed 12% of gross
receipts. As admitted by the PGMC, upon learning of the PCSO's decision, the Berjaya Group Berhad, with its affiliates, wanted to
offer its services and resources to the PCSO. Forthwith, it organized the PGMC as "a medium through which the technical and
management services required for the project would be offered and delivered to PCSO."
66

Undoubtedly, then, the Berjaya Group Berhad knew all along that in connection with an on-line lottery system, the PCSO had
nothing but its franchise, which it solemnly guaranteed it had in the General Information of the RFP.
67
Howsoever viewed then,
from the very inception, the PCSO and the PGMC mutually understood that any arrangement between them would necessarily
leave to the PGMC the technical, operations, and management aspects of the on-line lottery system while the PCSO would,
primarily, provide the franchise. The words Gaming and Management in the corporate name of respondent Philippine Gaming
Management Corporation could not have been conceived just for euphemistic purposes. Of course, the RFP cannot substitute for
the Contract of Lease which was subsequently executed by the PCSO and the PGMC. Nevertheless, the Contract of Lease
incorporates their intention and understanding.
The so-called Contract of Lease is not, therefore, what it purports to be. Its denomination as such is a crafty device, carefully
conceived, to provide a built-in defense in the event that the agreement is questioned as violative of the exception in Section 1 (B)
of the PCSO's charter. The acuity or skill of its draftsmen to accomplish that purpose easily manifests itself in the Contract of
Lease. It is outstanding for its careful and meticulous drafting designed to give an immediate impression that it is a contract of
lease. Yet, woven therein are provisions which negate its title and betray the true intention of the parties to be in or to have a
joint venture for a period of eight years in the operation and maintenance of the on-line lottery system.
Consistent with the above observations on the RFP, the PCSO has only its franchise to offer, while the PGMC represents and
warrants that it has access to all managerial and technical expertise to promptly and effectively carry out the terms of the
contract. And, for a period of eight years, the PGMC is under obligation to keep all the Facilities in safe condition and if necessary,
upgrade, replace, and improve them from time to time as new technology develops to make the on-line lottery system more cost-
effective and competitive; exclusively bear all costs and expenses relating to the printing, manpower, salaries and wages,
advertising and promotion, maintenance, expansion and replacement, security and insurance, and all other related expenses
needed to operate the on-line lottery system; undertake a positive advertising and promotions campaign for both institutional and
product lines without engaging in negative advertising against other lessors; bear the salaries and related costs of skilled and
qualified personnel for administrative and technical operations; comply with procedural and coordinating rules issued by the
PCSO; and to train PCSO and other local personnel and to effect the transfer of technology and other expertise, such that at the
end of the term of the contract, the PCSO will be able to effectively take over the Facilities and efficiently operate the on-line
lottery system. The latter simply means that, indeed, the managers, technicians or employees who shall operate the on-line
lottery system are not managers, technicians or employees of the PCSO, but of the PGMC and that it is only after the expiration of
the contract that the PCSO will operate the system. After eight years, the PCSO would automatically become the owner of the
Facilities without any other further consideration.
For these reasons, too, the PGMC has the initial prerogative to prepare the detailed plan of all games and the marketing thereof,
and determine the number of players, value of winnings, and the logistics required to introduce the games, including the Master
Games Plan. Of course, the PCSO has the reserved authority to disapprove them.
68
And, while the PCSO has the sole responsibility
over the appointment of dealers and retailers throughout the country, the PGMC may, nevertheless, recommend for appointment
dealers and retailers which shall be acted upon by the PCSO within forty-eight hours and collect and retain, for its own account, a
security deposit from dealers and retailers in respect of equipment supplied by it.
This joint venture is further established by the following:
(a) Rent is defined in the lease contract as the amount to be paid to the PGMC as compensation for the fulfillment of its
obligations under the contract, including, but not limited to the lease of the Facilities. However, this rent is not actually a fixed
amount. Although it is stated to be 4.9% of gross receipts from ticket sales, payable net of taxes required by law to be withheld, it
may be drastically reduced or, in extreme cases, nothing may be due or demandable at all because the PGMC binds itself to "bear
all risks if the revenue from the ticket sales, on an annualized basis, are insufficient to pay the entire prize money." This risk-
bearing provision is unusual in a lessor-lessee relationship, but inherent in a joint venture.
(b) In the event of pre-termination of the contract by the PCSO, or its suspension of operation of the on-line lottery system in
breach of the contract and through no fault of the PGMC, the PCSO binds itself "to promptly, and in any event not later than sixty
(60) days, reimburse the Lessor the amount of its total investment cost associated with the On-Line Lottery System, including but
not limited to the cost of the Facilities, and further compensate the LESSOR for loss of expected net profit after tax, computed
over the unexpired term of the lease." If the contract were indeed one of lease, the payment of the expected profits or rentals for
the unexpired portion of the term of the contract would be enough.
(c) The PGMC cannot "directly or indirectly undertake any activity or business in competition with or adverse to the On-Line
Lottery System of PCSO unless it obtains the latter's prior written consent." If the PGMC is engaged in the business of leasing
equipment and technology for an on-line lottery system, we fail to see any acceptable reason why it should allow a restriction on
the pursuit of such business.
(d) The PGMC shall provide the PCSO the audited Annual Report sent to its stockholders, and within two years from the effectivity
of the contract, cause itself to be listed in the local stock exchange and offer at least 25% of its equity to the public. If the PGMC is
merely a lessor, this imposition is unreasonable and whimsical, and could only be tied up to the fact that the PGMC will actually
operate and manage the system; hence, increasing public participation in the corporation would enhance public interest.
(e) The PGMC shall put up an Escrow Deposit of P300,000,000.00 pursuant to the requirements of the RFP, which it may, at its
option, maintain as its initial performance bond required to ensure its faithful compliance with the terms of the contract.
(f) The PCSO shall designate the necessary personnel to monitor and audit the daily performance of the on-line lottery system;
and promulgate procedural and coordinating rules governing all activities relating to the on-line lottery system. The first further
confirms that it is the PGMC which will operate the system and the PCSO may, for the protection of its interest, monitor and audit
the daily performance of the system. The second admits the coordinating and cooperative powers and functions of the parties.
(g) The PCSO may validly terminate the contract if the PGMC becomes insolvent or bankrupt or is unable to pay its debts, or if it
stops or suspends or threatens to stop or suspend payment of all or a material part of its debts.
All of the foregoing unmistakably confirm the indispensable role of the PGMC in the pursuit, operation, conduct, and management
of the On-Line Lottery System. They exhibit and demonstrate the parties' indivisible community of interest in the conception, birth
and growth of the on-line lottery, and, above all, in its profits, with each having a right in the formulation and implementation of
policies related to the business and sharing, as well, in the losses with the PGMC bearing the greatest burden because of its
assumption of expenses and risks, and the PCSO the least, because of its confessed unwillingness to bear expenses and risks. In a
manner of speaking, each is wed to the other for better or for worse. In the final analysis, however, in the light of the PCSO's RFP
and the above highlighted provisions, as well as the "Hold Harmless Clause" of the Contract of Lease, it is even safe to conclude
that the actual lessor in this case is the PCSO and the subject matter thereof is its franchise to hold and conduct lotteries since it is,
in reality, the PGMC which operates and manages the on-line lottery system for a period of eight years.
We thus declare that the challenged Contract of Lease violates the exception provided for in paragraph B, Section 1 of R.A. No.
1169, as amended by B.P. Blg. 42, and is, therefore, invalid for being contrary to law. This conclusion renders unnecessary further
discussion on the other issues raised by the petitioners.
WHEREFORE, the instant petition is hereby GRANTED and the challenged Contract of Lease executed on 17 December 1993 by
respondent Philippine Charity Sweepstakes Office (PCSO) and respondent Philippine Gaming Management Corporation (PGMC) is
hereby DECLARED contrary to law and invalid. The Temporary Restraining Order issued on 11 April 1994 is hereby MADE
PERMANENT. No pronouncement as to costs. SO ORDERED.

G.R. No. 115044 September 1, 1994
HON. ALFREDO S. LIM, in his capacity as Mayor of Manila; and THE CITY OF MANILA, petitioners,
vs.
HON. FELIPE G. PACQUING, as Judge, Regional Trial Court of Manila; and ASSOCIATED DEVELOPMENT CORPORATION,
respondents.
QUIASON, J.:
This is a petition for certiorari under Rule 65 of the Revised Rules of Court to set aside the Orders dated March 28, 1994, April 11,
1994 and April 20, 1994 of Judge Felipe G. Pacquing, presiding judge of the Regional Trial Court, Branch 40, Manila, issued in Civil
Case No. 88-45660.
The Order dated March 28, 1994 granted the motion of private respondent to compel petitioner Mayor Alfredo S. Lim to issue a
permit or license in favor of private respondent pursuant to Ordinance No. 7065 upon compliance by private respondent with all
the requirements set thereunder.
The Order dated April 11, 1994 denied the motion for reconsideration filed by petitioners of the Order dated May 28, 1994.
The Order dated April 20, 1994 reiterated the order of March 28, 1994, directing Mayor Lim to immediately issue to private
respondent the necessary permit or license pursuant to Ordinance No. 7065.
I
On September 7, 1971, the Municipal Board of Manila passed Ordinance No. 7065 pursuant to Section 18(jj) of the Revised
Charter of Manila, granting private respondent a franchise to operate a jai-alai in the city. The ordinance is reproduced as follows;
AN ORDINANCE AUTHORIZING THE MAYOR TO ALLOW AND PERMIT THE ASSOCIATED DEVELOPMENT CORPORATION TO
ESTABLISH, MAINTAIN AND OPERATE A JAI-ALAI IN THE CITY OF MANILA, UNDER CERTAIN TERMS AND CONDITIONS AND FOR
OTHER PURPOSES.
Be it ordained by the Municipal Board of the City of Manila, that:
Sec. 1. The Mayor is authorized, as he is hereby authorized to allow and permit the Associated Development Corporation to
establish, maintain and operate a jai-alai in the City of Manila, under the following terms and conditions and such other terms and
conditions as he (the Mayor) may prescribe for good reasons of general interest:
a. That the construction, establishment and maintenance of the jai-alai shall be at a place permissible under existing zoning
ordinance of Manila;
b. That the games to be played daily shall commence not earlier than 5:00 in the afternoon;
c. That the City of Manila will receive a share of 2 1/2% on the annual gross receipts on all wagers or bets, 1/2% of which will
accrue to the Games and Amusement Board as now provided by law;
d. That the corporation will, in addition, pay to the city an annual license fee of P3,000.00 and a daily permit fee of P200.00;
e. That the corporation will, to insure its faithful compliance of all the terms and conditions under this ordinance, put up a
performance bond from a surety acceptable to the city, in the amount of at least P30,000.00.
Sec. 2. The Mayor and the City Treasurer or their duly authorized representatives are hereby empowered to inspect at all times
during regular business hours the books, records and accounts of the establishment, as well as to prescribe the manner in which
the books and financial statements of the entrepreneur shall be kept.
Sec. 3. This ordinance shall take effect upon its approval.
Enacted originally by the Municipal Board on September 7, 1971; vetoed by the Mayor on September 27, 1971; modified and
amended by the Municipal Board at its regular session today, October 12, 1971.
Approved by His Honor, the Mayor, on 13 November 1971.
Thereafter, private respondent took steps preparatory to the establishment of the jai-alai at Ermita, Manila. Private respondent
retained the services of an architectural firm from Hongkong to design the fronton and contracted with a local firm for the
construction of the building.
On August 20, 1975, after the declaration of Martial Law, President Ferdinand E. Marcos promulgated Presidential Decree No. 771
revoking the powers of the local government to grant permits or licenses and canceling all existing franchises to operate jai-alais.
Less than two months after P.D. No. 771 was issued, the Philippine Jai-Alai and Amusement Corporation, an enterprise controlled
by Alfredo Romualdez, a brother-in-law of President Marcos, was granted a franchise to operate a jai-alai within the Greater
Manila Area under P.D. No. 810.
However, after the EDSA Resolution, President Corazon C. Aquino issued Executive Order No. 169, repealing P.D. No. 810.
On May 5, 1988, private respondent sought the resumption of its business operations under its franchise issued under Ordinance
No. 7065. Mayor Gemiliano C. Lopez denied private respondent's request, as well as its motion for reconsideration.
On August 2, 1988, private respondent filed a petition for mandamus and specific performance with the Regional Trial Court,
Branch 40, Manila, docketed as Civil Case No. 88-45660.
In a decision dated September 9, 1989, Judge Augusto E. Villarin of Branch 40 held that Ordinance No. 7065 created a binding
contract between the City of Manila and private respondent and that the City Mayor had no discretion but "to grant the necessary
permit or license allowing it to operate and maintain a jai-alai in the City of Manila pursuant to Ordinance No. 7065."
The trial court noted:
A careful reading, however, of Ordinance No. 7065 will readily show that the discretion, if any, allowed respondent Mayor, under
the Ordinance, will be exercisable only after the permit, which he is mandated to issue, has been issued and the jai-alai fronton is
already operational. The Ordinance stipulates that the Mayor is authorized "to allow and permit petitioner to establish, maintain
and operate a jai-alai in the City of
Manila ," under the five conditions enumerated in subparagraphs "a" to "e" of Section 1 of the Ordinance. But a simple reading of
these "terms and conditions" patently shows that subparagraphs "b" to "e" are clearly conditions that will only come into play
after the jai-alai fronton has been put up or established; while the condition under sub-paragraph "a" appears to have been
complied with satisfactorily by the petitioner, since no objection at all has been made by respondents to the proposed site for the
jai-alai fronton, that is, the 25,000 sq. m. land area behind the present Harrison Plaza Complex located at Ermita, Manila.
It is therefore, quite evident to this Court that no discretion is left to the respondent Mayor to allow or not petitioner "to
establish, maintain and operate a jai-alai in the City of Manila." The Court is satisfied that the requirements of Sec. 3, Rule 65, have
been met.
Moreover, it is well-settled that the grant of a franchise, when accepted and acted upon by the grantee, creates a contract. And,
going by contract law, under the undisputed circumstances in this case, respondent Mayor, in behalf of the City, is obliged to
comply with what is required of him under the Ordinance. At the very least, the enactment and approval of Ordinance No. 7065
on November 13, 1971, created a bilateral contract between petitioner and respondents. Petitioner has commenced the
performance of its obligation under the contract, but was prevented by events over which it has no control from completely
fulfilling what was called for on its part to establish, operate and maintain a jai-alai in the City of Manila (Rollo, pp. 39-40).
The trial court disposed as follows;
WHEREFORE, the petitioner is GRANTED and respondent City of Manila, is ordered to immediately issue to petitioner, the
permit/license required under Ordinance No. 7065 (Rollo, p. 40).
Mayor Lopez appealed said decision to the Court of Appeals (CA G.R. No. 16477 SP) but on February 9, 1989, he filed a Notice of
Withdrawal of Appeal.
On May 5, 1989, the Court of Appeals promulgated a resolution, the dispositive part of which reads as follows:
For the reasons stated in the NOTICE OF WITHDRAWAL OF APPEAL which was filed on February 9, 1989 by respondents appellants
thru counsel let their appeal from the Decision dated September 9, 1989 and Order dated August 25, 1988, of the Regional Trial
Court of Manila in Civil Case No. 88-45660 be as it is hereby considered WITHDRAWN (Rollo, p. 126).
With the withdrawal of the appeal, the judgment in Civil Case No. 45560 became final and executory and was entered in the Book
of Entries of Judgment of the Court of Appeals on May 26, 1989 and in the Book of Entries of Judgment of the Regional Trial Court
on October 27, 1992.
In 1991, the City of Manila filed an action to annul the franchise of private respondent with the Regional Trial Court, Branch 23,
Manila, docketed as Civil Case No. 91-58913.
In said complaint, the City of Manila claimed that private respondent had abandoned its franchise granted under Ordinance No.
7065 and that said ordinance had been repealed by P.D. Nos. 771 and 810.
Judge William Bayhon of Branch 23 noted that the issue of abandonment was squarely raised and resolved in Civil Case No. 88-
45660, while the issue of the repeal of Ordinance No. 7065 could have been pleaded but was not by the City of Manila as a
defense in Civil Case No. 88-45660. According to him, the city had waived such a defense. To make matters worse, the city was in
estoppel to raise said issue since it had been issuing permits pursuant to the decision in Civil Case No. 88-45660 and collecting the
corresponding fees.
Civil Case No. 91-58913, questioning the effectivity of the franchise granted private respondent under Ordinance No. 7065, was
therefore dismissed on December 21, 1991. No appeal was taken from said dismissal of the case.
The City of Manila filed with this Court another case for declaratory judgment to nullify the franchise to operate a jai-alai under
Ordinance No. 7065 (G.R. No. 101768). The petition was dismissed in a resolution dated October 3, 1991 "for lack of jurisdiction."
It may be of interest to note that three Manila councilors also filed an action to compel Mayor Lopez to cancel the permit and
license he issued in favor of private petitioner pursuant to Ordinance No. 7065 (Maceda v. Lopez, Civil Case No. 91-58930,
Regional Trial Court, Branch 37, Manila). In his answer to said petition, Mayor Lopez pointed out that in issuing the permit and
license, he was just acting in obedience to the final judgment in Civil Case No. 88-45660.
Judge Enrico A. Laxamana, presiding judge of Branch 37, made the following observations:
The license was issued by Mayor Lopez in obedience to a final order of a court of justice. For him to refuse to issue the license
would place him in danger of being cited in contempt of court. And for him now to revoke or cancel such license or permit
definitely would place a greater risk and danger of being cited in contempt of court? (Rollo, p. 184).
II
As a preliminary issue, private respondent urged the dismissal of the petition on the grounds that it was in violation of Circular No.
28-91, prohibiting forum shopping, and Revised Circular No. 1-88, requiring the inclusion in the petition of a verified statement of
the dates when notice of the judgment, order or resolution subject thereof, was received, when a motion for reconsideration, if
any, was filed, and when the notice of the denial thereof was received.
Private respondent averred that the certification submitted by petitioners did not disclose (1) that the trial court had rendered a
decision in Civil Case No. 88- 45660 on September 9, 1988 holding that Ordinance No. 7065 was in full force and effect; (2) that
said decision had become final and executory after the petitioners withdrew their appeal therefrom; (3) that petitioners had also
filed Civil Case No. 91-58913, questioning the effectivity of Ordinance No. 7065, which was dismissed. Likewise, they alleged that
the affidavit did not state the material dates necessary for the Court to determine the timelines of the filing of the petition (Rollo,
pp. 108-110).
The certification submitted in compliance with Circular No. 28-91 stated that the petitioner in said petition "has not commenced a
similar action in any court or administrative body against said respondents nor is there any pending cases of the same nature and
parties in any court or administrative body." Rightly, there was no case filed nor was there any case pending wherein the question
of whether the decision in Civil Case No. 88-45660 can be executed by motion is raised.
The affidavit on the material dates submitted by petitioners attested to the dates when petitioners received the three orders of
respondent judge being questioned in the petition for certiorari. These are the dates material for reckoning the timelines of the
filing of the petition to nullify said orders. As far as the issue of the proper mode for executing the decision is concerned, the dates
given in the affidavit are sufficient for the Court to determine whether the petition was filed within a reasonable time
contemplated in Rule 65.
There is, therefore, no violation of Circular No. 28-91 and Revised Circular No. 1-88 to speak of.
On their part, petitioners alleged that the decision in Civil Case No. 88-45660, which is being implemented by the three orders in
question, is null and void for want of jurisdiction of the trial court that rendered it. They posited their claim on the theory that
Ordinance No. 7065 had been canceled by P.D. No. 771 in 1975 and that the trial court had traduced the law when it made it
appear in its decision that Ordinance No. 7065 was still in full force and effect (Rollo, pp. 10-13).
Petitioners failed to appreciate the distinction between a void and an erroneous judgment and between jurisdiction and the
exercise of jurisdiction.
Jurisdiction should be distinguished from the exercise thereof (Lamagan v. De La Cruz, 40 SCRA 101 [1971]). The authority to
decide a case at all and not the decision rendered therein, is what makes up jurisdiction. The fact that the decision is erroneous
does not divest the court that rendered it of the jurisdiction conferred by law to try the case (Quiason, Philippine Courts and their
Jurisdictions, p. 199 [1993 ed.]).
Since jurisdiction is the power to hear and determine a particular case, or the jurisdiction over the subject matter, it does not
depend upon the regularity of the exercise by the court of its power (Century Insurance Co. v. Fuentes, 2 SCRA 1168 [1961]).
In the case at bench, there is no question that the Regional Trial Court has the competence to hear and decide Civil Case No. 88-
45660, a special civil action for mandamus under Rule 65 of the Revised Rules of Court. There is also no quarrel that said court has
jurisdiction over an action for specific performance under Section 19(1) of the Judiciary Reorganization Act of 1990 (Lapitan v.
Scandia, 24 SCRA 479 [1968]). Assuming arguendo that the Regional Trial Court did not have jurisdiction over the said civil case,
the principle of estoppel will operate to bar petitioners from raising the question of jurisdiction for the first time in the instant
case (Tijam v. Sibonghanay, 23 SCRA 29 [1968]).
Having jurisdiction over the civil case, whatever error may be attributed to the trial court, is simply one of judgment, not of
jurisdiction. An error of judgment cannot be corrected by certiorari but by appeal (Robles v. House of Representatives Electoral
Tribunal, 181 SCRA 780 [1990]; De Castro v. Delta Motor Sales Corporation, 57 SCRA 344 [1978]; Galang v. Endencia, 73 Phil. 391
[1941]). In fact, Mayor Lopez availed of such a remedy when he appealed the decision in Civil Case No. 88-45660 to the Court of
Appeals (CA G.R. No. 16477-SP).
The issue on the cancellation of Ordinance No. 7065 by President Marcos could have been raised as a special defense in Civil Case
No. 88-54660 but was not. The Revised Rules of Court frown at the piecemeal presentation of issues, and jurisprudence bars from
subsequent litigation between the same parties matters that could have been raised in a previous case (Revised Rules of Court,
Rule 39, Sec. 49[b]; Gonzales v. Gonzales, 26 SCRA 72 [1968]).
The City of Manila should have pursued in the appellate courts its appeal questioning the dismissal of Civil Case No. 91-58913,
where the trial court ruled that Mayor Lopez and the city could no longer claim that Ordinance No. 7065 had been canceled by
President Marcos because they failed to raise this issue in Civil Case No 88-54660.
At any rate, the unilateral cancellation of the franchise, which has the status of a contract, without notice, hearing and justifiable
cause is intolerable in any system where the Rule of Law prevails (Poses v. Toledo Transportation Co., 62 Phil. 297 [1935]); Manila
Electric Co., v. Public Utility commissioners, 30 Phil. 387 [1915]).
As a fall-back, petitioners claimed that assuming arguendo that the judgment in Civil Case No. 88-45660 dated September 9, 1986
is valid, its execution by mere motion on March 11, 1994 is irregular. Citing Section 6 of Rule 39 of the Revised Rules of Court, they
contended that the decision must be enforced by action, not motion (Rollo, pp. 13-14).
Petitioners erroneously counted the five-year period under Section 6 of Rule 39 from the date of the decision. Said Rule provides:
Execution by Motion or by Independent Action. A judgment may be executed on motion within five (5) years from the date of its
entry or from the date it becomes final and executory. After the lapse of such time and before it is barred by the statute of
limitations, a judgment may be enforced by action.
It must be remembered that Mayor Lopez appealed the decision in Civil Case No. 88-45660 to the Court of Appeals, that he filed
the motion to withdraw the appeal on February 9, 1989, and that the Court of Appeals approved the withdrawal of the appeals
only on May 5, 1989. The entries of judgment were made on May 26, 1989 in the Court of Appeals, and on October 27, 1992 in the
Regional Trial Court. The motion to compel the City Mayor to issue the permit or license pursuant to Ordinance No. 7065, was
filed on March 14, 1994, or well within the five-year period whether such period is counted from May 5, 1989, May 26, 1989 or
October 27, 1992.
Petitioners hypothesized that the withdrawal of an appeal operates as if no appeal was taken at all and that the five-year period
should be counted from January 24, 1989, the fifteenth day from the service of a copy of the decision on Mayor Lopez. Petitioners
anchored their theory on Section 9, Rule 40 and Section 2, Rule 50 of the Revised Rules of Court (Rollo, pp. 15-16).
We find nothing in said Rules to support petitioners' posture.
Sec. 9 of Rule 40, in pertinent part, provides:
. . . If the appeal is withdrawn, or dismissed for failure to prosecute, the judgment shall be deemed revived and shall forthwith be
remanded to the justice of the peace or municipal court for execution.
Rule 40 governed the procedure for appeals from the inferior courts to the Court of First Instance before they became courts of
record. A provision on the revival of the judgment was necessary because at those times the decisions appealed from were
automatically vacated and trials de novo had to be conducted by the Court of First Instance.
Sec. 2 of Rule 50, which governs the dismissal of an appeal by the Court of Appeals, in pertinent part, provides:
Upon the receipt of such certification [of the Clerk of Court that the appeal has been dismissed] in the lower court the case shall
stand there as though no appeal had ever been taken, and the judgment of the said court may be enforced with the additional
costs allowed by the appellate court upon dismissing the appeal.
The phrase "the case shall stand there as if no appeal has been taken" refers to the manner of how the judgment may be enforced
as can be gleaned from the phrase following it that "the judgment of said court may be enforced with the additional costs allowed
by the appellate court . . ." In other words, the judgment shall be executed in accordance with its original disposition, no
modifications thereof having been ordered by the Court of Appeals.
Certainly, said Rule has nothing to do with the five-year period for enforcing a judgment by motion, which is governed by Section 6
of Rule 39.
Mayor Lim's vow to clean the city of vices, like gambling, is commendable. But in the process, he should bear in mind that there
are forms of gambling, and jai-alai is one them, that Congress has deigned to allow.
The pronouncement of Justice Isagani A. Cruz in Mayor Pablo Magtales v. Pryce Properties Corporation, G.R. No. 111097. July 20,
1994, apropos the operation of a gambling casino in Cagayan de Oro by the Philippine Amusement and Games Inc., is cogent to
the instant case, thus:
The morality of gambling is not a justiciable issue. Gambling is not illegal perse. While it is generally considered inimical to the
interests of the people, there is nothing in the Constitution categorically proscribing or penalizing gambling or, for that matter,
even mentioning it at all. It is left to Congress to deal with the activity as it sees fit. In the exercise of its own discretion, the
legislature may prohibit gambling altogether or allow it without limitation or it may prohibit some forms of gambling and allow
others for whatever reasons it may consider sufficient. Thus, it has prohibited jueteng and monte but permits lotteries,
cockfighting and
horse-racing. In making such choices, Congress has consulted its own wisdom, which this Court has no authority to review, much
less reverse. Well has it been said that courts do not sit to resolve the merits of conflicting theories. (Garcia v. Executive Secretary,
204 SCRA 516, quoting Cooley, Constitutional Limitations, 8th ed., 379-380) That is the prerogative of the political departments. It
is settled that questions regarding the wisdom, morality, or practicability of statutes are not addressed to the judiciary but may be
resolved only by the legislative and executive departments, to which the function belongs in our scheme of government (Decision,
p. 8).
It was Mayor Lopez himself who assessed the benefits that will accrue to the city with the operation of the jai-alai. Explaining his
motion to withdraw the appeal from the decision in Civil Case No. 88-45660, he said:
The beneficient effects to the appellant City of Manila, especially during this critical period in our national economy, are manifold
and undeniable. The franchise operation shall be a great boost toward generating much needed revenues for the City coffers
estimated at P100,000.00 a day by way of franchise fees alone, not to mention other municipal taxes and regulatory fees. Millions
of pesos in real estate taxes on the improvements would be realizable. Employment opportunities to little less than five hundred
people in the main building and hundreds of others in the off track fronton shall also be created. These is also the fact that the jai-
alai building, together with all the equipment therein, with an aggregate estimated cost of P100 million shall belong to the city
upon termination of the franchise terms (Rollo, p. 127).
Considerations of equity and fair play militate against the petition.
The Office of the Mayor of the City of Manila issued on January 19, 1990, January 21, 1991 and May 25, 1992 business permits in
favor of private respondent to operate a jai-alai fronton and collected the corresponding license and regulatory fees (Rollo, pp.
151-153; 175-177; 178-198). Private respondent has spent close to P100,000,000.00 to finish the construction of the jai-alai
building and fronton.
The petition was brought under "Rule 42, Section 1 in relation to R.A. No. 5440, to declare null and void ab initio for want of
jurisdiction, the Decision and Orders dated March 28, 1994, April 11, 1994 and April 20, 1994 issued in Civil Case No. 88-45660 of
the Regional Trial Court of Manila, Branch 40" (Rollo, p. 2).
Said Rule and law refer to appeals to the Supreme Court from the decisions of the Regional Trial Court. Clearly, they do not
involved the review of orders of the Regional Trial Court rendered after the decision of the trial court has become final and
executory. Such a review must be taken under
Rule 65, which can be given due course only when there is a showing of lack or excess of jurisdiction or grave abuse of discretion
on the part of the trial court (Revised Rules of Court, Rule 67, Section 1; Planter's Products v. Court of Appeals, 193 SCRA 563
[1991]). We find no abuse of discretion, much less lack of or excess of jurisdiction, on the part of respondent judge. WHEREFORE,
the petition for certiorari is DISMISSED. SO ORDERED.

G.R. No. 88386 August 17, 1989
THE UNIVERSITY OF THE PHILIPPINES, THE UP BOARD OF REGENTS AND DEAN PATRICIO LAZARO, petitioners,
vs.
HON. JUDGE RUBEN AYSON, Br. VI, RTC-BAGUIO CITY, AND UP COLLEGE BAGUIO HIGH SCHOOL FOUNDATION, INC.,
REPRESENTED HEREIN BY ITS PRESIDENT AND CHAIRMAN OF THE BOARD, SALVADOR VALDEZ, JR., respondents.
BIDIN, J.:
This is a petition for certiorari, with urgent prayer for the issuance of a temporary restraining order, seeking to annul the Orders of
respondent Judge dated May 25, 1989 and June 14, 1989 in Civil Case No. 1748-R entitled, "UP College Baguio High School
Foundation, Inc., et al,, v. The University of the Philippines, et al.," restraining petitioners from implementing the decision of the
Board of Regents to phase out the UP College Baguio High School (UPCBHS) and the Memorandum of petitioner Dean Patricio
Lazaro directing the principal of UPCBHS not to accept new incoming freshmen for the school year 1989-1990.
Sometime in 1972, the UP Board of Regents approved the establishment of UPCBHS as an integral part of the graduate program in
education to serve, among others, as a laboratory and demonstration school for prospective teachers. Provided, however, that
UPCBHS must be self-supporting and should not entail any subsidy from the budget of the UP.
In 1978, the Board of Regents provided for the establishment of a Division of Education in UP College Baguio (UPCB) which shall be
composed of a Department of Professional Education and a High School Department. However, the Department of Professional
Education was never organized, although the High School Department has been in continuous operation.
In 1981, the Committee to Review Academic Program recommended the abolition of the UPCBHS. In 1985, the Program Review
Committee likewise asked the UPCB to look into the viability of its secondary education program on account of limited financial
resources plus the fact that UPCBHS failed to serve as a laboratory school for teacher training program as UPCB does not offer
programs in Education. Subsequently, various discussions were held on the proposed phase-out of the UPCBHS.
On January 30,1989, the UP Board of Regents approved the proposed phase-out of UPCBHS on the grounds, inter alia, that only an
insignificant number of UPCBHS graduates qualified for admission and actually enrolled in UPCB and that UPCBHS is not serving as
a laboratory or demonstration school for prospective teachers much less a self-supporting unit. Subsequently, petitioner Dean
Patricio Lazaro issued a memorandum directing the UPCBHS Principal not to accept new incoming high school freshmen for the
school year 1989- 1990.
On May 25,1989, respondent UP College Baguio High School Foundation Inc., represented by its president, filed a petition with the
Regional Trial Court of Baguio, Br. VI, presided by respondent Judge against herein petitioners, for Injunction with preliminary
preventive and mandatory injunction with prayer for the issuance of a temporary restraining order, docketed as Civil Case No.
1748-R, alleging among others, that the decision of the UP Board of Regents to phase out the UPCBHS is without legal basis and
unconstitutional.
Thereafter, respondent Judge issued the assailed Orders restraining petitioners from implementing the Board's decision to phase
out UPCBHS and the memorandum of Dean Patricio Lazaro. Petitioners' motion to dismiss Civil Case No. 1748-R was denied by
respondent Judge.
Hence, this petition.
On June 27,1989, the Court issued a Temporary Restraining Order enjoining the implementation of the assailed orders of
respondent Judge.
Petitioners contend, among other things, that the decision of the UP Board of Regents to phase out the UPCBHS is an exercise of
academic freedom guaranteed by the Constitution (Art. XIV, Sec. 5, par. 2).lwph1.t
Respondents, on the other hand, take issue not with the exercise of academic freedom but rather on the right to quality education
(Art. XIV, Sec. 1) and free public secondary education (Art. XIV, Sec. 2, par. 2) mandated by the Constitution and Rep. Act No. 6655,
otherwise known as "Free Public Secondary Education Act of 1988." Respondents ' contend that the abolition of the UPCBHS
would be violative of said rights.
The conflict of the present petition pits the concept of academic freedom as against the right to free public secondary education.
Art. XIV, Section 2, [2] of the Constitution, provides: "The State shall establish and maintain a system of free public education in
the elementary and high school levels. Without limiting the right of natural parents to rear their children, elementary education is
compulsory for all children of school age." On the other hand, Art. XIV, Section 5 [2], provides: "Academic freedom shall be
enjoyed in all institutions of higher learning."
Is secondary public education demandable in an institution of higher learning such as the University of the Philippines?
We rule in the negative.
It is beyond cavil that the UP, as an institution of higher learning, enjoys academic freedomthe institutional kind.
In Garcia v. The Faculty Admission Committee, Loyola School of Theology (68 SCRA 277 [1975]), the Court had occasion to note the
scope of academic freedom recognized by the Constitution as follows:
(I)t is to be noted that the reference is to the 'institutions of higher learning' as the recipients of this boon. It would follow then
that the school or college itself is possessed of such a right. It decides for itself its aims and objectives and how best to attain
them. It is free from outside coercion or interference save possibly when the overriding public welfare calls for some restraint. It
has a wide sphere of autonomy certainly extending to the choice of students. This constitutional provision is not to be construed
in a niggardly manner or in a grudging fashion. That would be to frustrate its purpose, nullify its intent.
xxx xxx xxx
It is the business of a university to provide that atmosphere which is most conducive to speculation, experiment and creation. It is
an atmosphere in which there prevail the four essential freedom of a universityto determine for itself on academic grounds who
may teach, what may be taught, how it shall be taught, and who may be admitted to study"' (Emphasis supplied; citing Sinco,
Philippine Political Law, 491, (1962) and the concurring opinion of Justice Frankfurter in Sweezy v. New Hampshire (354 US 234
[1957]).
Rep. Act No. 6655, otherwise known as the "Free Public Secondary Education Act of 1988," includes in its coverage state colleges
and universities (SCUs) offering secondary courses. Respondents cointend that since a secondary course is being offered in UPCB,
petitioners cannot unilaterally withdraw therefrom, otherwise, the said Act would be nothing but a mere nullity for all other SCUs.
Besides, respondents contend, petitioners already recognized the applicability of Rep. Act No. 6655 when they implemented the
same at the UPCBHS for School Year 1988-89 and petitioners' assertion that UPCBHS was established only if it would be "self-
supporting and should not entail any subsidy from the budget of UP" is but a lame excuse.
At this juncture, it must be pointed out that UPCBHS was established subject to a number of conditionalities, e.g., it must be self-
supporting, it can serve as a feeder for the UP at Baguio, it can serve as a laboratory and demonstration school for prospective
teachers, failing in which the University can order its abolition on academic grounds, specially where the purposes for which it was
established was not satisfied.
Specifically, the University of the Philippines was created under its Charter (Act No. 1870 [1908], as amended) to provide
advanced tertiary education and not secondary education. Section 2 of said Act states that "the purpose of said University shall be
to provide advanced instruction in literature, philosophy, the sciences, and arts, and to give professional and technical training."
It is apparent that secondary education is not the mandated function of the University of the Philippines; consequently, the latter
can validly phase out and/or abolish the UPCBHS especially so when the requirements for its continuance have not been met, Rep.
Act No. 6655 to the contrary notwithstanding. The findings of facts by the Board of Regents which led to its decision to phase out
the UPCBHS must be accorded respect, if not finality. Acts of an administrative agency within their areas of competence must be
casually overturned by the courts. It must be emphasized that UPCBHS was established as a component of the tertiary level, i.e.,
the teacher/training program. As it turned out however, the latter program was not viable in UPCB thereby necessitating the
phasing out of UPCBHS, the rationale being its reasons for existence no longer exists. On this score, UPCBHS differs from the other
UP high schools in Iloilo, Diliman, Cebu and Los Ba;os. The latter schools serve as laboratory schools for the College of Education
in said areas, whereas, in Baguio, there is no College of Education.
A careful perusal of Rep. Act No. 6655 could not lend respondents a helping hand either. Said Act implements the policy of the
State to provide free public secondary education (Sec. 4) and vests the formulation of a secondary public education curriculum
(Sec. 5), the nationalization of public secondary schools (Sec. 7) and the implementation of the rules and regulations thereof (Sec.
9) upon the Secretary of the Department of Education, Culture and Sports (DECS).lwph1.t Rep. Act No. 6655 complements
Sec. 2 (2), Article XIV of the Constitution which mandates that the State shall establish and maintain a system of free public
secondary education. However, this mandate is not directed to institutions of higher learning like UP but to the government
through the Department of Education, Culture and Sports (DECS). As an institution of higher learning enjoying academic freedom,
the UP cannot be compelled to provide for secondary education. However, should UP operate a high school in the exercise of its
academic freedom, Rep. Act No. 6655 requires that the students enrolled therein "shall be free from payment of tuition and other
school fees.
In view of the foregoing, respondents do not have a clear legal right to UP secondary education.
ACCORDINGLY, the Court Resolved to Grant the petition. The assailed Orders of respondent Judge dated May 25, 1989 and June
14, 1989 are hereby Set Aside and respondent Judge is ordered to Dismiss Civil Case No. 1748-R. Secretary Lourdes Quisumbing of
the Department of Education, Culture and Sports is requested to make arrangements with the other high schools in Baguio City for
purposes of accommodating the students herein affected. The temporary restraining order issued is made permanent.
SO ORDERED.

G.R. No. L-65439 November 13, 1985
PAMANTASAN NG LUNGSOD NG MAYNILA, petitioner
vs.
HON. INTERMEDIATE APPELLATE COURT, HON. FILEM0N FERNANDEZ, JR., HON. ALBINA MANALODANS as Commissioners of
Civil Service Commission and HERNANI P. ESTEBAN, respondents.
GUTIERREZ, JR., J.:
The sole issue raised in this petition is the status of respondent Hernani Esteban's appointment as Vice-President for
Administration of the Pamantasan ng Lungsod ng Maynila that is, whether or not he holds the position in a permanent capacity as
to guarantee as security of tenure.
Respondent Esteban asserts that his appointment is permanent whereas the petitioner maintains its temporary and contractual
nature such that the respondent may be dismissed at any time even without cause.
Prior to his joining the Pamantasan, Dr. Esteban had been a permanent employee in the government service for twenty five (25)
years. Until May 20, 1973, he was officially connected with the Philippine College of Commerce, a state-owned educational
institution as its Vice-President for Academic Affairs. Shortly before that date, the Board of Trustees of the College in a bold move
to streamline the college organization resolve to abolish the position of Vice-President for Academic Affairs. Private respondent
was given the option to continue teaching at the Philippine College of Commerce which he accepted until his transfer to the
Pamantasan ng Lungsod ng Maynila, upon the invitation of its president, Dr. Consuelo Blanco.
At the Pamantasan, Dr. Esteban was initially extended an ad interim temporary appointment as Vice-President for Administration
by Dr. Consuelo Blanco. Dr. Esteban received from the Secretary of Pamantasan a 'Notification of Confirmation of Temporary
Appointment' dated June 28, 1973. His appointment was 'effective May 21, 1973 until June 30, 1974, unless sooner terminated.'
On July 5, 1974, the Secretary of Pamantasan sent him a 'Notification of Renewal of Temporary Appointment' indicating that his
appointment was renewed 'effective July 1, 1974 until August 31, 1974.'
A month later, on August 30, 1974, he received from the University Secretary another 'notification of renewal of temporary
appointment' informing him that the Board of Regents, on recommendation of the President of the University approved the
renewal of his appointment 'effective September 1, 1974 until June 30, 1975' with an increased salary of P17,160 per annum.
On October 15, 1974, incident to a further increase of his salary, Dr. Esteban was notified that his appointment as vice-president
for administration at a salary of P17,600 per annum had been renewed effective September 1, 1974 until June 30, 1975.
On June 26, 1975, he received another 'Notification of Renewal of Temporary Appointment' as Vice-President for Administration
with at salary of P21,760 per annum, 'effective July 1, 1975 until June 30, 1976.'
On July 26, 1975, Dr. E qqqsteban discovered that he was not included in the list of employees recommended for permanent
appointments. He wrote Dr. Consuelo Blanco requesting the conversion of his temporary appointment to a permanent one,
considering his two and half (2) years service.
On July 26, 1975, Dr. Esteban received an answer to his request from President Blanco who indicated various reasons for her not
acting favorably on his request.
On August 1, 1975, Dr. Esteban received a 'Notification of Ad Interim Appointment notifying him that the president of the
university had approved his appointment as Professor III with a salary of P15,600 per annum 'effective August 1, 1975'. He was
further designated as Director of the Institute of Continuing Education and Community Service with an honorarium of P5,676 per
annum, likewise effective August 1, 1975.
On August 7, 1975, Dr. Consuelo Blanco, issued a memorandum circular terminating Dr. Esteban's appointment as Vice-President
for Administration effective July 31, 1975. His appointment dated June 26, 1975 and effective until June 30, 1976 had been
withdrawn before it could be confirmed by the Pamantasan Board of Regents.
On the same date, August 7, 1975, Dr. Esteban appealed to the Civil Service Commission for the protection of his tenure in the
Pamantasan .
On October 9,1975, the Civil Service Commission ruled that:
The temporary nature of the appointment issued to Dr. Esteban as Vice President for Administration is conceded. Such being the
Case, his services may be terminated at any time with or without request that he be extended permanent appointment ,or that his
temporary appointment be converted into permanent one, it may be stated that the issuance of such appointment is addressed to
the sound discretion of the appointing official.
Dr. Esteban flied a motion for the reconsideration of that ruling. On January 14, 1976, the Civil Service Commission ruled favorably
on Dr. Esteban's motion. It stated that he was fully qualified for the position of Vice-President for Administration and certified him
"for appointment therein under permanent status." The Commission stated:
In view thereof, and in the absence of any apparent justifiable reason why Dr. Esteban should remian under temporary status for
the length of time prior to the withdrawal of his appointment as Vice President for Administration in that University, and as it
further appears that he is fully qualified for the position in question in view of his extensive experience in the fields of public
administration and management, this Commission hereby certifies him for appointment therein under permanent status.
The Pamantasan, in turn, asked for the reconsideration of that ruling.
The Commission, in an undated Resolution No. 75, Series of 1976, came out with a statement which confused more than it
clarified. It stated that its certification should not be interpreted as directing the reinstatement of Dr. Esteban because 'it was
never intended to be so
On May 28, 1976 Esteban asked the commission to reconsider Resolution No. 75, Series of 1976. He also asked for the payment of
the salaries and allowances due him as of September 1975, which the Pamantasan had withheld. His request was denied by the
commission in its undated resolution No. 158, Series of 1976.
On September 15, 1976 Esteban reiterated his request for payment of his salaries.
On September 20, 1976, he asked for a review of the Pamantasan's decision to terminate his appointment as Vice-President for
Administration.
On December 1, 1976, his request for payment of his salaries was referred by the Commission to the treasurer of the Pamantasan.
On July 6, 1977, the Commission again modified its earlier resolution in as case. It ruled that Dr. Consuelo Blanco, had no authority
to extend to Dr. Esteban an ad interim appointment as Vice President for Administration as only the Board of Regents was
empowered to do that under Article 55 of the University Charter (Rep. Act 4196). However, it ruled that, as a de facto officer, he
was entitled to be paid the salary of that position.
Dr. Esteban and the Pamantasan filed motions for reconsideration of that ruling prompting the Commission to order them to
submit "all papers and documents pertinent to that case."
On June 6, 1978, Presidential Decree No.1409 was issued creating a Merits System Board in the Civil Service Commission to hear
and decide cases brought before it on appeal by officers and employees who feel aggrieved by the determination of officials on
personnel matters.
The Board required the Pamantasan to submit its complete records on the appointment and termination of Dr. Esteban as vice-
president for administration.
While the records officer of the Pamantasan submitted copies of the notices sent to Esteban regarding his appointment as vice-
president for administration, he did not submit a copy of the Board's Resolution No. 485 passed June 20, 1973 confirming the ad
interim appointments of several academic and non-academic personnel of said university among which was that of Dr. Hernani
Esteban "effective May 21, 1973." He produced a copy of the memorandum circular dated August 7, 1915 of the President of the
Pamantasan terminating Dr. Esteban's service as of July 31, 1975.
In Resolution No. 597 dated November 11, 1980, the Commissioner directed the Pamantasan to submit any document or
documents directly or actually showing that Dr. Hernani Esteban was appointed vice-president for administration of the
Pamantasan in a permanent capacity.
On January 15, 1981, the Pamantasan by 2nd Indorsement, despite the existence of Board Resolution No. 485, replied that "we
cannot find any document showing that Dr. Esteban was appointed ... in a permanent capacity.
In view of the Pamantasan's failure to produce the minutes of the regular Board of Regents meeting on June 20, 1973 when
Esteban's appointment was approved the Commission in its Resolution No. 81-279 dated March 5, 1981, concluded that there is
truth to the claim of Dr. Esteban that his appointment as Vice-President for Administration of the Pamantasan was approved as
permanent. It cited Government of the Philippine Islands vs. Martinez, (44 Phil. 817) that when a party has it in his possession or
power to produce the best evidence of which the case in its nature is susceptible and withholds it, the fair presumption is that the
evidence is withheld for some sinister motive and that its production would thwart his evil or fraudulent purpose.
The Commission ruled that "Dr. Hernani Esteban had been appointed Vice-President for Administration of Pamantasan with
permanent status and that the temporary appointment issued to him did not alter his permanent status as he had 'already
acquired a vested right as well as the right to security of tenure', that he cannot unceremoniously removed therefrom, nor can the
status of his appointment be changed without cause, as provided by law and after due process." The Commission held that the
termination of his services was obviously illegal. It directed his immediate reinstatement to the position of Vice-President for
Administration of Pamantasan and the payment of his back salaries, allowances and other benefits which he failed to receive from
the time he was separated therefrom.
The Pamantasan filed a motion for reconsideration of that resolution. It also submitted for the first time a copy of Resolution No.
485.
The Commission, in Resolution No. 71-510 dated April 23, 1981 chided the Pamantasan for having suppressed said piece of
evidence from which "the intention of, or the accurate action taken by PLM Board of Regents on Dr. Esteban's appointment in
question, may be determined." Following the decision of the Supreme Court in the case of Summers v. Ozaeta, (81 Phil. 760), the
Commission denied the Pamantasan's motion for reconsideration and ruled that "Upon confirmation of the Board of Regents of
the ad interim appointment of Dr. Esteban the same became permanent."
Upon getting this ruling, the Pamantasan filed a petition for certiorari against Dr. Esteban and Civil Service Commissionssioners
Filemon Fernandez, Jr. and Albina Manalo Dans. The petition was docketed as Civil Case No. 139840 of the Court of First Instance
of Manila, Branch XIII.
On January 8, 1982, the trial court rendered a decision reversing the Commission's Resolution No. 81-279 and adopted the earlier
Commission Resolution dated July 6, 1977 holding that Private respondent Dr. Esteban's appointment was invalid, though he may
be considered as a de facto vice-president of the University up to October 9, 1975, the date when the Commission ruled that his
appointment was temporary and could be terminated at any time.
The private respondent appealed to the Intermediate Appellate Court.
On September 26, 1983. the respondent Intermediate Appellate Court rendered a decision reversing the trial court's decision. The
dispositive portion of the appellate decision reads:
Wherefore, the appealed decision is hereby revised and set aside. The Pamantasan's petition for certiorari is denied. Resolution
No 81-279 dated March 5, 1981, as well as Resolution No. 81-510 dated April 23, 1981, of the respondent Civil Service
Commission, declaring as permanent the appointment of the appellant Dr. Hernani Esteban as vice- president for administration
of the university under the Board of Regents' Resolution No. 485 dated June 20, 1973, and ordering his immediate reinstatement
to that position with back salaries, allowances and other benefits, is affirmed, provided he has not yet reached the age of
compulsory retirement from the government service; otherwise, he shall be entitled to back salaries, allowances and other
benefits only up to the time he should handle been reared from the said position.
From the decision of the Intermediate Appellate Court and after its motion for reconsideration had been denied petitioner
Pamantasan ng Lungsod ng Maynila filed the present petition, now the subject of this review.
We find no error in the pronouncements of the Intermediate Appellate Court. We rule in favor of the respondents.
From the arguments, it is easy to see why the petitioner should experience difficulty in understanding the situation. Private
respondent had been extended several "ad-interim" appointments which petitioner mistakenly understands as appointments
temporary in nature. Perhaps, it is the literal translation of the word "ad interim" which creates such belief. The term is defined by
Black to mean "in the meantime" or for the time being, Thus, an officer ad interim is one appointed to fill a vacancy, or to
discharge the duties of the office during the absence or temporary incapacity of its regular incumbent (Black's Law Dictionary,
Revised Fourth Edition, 1978). But such is not the meaning nor the use intended in the context of Philippine law. In referring to Dr.
Esteban's appointments, the term is not descriptive of the nature of the appointments given to him. Rather, it is used to denote
the manner in which said appointments were made, that is, done by the President of the Pamantasan in the meantime, while the
Board of Regents, which is originally vested by the University Charter with the power of appointment, is unable to act. Thus, we
held in Summers v. Ozaeta (81 Phil. 760):
... an ad interim appointment is one made in pursuance of paragraph (4), section 10, Article VII of the Constitution, which provides
that the President shall have the power to make appointments during the recess of the Congress, but such appointments shall be
effective only until disapproval by the Commission on Appointments or until the next adjournment of the Congress.' lt is an
appointment permanent in nature, and the circumstance that it is subject to confirmation by the Commission on Appointments
does not alter its permanent character. An ad interim appointment is disapproved certainly for a reason other than that its
provisional period has expired. Said appointment is of course distinguishable from an 'acting' appointment which is merely
temporary, good until another permanent appointment is issued.
Not only is the appointment in question an ad interim appointment, but the same is also a confirmed ad interim appointment. In
its Resolution No. 485, dated June 20, 1973, the Pamantasan Board of Regents verified respondent Esteban's appointment
without condition nor limitation as to tenure. As of that moment, it became a regular and permanent appointment.
In other words, if the Board of Regents is in session, the Pamantasan President merely nominates while the Board issues the
appointment. But when the Board is not in session, the President is authorized to issue ad interim appointments. Such
appointments are permanent but their terms are only until the Board disapproves them. If confirmed, the appointee's term is
converted into the regular term inherent in the position.
Petitioner centers its arguments and tries to fix the attention of the court to the fact that all notices of appointments, renewals,
and confirmation thereof all declare the same to be temporary, carrying fixed commencement and termination dates, "unless
sooner terminated." As expressed by public respondent, "... This stubborn insistence is anchored on the notifications of temporary
appointment sent to private respondent Esteban by the Secretary of Pamantasan. However, this insistence deliberately ignores ...
Resolution No. 485 dated June 20, 1973 of the Board of Regents ...". And correctly so argued. "In case of conflict between a
notification issued by the Secretary of the University which is supposed to reflect the true content of a Board Resolution and the
Resolution itself of said Board of Regents of said University, the latter is controlling for obvious reasons. The Secretary of the
University has no authority to alter or add something which is not provided for in the Resolution of the Board of Regents ...". Thus,
respondent Intermediate Appellate Court held:
The permanent nature of appellant's appointment was not altered or diminished by the misleading 'notifications' which were sent
to him by the secretary of the university president, referring to his appointment as 'temporary', nor by his uninformed acceptance
thereof without knowledge of the true contents of Resolution No. 485 which the university president appears to have studiously
suppressed.
There is nothing in the Pamantasan Board of Regents' Resolution No. 485 which suggests that respondent Esteban's appointment
was temporary. The Board's action was to confirm or reject an existing ad interim appointment. If respondent's appointment was
intended to be temporary, it should have been expressly stated. It cannot be made to rest on inconclusive evidence, specially
because a temporary appointment divests the temporary appointee of the constitutional security of tenure against removal
without cause even if he is a civil service eligible." (Tolentino v. de Jesus, 56 SCRA 167, cited in Cortez v. Bartolome, 100 SCRA 1).
Further supporting private respondent's stand is the list of permanent personnel which was submitted to the Commission by the
university president herself on March 3, 1975 for recognition of their permanent status by the Commission. The appellant's name
was the first in that list (Exhibit 8-B). The permanent status of private respondent's appointment as Vice-President for
Administration at Pamantasan was recognized by the Civil Service Commission in its lst Indorsement dated April 18, 1975 upon the
request of petitioner. This fact is borne out by the records and the evidence and found as such by the Intermediate Appellate
Court, the Civil Service Commission as well as the Court of First Instance.
From the foregoing, there appears an intention to deprive private respondent of his rights as a permanent appointee. With
strained relations and differences in professional opinion between the private respondent and the Pamantasan President, Dr.
Esteban was led to believe that his services were terminable at pleasure.
The power to appoint is, in essence, discretionary. The appointing power has the right of choice which he may exercise freely
according to his judgment, deciding for himself who is best qualified among those who have the necessary qualifications and
eligibilities. lt is a prerogative of the appointing power that may be availed of without liability, provided however, that it is
exercised in good faith for the advancement of the employer's interest and not for the purpose of defeating or circumventing the
rights of the employees under special laws or under valid agreements, and provided further, that such prerogatives are not
exercised in a malicious, harsh, oppressive, vindictive or wanton manner, or out of malice or spite (Government Service and
Insurance System v. Ayroso 96 SCRA 213). The general rule is that the power of appointment must remain unhampered by judicial
intervention. However, when the law is violated or when there is grave abuse of discretion, we have to step in. Otherwise the
situation aptly described by newspaperman Jesus Bigornia would exist as he had written:
... With the sword of Damocles hanging over the heads of faculty members, the university has spawned a meek, spineless, even
subservient corps of professors and instructors. (Newsman's Notes, Bulletin Today, January 23, 1976).
We cannot also sanction the termination of private respondent's services by petitioner. With his appointment now settled as
permanent., the Civil Service law and the Constitution guarantee private respondent's security of tenure as 'No officer or employe
in the Civil Service shall be suspended or dismissed except for cause as provided by law" (Section 3, Article XII, the 1973 Philippine
Constitution). Petitioner has failed to substantiate its allegations of incompetence against respondent Esteban whose record of
government service appears quite impressive. Esteban was not dimissed for cause after proper proceedings. His appointment was
terminated on the ground that it was temporary.
The intermediate Appellate Court ordered the payment of full back salaries to Dr. Esteban provided he has not reached the age of
compulsory retirement from the government service.
It is not clear from the records as to when Dr. Esteban actually ceased working for Pamantasan. Under the law, he is entitled to full
pay, allowances, and other benefits during the period that he was actually reporting for work and rendering services in whatever
capacity, whether teaching, research or administration. As of backwages, the amount is generally based on the equivalent of three
years' earnings (Philippine Airlines, Inc. v. National Labor Relations Commission, 126 SCRA 223; Insular Life Assurance Co., Ltd. v.
National Labor Relations Commission, 135 SCRA 697). In line with the policy adopted by this Court to do away with the attendant
delay in awarding backwages because of the extended hearings necessary to prove the earnings, elsewhere of each and every
employee (Philippine Airlines, Inc. v. National Labor Relations Commission, supra, citing Mercury Drug Co., Inc. v. Court of
Industrial Relations, 56 SCRA 694), the formula for computing the same calls for fixing the award of backwages to three years.
However, in Dy Keh Beng v. International Labor and Marine Union, 90 SCRA 162, citing Mercury Drug Co., et al. v. Court of
Industrial Relations, 56 SCRA 694, 712), we held the amount of backwages to be "subject to deduction whre there are mitigating
circumstances in favor of the employer, but subject to increase whree there are aggravating circumstances. (Tupas Local Chapter
No. 979, et al. v. National Labor Relations Commission, et al., G. R. No. 60532-33, November 5,\1985; Progressive Development
Corporation v. Progressive Employees' Union, 80 SCRA 434.) Considering that in the case at bar, more than ten (10) years have
elpased from the date respondent Esteban as to the true nature of his appointment and "studiously suppressing" material data to
effectively deprive the latter of his rights as a permanent employee, we find an award of five (5) years backpay to respondent Dr.
Esteban just and equitable under the circumstances, assuming he has not reached retirement age in the meantime.
WHEREFORE, the petition for review on certiorari is hereby DISMISSED for lack of merit. The decision appealed from is affirmed
subject to the modification in the payment of back salaries as stated above. SO ORDERED.
G.R. No. 134625 August 31, 1999
UNIVERSITY OF THE PHILIPPINES BOARD OF REGENTS, CHANCELLOR ROGER POSADAS, DR. EMERLINDA ROMAN, DEAN
CONSUELO PAZ, DR. ISAGANI MEDINA, DR. MARIA SERENA DIOKNO, DR. OLIVIA CAOILI, DR. FRANCISCO NEMENZO II, DEAN
PACIFICO AGABIN, CARMELITA GUNO, and MARICHU LAMBINO, petitioners,
vs.
HON. COURT OF APPEALS and AROKIASWAMY WILLIAM MARGARET CELINE, respondents.
MENDOZA, J.:
For review before the Court is the decision of the Court of Appeals
1
in CA-G.R. SP No. 42788, dated December 16, 1997, which
granted private respondent's application for a writ of mandatory injunction, and its resolution, dated July 13, 1998, denying
petitioners' motion for reconsideration.
The antecedent facts are as follows:
Private respondent Arokiaswamy William Margaret Celine is a citizen of India and holder of a Philippine visitor's visa. Sometime in
April 1988, she enrolled in the doctoral program in Anthropology of the University of the Philippines College of Social Sciences and
Philosophy (CSSP) in Diliman, Quezon City.
After completing the units of course work required in her doctoral program, private respondent went on a two-year leave of
absence to work as Tamil Programme Producer of the Vatican Radio in the Vatican and as General Office Assistant at the
International Right to Life Federation in Rome. She returned to the Philippines in July 1991 to work on her dissertation entitled,
"Tamil Influences in Malaysia, Indonesia and the Philippines."
On December 22, 1992, Dr. Realidad S. Rolda, chairperson of the U.P. Department of Anthropology, wrote a letter to Dr. Maria
Serena Diokno, CSSP Associate Dean and Graduate Program Director, certifying that private respondent had finished her
dissertation and was ready for her oral defense. Dr. Rolda suggested that the oral defense be held on January 6, 1993 but, in a
letter, dated February 2, 1993, Dr. Serena Diokno rescheduled it on February 5, 1993. Named as members of the dissertation
panel were Drs. E. Arsenio Manuel, Serafin Quiason, Sri Skandarajah, Noel Teodoro, and Isagani Medina, the last included as the
dean's representative.
After going over private respondent's dissertation, Dr. Medina informed CSSP Dean Consuelo Joaquin-Paz that there was a portion
in private respondent's dissertation that was lifted, without proper acknowledgment, from Balfour's Cyclopaedia of India and
Eastern and Southern Asia (1967), volume I, pp. 392-401 (3 v., Edward Balfour 1885 reprint) and from John Edye's article entitled
"Description of the Various Classes of Vessels Constructed and Employed by the Natives of the Coasts of Coromandel, Malabar,
and the Island of Ceylon for their Coasting Navigation" in the Royal Asiatic Society of Great Britain and Ireland Journal, volume I,
pp. 1-14 (1833).
2

Nonetheless, private respondent was allowed to defend her dissertation on February 5, 1993. Four (4) out of the five (5) panelists
gave private respondent a passing mark for her oral defense by affixing their signatures on the approval form. These were Drs.
Manuel, Quiason, Skandarajah, and Teodoro. Dr. Quiason added the following qualification to his signature:
Ms. Arokiaswamy must incorporate the suggestions I made during the successful defense of her P.D. thesis.
3

Dr. Medina did not sign the approval form but added the following comment:
Pipirmahan ko ang pagsang-ayon/di pagsang-ayon kapag nakita ko na ang mga revisions ng dissertation.
4

Dr. Teodoro added the following note to his signature:
Kailangang isagawa ang mga mahahalagang pagbabago at ipakita sa panel and bound copies.
5

In a letter, dated March 5, 1993 and addressed to her thesis adviser, Dr. Manuel, private respondent requested a meeting with the
panel members, especially Dr. Medina, to discuss the amendments suggested by the panel members during the oral defense. The
meeting was held at the dean's office with Dean Paz, private respondent, and a majority of the defense panel present.
6
During the
meeting, Dean Paz remarked that a majority vote of the panel members was sufficient for a student to pass, notwithstanding the
failure to obtain the consent of the Dean's representative.
On March 24, 1993, the CSSP College Faculty Assembly approved private respondent's graduation pending submission of final
copies of her dissertation.
In April 1993, private respondent submitted copies of her supposedly revised dissertation to Drs. Manuel, Skandarajah, and
Quiason, who expressed their assent to the dissertation. Petitioners maintain, however, that private respondent did not
incorporate the revisions suggested by the panel members in the final copies of her dissertation.
Private respondent left a copy of her dissertation in Dr. Teodoro's office April 15, 1993 and proceeded to submit her dissertation
to the CSSP without the approvals of Dr. Medina and Dr. Teodoro, relying on Dean Paz's March 5, 1993 statement.
Dr. Teodoro later indicated his disapproval, while Dr. Medina did not sign the approval form.
7

Dean Paz then accepted private respondent's dissertation in partial fulfillment of the course requirements for the doctorate
degree in Anthropology.
In a letter to Dean Paz, dated April 17, 1993, private respondent expressed concern over matters related to her dissertation. She
sought to explain why the signature of Dr. Medina was not affixed to the revision approval form. Private respondent said that
since she already had the approval of a majority of the panel members, she no longer showed her dissertation to Dr. Medina nor
tried to obtain the latter's signature on the revision approval form. She likewise expressed her disappointment over the CSSP
administration and charged Drs. Diokno and Medina with maliciously working for the disapproval of her dissertation, and further
warned Dean Paz against encouraging perfidious acts against her.
On April 17, 1993, the University Council met to approve the list of candidates for graduation for the second semester of school
year 1992-1993. The list, which was endorsed to the Board of Regents for final approval, included private respondent's name.
On April 21, 1993, Dean Paz sent a letter to Dr. Milagros Ibe, Vice Chancellor for Academic Affairs, requesting the exclusion of
private respondent's name from the list of candidates for graduation, pending clarification of the problems regarding her
dissertation. Her letter reads:
8

Abril 21, 1993
Dr. Milagros Ibe
Vice Chancellor for Academic Affairs
Unibersidad ng Pilipinas
Quezon Hall, Diliman, Q.C.
Mahal na Dr. Ibe,
Mahigpit ko pong hinihiling na huwag munang isama ang pangalan ni Ms. Arokiaswam[y] William Margaret Celine sa listahan ng
mga bibigyan ng degri na Ph.D. (Anthropology) ngayon[g] semester, dahil sa mga malubhang bintang nya sa ilang myembro ng
panel para sa oral defense ng disertasyon nya at sa mga akusasyon ng ilan sa mga ito sa kanya.
Naniniwala po kami na dapat mailinaw muna ang ilang bagay bago makonfer ang degri kay Ms. Arokiaswam[y]. Kelangan po ito
para mapangalagaan ang istandard ng pinakamataas na degree ng Unibersidad.
(Sgd.)
CONSUELO JOAQUIN-PAZ, Ph.D.
Dekano
Apparently, however, Dean Paz's letter did not reach the Board of Regents on time, because the next day, April 22, 1993, the
Board approved the University Council's recommendation for the graduation of qualified students, including private respondent.
Two days later, April 24, 1993, private respondent graduated with the degree of Doctor of Philosophy in Anthropology.
On the other hand, Dean Paz also wrote a letter to private respondent, dated April 21, 1993, that she would not be granted an
academic clearance unless she substantiated the accusations contained in her letter dated April 17, 1993.
In her letter, dated April 27, 1993, private respondent claimed that Dr. Medina's unfavorable attitude towards her dissertation
was a reaction to her failure to include him and Dr. Francisco in the list of panel members; that she made the revisions proposed
by Drs. Medina and Teodoro in the revised draft of her dissertation; and that Dr. Diokno was guilty of harassment.
In a letter addressed to Dean Paz, dated May 1, 1993, Dr. Medina formally charged private respondent with plagiarism and
recommended that the doctorate granted to her be withdrawn.
9

On May 13, 1993, Dean Paz formed an ad hoc committee, composed of faculty members from various disciplines and chaired by
Eva Duka-Ventura, to investigate the plagiarism charge against private respondent. Meanwhile, she recommended to U.P. Diliman
Chancellor, Dr. Emerlinda Roman, that the Ph.D. degree conferred on private respondent be withdrawn.
10

In a letter, dated June 7, 1993, Dean Paz informed private respondent of the charges against her.
11

On June 15, 1993, the Ventura Committee submitted a report to Dean Paz, finding at least ninety (90) instances or portions in
private respondent's thesis which were lifted from sources without proper or due acknowledgment.
On July 28, 1993, the CSSP College Assembly unanimously approved the recommendation to withdraw private respondent's
doctorate degree and forwarded its recommendation to the University Council. The University Council, in turn, approved and
endorsed the same recommendation to the Board of Regents on August 16, 1993.
On September 6, 1993, the Board of Regents deferred action on the recommendation to study the legal implications of its
approval.
12

Meanwhile, in a letter, dated September 23, 1993, U.P. Diliman Chancellor Emerlinda Roman summoned private respondent to a
meeting on the same day and asked her to submit her written explanation to the charges against her.
During the meeting, Chancellor Roman informed private respondent of the charges and provided her a copy of the findings of the
investigating committee.
13
Private respondent, on the other hand, submitted her written explanation in a letter dated September
25, 1993.
Another meeting was held on October 8, 1993 between Chancellor Roman and private respondent to discuss her answer to the
charges. A third meeting was scheduled on October 27, 1993 but private respondent did not attend it, alleging that the Board of
Regents had already decided her case before she could be fully heard.
On October 11, 1993, private respondent wrote to Dr. Emil Q. Javier, U.P. President, alleging that some members of the U.P.
administration were playing politics in her case.
14
She sent another letter, dated December 14, 1993, to Dr. Armand Fabella,
Chairman of the Board of Regents, complaining that she had not been afforded due process and claiming that U.P. could no longer
withdraw her degree since her dissertation had already been accepted by the CSSP.
15

Meanwhile, the U.P. Office of Legal Services justified the position of the University Council in its report to the Board of Regents.
The Board of Regents, in its February 1, 1994 and March 24, 1994 meetings, further deferred action thereon.
On July 11, 1994, private respondent sent a letter to the Board of Regents requesting a re-investigation of her case. She stressed
that under the Rules and Regulations on Student Conduct and Discipline, it was the student disciplinary tribunal which had
jurisdiction to decide cases of dishonesty and that the withdrawal of a degree already conferred was not one of the authorized
penalties which the student disciplinary tribunal could impose.
On July 28, 1994, the Board of Regents decided to release private respondent's transcript of grades without annotation although it
showed that private respondent passed her dissertation with 12 units of credit.
On August 17, 1994, Chancellor Roger Posadas issued Administrative Order No. 94-94 constituting a special committee composed
of senior faculty members from the U.P. units outside Diliman to review the University Council's recommendation to withdraw
private respondent's degree. With the approval of the Board of Regents and the U.P. Diliman Executive Committee, Posadas
created a five-man committee, chaired by Dr. Paulino B. Zafaralla, with members selected from a list of nominees screened by Dr.
Emerenciana Arcellana, then a member of the Board of Regents. On August 13, 1994, the members of the Zafaralla committee and
private respondent met at U.P. Los Baos.
Meanwhile, on August 23, 1994, the U.P. Diliman Registrar released to private respondent a copy of her transcript of grades and
certificate of graduation.
In a letter to Chancellor Posadas, dated September 1, 1994, private respondent requested that the Zafaralla committee be
provided with copies of the U.P. Charter (Act No. 1870), the U.P. Rules and Regulations on Student Conduct and Discipline, her
letter-response to Chancellor Roman, dated September 25, 1993, as well as all her other communications.
On September 19, 1994, Chancellor Posadas obtained the Zafaralla Committee's report, signed by its chairman, recommending
the withdrawal of private respondent's doctorate degree. The report stated:
16

After going through all the pertinent documents of the case and interviewing Ms. Arokiaswamy William, the following facts were
established:
1. There is overwhelming evidence of massive lifting from a published source word for word and, at times, paragraph
by paragraph without any acknowledgment of the source, even by a mere quotation mark. At least 22 counts of such
documented liftings were identified by the Committee. These form part of the approximately ninety (90) instances
found by the Committee created by the Dean of the College and subsequently verified as correct by the Special
Committee. These instances involved the following forms of intellectual dishonesty: direct lifting/copying without
acknowledgment, full/partial lifting with improper documentation and substitution of terms or words (e.g., Tamil in
place of Sanskrit, Tamilization in place of Indianization) from an acknowledged source in support of her thesis (attached
herewith is a copy of the documents for reference); and
2. Ms. Arokiaswamy William herself admits of being guilty of the allegation of plagiarism. Fact is, she informed the
Special Committee that she had been admitting having lifted several portions in her dissertation from various sources
since the beginning.
In view of the overwhelming proof of massive lifting and also on the admission of Ms. Arokiaswamy William that she indeed
plagiarized, the Committee strongly supports the recommendation of the U.P. Diliman Council to withdraw the doctoral degree of
Ms. Margaret Celine Arokiaswamy William.
On the basis of the report, the University Council, on September 24, 1994, recommended to the Board of Regents that private
respondent be barred in the future from admission to the University either as a student or as an employee.
On January 4, 1995, the secretary of the Board of Regents sent private respondent the following letter:
17

4 January 1995
Ms. Margaret Celine Arokiaswamy William
Department of Anthropology
College of Social Sciences and Philosophy
U.P. Diliman, Quezon City
Dear Ms. Arokiaswamy William:
This is to officially inform you about the action taken by the Board of Regents at its 1081st and 1082nd meetings held last 17
November and 16 December 1994 regarding your case, the excerpts from the minutes of which are attached herewith.
Please be informed that the members present at the 1081st BOR meeting on 17 November 1994 resolved, by a majority decision,
to withdraw your Ph.D. degree as recommended by the U.P. Diliman University Council and as concurred with by the External
Review Panel composed of senior faculty from U.P. Los Baos and U.P. Manila. These faculty members were chosen by lot from
names submitted by the University Councils of U.P. Los Baos and U.P. Manila.
In reply to your 14 December 1994 letter requesting that you be given a good lawyer by the Board, the Board, at its 1082nd
meeting on 16 December 1994, suggested that you direct your request to the Office of Legal Aid, College of Law, U.P. Diliman.
Sincerely yours,
(Sgd.)
VIVENCIO R. JOSE
Secretary of the University
and of the Board of Regents
On January 18, 1995, private respondent wrote a letter to Commissioner Sedfrey Ordoez, Chairman of the Commission on
Human Rights, asking the commission's intervention.
18
In a letter, dated February 14, 1995, to Secretary Ricardo Gloria, Chairman
of the Board of Regents, she asked for a reinvestigation of her case. She also sought an audience with the Board of Regents and/or
the U.P. President, which request was denied by President Javier, in a letter dated June 2, 1995.
On August 10, 1995, private respondent then filed a petition for mandamus with a prayer for a writ of preliminary mandatory
injunction and damages, which was docketed as Civil Case No. Q-95-24690 and assigned to Branch 81 of the Regional Trial Court of
Quezon City.
19
She alleged that petitioners had unlawfully withdrawn her degree without justification and without affording her
procedural due process. She prayed that petitioners be ordered to restore her degree and to pay her P500,000.00 as moral and
exemplary damages and P1,500,000.00 as compensation for lost of earnings.
On August 6, 1996, the trial court, Branch 227, rendered a decision dismissing the petition for mandamus for lack of merit.
20

Private respondent appealed to the Court of Appeals, which on December 16, 1997, reversed the lower court. The dispositive
portion of the appellate court's decision reads:
21

WHEREFORE, the decision of the court a quo is hereby reversed and set aside. Respondents are ordered to restore to
petitioner her degree of Ph.D. in Anthropology.
No pronouncement as to costs.
SO ORDERED.
Hence, this petition. Petitioners contend:
I
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW IN GRANTING THE WRIT OF MANDAMUS AND ORDERING PETITIONERS
TO RESTORE RESPONDENT'S DOCTORAL DEGREE.
II
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW IN HOLDING THAT THE DOCTORAL DEGREE GIVEN RESPONDENT BY U.P.
CANNOT BE RECALLED WITHOUT VIOLATING HER RIGHT TO ENJOYMENT OF INTELLECTUAL PROPERTY AND TO JUSTICE AND
EQUITY.
III
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW IN DEPRIVING PETITIONERS OF THEIR RIGHT TO SUBSTANTIVE DUE
PROCESS.
22

Petitioners argue that private respondent failed to show that she had been unlawfully excluded from the use and enjoyment of a
right or office to which she is entitled so as to justify the issuance of the writ of mandamus. They also contend that she failed to
prove that the restoration of her degree is a ministerial duty of U.P. or that the withdrawal of the degree violated her right to the
enjoyment of intellectual property.
On the other hand, private respondent, unassisted by counsel, argue that petitioners acted arbitrarily and with grave abuse of
discretion in withdrawing her degree even prior to verifying the truth of the plagiarism charge against her; and that as her answer
to the charges had not been forwarded to the members of the investigating committees, she was deprived of the opportunity to
comment or refute their findings.
In addition, private respondent maintains that petitioners are estopped from, withdrawing her doctorate degree; that petitioners
acted contrary to 9 of the U.P. Charter and the U.P. Rules and Regulations of Student Conduct and Discipline of the University,
which according to her, does not authorize the withdrawal of a degree as a penalty for erring students; and that only the college
committee or the student disciplinary tribunal may decide disciplinary cases, whose report must be signed by a majority of its
members.
We find petitioners' contention to be meritorious.
Mandamus is a writ commanding a tribunal, corporation, board or person to do the act required to be done when it or he
unlawfully neglects the performance of an act which the law specifically enjoins as a duty resulting from an office, trust, or station,
or unlawfully excludes another from the use and enjoyment of a right or office to which such other is entitled, there being no
other plain, speedy, and adequate remedy in the ordinary course of law.
23
In University of the Philippines Board of Regents v.
Ligot-Telan,
24
this Court ruled that the writ was not available to restrain U.P. from the exercise of its academic freedom. In that
case, a student who was found guilty of dishonesty and ordered suspended for one year by the Board of Regents, filed a petition
for mandamus and obtained from the lower court a temporary restraining order stopping U.P. from carrying out the order of
suspension. In setting aside the TRO and ordering the lower court to dismiss the student's petition, this Court said:
[T]he lower court gravely abused its discretion in issuing the writ of preliminary injunction of May 29, 1993. The
issuance of the said writ was based on the lower court's finding that the implementation of the disciplinary sanction of
suspension on Nadal "would work injustice to the petitioner as it would delay him in finishing his course, and
consequently, in getting a decent and good paying job." Sadly, such a ruling considers only the situation of Nadal
without taking into account the circumstances, clearly of his own making, which led him into such a predicament. More
importantly, it has completely disregarded the overriding issue of academic freedom which provides more than ample
justification for the imposition of a disciplinary sanction upon an erring student of an institution of higher learning.
From the foregoing arguments, it is clear that the lower court should have restrained itself from assuming jurisdiction
over the petition filed by Nadal. Mandamus is never issued in doubtful cases, a showing of a clear and certain right on
the part of the petitioner being required. It is of no avail against an official or government agency whose duty requires
the exercise of discretion or judgment.
25

In this case, the trial court dismissed private respondent's petition precisely on grounds of academic freedom but the Court of
Appeals reversed holding that private respondent was denied due process. It said:
It is worthy to note that during the proceedings taken by the College Assembly culminating in its recommendation to
the University Council for the withdrawal of petitioner's Ph.D. degree, petitioner was not given the chance to be heard
until after the withdrawal of the degree was consummated. Petitioner's subsequent letters to the U.P. President
proved unavailing.
26

As the foregoing narration of facts in this case shows, however, various committees had been formed to investigate the charge
that private respondent had committed plagiarism and, in all the investigations held, she was heard in her defense. Indeed, if any
criticism may be made of the university proceedings before private respondent was finally stripped of her degree, it is that there
were too many committee and individual investigations conducted, although all resulted in a finding that private respondent
committed dishonesty in submitting her doctoral dissertation on the basis of which she was conferred the Ph.D. degree.
Indeed, in administrative proceedings, the essence of due process is simply the opportunity to explain one's side of a controversy
or a chance seek reconsideration of the action or ruling complained of.
27
A party who has availed of the opportunity to present his
position cannot tenably claim to have been denied due process.
28

In this case, private respondent was informed in writing of the charges against her
29
and afforded opportunities to refute them.
She was asked to submit her written explanation, which she forwarded on September 25, 1993.
30
Private respondent then met
with the U.P. chancellor and the members of the Zafaralla committee to discuss her case. In addition, she sent several letters to
the U.P. authorities explaining her position.
31

It is not tenable for private respondent to argue that she was entitled to have an audience before the Board of Regents. Due
process in an administrative context does not require trial-type proceedings similar to those in the courts of justice.
32
It is
noteworthy that the U.P. Rules do not require the attendance of persons whose cases are included as items on the agenda of the
Board of Regents.
33

Nor indeed was private respondent entitled to be furnished a copy of the report of the Zafaralla committee as part of her right to
due process. In Ateneo de Manila University v. Capulong,
34
we held:
Respondent students may not use the argument that since they were not accorded the opportunity to see and examine
the written statements which became the basis of petitioners' February 14, 1991 order, they were denied procedural
due process. Granting that they were denied such opportunity, the same may not be said to detract from the
observance of due process, for disciplinary cases involving students need not necessarily include the right to cross
examination. An administrative proceeding conducted to investigate students' participation in a hazing activity need
not be clothed with the attributes of a judicial proceeding. . .
In this case, in granting the writ of mandamus, the Court of Appeals held:
First. Petitioner graduated from the U.P. with a doctorate degree in Anthropology. After graduation, the contact
between U.P. and petitioner ceased. Petitioner is no longer within the ambit of the disciplinary powers of the U.P. As a
graduate, she is entitled to the right and enjoyment of the degree she has earned. To recall the degree, after
conferment, is not only arbitrary, unreasonable, and an act of abuse, but a flagrant violation of petitioner's right of
enjoyment to intellectual property.
Second. Respondents aver that petitioner's graduation was a mistake.
Unfortunately this "mistake" was arrived at after almost a year after graduation. Considering that the members of the
thesis panel, the College Faculty Assembly, and the U.P. Council are all men and women of the highest intellectual
acumen and integrity, as respondents themselves aver, suspicion is aroused that the alleged "mistake" might not be
the cause of withdrawal but some other hidden agenda which respondents do not wish to reveal.
At any rate, We cannot countenance the plight the petitioner finds herself enmeshed in as a consequence of the acts
complained of. Justice and equity demand that this be rectified by restoring the degree conferred to her after her
compliance with the academic and other related requirements.
Art. XIV, 5 (2) of the Constitution provides that "[a]cademic freedom shall be enjoyed in all institutions of higher learning." This is
nothing new. The 1935 Constitution
35
and the 1973 Constitution
36
likewise provided for the academic freedom or, more precisely,
for the institutional autonomy of universities and institutions of higher learning. As pointed out by this Court in Garcia vs. Faculty
Admission Committee, Loyola School of Theology,
37
it is a freedom granted to "institutions of higher learning" which is thus given
"a wide sphere of authority certainly extending to the choice of the students." If such institution of higher learning can decide who
can and who cannot study in it, it certainly can also determine on whom it can confer the honor and distinction of being its
graduates.
Where it is shown that the conferment of an honor or distinction was obtained through fraud, a university has the right to revoke
or withdraw the honor or distinction it has thus conferred. This freedom of a university does not terminate upon the "graduation"
of a student, as the Court of Appeals held. For it is precisely the "graduation" of such a student that is in question. It is noteworthy
that the investigation of private respondent's case began before her graduation. If she was able to join the graduation ceremonies
on April 24, 1993, it was because of too many investigations conducted before the Board of Regents finally decided she should not
have been allowed to graduate.
Wide indeed is the sphere of autonomy granted to institutions of higher learning, for the constitutional grant of academic
freedom, to quote again from Garcia v. Faculty Admission Committee, Loyola School of Theology, "is not to be construed in a
niggardly manner or in a grudging fashion."
Under the U.P. Charter, the Board of Regents is the highest governing body of the University of the Philippines.
38
It has the power
confer degrees upon the recommendation of the University Council.
39
If follows that if the conferment of a degree is founded on
error or fraud, the Board of Regents is also empowered, subject to the observance of due process, to withdraw what it has
granted without violating a student's rights. An institution of higher learning cannot be powerless if it discovers that an academic
degree it has conferred is not rightfully deserved. Nothing can be more objectionable than bestowing a university's highest
academic degree upon an individual who has obtained the same through fraud or deceit. The pursuit of academic excellence is the
university's concern. It should be empowered, as an act of self-defense, to take measures to protect itself from serious threats to
its integrity.
While it is true that the students are entitled to the right to pursue their educaiton, the USC as an educational
institution is also entitled to pursue its academic freedom and in the process has the concomitant right to see to it that
this freedom is not jeopardized.
40

In the case at bar, the Board of Regents determined, after due investigation conducted by a committee composed of faculty
members from different U.P. units, that private respondent committed no less than ninety (90) instances of intellectual dishonesty
in her dissertation. The Board of Regents' decision to withdraw private respondent's doctorate was based on documents on record
including her admission that she committed the offense.
41

On the other hand, private respondent was afforded the opportunity to be heard and explain her side but failed to refute the
charges of plagiarism against her. Her only claim is that her responses to the charges against her were not considered by the
Board of Regents before it rendered its decision. However, this claim was not proven. Accordingly, we must presume regularity in
the performance of official duties in the absence of proof to the contrary.
42

Very much the opposite of the position of the Court of Appeals that, since private respondent was no longer a student of the U.P.,
the latter was no longer within the "ambit of disciplinary powers of the U.P.," is private respondent's contention that it is the
Student Disciplinary Tribunal which had jurisdiction over her case because the charge is dishonesty. Private respondent invoke 5
of the U.P. Rules and Regulations on Student Conduct and Discipline which provides:
Jurisdiction. All cases involving discipline of students under these rules shall be subject to the jurisdiction of the
student disciplinary tribunal, except the following cases which shall fall under the jurisdiction of the appropriate college
or unit;
(a) Violation of college or unit rules and regulations by students of the college, or
(b) Misconduct committed by students of the college or unit within its classrooms or premises or in the
course of an official activity;
Provided, that regional units of the University shall have original jurisdiction over all cases involving students of such
units.
Private respondent argues that under 25 (a) of the said Rules and Regulations, dishonesty in relation to one's studies (i.e.,
plagiarism) may be punished only with suspension for at least one (1) year.
As the above-quoted provision of 5 of the Rules and Regulations indicates, the jurisdiction of the student disciplinary tribunal
extend only to disciplinary actions. In this case, U.P. does not seek to discipline private respondent. Indeed, as the appellate court
observed, private respondent is no longer within "the ambit of disciplinary powers of the U.P." Private respondent cannot even be
punished since, as she claims, the penalty for acts of dishonesty in administrative disciplinary proceedings is suspension from the
University for at least one year. What U.P., through the Board of Regents, seeks to do is to protect its academic integrity by
withdrawing from private respondent an academic degree she obtained through fraud.
WHEREFORE, the decision of the Court of Appeals is hereby REVERSED and the petition for mandamus is hereby DISMISSED.
SO ORDERED.





G.R. No. 141314 November 15, 2002
REPUBLIC OF THE PHILIPPINES, REPRESENTED BY ENERGY REGULATORY BOARD petitioner,
vs.
MANILA ELECTRIC COMPANY, respondent.
-----------------------------
G.R. No. 141369 November 15, 2002
LAWYERS AGAINST MONOPOLY AND POVERTY (LAMP) consisting of CEFERINO PADUA, Chairman,
G. FULTON ACOSTA, GALILEO BRION, ANATALIA BUENAVENTURA,
PEDRO CASTILLO, NAPOLEON CORONADO, ROMEO ECHAUZ,
FERNANDO GAITE, ALFREDO DE GUZMAN, ROGELIO KARAGDAG, JR.,
MA. LUZ ARZAGA-MENDOZA, ANSBERTO PAREDES, AQUILINO PIMENTEL III,
MARIO REYES, EMMANUEL SANTOS, RUDEGELIO TACORDA, members,
and ROLANDO ARZAGA, Secretary-General,
JUSTICE ABRAHAM SARMIENTO, SENATOR AQUILINO PIMENTEL, JR. and
COMMISSIONER BARTOLOME FERNANDEZ, JR., Board of Consultants,
and Lawyer GENARO LUALHATI, petitioners,
vs.
MANILA ELECTRIC COMPANY (MERALCO), respondent.
D E C I S I O N
PUNO, J.:
In third world countries like the Philippines, equal justice will have a synthetic ring unless the economic rights of the people,
especially the poor, are protected with the same resoluteness as their right to liberty. The cases at bar are of utmost significance
for they concern the right of our people to electricity and to be reasonably charged for their consumption. In configuring the
contours of this economic right to a basic necessity of life, the Court shall define the limits of the power of respondent MERALCO,
a giant public utility and a monopoly, to charge our people for their electric consumption. The question is: should public interest
prevail over private profits?
The facts are brief and undisputed. On December 23, 1993, MERALCO filed with the ERB an application for the revision of its rate
schedules. The application reflected an average increase of 21 centavos per kilowatthour (kwh) in its distribution charge. The
application also included a prayer for provisional approval of the increase pursuant to Section 16(c) of the Public Service Act and
Section 8 of Executive Order No. 172.
On January 28, 1994, the ERB issued an Order granting a provisional increase of P0.184 per kwh, subject to the following
condition.
"In the event, however, that the Board finds, after hearing and submission by the Commission on Audit of an audit report on the
books and records of the applicant that the latter is entitled to a lesser increase in rates, all excess amounts collected from the
applicant's customers as a result of this Order shall either be refunded to them or correspondingly credited in their favor for
application to electric bills covering future consumptions."
1

In the same Order, the ERB requested the Commission on Audit (COA) to conduct an "audit and examination of the books and
other records of account of the applicant for such period of time, which in no case shall be less than 12 consecutive months, as it
may deem appropriate" and to submit a copy thereof to the ERB immediately upon completion.
2

On February 11, 1997, the COA submitted its Audit Report SAO No. 95-07 (the "COA Report") which contained, among others, the
recommendation not to include income taxes paid by MERALCO as part of its operating expenses for purposes of rate
determination and the use of the net average investment method for the computation of the proportionate value of the
properties used by MERALCO during the test year for the determination of the rate base.
3

Subsequently, the ERB rendered its decision adopting the above recommendations and authorized MERALCO to implement a rate
adjustment in the average amount of P0.017 per kwh, effective with respect to MERALCO's billing cycles beginning February 1994.
The ERB further ordered that "the provisional relief in the amount of P0.184 per kilowatthour granted under the Board's Order
dated January 28, 1994 is hereby superseded and modified and the excess average amount of P0.167 per kilowatthour starting
with [MERALCO's] billing cycles beginning February 1994 until its billing cycles beginning February 1998, be refunded to
[MERALCO's] customers or correspondingly credited in their favor for future consumption."
4

The ERB held that income tax should not be treated as operating expense as this should be "borne by the stockholders who are
recipients of the income or profits realized from the operation of their business" hence, should not be passed on to the
consumers.
5
Further, in applying the net average investment method, the ERB adopted the recommendation of COA that in
computing the rate base, only the proportionate value of the property should be included, determined in accordance with the
number of months the same was actually used in service during the test year.
6

On appeal, the Court of Appeals set aside the ERB decision insofar as it directed the reduction of the MERALCO rates by an
average of P0.167 per kwh and the refund of such amount to MERALCO's customers beginning February 1994 and until its
billing cycle beginning February 1998.
7
Separate Motions for Reconsideration filed by the petitioners were denied by the Court of
Appeals.
8

Petitioners are now before the Court seeking a reversal of the decision of the Court of Appeals by arguing primarily that the Court
of Appeals erred: a) in ruling that income tax paid by MERALCO should be treated as part of its operating expenses and thus
considered in determining the amount of increase in rates imposed by MERALCO and b) in rejecting the net average investment
method used by the COA and the ERB and instead adopted the average investment method used by MERALCO.
We grant the petition.
The regulation of rates to be charged by public utilities is founded upon the police powers of the State and statutes prescribing
rules for the control and regulation of public utilities are a valid exercise thereof. When private property is used for a public
purpose and is affected with public interest, it ceases to be juris privati only and becomes subject to regulation. The regulation is
to promote the common good. Submission to regulation may be withdrawn by the owner by discontinuing use; but as long as use
of the property is continued, the same is subject to public regulation.
9

In regulating rates charged by public utilities, the State protects the public against arbitrary and excessive rates while maintaining
the efficiency and quality of services rendered. However, the power to regulate rates does not give the State the right to prescribe
rates which are so low as to deprive the public utility of a reasonable return on investment. Thus, the rates prescribed by the
State must be one that yields a fair return on the public utility upon the value of the property performing the service and one
that is reasonable to the public for the services rendered.
10
The fixing of just and reasonable rates involves a balancing of the
investor and the consumer interests.
11

In his famous dissenting opinion in the 1923 case of Southwestern Bell Tel. Co. v. Public Service Commission,
12
Mr. Justice
Brandeis wrote:
"The thing devoted by the investor to the public use is not specific property, tangible and intangible, but capital embarked in an
enterprise. Upon the capital so invested, the Federal Constitution guarantees to the utility the opportunity to earn a fair return
The Constitution does not guarantee to the utility the opportunity to earn a return on the value of all items of property used by
the utility, or of any of them.
.
The investor agrees, by embarking capital in a utility, that its charges to the public shall be reasonable. His company is the
substitute for the State in the performance of the public service, thus becoming a public servant. The compensation which the
Constitution guarantees an opportunity to earn is the reasonable cost of conducting the business."
While the power to fix rates is a legislative function, whether exercised by the legislature itself or delegated through an
administrative agency, a determination of whether the rates so fixed are reasonable and just is a purely judicial question and is
subject to the review of the courts.
13

The ERB was created under Executive Order No. 172 to regulate, among others, the distribution of energy resources and to fix
rates to be charged by public utilities involved in the distribution of electricity. In the fixing of rates, the only standard which the
legislature is required to prescribe for the guidance of the administrative authority is that the rate be reasonable and just. It has
been held that even in the absence of an express requirement as to reasonableness, this standard may be implied.
14
What is a just
and reasonable rate is a question of fact calling for the exercise of discretion, good sense, and a fair, enlightened and independent
judgment. The requirement of reasonableness comprehends such rates which must not be so low as to be confiscatory, or too
high as to be oppressive. In determining whether a rate is confiscatory, it is essential also to consider the given situation,
requirements and opportunities of the utility.
15

Settled jurisprudence holds that factual findings of administrative bodies on technical matters within their area of expertise should
be accorded not only respect but even finality if they are supported by substantial evidence even if not overwhelming or
preponderant.
16
In one case,
17
we cautioned that courts should "refrain from substituting their discretion on the weight of the
evidence for the discretion of the Public Service Commission on questions of fact and will only reverse or modify such orders of
the Public Service Commission when it really appears that the evidence is insufficient to support their conclusions."
18

In the cases at bar, findings and conclusions of the ERB on the rate that can be charged by MERALCO to the public should be
respected.
19
The function of the court, in exercising its power of judicial review, is to determine whether under the facts and
circumstances, the final order entered by the administrative agency is unlawful or unreasonable.
20
Thus, to the extent that the
administrative agency has not been arbitrary or capricious in the exercise of its power, the time-honored principle is that courts
should not interfere. The principle of separation of powers dictates that courts should hesitate to review the acts of administrative
officers except in clear cases of grave abuse of discretion.
21

In determining the just and reasonable rates to be charged by a public utility, three major factors are considered by the regulating
agency: a) rate of return; b) rate base and c) the return itself or the computed revenue to be earned by the public utility based on
the rate of return and rate base.
22
The rate of return is a judgment percentage which, if multiplied with the rate base, provides a
fair return on the public utility for the use of its property for service to the public.
23
The rate of return of a public utility is not
prescribed by statute but by administrative and judicial pronouncements. This Court has consistently adopted a 12% rate of return
for public utilities.
24
The rate base, on the other hand, is an evaluation of the property devoted by the utility to the public service
or the value of invested capital or property which the utility is entitled to a return.
25

In the cases at bar, the resolution of the issues involved hinges on the determination of the kind and the amount of operating
expenses that should be allowed to a public utility to generate a fair return and the proper valuation of the rate base or the value
of the property entitled to a return.
I
Income Tax as Operating Expense Cannot be Allowed For Rate-Determination Purposes
In determining whether or not a rate yields a fair return to the utility, the operating expenses of the utility must be considered.
The return allowed to a public utility in accordance with the prescribed rate must be sufficient to provide for the payment of such
reasonable operating expenses incurred by the public utility in the provision of its services to the public. Thus, the public utility is
allowed a return on capital over and above operating expenses. However, only such expenses and in such amounts as are
reasonable for the efficient operation of the utility should be allowed for determination of the rates to be charged by a public
utility.
The ERB correctly ruled that income tax should not be included in the computation of operating expenses of a public utility.
Income tax paid by a public utility is inconsistent with the nature of operating expenses. In general, operating expenses are those
which are reasonably incurred in connection with business operations to yield revenue or income. They are items of expenses
which contribute or are attributable to the production of income or revenue. As correctly put by the ERB, operating expenses
"should be a requisite of or necessary in the operation of a utility, recurring, and that it redounds to the service or benefit of
customers."
26

Income tax, it should be stressed, is imposed on an individual or entity as a form of excise tax or a tax on the privilege of earning
income.
27
In exchange for the protection extended by the State to the taxpayer, the government collects taxes as a source of
revenue to finance its activities. Clearly, by its nature, income tax payments of a public utility are not expenses which contribute to
or are incurred in connection with the production of profit of a public utility. Income tax should be borne by the taxpayer alone as
they are payments made in exchange for benefits received by the taxpayer from the State. No benefit is derived by the customers
of a public utility for the taxes paid by such entity and no direct contribution is made by the payment of income tax to the
operation of a public utility for purposes of generating revenue or profit. Accordingly, the burden of paying income tax should be
Meralco's alone and should not be shifted to the consumers by including the same in the computation of its operating
expenses.
The principle behind the inclusion of operating expenses in the determination of a just and reasonable rate is to allow the public
utility to recoup the reasonable amount of expenses it has incurred in connection with the services it provides. It does not give the
public utility the license to indiscriminately charge any and all types of expenses incurred without regard to the nature thereof,
i.e., whether or not the expense is attributable to the production of services by the public utility. To charge consumers for
expenses incurred by a public utility which are not related to the service or benefit derived by the customers from the public utility
is unjustified and inequitable.
While the public utility is entitled to a reasonable return on the fair value of the property being used for the service of the public,
no less than the Federal Supreme Court of the United States emphasized: "[t]he public cannot properly be subjected to
unreasonable rates in order simply that stockholders may earn dividends If a corporation cannot maintain such a *facility+ and
earn dividends for stockholders, it is a misfortune for it and them which the Constitution does not require to be remedied by
imposing unjust burdens on the public."
28

We are not impressed by the reliance by MERALCO on some American case law allowing the treatment of income tax paid by a
public utility as operating expense for rate-making purposes. Suffice to state that with regard to rate-determination, the
government is not hidebound to apply any particular method or formula.
29
The question of what constitutes a reasonable return
for the public utility is necessarily determined and controlled by its peculiar environmental milieu. Aside from the financial
condition of the public utility, there are other critical factors to consider for purposes of rate regulation. Among others, they are:
particular reasons involved for the request of the rate increase, the quality of services rendered by the public utility, the existence
of competition, the element of risk or hazard involved in the investment, the capacity of consumers, etc.
30
Rate regulation is the
art of reaching a result that is good for the public utility and is best for the public.
For these reasons, the Court cannot give in to the importunings of MERALCO that we blindly apply the rulings of American courts
on the treatment of income tax as operating expenses in rate regulation cases. An approach allowing the indiscriminate inclusion
of income tax payments as operating expenses may create an undesirable precedent and serve as a blanket authority for public
utilities to charge their income tax payments to operating expenses and unjustly shift the tax burden to the customer. To be sure,
public utility taxation in the United States is going through the eye of criticism. Some commentators are of the view that by
allowing the public utility to collect its income tax payment from its customers, a form of "sales tax" is, in effect, imposed on the
public for consumption of public utility services. By charging their income tax payments to their customers, public utilities virtually
become "tax collectors" rather than taxpayers.
31
In the cases at bar, MERALCO has not justified why its income tax should be
treated as an operating expense to enable it to derive a fair return for its services.
It is also noteworthy that under American laws, public utilities are taxed differently from other types of corporations and thus
carry a heavier tax burden. Moreover, different types of taxes, charges, tolls or fees are assessed on a public utility depending on
the state or locality where it operates. At a federal level, public utilities are subject to corporate income taxes and Social Security
taxesin the same manner as other business corporations. At the state and local levels, public utilities are subject to a wide
variety of taxes, not all of which are imposed on each state. Thus, it is not unusual to find different taxes or combinations of taxes
applicable to respective utility industries within a particular state.
32
A significant aspect of state and local taxation of public utilities
in the United States is that they have been singled out for special taxation, i.e., they are required to pay one or more taxes that are
not levied upon other industries. In contrast, in this jurisdiction, public utilities are subject to the same tax treatment as any other
corporation and local taxes paid by it to various local government units are substantially the same. The reason for this is that the
power to tax resides in our legislature which may prescribe the limits of both national and local taxation, unlike in the federal
system of the United States where state legislature may prescribe taxes to be levied in their respective jurisdictions.
MERALCO likewise cites decisions of the ERB
33
allowing the application of a tax recovery clause for the imposition of an additional
charge on consumers for taxes paid by the public utility. A close look at these decisions will show they are inappropos. In the said
cases, the ERB approved the adoption of a formula which will allow the public utility to recover from its customers taxes already
paid by it. However, in the cases at bar, the income tax component added to the operating expenses of a public utility is based on
an estimate or approximate figure of income tax to be paid by the public utility. It is this estimated amount of income tax to be
paid by MERALCO which is included in the amount of operating expenses and used as basis in determining the reasonable rate to
be charged to the customers. Accordingly, the varying factual circumstances in the said cases prohibit a square application of the
rule under the previous ERB decisions.
II
Use of "Net Average Investment Method" is Not Unreasonable
In the determination of the rate base, property used in the operation of the public utility must be subject to appraisal and
evaluation to determine the fair value thereof entitled to a fair return. With respect to those properties which have not been used
by the public utility for the entire duration of the test year, i.e., the year subject to audit examination for rate-making purposes, a
valuation method must be adopted to determine the proportionate value of the property. Petitioners maintain that the net
average investment method (also known as "actual number of months use method") recommended by COA and adopted by the
ERB should be used, while MERALCO argues that the average investment method (also known as the "trending method") to
determine the proportionate value of properties should be applied.
Under the "net average investment method," properties and equipment used in the operation of a public utility are entitled to a
return only on the actual number of months they are in service during the period.
34
In contrast, the "average investment method"
computes the proportionate value of the property by adding the value of the property at the beginning and at the end of the test
year with the resulting sum divided by two.
35

The ERB did not abuse its discretion when it applied the net average investment method. The reasonableness of net average
investment method is borne by the records of the case. In its report, the COA explained that the computation of the proportionate
value of the property and equipment in accordance with the actual number of months such property or equipment is in service
for purposes of determining the rate base is favored, as against the trending method employed by MERALCO, "to reflect the real
status of the property."
36
By using the net average investment method, the ERB and the COA considered for determination of the
rate base the value of properties and equipment used by MERALCO in proportion to the period that the same were actually used
during the period in question. This treatment is consistent with the settled rule in rate regulation that the determination of the
rate base of a public utility entitled to a return must be based on properties and equipment actually being used or are useful to
the operations of the public utility.
37

MERALCO does not seriously contest this treatment of actual usage of property but opposes the method of computation or
valuation thereof adopted by the ERB and the COA on the ground that the net average investment method "assumes an ideal
situation where a utility, like MERALCO, is able to record in its books within any given month the value of all the properties
actually placed in service during that month."
38
MERALCO contends that immediate recordal in its books of the property or
equipment is not possible as MERALCO's franchise covers a wide area and that due to the volume of properties and equipment
put into service and the amount of paper work required to be accomplished for recording in the books of the company, "it takes
three to six months (often longer) before an asset placed in service is recorded in the books" of MERALCO.
39
Hence, MERALCO
adopted the "average investment method" or the "trending method" which computes the average value of the property at the
beginning and at the end of the test year to compensate for the irregular recording in its books.
MERALCO'S stance is belied by the COA Report which states that the "verification of the records, as confirmed by the
Management Staff, disclosed that properties are recorded in the books as these are actually placed in service."
40
Moreover,
while the case was pending trial before the ERB, the ERB conducted an ocular inspection to examine the assets in service, records
and books of accounts of MERALCO to ascertain the physical existence, ownership, valuation and usefulness of the assets
contained in the COA Report.
41
Thus, MERALCO's contention that the date of recordal in the books does not reflect the date when
the asset is placed in service is baseless.
Further, computing the proportionate value of assets used in service in accordance with the actual number of months the same is
used during the test year is a more accurate method of determining the value of the properties of a public utility entitled to a
return. If, as determined by COA, the date of recordal in the books of MERALCO reflects the actual date the equipment or property
is used in service, there is no reason for the ERB to adopt the trending method applied by MERALCO if a more precise method is
available for determining the proportionate value of the assets placed in service.
If we were to sustain the application of the "trending method," the public utility may easily manipulate the valuation of its
property entitled to a return (rate base) by simply including a highly capitalized asset in the computation of the rate base even if
the same was used for a limited period of time during the test year. With the inexactness of the trending method and the
possibility that the valuation of certain properties may be subject to the control of and abuse by the public utility, the Court finds
no reasonable basis to overturn the recommendation of COA and the decision of the ERB.
MERALCO further insists that the Court should sustain the "trending method" in view of previous decisions by the Public Service
Commission and of this Court which "upheld" the use of this method. By refusing to adopt the trending method, MERALCO argues
that the ERB violated the rule on stare decisis.
Again, we are not impressed. It is a settled rule that the goal of rate-making is to arrive at a just and reasonable rate for both the
public utility and the public which avails of the former's products and services.
42
However, what is a just and reasonable rate
cannot be fixed by any immutable method or formula. Hence, it has been held that no public utility has a vested right to any
particular method of valuation.
43
Accordingly, with respect to a determination of the proper method to be used in the valuation of
property and equipment used by a public utility for rate-making purposes, the administrative agency is not bound to apply any
one particular formula or method simply because the same method has been previously used and applied. In fact, nowhere in the
previous decisions cited by MERALCO which applied the trending method did the Court rule that the same should be the only
method to be applied in all instances.
At any rate, MERALCO has not adequately shown that the rates prescribed by the ERB are unjust or confiscatory as to deprive its
stockholders a reasonable return on investment. In the early case of Ynchausti S.S. Co. v. Public Utility Commissioner, this Court
held: "[t]here is a legal presumption that the rates fixed by an administrative agency are reasonable, and it must be conceded that
the fixing of rates by the Government, through its authorized agents, involves the exercise of reasonable discretion and, unless
there is an abuse of that discretion, the courts will not interfere."
44
Thus, the burden is upon the oppositor, MERALCO, to prove
that the rates fixed by the ERB are unreasonable or otherwise confiscatory as to merit the reversal of the ERB. In the instant cases,
MERALCO was unable to discharge this burden.
WHEREFORE, in view of the foregoing, the instant petitions are GRANTED and the decision of the Court of Appeals in C.A. G.R. SP
No. 46888 is REVERSED. Respondent MERALCO is authorized to adopt a rate adjustment in the amount of P0.017 per
kilowatthour, effective with respect to MERALCO's billing cycles beginning February 1994. Further, in accordance with the decision
of the ERB dated February 16, 1998, the excess average amount of P0.167 per kilwatthour starting with the applicant's billing
cycles beginning February 1998 is ordered to be refunded to MERALCO's customers or correspondingly credited in their favor for
future consumption. SO ORDERED.

[G.R. No. 126995. October 6, 1998]
IMELDA R. MARCOS, petitioner, vs. The Honorable SANDIGANBAYAN (First Division), and THE PEOPLE OF THE PHILIPPINES,
respondents.
R E S O L U T I O N
PURISIMA, J.:
This scenic Philippine archipelago is a citadel of justice, due process and rule of law. Succinct and clear is the provision of the
constitution of this great Republic that every accused is presumed innocent until the contrary is proved. [Art. 111, Sec. 14(2)]. As
held in People of the Philippines vs. Ellizabeth Ganguso y Decena (G.R. No 115430, November 23, 1995, 250 SCRA 268, 274-275):
An accused has in his favor the presumption of innocence which the Bill of Rights guarantees. Unless his guilt is shown beyond
reasonable doubt, he must be acquitted. This reasonable doubt standard is demanded by the due process clause of the Constitution
which protects the accused from conviction except upon proof beyond reasonable doubt of every fact necessary to constitute the
crime with which he is charged. The burden of proof is on the prosecution, and unless it discharges that burden the accused need
not even offer evidence in his behalf, and he would be entitled to an acquittal. Proof beyond reasonable doubt does not, of course,
mean such degree of proof as, excluding the possibility of error, produce absolute certainty. Moral certainty only is required, or
that degree of proof which produces conviction in an unprejudiced mind. The conscience must be satisfied that the accused is
responsible for the offense charged.
So also, well-settled, to the point of being elementary, is the doctrine that when inculpatory facts are susceptible to two or more
interpretations, one of which is consistent with the innocence of the accused, the evidence does not fulfill or hurdle the test of
moral certainty required for conviction. (People of the Philippines vs. Eric F. Timtiman, G.R. No. 101663, November 4, 1992, 215
SCRA 364, 373 citing People vs. Remorosa, 200 SCRA 350, 360 [1991]; People vs. Raquel, 265 SCRA 248; People vs. Aranda, 226
SCRA 562; People vs. Maongco, 230 SCRA 562; People vs. Salangga, 234 SCRA 407)
Mindful of and guided by the aforecited constitutional and legal precepts, doctrines and principles prevailing in this jurisdiction,
should petitioners Motion for Reconsideration be granted?
Docketed as Criminal Case No. 17450 before the Sandiganbayan, the Information indicting Imelda R. Marcos and Jose P. Dans, Jr.
for a violation of Section 3(g) of Republic Act No. 3019, as amended, otherwise known as the Anti-Graft and Corrupt Practices Act,
alleges:
That on or about June 8, 1984, and for sometime prior or subsequent thereto, in Makati, Metro-Manila, Philippines, and within
the jurisdiction of this Honorable Court, the accused IMELDA R. MARCOS and JOSE P. DANS, JR., public officers, being then
Chairman and Vice-Chairman, respectively, of the Light Rail Transit Authority (LRTA), a government corporate entity created under
Executive Order No. 603 of the former President Ferdinand Marcos, while in the performance of their official functions, taking
advantage of their positions and committing the crime in relation to their offices, did then and there wilfully, unlawfully and
criminally conspiring with one another, enter on behalf of the aforesaid government corporation into a Lease Agreement covering
LRTA property located in Pasay City, with the Philippine General Hospital Foundation, Inc. (PGHFI), a private enterprise, under
terms and conditions manifestly and grossly disadvantageous to the government.
CONTRARY TO LAW.
The case was raffled off to the First Division of the Sandiganbayan, with Presiding Justice Francis E. Garchitorena, as Chairman and
Justices Jose S. Balajadia and Narciso T. Atienza, as members. On September 15, 1993, when the First Division failed to comply
with the legal requirement of unanimity of its three members due to the dissent of Justice Narciso T. Atienza, Presiding Justice
Garchitorena issued Administrative Order No. 288-93 constituting a Special Division of five and designating Justices Augusto M.
Amores and Cipriano A. Del Rosario, as additional members.
On September 21, 1993, Justice Amores wrote Presiding Justice Garchitorena requesting that he be given fifteen (15) days to send
in his Manifestation. However, on the same day, September 21, 1993, when Justice Balajadia and Presiding Justice Garchitorena
agreed with the opinion of Justice Del Rosario, Presiding Justice Garchitorena issued Administrative Order No. 293-93, dissolving
the Special Division of Five, without waiting for Justice Amores manifestation. Justice Garchitorena considered the said request of
Justice Amores as pointless because of the agreement of Justice Balajadia and the undersigned to the conclusion reached by
Justice Atienza. Thus, on September 24, 1993, the now assailed decision was handed down by the First Division of the
Sandiganbayan.
Under the aforequoted Information charging accused Imelda R. Marcos and Jose P. Dans, Jr. with a violation of Section 3(g) of RA
3019, the following elements of the offense charged must be proved beyond reasonable doubt, to wit: 1] that the accused acted
as a public officer; 2] that subject Contract or transaction entered into by the latter is manifestly and grossly disadvantageous to
the government.
There is no dispute that sometime in the year 1984, the herein petitioner, Imelda R. Marcos, was Minister of Human Settlement
while Jose P. Dans, Jr. was the Minister of Transportation and Communication. The two served as ex oficio Chairman and Vice
Chairman, respectively, of the Light Rail Transport Authority (LRTA). Petitioner Marcos was also Chairman of the Board of Trustees
of the Philippine General Hospital Foundation, Inc. (PGHFI).
On June 8, 1984, petitioner, in her capacity as Chairman of PGHFI, and Jose P. Dans, Jr. as Vice Chairman of LRTA, signed the Lease
Agreement (Exhibit B) by virtue of which LRTA leased to PGHFI subject lot with an area of 7,340 square meters, at a monthly
rental of P102,760.00 for a period of twenty-five (25) years.
On June 27, 1984, the PGHFI, represented by its Chairman Imelda R. Marcos, and Transnational Construction Corporation,
represented by its President Ignacio B. Gimenez, signed the Sub-lease Agreement (Exhibit D), wherein said lessee rented the
same area of 7,340 square meters for P734,000.00 a month, for a period of twenty-five (25) years.
For executing the aforesaid Lease Agreement (Exhibit B), petitioner and Jose P. Dans, Jr. were indicted in the said Information,
for conspiring and confederating with each other in entering into subject Lease Agreement alleged to be manifestly and grossly
disadvantageous to the government.
After trial, as earlier alluded to, the Sandiganbayan convicted the petitioner and Jose P. Dans, Jr. of the offense charged.
On June 29, 1998, the Third Division of this court came out with its decision affirming the judgment, as against petitioner Imelda R.
Marcos, in G.R. No. 126995, but reversing the same judgment, as against Jose P. Dans, Jr., in G.R. No. 127073.
In affirming the judgment of conviction against petitioner, the Third Division found the rental price stipulated in the Lease
Agreement, (Exhibit B) unfair and unreasonably low, upon a comparison with the rental rate in the Sub-lease Agreement (Exhibit
D), which contract petitioner subsequently signed on behalf of PGHFI, with TNCC. Undaunted, the petitioner interposed the
present Motion for Reconsideration.
The pivot of inquiry here is whether all the elements of the offense charged have been duly substantiated. As regards the first
element, did petitioner Imelda R. Marcos enter into the Lease Agreement marked Exhibit B as a public officer? As clearly stated
on the face of the subject contract under scrutiny, petitioner signed the same in her capacity as Chairman of PGHFI and not as
Human Settlement Minister nor as ex-officio Chairman of LRTA. It was Jose P. Dans, Jr. who signed said Contract, as ex-officio Vice-
Chairman of LRTA. Although petitioner was the ex-officio Chairman of LRTA, at the time, there is no evidence to show that she was
present when the Board of Directors of LRTA authorized and approved the Lease Agreement sued upon.
In light of the foregoing antecedent facts and circumstances, the irresistible conclusion is that petitioner did not sign subject Lease
Agreement as a public officer, within the contemplation of RA 3019 and, therefore, the first element of the offense charged is
wanting.
It bears stressing, in this connection, that Jose P. Dans, Jr., the public officer who signed the said Lease Agreement (Exhibit B) for
LRTA, was acquitted.
As regards the second element of the offense - that such Lease Agreement is grossly and manifestly disadvantageous to the
government, the respondent court based its finding thereon against the petitioner and Jose P. Dans, Jr., on a ratiocination that
while the rental price under the Lease Agreement is only P102,760.00 a month, the monthly rental rate under the Sub-lease
Agreement is P734,000.00. After comparing the two rental rates aforementioned, the respondent court concluded that the rental
price of P102,760.00 a month is unfair, unreasonable and disadvantageous to the government.
But Exhibit B does not prove that the said contract entered into by petitioner is manifestly and grossly disadvantageous to the
government. There is no established standard by which Exhibit Bs rental provisions could be adjudged prejudicial to LRTA or
the entire government. Exhibit B standing alone does not prove any offense. Neither does Exhibit B together with the Sub-
lease Agreement (Exhibit D) prove the offense charged.
At most, it creates only a doubt in the mind of the objective readers as to which (between the lease and sub-lease rental rates) is
the fair and reasonable one, considering the different circumstances as well as parties involved. It could happen that in both
contracts, neither the LRTA nor the Government suffered any injury. There is, therefore, insufficient evidence to prove petitioners
guilt beyond reasonable doubt.
Verily, it is too obvious to require an extended disquisition that the only basis of the respondent court for condemning the Lease
Agreement (Exhibit B) as manifestly and grossly disadvantageous to the government was a comparison of the rental rate in
the Lease Agreement, with the very much higher rental price under the Sub-lease Agreement (Exhibit D). Certainly, such a
comparison is purely speculative and violative of due process. The mere fact that the Sub-lease Agreement provides a monthly
rental of P734,000.00 does not necessarily mean that the rental price of P102,760.00 per month under the Lease Agreement
(Exhibit B) is very low, unreasonable and manifestly and grossly disadvantageous to the government. There are many factors to
consider in the determination of what is a reasonable rate of rental.
What is more, as stressed by Jose P. Dans Jr., when subject Lease Agreement was inked, the rental rate therein provided was
based on a study conducted in accordance with generally accepted rules of rental computation. On this score, Mr. Ramon F.
Cuervo, Jr., the real estate appraiser who testified in the case as an expert witness and whose impartiality and competence were
never impugned, assured the court that the rental price stipulated in the Lease Agreement under scrutiny was fair and adequate.
According to him, witness, the reasonable rental for subject property at the time of execution of Exhibit B was only P73,000.00
per month.
That the Sub-lease Agreement (Exhibit D) was for a very much higher rental rate of P734,000.00 a month is of no moment. This
circumstance did not necessarily render the monthly rental rate of P102,760.00 manifestly and grossly disadvantageous to the
lessor. Evidently, the prosecution failed to prove that the rental rate of P102,760.00 per month was manifestly and grossly
disadvantageous to the government. Not even a single lease contract covering a property within the vicinity of the said leased
premises was offered in evidence. The disparity between the rental price of the Lease Agreement and that of the Sublease
Agreement is no evidence at all to buttress the theory of the prosecution, that the Lease Agreement in question is manifestly and
grossly disadvantageous to the government. Gross is a comparative term. Before it can be considered gross, there must be a
standard by which the same is weighed and measured.
All things viewed in proper perspective, it is decisively clear that there is a glaring absence of substantiation that the Lease
Agreement under controversy is grossly and manifestly disadvantageous to the government, as theorized upon by the
prosecution.
Furthermore, that the lessee, PGHFI, succeeded in obtaining a high rental rate of P734,000.00 a month, did not result in any
disadvantage to the government because obviously, the rental income realized by PGHFI from the Sub-lease Agreement (Exhibit
D) augmented the financial support for and improved the management and operation of the Philippine General Hospital, which
is, after all, a government hospital of the people and for the people.
Another sustainable ground for the granting of petitioners motion for reconsideration is the failure and inability of the
prosecution to prove that petitioner was present when the Board of Directors of LRTA authorized and approved the Lease
Agreement complained of. Albeit, petitioner was ex oficio chairman of the Board of Directors of LRTA when the said Lease
Agreement was entered into, there is no evidence whatsoever to show that she attended the board meeting of LRTA which
deliberated and acted upon subject Lease Agreement (Exhibit B). It is thus beyond cavil that petitioner signed the said Lease
Agreement as Chairman of the PGH Foundation, Inc., a private charitable foundation, and not as a public officer.
Neither can petitioner be considered as in conspiracy with Jose P. Dans, Jr., who has been found without any criminal liability for
signing the same Lease Agreement. Absent any conspiracy of petitioner with Dans, the act of the latter cannot be viewed as an act
of the former. Petitioner is only answerable for her own individual act. Consequently, petitioner not having signed Exhibit B as a
public officer, there is neither legal nor factual basis for her conviction under Section 3 (g) of Rep Act 3019.
It bears repeating that apart from the Lease Agreement and Sub-lease Agreement marked Exhibits B and D, respectively, the
prosecution offered no other evidence to prove the accusation at bar.
What makes petitioners stance the more meritorious and impregnable is the patent violation of her right to due process,
substantive and procedural, by the respondent court. Records disclose that: (a) the First Division of the Sandiganbayan composed
of Presiding Justice Garchitorena and Associate Justices Balajadia and Atienza could not agree on whether to convict or acquit the
petitioner in the five (5) criminal cases pending against her. Justice Atienza was in favor of exonerating petitioner in Criminal Case
Nos. 17449, 17451 and 17452. Justices Garchitorena and Balajadia wanted to convict her in Criminal Case Nos. 17450, 17451,
17452 and 17453. As there there was no unanimity of votes in Criminal Case Nos. 17451 and 17452; (b) on September 15, 1993, in
accordance with Sec. 5 of P. D. No. 1606, Presiding Justice Garchitorena issued Adm. Order No. 288-93 constituting a Special
Division of five (5) justices, and naming thereto, Justices Augusto M. Amores and Cipriano A. del Rosario; (c) on September 21,
1993, Justice Amores sent a written request to Presiding Justice Garchitorena asking that he be given fifteen (15) days to submit
his Manifestation; (d) on the same day, September 21, 1993, however, Presiding Justice Garchitorena and Justices Balajadia and
del Rosario, after attending a hearing of the Committee of Justice of the House of Representatives, lunched together in a Quezon
City restaurant where they discussed petitioners cases in the absence of Justices Atienza and Amores and in the presence of a
non-member of the Special Division. Thereat, Presiding Justice Garchitorena, and Justices Balajadia and del Rosario agreed with
the position of Justice Atienza to acquit petitioner in Criminal Case Nos. 17449, 17451 and 17452 and to convict her in the other
cases; and (e) when the Justices returned to the official workplace of Sandiganbayan, Presiding Justice Garchitorena issued Adm.
Order No. 293-93 dissolving the Special Division.
Such procedural flaws committed by respondent Sandiganbayan are fatal to the validity of its decision convicting petitioner for
the following reasons, viz:
First. Section 4, Rule VI categorically provides that sessions of the Sandiganbayan, whether en banc or division, shall be held in its
principal office in the Metropolitan Manila where it shall try and determine all cases filed with it x x x. This rule reiterates Sec. 2
of P.D. No. 1606, as amended, creating the Sandiganbayan.
Second, The rules of Sandiganbayan do not allow unscheduled discussion of cases. We take judicial notice of the procedure that
cases in all courts are carefully calendared and advance notices are given to judges and justices to enable them to study and
prepare for deliberation. The calendaring of cases cannot be the subject of anybodys whims and caprices.
Third. The rules of Sandiganbayan do not also allow informal discussion of cases. The deliberations in case at bar did not appear on
record. The informal discussion of the three justices came to light only when petitioner moved to inhibit Presiding Justice
Garchitorena after her conviction by the resuscitated First Division. Presiding Justice Garchitorena, in a paper entitled Response,
revealed for the first time the informal discussion of petitioners cases at an unnamed restaurant in Quezon City. There is no way
to know how the discussion was conducted as it was not minuted.
Fourth. The rules of the Sandiganbayan do not allow the presence of a non-member in the deliberation of cases. In the case at bar,
a certain justice was present when Presiding Justice Garchitorena, Justice Balajadia, and Justice del Rosario discussed petitioners
cases while taking their lunch in a Quezon City restaurant.
Fifth. The rules of the Sandiganbayan do not allow the exclusion of a member of a Division, whether regular or special, in the
deliberation of cases. Justices Atienza and Amores were members of the Special Division but were not present when petitioners
cases were discussed over lunch in a Quezon City restaurant. They were not notified of the informal, unscheduled meeting. In fact,
Justice Amores had a pending request for 15 days to study petitioners cases. In effect, Atienza and Amores were disenfranchised.
They were denied their right to vote for the conviction or acquittal of petitioner.
These irregularities violated the right of petitioner to be tried by a collegial court. Under PD No. 1606, as amended, and pursuant
to the rules of Sandiganbayan, petitioner cannot be convicted except upon the vote of three justices, regardless of whether her
cases are before a regular division of three (3) justices or a Special Division of five (5) justices. But more important than the vote of
three (3) justices is the process by which they arrive at their vote. It is indispensable that their vote be preceded by discussion and
deliberation by all the members of the division. Before the deliberation by all, any opinion of a justice is but tentative and could be
changed. It is only after all the justices have been heard should the justices reach a judgment. No one opinion can be denigrated in
importance for experience shows that an opinion that starts as a minority opinion could become the majority opinion after the
collision of views of the justices. The right of the petitioner, therefore, is the right to be heard by all the five justices of the Special
Division. She is entitled to be afforded the opinion of all its members.
In the case at bar, Presiding Justice Garchitorena had already created the Special Division of five (5) justices in view of the lack of
unanimity of the three (3) justices in the First Division. At that stage, petitioner had a vested right to be heard by the five (5)
justices, especially the new justices in the persons of Justices Amores and del Rosario who may have a different view of the cases
against her. At that point, Presiding Justice Garchitorena and Justice Balajadia may change their mind and agree with the original
opinion of Justice Atienza but the turnaround cannot deprive petitioner of her vested right to the opinion of Justices Amores and
del Rosario. It may be true that Justice del Rosario had already expressed his opinion during an informal, unscheduled meeting in
the unnamed restaurant but as aforestated, that opinion is not the opinion contemplated by law. But what is more, petitioner was
denied the opinion of Justice Amores for before it could be given, Presiding Justice Garchitorena dissolved the Special Division.
We reject the rationalization that the opinion of Justice Amores was of de minimis importance as it cannot overturn the votes of
the three justices convicting the petitioner. This is a mere guesswork. The more reasonable supposition is that said opinion could
have changed the opinions of the other justices if it is based on an unbiased appreciation of facts and an undistorted
interpretation of pertinent laws. For we cannot unreasonably suppose that Presiding Justice Garchitorena and Justices Balajadia
and Atienza are bigots who will never change their opinions about the guilt of the petitioner despite a better opinion.
Yet, that is not all the value of the aborted opinion of Justice Amores. If it were an opinion for the acquittal of the petitioner, that
opinion will have an added value when petitioner appeals her conviction to this Court. Again, depending on its scholarship, that
minority opinion could sway the opinion of this Court towards the acquittal of petitioner.
Prescinding from those premises, it is indisputable that the decision of the First Division of the respondent Sandiganbayan
convicting the petitioner is void for violating her right to substantive and procedural due process of law.
It is opined, however, that this case should be remanded to the respondent Sandiganbayan for re-decision by a Special Division of
5. As a general rule, a void decision will not result in the acquittal of an accused. The case ought to be remanded to the court of
origin for further proceedings for a void judgment does not expose an accused to double jeopardy. But the present case deserves
a different treatment considering the great length of time it has been pending with our courts. Records reveal that petitioner was
first indicted in Criminal Case No. 17450 in January 1992. More than six (6) years passed but petitioners prosecution is far from
over. To remand the case to the Sandiganbayan will not sit well with her constitutional right to its speedy disposition. Section 16,
Article III of the Constitution assures all persons shall have the right to a speedy disposition of their cases before all judicial, quasi-
judicial, or administrative bodies. This right expands the right of an accused to have a speedy, impartial, and public trial x x x in
criminal cases guaranteed by Section 14(2) of Article III of the Constitution. It has a broadening effect because Section 16 covers
the periods before, during and after trial whereas Section 14(2) covers only the trial period.[1] Heretofore, we have held that an
accused should be acquitted when his right to speedy trial has been violated. Thus, in the early 1936 case of People vs. Castaeda,
et al. 63 Phil 480, 485, 486, a ponencia of Mr. Justice Laurel, we held:
A strict regard for the constitutional rights of the accused would demand, therefore, that the case be remanded to the court
below for new trial before an impartial judge. There are vital considerations, however, which in the opinion of this court render
this step unnecessary. In the first place, the Constitution, Article III, section 1, paragraph 17, guarantees to every accused person
the right to a speedy trial. This criminal proceeding has been dragging on for almost five (5) years now. The accused have twice
appealed to this court for redress from the wrong that they have suffered at the hands of the trial court. At least one of them,
namely, Pedro Fernandez (alias Piro), had been confined in prison from July 20, 1932 to November 27, 1934 for inability to post
the required bond of P3,000 which was finally reduced to P300. The Government should be the last to set an example of delay and
oppression in the administration of justice and it is the moral and legal obligation of this court to see that the criminal proceedings
against the accused to come to an end and that they be immediately discharged from the custody of the law. (Conde vs. Rivera
and Unson, 45 Phil., 650).
We reiterated this rule in Acebedo vs. Sarmiento , viz:[2]
2. More specifically, this Court has consistently adhered to the view that a dismissal based on the denial of the right to a speedy
trial amounts to an acquittal. Necessarily, any further attempt at continuing the prosecution or starting a new one would fall
within the prohibition against an accused being twice put in jeopardy. The extensive opinion of Justice Castro in People vs.
Obsania noted earlier made reference to four Philippine decisions, People vs. Diaz, People vs. Abao, People vs. Robles, and
People vs. Cloribel. In all of the above case, this Court left no doubt that a dismissal of the case, though at the instance of the
defendant grounded on the disregard of his right to a speedy trial was tantamount to an acquittal. In People vs. Diaz, it was shown
that the case was set for hearing twice and the prosecution without asking for postponement or giving any explanation failed to
appear. In People vs. Abao, the facts disclosed that there were three postponements. Thereafter, at the time the resumption of
the trial was scheduled, the complaining witness as in this case was absent, this Court held that respondent Judge was justified in
dismissing the case upon motion of the defense and that the annulment or setting aside of the order of dismissal would place the
accused twice in jeopardy of punishment for the same offense. People vs. Robles likewise presented a picture of witnesses for the
prosecution not being available, with the lower court after having transferred the hearings on several occasions denying the last
plea for postponement and dismissing the case. Such order of dismissal, according to this Court is not provisional in character but
one which is tantamount to acquittal that would bar further prosecution of the accused for the same offense. This is a summary
of the Cloribel case as set forth in the above opinion of Justice Castro. In Cloribel, the case dragged for three years and eleven
months, that is, from September 27, 1958 when the information was filed to August 15, 1962 when it was called for trial, after
numerous postponements, mostly at the instance of the prosecution. On the latter date, the prosecution failed to appear for trial,
and upon motion of defendants, the case was dismissed. This Court held, that the dismissal here complained of was not truly a
dismissal but an acquittal. For it was entered upon the defendants insistence on their constitutional right to speedy trial and by
reason of the prosecutions failure to appear on the date of trial. (Italics supplied) There is no escaping the conclusion then that
petitioner here has clearly made out a case of an acquittal arising from the order of dismissal given in open court.
The rationale for both Section 14(2) and section 16 of Article III of the Constitution is the same: justice delayed is justice denied.
Violation of either section should therefore result in the acquittal of the accused.
There are other reasons why the case should not be remanded to the court a quo. Three justices of the Special Division, namely
Justice Atienza, Balajadia and Amores have already retired. Presiding Justice Garchitorena is still with the respondent court but his
impartiality has been vigorously assailed by the petitioner. Mr. Justice Francisco of the Third Division of this Court noted that
Presiding Justice Garchitorenas undue interference in the examination of witness Cuervo revealed his bias and prejudice against
petitioner.[3] As Mr. Justice Francisco observed the court questions were so numerous which as per petitioner Dans count
totaled 179 compared to prosecutor Querubins questions which numbered merely 73. More noteworthy, however, is that the
court propounded leading, misleading, and baseless hypothetical questions rolled into one.[4] Mr. Justice Franciscos opinion was
concurred by Mr. Justice Melo. Truly, even Mr. Chief Justice Narvasa, Madam Justice Romero and Mr. Justice Panganiban who
voted to convict petitioner did not refute Mr. Justice Franciscos observations on the lack of impartiality of Presiding Justice
Garchitorena. They disregarded Mr. Ramon F. Cuervos testimony and based the conviction of petitioner purely on the
documentary evidence submitted by the People. Moreover, all the evidence in the case at bar are now before this Court and to
avoid further delay, we can evaluate the evidence. In fact, the same evidence has been passed upon by the Third Division of this
Court in formulating its judgment of affirmance sought to be reconsidered. Certainly, it will be sheer rigmarole for this Court to
still remand the case for a Special Division of five of the Sandiganbayan to render another decision in the case, with respect to the
herein petitioner.
I consider this opinion incomplete without quoting herein the following portion of the concurring and dissenting opinion of former
Associate Justice Ricardo J. Francisco dated January 29, 1998:
Thus, purely from the legal standpoint, with the evident weakness of the prosecutions case and the procedural aberrations that
marred the trial, it is simply unsound and impossible to treat differently each petitioner who found themselves in one and the
same situation. Indeed, our regained democracy, creditably, is successfully bailing us out from the ruins of the authoritarian
regime, and it expects that government efforts in going after the plunderers of that dark past remain unrelenting and decisive. But
let us not, in our anxiety to carry out this duty, for a moment forget that our criminal justice system is not a popularity contest
where freedom and punishment are determined merely by the fame or infamy of the litigants. The scales of justice, it has been
aptly said,[5] must hang equal and, in fact, should even be tipped in favor of the accused because of the constitutional
presumption of innocence. Needless to stress, this right is available to every accused, whatever his present circumstance and no
matter how dark and repellent his past. Culpability for crimes must always take its bearing from evidence and universal precepts
of due process - lest we sacrifice in mocking shame once again the very liberties we are defending.
IN VIEW OF THE FOREGOING, the Motion for Reconsideration under consideration is hereby GRANTED and petitioner Imelda R.
Marcos is hereby ACQUITTED of the offense charged. Costs de oficio.
SO ORDERED.

[G.R. No. 170626, March 03, 2008]

THE SANGGUNIANG BARANGAY OF BARANGAY DON MARIANO MARCOS, MUNICIPALITY OF BAYOMBONG PROVINCE OF
NUEVA VISCAYA represented by BARANGAY KAGAWAD JOSE CENEN SANTOS, MARIO BACUD, WALTER FRANCISCO, ROSITA
SEBASTIAN, LAURETA CABAUATAN, CECILIA ALINDAYU and MELY SIMANGAN, Petitioners, vs. PUNONG BARANGAY SEVERINO
MARTINEZ, Respondent.

D E C I S I O N

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the Orders dated 20 October 2005
[1]
and 30
November 2005
[2]
of the Regional Trial Court (trial court), Branch 27, of Bayombong, Nueva Vizcaya, in Special Civil Action No.
6727. In its assailed Orders, the trial court ruled that the Sangguniang Bayan of Bayombong, Neuva Vizcaya (Sangguniang Bayan),
exceeded its jurisdiction when it imposed upon respondent Severino Martinez the administrative penalty of removal from office.

Petitioner Sangguniang Barangay is the legislative body of Barangay Don Mariano Marcos, Bayombong, Nueva Vizcaya, a local
government unit created, organized and existing as such under pertinent laws of the Republic of the Philippines. Respondent
Martinez is the incumbent Punong Barangay of the said local government unit.
[3]


On 5 November 2004, Martinez was administratively charged with Dishonesty and Graft and Corruption by petitioner through the
filing of a verified complaint before the Sangguniang Bayan as the disciplining authority over elective barangay officials pursuant
to Section 61
[4]
of Rep. Act No. 7160, otherwise known as the Local Government Code. Petitioner filed with the Sangguniang Bayan
an Amended Administrative Complaint against Martinez on 6 December 2004 for Dishonesty, Misconduct in Office and Violation
of the Anti-Graft and Corrupt Practices Act.
[5]
Petitioner alleged that Martinez committed the following acts:
1. Failure to submit and fully remit to the Barangay Treasurer the income of their solid waste management project since
2001 particularly the sale of fertilizer derived from composting.
2. Failure to submit/remit to the barangay treasurer the sale of recyclable materials taken from garbage collection.
3. Using the garbage truck for other purposes like hauling sand and gravel for private persons without monetary benefit
to the barangay because no income from this source appears in the year end report even if payments were collected x
x x.
4. Using/spending barangay funds for repair, gasoline, lubricants, wheels and other spare parts of the garbage truck
instead of using the money or income of said truck from the garbage fees collected as income from its Sold Waste
Management Project. x x x.
5. Unliquidated traveling expenses for Seminar/Lakbay-Aral in 2003 because although a cash advance was made by the
respondent for the said purpose, he, however, did not attend said seminar because on the dates when he was
supposed to be on seminar they saw him in the barangay. x x x.
6. That several attempts to discuss said problem during sessions were all in vain because respondent declined to discuss it
and would adjourn the session.x x x.
[6]

Upon his failure to file an Answer to the Amended Administrative Complaint dated 6 December 2004, Martinez was declared by
the Sangguniang Bayan as in default. Pending the administrative proceedings, Martinez was placed under preventive suspension
for 60 days or until 8 August 2005.
[7]


On 28 July 2005, the Sangguniang Bayan rendered its Decision which imposed upon Martinez the penalty of removal from office.
[8]


The Decision dated 28 July 2005 was conveyed to the Municipal Mayor of Bayombong, Nueva Ecija, Severino Bagasao, for its
implementation. On 3 August 2005, Municial Mayor Bagasao issued a Memorandum, wherein he stated that the Sanggunaing
Bayan is not empowered to order Martinezs removal from service. However, the Decision remains valid until reversed and must
be executed by him. For the meantime, he ordered the indefinite suspension of Martinez since the period of appeal had not yet
lapsed.
[9]
The dispositive portion of the said Memorandum states that:
[10]

The FOREGOING considered come AUGUST 8, 2005, respondent SEVERINO D. MARTINEZ is hereby directed NOT to ASSUME and
DISCHARGE the functions of the Office of the Punong Barangay of Barangay Don Mariano Marcos, Bayombong, Nueva Vizcaya and
for complainant JOSE CENEN SANTOS to CONTINUE assuming and discharging the functions of the said office in ACTING CAPACITY
pursuant to the provisions of Sections 67 and 68 of Republic Act No. 7160.
On 26 August 2005, Martinez filed a Special Civil Action for Certiorari with a prayer for Temporary Restraining Order and
Preliminary Injunction before the trial court against petitioner, the Sangguniang Bayan and Mayor Bagasao questioning the validity
of the Decision dated 28 July 2005 of the Sangguniang Bayan. This case was docketed as Special Civil Action No. 6727, which was
initially heard by Branch 28, but later raffled to Branch 27 of the trial court.
[11]


On 20 October 2005, the trial court issued an Order declaring the Decision of the Sangguniang Bayan and the Memorandum of
Mayor Bagasao void. It maintained that the proper courts, and not the petitioner, are empowered to remove an elective local
official from office, in accordance with Section 60 of the Local Government Code. Thus, the Order of the Sangguniang Bayan
removing Martinez from service is void. As a consequence, Mayor Bagasao cannot prevent Martinez from assuming his office on
the basis of a void order. The trial court further ruled that Martinez properly availed himself of the remedy of Special Civil Action,
where the order assailed was a patent nullity.
[12]


On 10 November 2005, petitioner filed a Motion for Reconsideration
[13]
of the trial courts Order dated 10 October 2005. The trial
court denied the said motion in another Order dated 30 November 2005.
[14]


Hence, the present petition was filed.

Although Martinezs term as Punong Baranggay expired upon the holding of the 29 October 2007 Synchronized Barangay and
Sangguniang Kabataan elections and, thus, rendering this petition moot and academic, the Court will nevertheless settle a legal
question that is capable of repetition yet evading review.
[15]


The pivotal issue in this case is whether or not the Sangguniang Bayan may remove Martinez, an elective local official, from office.
The pertinent legal provisions and cases decided by this Court firmly establish that the Sanggunaing Bayan is not empowered to do
so.

Section 60 of the Local Government Code conferred upon the courts the power to remove elective local officials from office:
Section 60. Grounds for Disciplinary Actions.An elective local official may be disciplined, suspended, or removed from office on
any of the following grounds:

x x x x.

An elective local official may be removed from office on the grounds enumerated above by order of the proper court. (Emphasis
provided.)
During the deliberations of the Senate on the Local Government Code,
[16]
the legislative intent to confine to the courts, i.e.,
regional trial courts, the Sandiganbayan and the appellate courts, jurisdiction over cases involving the removal of elective local
officials was evident:
Senator Pimentel. This has been reserved, Mr. President, including the issue of whether or not the Department Secretary or the
Office of the President can suspend or remove an elective official.

Senator Saguisag. For as long as that is open for some later disposition, may I just add the following thought: It seems to me that
instead of identifying only the proper regional trial court or the Sandiganbayan, and since we know that in the case of a
regional trial court, particularly, a case may be appealed or may be the subject of an injunction, in the framing of this later on, I
would like to suggest that we consider replacing the phrase PROPER REGIONAL TRIAL COURT OR THE SANDIGANBAYAN
simply by COURTS. Kasi po, maaaring sabihin nila na mali iyong regional trial court o ang Sandiganbayan.

Senator Pimentel. OR THE PROPER COURT.

Senator Saguisag. OR THE PROPER COURT.

Senator Pimentel. Thank you. We are willing to accept that now, Mr. President.

Senator Saguisag. It is to be incorporated in the phraseology that we will craft to capture the other ideas that have been elevated.
(Emphasis provided.)
In Salalima v. Guingona, Jr.,
[17]
the Court en banc categorically ruled that the Office of the President is without any power to
remove elected officials, since the power is exclusively vested in the proper courts as expressly provided for in the last paragraph
of Section 60 of the Local Government Code. It further invalidated Article 125, Rule XIX of the Rules and Regulations Implementing
the Local Government Code of 1991, which provided that:
Article 125. Grounds for Disciplinary Actions. x x x.

x x x x.

(b) An elective local official may be removed from office on the grounds enumerated in paragraph (a) of this Article by order of the
proper court or the disciplining authority whichever first acquires jurisdiction to the exclusion of the other.
The Court nullified the aforequoted rule since the Oversight Committee that prepared the Rules and Regulations of the Local
Government Code exceeded its authority when it granted to the disciplining authority the power to remove elective officials, a
power which the law itself granted only to the proper courts. Thus, it is clear that under the law, the Sangguniang Bayan is not
vested with the power to remove Martinez.

Petitioner contends that administrative cases involving elective barangay officials may be filed with, heard and decided by the
Sangguniang Panlungsod or Sangguniang Bayan concerned, which can, thereafter, impose a penalty of removal from office. It
further claims that the courts are merely tasked with issuing the order of removal, after the Sangguniang Panlungsod or
Sangguniang Bayan finds that a penalty of removal is warranted.
[18]


The aforementioned position put forward by the petitioner would run counter to the rationale for making the removal of elective
officials an exclusive judicial prerogative. In Pablico v. Villapando,
[19]
the court declared that:
It is beyond cavil, therefore, that the power to remove erring elective local officials from service is lodged exclusively with the
courts. Hence, Article 124 (sic 125)
[20]
(b), Rule XIX, of the Rules and Regulations Implementing the Local Government Code, insofar
as it vests power on the disciplining authority to remove from office erring elective local officials, is void for being repugnant to
the last paragraph of Section 60 of the Local Government Code of 1991. The law on suspension or removal of elective public
officials must be strictly construed and applied, and the authority in whom such power of suspension or removal is vested must
exercise it with utmost good faith, for what is involved is not just an ordinary public official but one chosen by the people through
the exercise of their constitutional right of suffrage. Their will must not be put to naught by the caprice or partisanship of the
disciplining authority. Where the disciplining authority is given only the power to suspend and not the power to remove, it should
not be permitted to manipulate the law by usurping the power to remove. (Emphasis supplied.)
The rule which confers to the proper courts the power to remove an elective local official from office is intended as a check
against any capriciousness or partisan activity by the disciplining authority. Vesting the local legislative body with the power to
decide whether or not a local chief executive may be removed from office, and only relegating to the courts a mandatory duty to
implement the decision, would still not free the resolution of the case from the capriciousness or partisanship of the disciplining
authority. Thus, the petitioners interpretation would defeat the clear intent of the law.

Moreover, such an arrangement clearly demotes the courts to nothing more than an implementing arm of the Sangguniang
Panlungsod, or Sangguniang Bayan. This would be an unmistakable breach of the doctrine on separation of powers, thus placing
the courts under the orders of the legislative bodies of local governments. The courts would be stripped of their power of review,
and their discretion in imposing the extreme penalty of removal from office is thus left to be exercised by political factions which
stand to benefit from the removal from office of the local elective official concerned, the very evil which Congress sought to avoid
when it enacted Section 60 of the Local Government Code.

Congress clearly meant that the removal of an elective local official be done only after a trial before the appropriate court, where
court rules of procedure and evidence can ensure impartiality and fairness and protect against political maneuverings. Elevating
the removal of an elective local official from office from an administrative case to a court case may be justified by the fact that
such removal not only punishes the official concerned but also, in effect, deprives the electorate of the services of the official for
whom they voted.

As the law stands, Section 61 of the Local Government Code provides for the procedure for the filing of an administrative case
against an erring elective barangay official before the Sangguniang Panlungsod or Sangguniang Bayan. However, the Sangguniang
Panlungsod or Sangguniang Bayan cannot order the removal of an erring elective barangay official from office, as the courts are
exclusively vested with this power under Section 60 of the Local Government Code. Thus, if the acts allegedly committed by the
barangay official are of a grave nature and, if found guilty, would merit the penalty of removal from office, the case should be
filed with the regional trial court. Once the court assumes jurisdiction, it retains jurisdiction over the case even if it would be
subsequently apparent during the trial that a penalty less than removal from office is appropriate. On the other hand, the most
extreme penalty that the Sangguniang Panlungsod or Sangguniang Bayan may impose on the erring elective barangay official is
suspension; if it deems that the removal of the official from service is warranted, then it can resolve that the proper charges be
filed in court.

Petitioner alleged that an interpretation which gives the judiciary the power to remove local elective officials violates the doctrine
of separation of powers. This allegation runs contrary to the 1987 Constitution itself, as well as jurisprudence.

The 1987 Constitution is explicit in defining the scope of judicial power. It establishes the authority of the courts to determine in
an appropriate action the validity of acts of the political departments. It speaks of judicial prerogative in terms of duty.
[21]

Paragraph 2, Section 1, Article VIII of the 1987 Constitution, provides that:
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. (Emphasis provided.)
The doctrine of separation of powers is not absolute in its application; rather, it should be applied in accordance with the principle
of checks and balances. The removal from office of elective officials must not be tainted with partisan politics and used to defeat
the will of the voting public. Congress itself saw it fit to vest that power in a more impartial tribunal, the court. Furthermore, the
local government units are not deprived of the right to discipline local elective officials; rather, they are prevented from imposing
the extreme penalty of dismissal.

Petitioner questions the Decision dated 20 October 2005 of the trial court for allowing the petition filed before it as an exception
to the doctrine of exhaustion of administrative remedies. If, indeed, the Sangguniang Bayan had no power to remove Martinez
from office, then Martinez should have sought recourse from the Sangguniang Panlalawigan. This Court upholds the ruling of the
trial court.

The doctrine of exhaustion of administrative remedies calls for resort first to the appropriate administrative authorities in the
resolution of a controversy falling under their jurisdiction before the same may be elevated to the courts of justice for review.
Non-observance of the doctrine results in lack of a cause of action, which is one of the grounds allowed by the Rules of Court for
the dismissal of the complaint.
[22]


The doctrine of exhaustion of administrative remedies, which is based on sound public policy and practical consideration, is not
inflexible. There are instances when it may be dispensed with and judicial action may be validly resorted to immediately. Among
these exceptions are: 1) where there is estoppel on the part of the party invoking the doctrine; 2) where the challenged
administrative act is patently illegal, amounting to lack of jurisdiction; 3) where there is unreasonable delay or official inaction
that will irretrievably prejudice the complainant; 4) where the amount involved is relatively small as to make the rule impractical
and oppressive; 5) where the question raised is purely legal and will ultimately have to be decided by the courts of justice; 6)
where judicial intervention is urgent; 7) where its application may cause great and irreparable damage; 8) where the
controverted acts violate due process; 9) when the issue of non-exhaustion of administrative remedies has been rendered moot;
10) where there is no other plain, speedy and adequate remedy; 11) when strong public interest is involved; and 13) in quo
warranto proceedings.
[23]


As a general rule, no recourse to courts can be had until all administrative remedies have been exhausted. However, this rule is
not applicable where the challenged administrative act is patently illegal, amounting to lack of jurisdiction and where the question
or questions involved are essentially judicial.

In this case, it is apparent that the Sangguniang Bayan acted beyond its jurisdiction when it issued the assailed Order dated 28 July
2005 removing Martinez from office. Such act was patently illegal and, therefore, Martinez was no longer required to avail himself
of an administrative appeal in order to annul the said Order of the Sangguniang Bayan.
[24]
Thus, his direct recourse to regular
courts of justice was justified.

In addition, this Court in Castro v. Gloria
[25]
declared that where the case involves only legal questions, the litigant need not
exhaust all administrative remedies before such judicial relief can be sought. The reason behind providing an exception to the rule
on exhaustion of administrative remedies is that issues of law cannot be resolved with finality by the administrative officer. Appeal
to the administrative officer would only be an exercise in futility. A legal question is properly addressed to a regular court of
justice rather than to an administrative body.
[26]


In the present case, Martinez raised before the trial court the sole issue of whether the Sangguniang Bayan has jurisdiction over a
case involving the removal of a local elective official from office.
[27]
In Martinezs petition before the trial court, only a legal
question was raised, one that will ultimately be resolved by the courts. Hence, appeal to the administrative officer concerned
would only be circuitous and, therefore, should no longer be required before judicial relief can be sought.

IN VIEW OF THE FOREGOING, the instant Petition is DENIED and the assailed Decision of the Bayombong RTC in Special Civil
Action No. 6727 is AFFIRMED. SO ORDERED.
A.M. No. RTJ-06-2017 June 19, 2008
LT. GEN. ALFONSO P. DAGUDAG (Ret.), complainant,
vs.
JUDGE MAXIMO G.W. PADERANGA, Regional Trial Court, Branch 38, Cagayan de Oro City, respondent.
D E C I S I O N
PER CURIAM, J.:
This is a complaint for gross ignorance of the law and conduct unbecoming a judge filed by retired Lt. Gen. Alfonso P. Dagudag
(Gen. Dagudag), Head of Task Force Sagip Kalikasan, against Judge Maximo G. W. Paderanga (Judge Paderanga), Presiding Judge of
the Regional Trial Court, Branch 38, Cagayan de Oro City.
On or about 30 January 2005, the Region VII Philippine National Police Regional Maritime Group (PNPRMG) received information
that MV General Ricarte of NMC Container Lines, Inc. was shipping container vans containing illegal forest products from Cagayan
de Oro to Cebu. The shipments were falsely declared as cassava meal and corn grains to avoid inspection by the Department of
Environment and Natural Resources (DENR).
1

On 30 and 31 January 2005, a team composed of representatives from the PNPRMG, DENR, and the Philippine Coast Guard
inspected the container vans at a port in Mandaue City, Cebu. The team discovered the undocumented forest products and the
names of the shippers and consignees:
Container Van No. Shipper Consignee
NCLU 2000492-22GI Polaris Chua Polaris Chua
IEAU 2521845-2210 Polaris Chua Polaris Chua
NOLU 2000682-22GI Rowena Balangot Rowena Balangot
INBU 3125757-BB2210 Rowena Balangot Rowena Balangot
NCLU 20001591-22GI Jovan Gomez Jovan Gomez
GSTU 339074-US2210 Jovan Gomez Jovan Gomez
CRXU 2167567 Raffy Enriquez Raffy Enriquez
NCLU 2001570-22GI Raffy Enriquez Raffy Enriquez
The crew of MV General Ricarte failed to produce the certificate of origin forms and other pertinent transport documents covering
the forest products, as required by DENR Administrative Order No. 07-94. Gen. Dagudag alleged that, since nobody claimed the
forest products within a reasonable period of time, the DENR considered them as abandoned and, on 31 January 2005, the
Provincial Environment and Natural Resources Office (PENRO) Officer-in-Charge (OIC), Richard N. Abella, issued a seizure receipt
to NMC Container Lines, Inc.
2

On 1 February 2005, Community Environment and Natural Resources Office (CENRO) OIC Loreto A. Rivac (Rivac) sent a notice to
NMC Container Lines, Inc. asking for explanation why the government should not confiscate the forest products.
3
In an affidavit
4

dated 9 February 2005, NMC Container Lines, Inc.s Branch Manager Alex Conrad M. Seno stated that he did not see any reason
why the government should not confiscate the forest products and that NMC Container Lines, Inc. had no knowledge of the actual
content of the container vans.
On 2, 9, and 15 February 2005, DENR Forest Protection Officer Lucio S. Canete, Jr. posted notices on the CENRO and PENRO
bulletin boards and at the NMC Container Lines, Inc. building informing the unknown owner about the administrative adjudication
scheduled on 18 February 2005 at the Cebu City CENRO. Nobody appeared during the adjudication.
5
In a resolution
6
dated 10
March 2005, Rivac, acting as adjudication officer, recommended to DENR Regional Executive Director Clarence L. Baguilat that the
forest products be confiscated in favor of the government.
In a complaint
7
dated 16 March 2005 and filed before Judge Paderanga, a certain Roger C. Edma (Edma) prayed that a writ of
replevin be issued ordering the defendants DENR, CENRO, Gen. Dagudag, and others to deliver the forest products to him and that
judgment be rendered ordering the defendants to pay him moral damages, attorneys fees, and litigation expenses. On 29 March
2005, Judge Paderanga issued a writ of replevin
8
ordering Sheriff Reynaldo L. Salceda to take possession of the forest products.
In a motion to quash the writ of replevin,
9
the defendants DENR, CENRO, and Gen. Dagudag prayed that the writ of replevin be set
aside: (1) Edmas bond was insufficient; (2) the forest products were falsely declared as cassava meal and corn grains; (3) Edma
was not a party-in-interest; (4) the forest products were not covered by any legal document; (5) nobody claimed the forest
products within a reasonable period of time; (6) the forest products were already considered abandoned; (7) the forest products
were lawfully seized under the Revised Forestry Code of the Philippines; (8) replevin was not proper; (9) courts could not take
cognizance of cases pending before the DENR; (10) Edma failed to exhaust administrative remedies; and (11) the DENR was the
agency responsible for the enforcement of forestry laws. In a motion to dismiss ad cautelam
10
dated 12 April 2005, the defendants
prayed that the complaint for replevin and damages be dismissed: (1) the real defendant is the Republic of the Philippines; (2)
Edma failed to exhaust administrative remedies; (3) the State cannot be sued without its consent; and (4) Edma failed to allege
that he is the owner or is entitled to the possession of the forest products.
In an order
11
dated 14 April 2005, Judge Paderanga denied the motion to quash the writ of replevin for lack of merit.
Gen. Dagudag filed with the Office of the Court Administrator (OCA) an affidavit-complaint
12
dated 8 July 2005 charging Judge
Paderanga with gross ignorance of the law and conduct unbecoming a judge. Gen. Dagudag stated that:
During the x x x hearing, *Judge Paderanga+ showed manifest partiality in favor of x x x Edma. DENRs
counsel was lambasted, cajoled and intimidated by [Judge Paderanga] using words such as "SHUT UP" and
"THATS BALONEY."
x x x x
Edma in the replevin case cannot seek to recover the wood shipment from the DENR since he had not
sought administrative remedies available to him. The prudent thing for [Judge Paderanga] to have done was
to dismiss the replevin suit outright.
x x x x
*Judge Paderangas+ act*s+ of taking cognizance of the x x x replevin suit, issuing the writ of replevin and the
subsequent denial of the motion to quash clearly demonstrates [sic] ignorance of the law.
In its 1
st
Indorsement
13
dated 1 August 2005, the OCA directed Judge Paderanga to comment on the affidavit-complaint. In his
comment
14
dated 6 September 2005, Judge Paderanga stated that he exercised judicial discretion in issuing the writ of replevin
and that he could not delve into the issues raised by Gen. Dagudag because they were related to a case pending before him.
In its Report
15
dated 10 July 2006, the OCA found that Judge Paderanga (1) violated the doctrine of exhaustion of administrative
remedies; (2) violated the doctrine of primary jurisdiction; and (3) used inappropriate language in court. The OCA recommended
that the case be re-docketed as a regular administrative matter; that Judge Paderanga be held liable for gross ignorance of the law
and for violation of Section 6, Canon 6 of the New Code of Judicial Conduct for the Philippine Judiciary;
16
and that he be fined
P30,000.
In its Resolution
17
dated 16 August 2006, the Court re-docketed the case as a regular administrative matter and required the
parties to manifest whether they were willing to submit the case for decision based on the pleadings already filed. Judge
Paderanga manifested his willingness to submit the case for decision based on the pleadings already filed.
18
Since Gen. Dagudag
did not file any manifestation, the Court considered him to have waived his compliance with the 16 August 2006 Resolution.
19

The Court finds Judge Paderanga liable for gross ignorance of the law and for conduct unbecoming a judge.
The DENR is the agency responsible for the enforcement of forestry laws. Section 4 of Executive Order No. 192 states that the
DENR shall be the primary agency responsible for the conservation, management, development, and proper use of the countrys
natural resources.
Section 68 of Presidential Decree No. 705, as amended by Executive Order No. 277, states that possessing forest products without
the required legal documents is punishable. Section 68-A states that the DENR Secretary or his duly authorized representatives
may order the confiscation of any forest product illegally cut, gathered, removed, possessed, or abandoned.
In the instant case, the forest products were possessed by NMC Container Lines, Inc. without the required legal documents and
were abandoned by the unknown owner. Consequently, the DENR seized the forest products.
Judge Paderanga should have dismissed the replevin suit outright for three reasons. First, under the doctrine of exhaustion of
administrative remedies, courts cannot take cognizance of cases pending before administrative agencies. In Factoran, Jr. v. Court
of Appeals,
20
the Court held that:
The doctrine of exhaustion of administrative remedies is basic. Courts, for reasons of law, comity and
convenience, should not entertain suits unless the available administrative remedies have first been
resorted to and the proper authorities have been given an appropriate opportunity to act and correct
their alleged errors, if any, committed in the administrative forum. (Emphasis ours)
In Dy v. Court of Appeals,
21
the Court held that a party must exhaust all administrative remedies before he can resort to the courts.
In Paat v. Court of Appeals,
22
the Court held that:
This Court in a long line of cases has consistently held that before a party is allowed to seek the
intervention of the court, it is a pre-condition that he should have availed of all the means of
administrative processes afforded him. Hence, if a remedy within the administrative machinery can still
be resorted to by giving the administrative officer concerned every opportunity to decide on a matter that
comes within his jurisdiction then such remedy should be exhausted first before courts judicial power can
be sought. The premature invocation of courts intervention is fatal to ones cause of action. Accordingly,
absent any finding of waiver or estoppel the case is susceptible of dismissal for lack of cause of action.
(Emphasis ours)
In the instant case, Edma did not resort to, or avail of, any administrative remedy. He went straight to court and filed a complaint
for replevin and damages. Section 8 of Presidential Decree No. 705, as amended, states that (1) all actions and decisions of the
Bureau of Forest Development Director are subject to review by the DENR Secretary; (2) the decisions of the DENR Secretary are
appealable to the President; and (3) courts cannot review the decisions of the DENR Secretary except through a special civil action
for certiorari or prohibition. In Dy,
23
the Court held that all actions seeking to recover forest products in the custody of the DENR
shall be directed to that agency not the courts. In Paat,
24
the Court held that:
Dismissal of the replevin suit for lack of cause of action in view of the private respondents failure to
exhaust administrative remedies should have been the proper course of action by the lower court instead
of assuming jurisdiction over the case and consequently issuing the writ [of replevin]. Exhaustion of the
remedies in the administrative forum, being a condition precedent prior to ones recourse to the courts
and more importantly, being an element of private respondents right of action, is too significant to be
waylaid by the lower court.
x x x x
Moreover, the suit for replevin is never intended as a procedural tool to question the orders of
confiscation and forfeiture issued by the DENR in pursuance to the authority given under P.D. 705, as
amended. Section 8 of the said law is explicit that actions taken by the
Director of the Bureau of Forest Development concerning the enforcement of the provisions of the said law
are subject to review by the Secretary of DENR and that courts may not review the decisions of the
Secretary except through a special civil action for certiorari or prohibition. (Emphasis ours)
Second, under the doctrine of primary jurisdiction, courts cannot take cognizance of cases pending before administrative agencies
of special competence. The DENR is the agency responsible for the enforcement of forestry laws. The complaint for replevin itself
stated that members of DENRs Task Force Sagip Kalikasan took over the forest products and brought them to the DENR
Community Environment and Natural Resources Office. This should have alerted Judge Paderanga that the DENR had custody of
the forest products, that administrative proceedings may have been commenced, and that the replevin suit had to be dismissed
outright. In Tabao v. Judge Lilagan
25
a case with a similar set of facts as the instant case the Court held that:
The complaint for replevin itself states that the shipment x x x [was] seized by the NBI for verification of
supporting documents. It also states that the NBI turned over the seized items to the DENR "for official
disposition and appropriate action." x x x To our mind, these allegations [should] have been sufficient to
alert respondent judge that the DENR has custody of the seized items and that administrative proceedings
may have already been commenced concerning the shipment. Under the doctrine of primary jurisdiction,
courts cannot take cognizance of cases pending before administrative agencies of special competence. x x
x The prudent thing for respondent judge to have done was to dismiss the replevin suit outright.
(Emphasis ours)
In Paat,
26
the Court held that:
[T]he enforcement of forestry laws, rules and regulations and the protection, development and
management of forest lands fall within the primary and special responsibilities of the Department of
Environment and
Natural Resources. By the very nature of its function, the DENR should be given a free hand unperturbed
by judicial intrusion to determine a controversy which is well within its jurisdiction. The assumption by
the trial court, therefore, of the replevin suit filed by private respondents constitutes an unjustified
encroachment into the domain of the administrative agencys prerogative. The doctrine of primary
jurisdiction does not warrant a court to arrogate unto itself the authority to resolve a controversy the
jurisdiction over which is initially lodged with an administrative body of special competence. (Emphasis
ours)
Third, the forest products are already in custodia legis and thus cannot be the subject of replevin. There was a violation of the
Revised Forestry Code and the DENR seized the forest products in accordance with law. In Calub v. Court of Appeals,
27
the Court
held that properties lawfully seized by the DENR cannot be the subject of replevin:
Since there was a violation of the Revised Forestry Code and the seizure was in accordance with law, in
our view the [properties seized] were validly deemed in custodia legis. [They] could not be subject to an
action for replevin. For it is property lawfully taken by virtue of legal process and considered in the custody
of the law, and not otherwise. (Emphasis ours)
Judge Paderangas acts of taking cognizance of the replevin suit and of issuing the writ of replevin constitute gross ignorance of
the law. In Tabao,
28
the Court held that:
Under the doctrine of primary jurisdiction, courts cannot take cognizance of cases pending before
administrative of special competence. x x x [T]he plaintiff in the replevin suit who [sought] to recover the
shipment from the DENR had not exhausted the administrative remedies available to him. The prudent
thing for respondent judge to have done was to dismiss the replevin suit outright.
Under Section 78-A of the Revised Forestry Code, the DENR secretary or his authorized representatives may
order the confiscation of forest products illegally cut, gathered, removed, or possessed or abandoned.
x x x x
Respondent judges act of taking cognizance of the x x x replevin suit clearly demonstrates ignorance of
the law. x x x [J]udges are expected to keep abreast of all laws and prevailing jurisprudence. Judges are duty
bound to have more than just a cursory acquaintance with laws and jurisprudence. Failure to follow basic
legal commands constitutes gross ignorance of the law from which no one may be excused, not even a
judge. (Emphasis ours)
Canon 6 of the New Code of Judicial Conduct for the Philippine Judiciary states that competence is a prerequisite to the due
performance of judicial office. Section 3 of Canon 6 states that judges shall take reasonable steps to maintain and enhance their
knowledge necessary for the proper performance of judicial duties. Judges should keep themselves abreast with legal
developments and show acquaintance with laws.
29

The rule that courts cannot prematurely take cognizance of cases pending before administrative agencies is basic. There was no
reason for Judge Paderanga to make an exception to this rule. The forest products were in the custody of the DENR and Edma had
not availed of any administrative remedy. Judge Paderanga should have dismissed the replevin suit outright. In Espaol v. Toledo-
Mupas,
30
the Court held that:
Being among the judicial front-liners who have direct contact with the litigants, a wanton display of utter
lack of familiarity with the rules by the judge inevitably erodes the confidence of the public in the
competence of our courts to render justice. It subjects the judiciary to embarrassment. Worse, it could raise
the specter of corruption.
When the gross inefficiency springs from a failure to consider so basic and elemental a rule, a law, or a
principle in the discharge of his or her duties, a judge is either too incompetent and undeserving of the
exalted position and title he or she holds, or the oversight or omission was deliberately done in bad faith
and in grave abuse of judicial authority.
The OCA found Judge Paderanga liable for using inappropriate language in court: "We x x x find respondents intemperate use of
"Shut up!" and "Baloney!" well nigh inappropriate in court proceedings. The utterances are uncalled for."
31

Indeed, the 14 and 22 April 2005 transcripts of stenographic notes show that Judge Paderanga was impatient, discourteous, and
undignified in court:
Atty. Luego: Your Honor, we want to have this motion because that is...
Judge Paderanga: I am asking you why did you not make any rejoinder[?]
x x x x
Atty. Luego: I apologize, Your Honor. We are ready to...
Judge Paderanga: Ready to what? Proceed.
Atty. Luego: Yes, Your Honor. We filed this motion to quash replevin, Your Honor, on the grounds, first and
foremost, it is our contention, Your Honor, with all due respect of [sic] this Honorable Court, that the writ of
replevin dated March 29, 2005 was improper, Your Honor, for the reasons that the lumber, subject matter
of this case, were apprehended in accordance with...
Judge Paderanga: Where is your proof that it was apprehended? Where is your proof? Is that apprehension
proven by a seizure receipt? Where is your seizure receipt?
Atty. Luego: Under the rules...
Judge Paderanga: Where is your seizure receipt? You read your rules. What does [sic] the rules say? Where
in your rules does it say that it does not need any seizure receipt? You look at your rules. You point out the
rules. You take out your rules and then you point out. Do you have the rules?
x x x x
Atty. Luego: Your Honor, there was no seizure receipt, but during the apprehension, Your Honor, there was
no claimant.
Judge Paderanga: Answer me. Is there a seizure receipt?
Atty. Luego: But during the apprehension, Your Honor, no owner has [sic] appeared.
x x x x
Atty. Luego: According to [the] rules, Your Honor, if there is no...
Judge Paderanga: Whom are you seizing it from? To [sic] whom are you taking it from?
Atty. Luego: From the shipping company, Your Honor.
x x x x
Atty. Luego: Your Honor please, the shipping company denied the ownership of that lumber.
x x x x
Atty. Luego: But the shipping company, Your Honor,...
Judge Paderanga: Shut up. Thats baloney. You are seizing it from nobody. Then how can you seize it from
the shipping company. Are you not? You are a lawyer. Who is in possession of the property? The shipping
company. Why did you not issue [a] seizure receipt to the shipping company?
Atty. Luego: But the... May I continue, Your Honor?
x x x x
Judge Paderanga: Stop talking about the shipping company. Still you did not issue a seizure receipt here.
Well, Im telling you you should have issued *a+ seizure receipt to the shipping company.
x x x x
Judge Paderanga: You are a lawyer. You should know how to write pleadings. You write the pleadings the
way it should be, not the way you think it should be.
Atty. Luego: Im sorry, Your Honor.
Judge Paderanga: You are an officer of the court. You should be careful with your language. You say that I
am wrong. Its you who are [sic] wrong because you do not read the law.
x x x x
Judge Paderanga: Then you read the law. How dare you say that the Court is wrong.
x x x x
Judge Paderanga: Are you not representing [the DENR]?
Atty. Luego: Yes, in this case, Your Honor.
Judge Paderanga: Then you are representing them. They are your clients. What kind of a lawyer are you?
32

x x x x
Atty. Tiamson: Specifically it was stated in the [Factoran] versus Court of Appeals [case] that the Court
should not interfere, Your Honor.
Judge Paderanga: No.
x x x x
Judge Paderanga: The problem with you people is you do not use your heads.
Atty. Tiamson: We use our heads, your Honor.
x x x x
Atty. Tiamson: Your Honor, we would like to put on record that we use our heads, your Honor.
33
(Emphasis
ours)
Section 6, Canon 6 of the New Code of Judicial Conduct for the Philippine Judiciary states that judges shall be patient, dignified,
and courteous in relation to lawyers. Rule 3.04, Canon 3 of the Code of Judicial Conduct states that judges should be patient and
courteous to lawyers, especially the inexperienced. They should avoid the attitude that the litigants are made for the courts,
instead of the courts for the litigants.
Judicial decorum requires judges to be temperate in their language at all times. They must refrain from inflammatory, excessively
rhetoric, or vile language.
34
They should (1) be dignified in demeanor and refined in speech; (2) exhibit that temperament of
utmost sobriety and self-restraint; and (3) be considerate, courteous, and civil to all persons who come to their court.
35
In Juan de
la Cruz v. Carretas,
36
the Court held that:
A judge who is inconsiderate, discourteous or uncivil to lawyers x x x who appear in his sala commits an
impropriety and fails in his duty to reaffirm the peoples faith in the judiciary. He also violates Section 6,
Canon 6 of the New Code of Judicial Conduct for the Philippine Judiciary.
x x x x
It is reprehensible for a judge to humiliate a lawyer x x x. The act betrays lack of patience, prudence and
restraint. Thus, a judge must at all times be temperate in his language. He must choose his words x x x with
utmost care and sufficient control. The wise and just man is esteemed for his discernment. Pleasing speech
increases his persuasiveness.
Equanimity and judiciousness should be the constant marks of a dispenser of justice. A judge should always
keep his passion guarded. He can never allow it to run loose and overcome his reason. He descends to the
level of a sharp-tongued, ill-mannered petty tyrant when he utters harsh words x x x. As a result, he
degrades the judicial office and erodes public confidence in the judiciary.
Judge Paderangas refusal to consider the motion to quash the writ of replevin, repeated interruption of the lawyers, and
utterance of "shut up," "thats baloney," "how dare you say that the court is wrong," "what kind of a lawyer are you?," and "the
problem with you people is you do not use your heads" are undignified and very unbecoming a judge. In Office of the Court
Administrator v. Paderanga,
37
the Court already reprimanded Judge Paderanga for repeatedly saying "shut up," being arrogant,
and declaring that he had "absolute power" in court. He has not changed.
Section 8, Rule 140 of the Rules of Court classifies gross ignorance of the law as a serious offense. It is punishable by (1) dismissal
from the service, forfeiture of benefits, and disqualification from reinstatement to any public office; (2) suspension from office
without salary and other benefits for more than three months but not exceeding six months; or (3) a fine of more than P20,000
but not exceeding P40,000.
38
Section 10 of Rule 140 classifies conduct unbecoming a judge as a light offense. It is punishable by (1)
a fine of not less than P1,000 but not exceeding P10,000; (2) censure; (3) reprimand; or (4) admonition with warning.
39

The Court notes that this is Judge Paderangas third offense. In Office of the Court Administrator v. Paderanga,
40
the Court held
him liable for grave abuse of authority and simple misconduct for unceremoniously citing a lawyer in contempt while declaring
himself as having "absolute power" and for repeatedly telling a lawyer to "shut up." In Beltran, Jr. v. Paderanga,
41
the Court held
him liable for undue delay in rendering an order for the delay of nine months in resolving an amended formal offer of exhibits. In
both cases, the Court sternly warned Judge Paderanga that the commission of another offense shall be dealt with more severely.
The instant case and the two cases decided against him demonstrate Judge Paderangas arrogance, incorrigibility, and unfitness to
become a judge.
Judge Paderanga has two other administrative cases pending against him one
42
for gross ignorance of the law, knowingly
rendering an unjust judgment, and grave abuse of authority, and the other
43
for gross misconduct, grave abuse of authority, and
gross ignorance of the law.
The Court will not hesitate to impose the ultimate penalty on those who have fallen short of their accountabilities. It will not
tolerate any conduct that violates the norms of public accountability and diminishes the faith of the people in the judicial
system.
44

WHEREFORE, the Court finds Judge Maximo G.W. Paderanga, Regional Trial Court, Branch 38, Cagayan de Oro City, GUILTY of
GROSS IGNORANCE OF THE LAW and UNBECOMING CONDUCT. Accordingly, the Court DISMISSES him from the service, with
forfeiture of all retirement benefits, except accrued leave credits, and with prejudice to reinstatement or appointment to any
public office, including government-owned or controlled corporations.
SO ORDERED.

G.R. No. 96409 February 14, 1992
CITIZEN J. ANTONIO M. CARPIO, petitioner,
vs.
THE EXECUTIVE SECRETARY, THE SECRETARY OF LOCAL GOVERNMENTS, THE SECRETARY OF NATIONAL DEFENSE and THE
NATIONAL TREASURER, respondents.
PARAS, J.:
At the very outset, it should be well to set forth the constitutional provision that is at the core of the controversy now confronting
us, thus:
Article XVI, Section 6:
The State shall establish and maintain one police force, which stall be national in scope and civilian in
character, to be administered and controlled by a national police commission. The authority of local
executives over the police units in their jurisdiction shall be provided by law.
1

With the aforequoted provision in mind, Congress passed Republic Act No. 6975 entitled "AN ACT ESTABLISHING THE PHILIPPINE
NATIONAL POLICE UNDER A REORGANIZED DEPARTMENT OF THE INTERIOR AND LOCAL GOVERNMENT, AND FOR OTHER
PURPOSES" as the consolidated version of House Bill No. 23614 and Senate Bill No. 463.
Following the said Act's approval by President Corazon C. Aquino on December 13, 1990, it was published on December 17, 1990.
2

Presently, however, petitioner as citizen, taxpayer and member of the Philippine Bar sworn to defend the Constitution, filed the
petition now at bar on December 20, 1990, seeking this Court's declaration of unconstitutionality of RA 6975 with prayer for
temporary restraining order.
But in an en banc resolution dated December 27, 1990, We simply required the public respondents to file their Comment, without
however giving due course to the petition and the prayer therein. Hence, the Act took effect after fifteen days following its
publication, or on January 1, 1991.
3

Before we settle down on the merits of the petition, it would likewise be well to discuss albeit briefly the history of our police
force and the reasons for the ordination of Section 6, Article XVI in our present Constitution.
During the Commonwealth period, we had the Philippine Constabulary as the nucleus of the Philippine Ground Force (PGF), now
the Armed Forces of the Philippines (AFP). The PC was made part of the PGF but its administrative, supervisory and directional
control was handled by the then Department of the Interior. After the war, it remained as the "National Police" under the
Department of National Defense, as a major service component of the AFP.
4

Later, the Integration Act of 1975
5
created the Integrated National Police (INP) under the Office of the President, with the PC as
the nucleus, and the local police forces as the civilian components. The PC-INP was headed by the PC Chief who, as concurrent
Director-General of the INP, exercised command functions over the INP.
6

The National Police Commission (NAPOLCOM)
7
exercised administrative control and supervision while the local executives
exercised operational supervision and direction over the INP units assigned within their respective localities. 8
The set-up whereby the INP was placed under the command of the military component, which is the PC, severely eroded the INP's
civilian character and the multiplicity in the governance of the PC-INP resulted in inefficient police service.
9
Moreover, the
integration of the national police forces with the PC also resulted in inequities since the military component had superior benefits
and privileges.
10

The Constitutional Commission of 1986 was fully aware of the structural errors that beset the system. Thus, Com. Teodulo C.
Natividad explained that:
xxx xxx xxx
MR. NATIVIDAD. . . . The basic tenet of a modern police organization is to remove it
from the military.
11

xxx xxx xxx
Here in our draft Constitution, we have already made a constitutional postulate that the military cannot
occupy any civil service position [in Section 6 of the Article on the Civil Service
12
] Therefore, in keeping with
this and because of the universal acceptance that a police force is a civilian function, a public service, and
should not be performed by military force, one of the basic reforms we are presenting here is that it should
be separated from the military force which is the PC.
13

xxx xxx xxx
Furthermore:
xxx xxx xxx
. . . the civilian police cannot blossom into full profession because most of the key positions are being
occupied by the military So, it is up to this Commission to remove the police from such a situation so that it
can develop into a truly professional civilian police. . . .
14

Hence, the "one police force, national in scope, and civilian in character" provision that is now Article XVI, Section 6 of the 1987
Constitution.
And so we now come to the merits of the petition at hand.
In the main, petitioner herein respectfully advances the view that RA 6975 emasculated the National Police Commission by
limiting its power "to administrative control" over the Philippine National Police (PNP), thus, "control" remained with the
Department Secretary under whom both the National Police Commission and the PNP were placed.
15

We do not share this view.
To begin with, one need only refer to the fundamentally accepted principle in Constitutional Law that the President has control of
all executive departments, bureaus, and offices to lay at rest petitioner's contention on the matter.
This presidential power of control over the executive branch of government extends over all executive officers from Cabinet
Secretary to the lowliest clerk
17
and has been held by us, in the landmark case of Mondano vs. Silvosa,
18
to mean "the power of
[the President] to alter or modify or nullify or set aside what a subordinate officer had done in the performance of his duties and
to substitute the judgment of the former with that of the latter." It is said to be at the very "heart of the meaning of Chief
Executive."
19

Equally well accepted, as a corollary rule to the control powers of the President, is the "Doctrine of Qualified Political Agency". As
the President cannot be expected to exercise his control powers all at the same time and in person,
20
he will have to delegate
some of them to his Cabinet members.
Under this doctrine, which recognizes the establishment of a single executive,
21
"all executive and administrative organizations
are adjuncts of the Executive Department, the heads of the various executive departments are assistants and agents of the Chief
Executive, and, except in cases where the Chief Executive is required by the Constitution or law to act in person on the exigencies
of the situation demand that he act personally, the multifarious executive and administrative functions of the Chief Executive are
performed by and through the executive departments, and the acts of the Secretaries of such departments, performed and
promulgated in the regular course of business, unless disapproved or reprobated by the Chief Executive presumptively the acts of
the Chief Executive."
22
(emphasis ours)
Thus, and in short, "the President's power of control is directly exercised by him over the members of the Cabinet who, in turn,
and by his authority, control the bureaus and other offices under their respective jurisdictions in the executive department."
23

Additionally, the circumstance that the NAPOLCOM and the PNP are placed under the reorganized Department of Interior and
Local Government is merely an administrative realignment that would bolster a system of coordination and cooperation among
the citizenry, local executives and the integrated law enforcement agencies and public safety agencies created under the assailed
Act,
24
the funding of the PNP being in large part subsidized by the national government.
Such organizational set-up does not detract from the mandate of the Constitution that the national police force shall be
administered and controlled by a national police commission as at any rate, and in fact, the Act in question adequately provides
for administration and control at the commission level, as shown in the following provisions, to wit:
Sec. 14. Powers and Functions of the Commission. The Commission shall exercise the following powers and functions:
xxx xxx xxx
(i) Approve or modify plans and programs on education and training, logistical requirements, communications, records,
information systems, crime laboratory, crime prevention and crime reporting;
(j) Affirm, reverse or modify, through the National Appellate Board, personnel disciplinary actions involving demotion or dismissal
from the service imposed upon members of the Philippine National Police by the Chief of the PNP;
(k) Exercise appellate jurisdiction through .the regional. appellate boards over administrative cases against policemen and over
decisions on claims for police benefits;
xxx xxx xxx
Sec. 26. The Command and direction of the PNP shall be vested in the Chief of the PNP . . . Such command and direction of the
Chief of the PNP may be delegated to subordinate officials with respect to the units under their respective commands, in
accordance with the rules and regulations prescribed by the Commission. . . .
xxx xxx xxx
Sec. 35. . . . To enhance police operational efficiency and effectiveness, the Chief of the PNP may constitute such other support
units as may be necessary subject to the approval of the Commission. . . .
xxx xxx xxx
Sec. 37. . . . There shall be established a performance evaluation system which shall be administered in accordance with the rules,
regulations and standards; and a code of conduct promulgated by the Commission for members of the PNP. . . .
xxx xxx xxx
Petitioner further asserts that in manifest derogation of the power of control of the NAPOLCOM over the PNP, RA 6975 vested the
power to choose the PNP Provincial Director and the Chiefs of Police in the Governors and Mayors, respectively; the power of
"operational supervision and control" over police units in city and municipal mayors; in the Civil Service Commission, participation
in appointments to the positions of Senior Superintendent to Deputy Director-General as well as the administration of qualifying
entrance examinations; disciplinary powers over PNP members in the "People's Law Enforcement Boards" and in city and
municipal mayors.
25

Once more, we find no real controversy upon the foregoing assertions.
It is true that when the Constitutional Commissioners of 1986 provided that the authority of local executives over the police units
in their jurisdiction shall be provided by law, they intended that the day-to-day functions of police work like crime, investigation,
crime prevention activities, traffic control, etc., would be under the operational control of the local executives as it would not be
advisable to give full control of the police to the local executives.
26

They reasoned that in the past, this gave rise to warlordism, bossism, and sanctuaries for vices and abuses.
27

It would appear then that by vesting in the local executives the power to choose the officers in question, the Act went beyond the
bounds of the Constitution's intent.
Not so. We find light in the principle of constitutional construction that every presumption should be indulged in favor of
constitutionality and the court in considering the validity of the statute in question should give it such reasonable construction as
can be reached to bring it within the fundamental
law.
28

Under the questioned provisions, which read as follows:
D. PARTICIPATION OF LOCAL EXECUTIVES IN THE ADMINISTRATION OF THE PNP.
Sec. 51. Powers of Local Government Officials over the PNP Units or Forces.
Governors and mayors shall be deputized as representatives of the Commission in their respective territorial jurisdictions. As such,
the local executives shall discharge the following functions:
a.) Provincial Governor (1) . . .
The provincial governor shall choose the provincial director from a list of three (3) eligibles recommended by the PNP Regional
Director.
4) . . . City and municipal mayors shall have the following authority over the PNP units in their respective jurisdictions:
i.) Authority to choose the chief of police from a list of five (5) eligibles recommended by the Provincial Police Director. . . .
(Emphasis ours)
full control remains with the National Police Commission.
We agree, and so hold, with the view of the Solicitor General that "there is no usurpation of the power of control of the
NAPOLCOM under Section 51 because under this very same provision, it is clear that the local executives are only acting as
representatives of the NAPOLCOM. . . . As such deputies, they are answerable to the NAPOLCOM for their actions in the exercise
of their functions under that section. Thus, unless countermanded by the NAPOLCOM, their acts are valid and binding as acts of
the NAPOLCOM."
29
It is significant to note that the local officials, as NAPOLCOM representatives, will choose the officers
concerned from a list of eligibles (those who meet the general qualifications for appointment to the PNP)
30
to be recommended
by PNP officials.
The same holding is true with respect to the contention on the operational supervision and control exercised by the local officials.
Those officials would simply be acting as representatives of the Commission.
As regards the assertion involving the Civil Service Commission, suffice it to say that the questioned provisions, which read:
Sec. 31. Appointment of PNP Officers and Members. The Appointment of the officers and members of the PNP shall be effected
in the following manner:
a.) Police Officer I to Senior Police Officer IV. Appointed by the PNP regional director for regional personnel or by the Chief of
the PNP for national headquarters personnel and attested by the Civil Service Commission;
b.) Inspector to Superintendent. Appointed by the Chief of the PNP, as recommended by their immediate superiors, and
attested by the Civil Service Commission;
c.) Senior Superintendent to Deputy Director-General. Appointed by the President upon recommendation of the Chief of the
PNP, with proper endorsement by the Chairman of the Civil Service
Commission . . .
Sec. 32. Examinations for Policemen. The Civil Service Commission shall administer the qualifying entrance examinations for
policemen on the basis of the standards set by the NAPOLCOM.
precisely underscore the civilian character of the national police force, and will undoubtedly professionalize the same.
The grant of disciplinary powers over PNP members to the "People's Law Enforcement Boards" (or the PLEB) and city and
municipal mayors is also not in derogation of the commission's power of control over the PNP.
Pursuant to the Act, the Commission exercises appellate jurisdiction, thru the regional appellate boards, over decisions of both the
PLEB and the said mayors. This is so under Section 20(c). Furthermore, it is the Commission which shall issue the implementing
guidelines and procedures to be adopted by the PLEB for in the conduct of its hearings, and it may assign NAPOLCOM hearing
officers to act as legal consultants of the PLEBs (Section 43-d4, d5).
As a disciplinary board primarily created to hear and decide citizen's complaints against erring officers and members of the PNP,
the establishment of PLEBs in every city, and municipality would all the more help professionalize the police force.
Petitioner would likewise have this Court imagine that Section 12 of the questioned Act, the pertinent portion of which reads:
Sec. 12. Relationship of the Department with the Department of National Defense. During a period of twenty- four (24) months
from the effectivity of this Act, the Armed Forces of the Philippines (AFP) shall continue its present role of preserving the internal
and external security of the State: Provided, that said period may be extended by the President, if he finds it justifiable, for
another period not exceeding twenty-four (24) months, after which, the Department shall automatically take over from the AFP
the primary role of preserving internal security, leaving to the AFP its primary role of preserving external security.
xxx xxx xxx
constitutes an "encroachment upon, interference with, and an abdication by the President of, executive control and commander-
in-chief powers."
That We are not disposed to do for such is not the case at all here. A rejection thus of petitioner's submission anent Section 12 of
the Act should be in order in the light of the following exchanges during the CONCOM deliberations of Wednesday, October 1,
1986:
xxx xxx xxx
MR. RODRIGO. Just a few questions. The President of the Philippines is the Commander-in-Chief of all the armed forces.
MR. NATIVIDAD. Yes, Madam President.
MR. RODRIGO. Since the national police is not integrated with the armed forces, I do not suppose they come under the
Commander-in-Chief powers of the President of the Philippines.
MR. NATIVIDAD. They do, Madam President. By law they are under the supervision and control of the President of the Philippines.
MR. RODRIGO. Yes, but the President is not the Commander-in-Chief of the national police.
MR. NATIVIDAD. He is the President.
MR. RODRIGO. Yes, the Executive. But they do not come under that specific provision that the President is Commander-in-Chief of
all the armed forces.
MR. NATIVIDAD. No, not under the Commander-in-Chief provision.
MR. RODRIGO. There are two other powers of the President. The President has control over departments, bureaus and offices,
and supervision over local governments. Under which does the police fall, under control or under supervision?
MR. NATIVIDAD. Both, Madam President.
MR. RODRIGO. Control and Supervision.
MR. NATIVIDAD. Yes, in fact, the National Police Commission is under the Office of the President. (CONCOM RECORDS, Vol. 5, p.
296)
It thus becomes all too apparent then that the provision herein assailed precisely gives muscle to and enforces the proposition
that the national police force does not fall under the Commander-in-Chief powers of the President. This is necessarily so since the
police force, not being integrated with the military, is not a part of the Armed Forces of the Philippines. As a civilian agency of the
government, it properly comes within, and is subject to, the exercise by the President of the power of executive control.
Consequently, Section 12 does not constitute abdication of commander-in-chief powers. It simply provides for the transition
period or process during which the national police would gradually assume the civilian function of safeguarding the internal
security of the State. Under this instance, the President, to repeat, abdicates nothing of his war powers. It would bear to here
state, in reiteration of the preponderant view, that the President, as Commander-in-Chief, is not a member of the Armed Forces.
He remains a civilian whose duties under the Commander-in-Chief provision "represent only a part of the organic duties imposed
upon him. All his other functions are clearly civil in nature."
31
His position as a civilian Commander-in-Chief is consistent with, and
a testament to, the constitutional principle that "civilian authority is, at all times, supreme over the military." (Article II, Section 3,
1987 Constitution)
Finally, petitioner submits that the creation of a "Special Oversight Committee" under Section 84 of the Act, especially the
inclusion therein of some legislators as members (namely: the respective Chairmen of the Committee on Local Government and
the Committee on National Defense and Security in the Senate, and the respective Chairmen of the Committee on Public Order
and Security and the Committee on National Defense in the House of Representatives) is an "unconstitutional encroachment upon
and a diminution of, the President's power of control over all executive departments, bureaus and offices."
But there is not the least interference with the President's power of control under Section 84. The Special Oversight Committee is
simply an ad hoc or transitory body, established and tasked solely with planning and overseeing the immediate "transfer, merger
and/or absorption" into the Department of the Interior and Local Governments of the "involved agencies." This it will undertake in
accordance with the phases of implementation already laid down in Section 85 of the Act and once this is carried out, its functions
as well as the committee itself would cease altogether.
32
As an ad hoc body, its creation and the functions it exercises, decidedly
do not constitute an encroachment and in diminution of the power of control which properly belongs to the President. What is
more, no executive department, bureau or office is placed under the control or authority, of the committee.
33

As a last word, it would not be amiss to point out here that under the Constitution, there are the so-called independent
Constitutional Commissions, namely: The Civil Service Commission, Commission on Audit, and the Commission on Elections.
(Article IX-A, Section 1)
As these Commissions perform vital governmental functions, they have to be protected from external influences and political
pressures. Hence, they were made constitutional bodies, independent of and not under any department of the government.
34

Certainly, they are not under the control of the President.
The Constitution also created an independent office called the "Commission on Human Rights." (Article XIII, Section
17[1]).However, this Commission is not on the same level as the Constitutional Commissions under Article IX, although it is
independent like the latter Commissions.
35
It still had to be constituted thru Executive Order No. 163 (dated May 5, 1987).
In contrast, Article XVI, Section 6 thereof, merely mandates the statutory creation of a national police commission that will
administer and control the national police force to be established thereunder.
This commission is, for obvious reasons, not in the same category as the independent Constitutional Commissions of Article IX and
the other constitutionally created independent Office, namely, the Commission on Human Rights.
By way of resume, the three Constitutional Commissions (Civil Service, Audit, Elections) and the additional commission created by
the Constitution (Human Rights) are all independent of the Executive; but the National Police Commission is not.
36
In fact, it was
stressed during the CONCOM deliberations that this commission would be under the President, and hence may be controlled by
the President, thru his or her alter ego, the Secretary of the Interior and Local Government.
WHEREFORE, having in view all of the foregoing holdings, the instant petition is hereby DISMISSED for lack of merit. SO ORDERED.